The Cheesecake Factory Reports Record Revenues in the Second Quarter of Fiscal 2021 and Provides Business Update

Third quarter-to-date through July 26th comparable sales at The Cheesecake Factory restaurants increased 10% over 2019 levels

The Cheesecake Factory Incorporated (NASDAQ: CAKE) yesterday reported financial results for the second quarter of fiscal 2021, which ended on June 29, 2021.

Total revenues were $769.0 million in the second quarter of fiscal 2021 compared to $295.9 million in the second quarter of fiscal 2020. Net income available to common stockholders and diluted net income per common share were $17.1 million and $0.37, respectively, in the second quarter of fiscal 2021.

During the second quarter of fiscal 2021, the Company recorded $11.4 million in non-cash acquisition-related contingent consideration and amortization expense primarily associated with the amendment to the Fox Restaurant Concepts (“FRC”) acquisition agreement, including the extension of the earn-out period through 2026. Excluding the after-tax impact of this item, the termination of the Company’s interest rate swap agreement and reflecting the then potential impact of the conversion of the Company’s convertible preferred stock into common stock for the period that it was outstanding during the quarter prior to the repurchase and conversion on June 15, 2021, adjusted net income and adjusted net income per share for the second quarter of fiscal 2021 were $43.9 million and $0.80, respectively. Please see the Company’s reconciliation of non-GAAP financial measures at the end of this press release.

Comparable restaurant sales at The Cheesecake Factory restaurants increased 150.0% year-over-year in the second quarter of fiscal 2021. Relative to the second quarter of fiscal 2019, comparable restaurant sales at The Cheesecake Factory restaurants increased 7.8%.

As of today, nearly all of the Company’s restaurants across its concepts are operating with no indoor dining restrictions. Fiscal 2021 third quarter-to-date through July 26th comparable sales for The Cheesecake Factory restaurants increased approximately 61% year-over-year and 10% relative to the same period in fiscal 2019, supported by approximately 27% off-premise sales mix. Based on average weekly sales quarter-to-date of approximately $230,000, this equates to nearly $12 million on average, per unit on an annualized basis. Off-premise average weekly sales are about double the level seen during the same period in fiscal 2019.

“We had a tremendous second quarter, driving record revenues and strong cash flow,” said David Overton, Chairman and Chief Executive Officer. “When we reflect on where we were a year ago during the depths of COVID-19, we are so proud of our team’s accomplishments that have driven our recovery. Comparable sales at The Cheesecake Factory restaurants far outpaced pre-COVID levels during the second quarter and we leveraged the sales to drive solid bottom line performance. Sales across our concepts further strengthened early in the third quarter as nearly all of our restaurants are now operating with no indoor dining restrictions. Additionally, we opened three new restaurants during the second quarter and with our most recent opening last week, we are on track to meet our development objective to open as many as 14 new restaurants across our concepts this year.”

Development

During the second quarter of fiscal 2021, two North Italia restaurants opened in Miami and San Antonio, Flower Child opened in Atlanta, and one Cheesecake Factory restaurant opened internationally in Shanghai under a licensing agreement. Subsequent to quarter-end, a second North Italia opened in the Nashville area.

Balance Sheet & Cash Flow

During the second quarter, the Company generated $108.8 million in cash flow from operating activities.

As of June 29, 2021, the Company had total available liquidity of $401.9 million, including a cash balance of $161.8 million and availability on its revolving credit facility of $240.1 million. Total principal amount of debt outstanding was $475 million, including $345 million of 0.375% convertible senior notes due 2026 issued during the second quarter and $130 million drawn on the Company’s revolving credit facility following the previously announced $150 million repayment during the second quarter.

The Company also completed the offering of 3.125 million shares of common stock during the second quarter of fiscal 2021. As previously disclosed, the Company used the net proceeds from the convertible senior note and common stock offerings to fund approximately $457.4 million payable in connection with the repurchase of 150,000 shares of its previously outstanding convertible preferred stock and the conversion of the remaining 50,000 shares of convertible preferred stock into approximately 2.4 million shares of the Company’s common stock, which simplified the Company’s capital structure and eliminated future convertible preferred dividends. For GAAP accounting purposes, $13.6 million of the total consideration paid was deemed to be an assumed dividend during the second quarter of fiscal 2021.

About The Cheesecake Factory Incorporated

The Cheesecake Factory Incorporated is a leader in experiential dining. We are culinary forward and relentlessly focused on hospitality. Delicious, memorable experiences created by passionate people – this defines who we are and where we are going. We currently own and operate 301 restaurants throughout the United States and Canada under brands including The Cheesecake Factory®, North Italia® and a collection within our Fox Restaurant Concepts business. Internationally, 28 The Cheesecake Factory® restaurants operate under licensing agreements.

The Cheesecake Factory Incorporated
Condensed Consolidated Financial Statements
(unaudited; in thousands, except per share and statistical data)
                         
                         
    13 Weeks Ended   13 Weeks Ended   26 Weeks Ended   26 Weeks Ended
Consolidated Statements of Income   June 29, 2021   June 30, 2020   June 29, 2021   June 30, 2020
    Amount Percent of
Revenues
  Amount Percent of
Revenues
  Amount Percent of
Revenues
  Amount Percent of
Revenues
         
Revenues  

$

768,956

100.0

%

 

$

295,851

100.0

%

 

$

1,396,373

100.0

%

 

$

910,957

100.0

%

Costs and expenses:                        
Cost of sales  

168,944

22.0

%

 

72,139

24.4

%

 

304,819

21.8

%

 

213,044

23.4

%

Labor expenses  

274,812

35.7

%

 

122,812

41.5

%

 

504,544

36.1

%

 

359,794

39.5

%

Other operating costs and expenses  

199,495

25.9

%

 

121,675

41.1

%

 

381,028

27.3

%

 

289,645

31.8

%

General and administrative expenses  

48,228

6.3

%

 

35,712

12.1

%

 

92,655

6.6

%

 

79,672

8.7

%

Depreciation and amortization expenses  

22,223

2.9

%

 

22,590

7.6

%

 

44,229

3.2

%

 

46,152

5.1

%

Impairment of assets and lease termination expenses  

0.0

%

 

2,433

0.8

%

 

594

0.0

%

 

194,329

21.3

%

Acquisition-related costs  

0.0

%

 

1,068

0.4

%

 

0.0

%

 

2,304

0.3

%

Acquisition-related contingent consideration, compensation
and amortization expenses/(benefit)
 

11,357

1.5

%

 

(965

)

(0.3

)%

 

11,907

0.9

%

 

(5,431

)

(0.6

)%

Preopening costs  

2,779

0.4

%

 

2,097

0.7

%

 

6,635

0.5

%

 

5,216

0.6

%

Total costs and expenses  

727,838

94.7

%

 

379,561

128.3

%

 

1,346,411

96.4

%

 

1,184,725

130.1

%

Income/(loss) from operations  

41,118

5.3

%

 

(83,710

)

(28.3

)%

 

49,962

3.6

%

 

(273,768

)

(30.1

)%

Interest and other expense, net  

(4,706

)

(0.6

)%

 

(2,566

)

(0.9

)%

 

(7,400

)

(0.5

)%

 

(4,084

)

(0.4

)%

Income/(loss) before income taxes  

36,412

4.7

%

 

(86,276

)

(29.2

)%

 

42,562

3.1

%

 

(277,852

)

(30.5

)%

Income tax provision/(benefit)  

2,697

0.3

%

 

(29,737

)

(10.1

)%

 

4,979

0.4

%

 

(85,150

)

(9.3

)%

Net income/(loss)  

33,715

4.4

%

 

(56,539

)

(19.1

)%

 

37,583

2.7

%

 

(192,702

)

(21.2

)%

Dividends on Series A preferred stock (1)  

(13,591

)

(1.8

)%

 

(3,694

)

(1.2

)%

 

(18,661

)

(1.4

)%

 

(3,694

)

(0.4

)%

Direct and incremental Series A preferred stock issuance cost  

0.0

%

 

(10,257

)

(3.5

)%

 

0.0

%

 

(10,257

)

(1.1

)%

Undistributed earnings allocated to Series A preferred stock  

(3,051

)

(0.4

)%

 

0.0

%

 

(3,123

)

(0.2

)%

 

0.0

%

Net income/(loss) available to common stockholders  

$

17,073

2.2

%

 

$

(70,490

)

(23.8

)%

 

$

15,799

1.1

%

 

$

(206,653

)

(22.7

)%

                         
Basic net income/(loss) per common share  

$

0.38

   

$

(1.61

)

   

$

0.35

   

$

(4.72

)

 
Basic weighted average shares outstanding  

45,471

   

43,874

   

44,830

   

43,824

 
                         
Diluted net income/(loss) per common share (2)  

$

0.37

   

$

(1.61

)

   

$

0.35

   

$

(4.72

)

 
Diluted weighted average shares outstanding  

46,777

   

43,874

   

45,975

   

43,824

 
                         
(1) During the second quarter of fiscal 2021, the Company completed the repurchase of 150,000 shares of its previously outstanding convertible preferred stock and the conversion of the remaining 50,000 shares of convertible preferred stock into approximately 2.4 million shares of the Company’s common stock, which simplified the Company’s capital structure and eliminated future convertible preferred dividends. For GAAP accounting purposes, $13.6 million of the total consideration paid was deemed to be a dividend during the second quarter of fiscal 2021.
(2) Diluted net income per common share reflects an adjustment for reallocation of undistributed earnings to preferred stock of $72,552 and $65,204, respectively, for the thirteen and twenty-six weeks ended June 29, 2021.
                       
    13 Weeks Ended   13 Weeks Ended   26 Weeks Ended   26 Weeks Ended
Selected Segment Information   June 29, 2021   June 30, 2020   June 29, 2021   June 30, 2020
Revenues:                      
The Cheesecake Factory restaurants  

$

606,691

   

$

241,068

   

$

1,106,080

   

$

729,539

North Italia  

43,566

   

13,759

   

76,390

   

44,271

Other FRC  

47,458

   

12,208

   

83,652

   

47,791

Other  

71,241

   

28,816

   

130,251

   

89,356

Total  

$

768,956

   

$

295,851

   

$

1,396,373

   

$

910,957

                       
Income/(loss) from operations:                      
The Cheesecake Factory restaurants  

$

83,198

   

$

(26,951

)

   

$

127,679

   

$

12,373

North Italia  

3,026

   

(4,405

)

   

3,358

   

(76,491

)

Other FRC  

7,282

   

(5,212

)

   

11,162

   

(75,176

)

Other  

(52,388

)

   

(47,142

)

   

(92,237

)

   

(134,474

)

Total  

$

41,118

   

$

(83,710

)

   

$

49,962

   

$

(273,768

)

                       
Preopening costs:                      
The Cheesecake Factory restaurants  

$

584

   

$

767

   

$

2,648

   

$

2,181

North Italia  

1,061

   

311

   

2,279

   

1,264

Other FRC  

637

   

380

   

1,099

   

221

Other  

497

   

639

   

609

   

1,550

Total  

$

2,779

   

$

2,097

   

$

6,635

   

$

5,216

                       
Impairment of assets and lease termination expenses:                      
The Cheesecake Factory restaurants  

$

   

$

2,325

   

$

   

$

2,941

North Italia  

   

   

   

71,524

Other FRC  

   

   

   

72,939

Other  

   

108

   

594

   

46,925

Total  

$

   

$

2,433

   

$

594

   

$

194,329

                       
Depreciation and amortization expenses:                      
The Cheesecake Factory restaurants  

$

16,487

   

$

16,867

   

$

32,807

   

$

34,144

North Italia  

981

   

901

   

1,825

   

1,866

Other FRC  

1,038

   

814

   

2,215

   

2,015

Other  

3,717

   

4,008

   

7,382

   

8,127

Total  

$

22,223

   

$

22,590

   

$

44,229

   

$

46,152

                       
    13 Weeks Ended   13 Weeks Ended   26 Weeks Ended   26 Weeks Ended
The Cheesecake Factory restaurants operating information:   June 29, 2021   June 30, 2020   June 29, 2021   June 30, 2020
Comparable restaurant sales vs. prior year  

150.0

%

   

(56.9

)%

   

52.0

%

   

(35.0

)%

Comparable restaurant sales vs. 2019  

7.8

%

         

(1.2

)%

     
Restaurants opened during period  

   

   

1

   

Restaurants open at period-end  

207

   

206

   

207

   

206

Restaurant operating weeks  

2,691

   

2,640

   

5,369

   

5,314

                       
North Italia operating information:                      
Comparable restaurant sales vs. prior year  

182

%

   

(59

)%

   

63

%

   

(17

)%

Comparable restaurant sales vs. 2019  

10

%

         

3

%

     
Restaurants opened during period  

2

   

   

3

   

1

Restaurants open at period-end  

26

   

23

   

26

   

23

Restaurant operating weeks  

328

   

261

   

631

   

551

                       
Other Fox Restaurant Concepts (FRC) operating information:(1)                      
Restaurants opened during period  

   

   

1

   

Restaurants open at period-end  

28

   

25

   

28

   

25

Restaurant operating weeks  

354

   

221

   

696

   

534

                       
Other operating information:(2)                      
Restaurants opened during period  

1

   

   

1

   

1

Restaurants open at period-end  

39

   

40

   

39

   

40

Restaurant operating weeks  

490

   

313

   

967

   

805

                       
Number of company-owned restaurants:                      
The Cheesecake Factory  

207

                 
North Italia  

26

                 
Other FRC  

28

                 
Other  

39

                 
Total  

300

                 
                       
Number of international-licensed restaurants:                      
The Cheesecake Factory  

28

                 
                       
(1) The Other FRC segment includes all FRC brands except Flower Child.
(2) The Other segment includes the Flower Child, Grand Lux Cafe, RockSugar Southeast Asian Kitchen and Social Monk Asian Kitchen concepts, as well as the Company’s third-party bakery, international and consumer packaged goods businesses, unallocated corporate expenses and gift card costs.
             
Selected Consolidated Balance Sheet Information   June 29, 2021   December 29, 2020
Cash and cash equivalents    

$

161,768

   

$

154,085

Long-term debt, net of issuance costs (1)    

465,010

   

280,000

             

(1) Includes $335 million net balance of 0.375% convertible senior notes due 2026 (principal amount of $345 million less $10 million in unamortized issuance cost) and $130 million drawn on the Company’s revolving credit facility. The unamortized issuance costs were recorded as a contra-liability and netted with long-term debt on the Condensed Consolidated Balance Sheets and were being amortized as interest expense.

Reconciliation of Non-GAAP Results to GAAP Results

In addition to the results provided in accordance with accounting principles generally accepted in the United States of America (“GAAP”) in this press release, the Company is providing non-GAAP measurements which present net income and net income per share excluding the impact of certain items. The non-GAAP measurements are intended to supplement the presentation of the Company’s financial results in accordance with GAAP. These non-GAAP measures are calculated by eliminating from net income and diluted net income per share the impact of items the Company does not consider indicative of its ongoing operations. To reflect the then potential impact of the conversion of the Company’s convertible preferred stock into common stock for the period that it was outstanding prior to the repurchase and conversion on June 15, 2021, the Company excludes the preferred dividend and assumes all convertible preferred shares convert to common stock. The Company uses these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons.

The Cheesecake Factory Incorporated
Reconciliation of Non-GAAP Financial Measures
(unaudited; in thousands, except per share data)
                         
                         
    13 Weeks Ended   13 Weeks Ended   26 Weeks Ended   26 Weeks Ended
    June 29, 2021   June 30, 2020   June 29, 2021   June 30, 2020
     
Net loss available to common stockholders (GAAP)    

$

17,073

   

$

(70,490

)

   

$

15,798

   

$

(206,653

)

Dividends on Series A preferred stock    

13,591

   

3,694

   

18,661

   

3,694

Net income attributable to Series A preferred stock to apply if-converted method    

3,051

   

   

3,123

   

Direct and incremental Series A preferred stock issuance costs    

   

10,257

   

   

10,257

COVID-19 related costs(1)    

   

11,730

   

4,917

   

15,020

Impairment of assets and lease termination expenses(2)    

   

2,433

   

594

   

194,329

Acquisition-related costs(3)    

   

1,068

   

   

2,304

Acquisition-related contingent consideration,
compensation and amortization expenses/(benefit)(4)
   

11,357

   

(965

)

   

11,907

   

(5,431

)

Termination of Interest rate swap    

2,354

   

   

2,354

   

Uncertain tax position related to tenant improvement allowances(5)    

   

   

2,471

   

Tax effect of adjustments(6)    

(3,565

)

   

(3,710

)

   

(5,140

)

   

(53,618

)

Adjusted net income/(loss) (non-GAAP)    

$

43,861

   

$

(45,983

)

   

$

54,685

   

$

(40,098

)

                         
Diluted net loss per common share (GAAP)    

$

0.37

   

$

(1.61

)

   

$

0.35

   

$

(4.72

)

Dividends on Series A preferred stock    

0.25

   

0.07

   

0.34

   

0.08

Net income attributable to Series A preferred stock to apply if-converted method    

0.06

   

   

0.06

   

Direct and incremental Series A preferred stock issuance costs    

   

0.20

   

   

0.22

Assumed impact of potential conversion of Series A preferred stock into common stock(7)    

(0.06

)

   

0.22

   

(0.06

)

   

0.35

COVID-19 related costs    

   

0.23

   

0.09

   

0.32

Impairment of assets and lease termination expenses    

   

0.05

   

0.01

   

4.11

Acquisition-related costs    

   

0.02

   

   

0.05

Acquisition-related contingent consideration,
compensation and amortization expenses/(benefit)
   

0.21

   

(0.02

)

   

0.22

   

(0.11

)

Termination of Interest rate swap    

0.04

   

   

0.04

   

Uncertain tax position related to tenant improvement allowances    

   

   

0.05

   

Tax effect of adjustments    

(0.07

)

   

(0.07

)

   

(0.09

)

   

(1.13

)

Adjusted net income/(loss) per share (non-GAAP)(8)    

$

0.80

   

$

(0.90

)

   

$

1.00

   

$

(0.85

)

                         
(1) Represents incremental costs associated with COVID-19 such as sick and vaccination pay, healthcare and meal benefits for furloughed staff members, additional sanitation and personal protective equipment.
(2) A detailed breakdown of impairment of assets and lease termination expenses recorded in the thirteen and twenty-six weeks ended June 29, 2021 and June 30, 2020 can be found in the Selected Segment Information table.
(3) Represents costs incurred to effect and integrate the North and FRC acquisition.
(4) Represents changes in the fair value of the deferred consideration and contingent consideration and compensation liabilities related to the North and FRC acquisition, as well as amortization of acquired definite-lived licensing agreements. The increase during the thirteen weeks ended June 29, 2021 primarily reflects the impact of the amendment to the Fox Restaurant Concepts acquisition agreement that, among other things, included the extension of the earn-out period through 2026.
(5) Reserve for uncertain tax position related to tenant improvement allowances. Uncertain tax positions taken in a tax return are recognized in the financial statements when it is more likely than not that the position will be sustained upon examination by tax authorities based on its technical merits, taking into account available administrative remedies and litigation.
(6) Based on the federal statutory rate and an estimated blended state tax rate, the tax effect on all adjustments assumes a 26% tax rate for the fiscal 2021 and 2020 periods.
(7) Represents the impact of assuming the conversion of Series A preferred stock into common stock (8,126,001 and 8,862,280 shares for the thirteen and twenty-six weeks ended June 29, 2021, respectively), resulting in an assumption of 54,902,770 and 54,837,353 weighted-average common shares outstanding for the thirteen and twenty-six weeks ended June 29, 2021, respectively. The impact of assuming the conversion of Series A preferred stock into common stock (7,019,521 and 3,509,761 shares for the thirteen and twenty-six weeks ended June 30, 2020, respectively), resulting in an assumption of 50,893,967 and 47,333,583 weighted-average common shares outstanding for the thirteen and twenty-six weeks ended June 30, 2020, respectively.
(8) Adjusted net income per share may not add due to rounding.