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Chuy's Holdings, Inc. Announces First Quarter 2017 Financial Results

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Chuy's Holdings, Inc. (NASDAQ:CHUY) today announced financial results
for the first quarter ended March 26, 2017.

Highlights for the first quarter ended March 26, 2017 were as follows:

  • Revenue increased 11.3% to $86.9 million from $78.1 million in the
    first quarter of 2016.
  • Comparable restaurant sales decreased 0.7% as compared to the same
    period in 2016.
  • Net income was $4.6 million, or $0.27 per diluted share, compared
    to $4.5 million, or $0.27 per diluted share, in the first quarter
    of 2016.
  • Restaurant-level operating profit(1) increased to $16.6
    million from $15.9 million in the first quarter of 2016.
  • Two new restaurants opened during the first quarter of 2017.

(1)

  Restaurant-level operating profit is a non-GAAP measure. For a
reconciliation of restaurant-level operating profit to the most
directly comparable GAAP measure see the accompanying financial
tables. For a discussion of why we consider them useful, see
"Non-GAAP Measures" below.
 

Steve Hislop, President and Chief Executive Officer of Chuy's Holdings,
Inc. stated, "Our main focus remains taking care of our customers, one
customer at a time, delivering high-quality, made-from-scratch food and
drink at a tremendous value in a unique and upbeat atmosphere. Our
unique positioning, the broad appeal of our concept, and our flexible
real estate strategy all contribute to our ability to deliver
segment-leading unit growth. Over the last two years, we've expanded our
store base by over 35%, and our 2017 development is off to an active
start with three new restaurants open year to date."

First Quarter 2017 Financial Results

Revenue increased $8.9 million, or 11.3%, to $86.9 million in the first
quarter of 2017 compared to the first quarter of 2016. The increase was
driven by $11.7 million in incremental revenue from an additional 157
operating weeks provided by 14 new restaurants which opened during and
subsequent to the first quarter of 2016. This increase was partially
offset by a decrease in revenue related to our non-comparable
restaurants that are not included in the incremental revenue discussed
above and the loss of 13 operating weeks due to the closing of the
Charlotte, NC location during the third quarter of 2016. Revenue for the
non-comparable restaurants is historically lower as the restaurants
transition out of the 'honeymoon' period that follows a restaurant's
initial opening.

Comparable restaurant sales decreased 0.7% in the first quarter of 2017
as compared to the same period in 2016. The decrease in comparable sales
was driven by a 2.2% decrease in average weekly customers offset by a
1.5% increase in average check. Comparable restaurant sales and average
weekly customers were negatively affected by approximately 60 basis
points due to unfavorable weather and the timing of Valentine's Day
during the week. This negative impact was offset by approximately 30
basis points due to Easter falling in the first quarter of 2016 compared
to the second quarter of 2017. The comparable restaurant base consisted
of 62 restaurants at the end of the first quarter of 2017.

Total restaurant operating costs as a percentage of revenue increased to
80.9% in the first quarter of 2017 from 79.6% in the first quarter of
2016. This increase was primarily driven by higher labor costs due to
new store labor inefficiencies and hourly labor rate inflation and
higher operating costs due to increases in general utility costs. These
increases were offset by lower cost of sales driven by favorable
commodity pricing.

Net income was $4.6 million, or $0.27 per diluted share, compared
to $4.5 million, or $0.27 per diluted share, in the first quarter
of 2016.

Development Update

During the first quarter, two new Chuy's restaurants were opened in
Cedar Park, Texas and Cumberland, Georgia. Subsequent to the end of the
first quarter, one additional Chuy's restaurant was opened in West
Chester, Ohio.

2017 Outlook

The Company currently expects 2017 diluted net income per share of $1.11
to $1.15. The diluted net income per share guidance for fiscal year 2017
includes an estimated $0.05 per share positive impact due to the fourth
quarter of 2017 containing 14 weeks versus 13 weeks in fiscal 2016 and
is further based, in part, on the following annual assumptions:

  • Comparable restaurant sales growth of 0.5% to 1.5% versus a previous
    range of 1.0% to 2.0% (on a 52-week comparable basis);
  • Restaurant pre-opening expenses of $5.8 million to $6.3 million versus
    a previous range of $6.0 million to $6.5 million;
  • General and administrative expense of $20.6 million to $21.1 million;
  • An effective tax rate of 29% to 31%;
  • The opening of 12 to 14 new restaurants;
  • Annual weighted average diluted shares outstanding of 17.0 million to
    17.1 million shares; and
  • Net capital expenditures (net of tenant improvement allowances) of
    $39.0 million to $44.0 million.

The following definitions apply to these terms as used in this
release:

Comparable restaurant sales reflect changes in sales for the
comparable group of restaurants over a specified period of time. We
consider a restaurant to be comparable in the first full quarter
following the 18th month of operations. Changes in comparable sales
reflect changes in customer count trends as well as changes in average
check.

Average check is calculated by dividing revenue by total entrées
sold for a given time period. Average check reflects menu price
influences as well as changes in menu mix.

Average weekly customers is measured by the number of entrées
sold per week. Our management team uses this metric to measure changes
in customer traffic.

Total restaurant operating costs includes cost of sales, labor,
operating, occupancy and marketing costs.

Conference Call

The Company will host a conference call to discuss financial results for
the first quarter of 2017 today at 5:00 p.m. Eastern Time. Steve Hislop,
President and Chief Executive Officer, and Jon Howie, Vice President and
Chief Financial Officer will host the call.

The conference call can be accessed live over the phone by dialing
877-681-3372 or for international callers by dialing 719-325-4758. A
replay will be available after the call and can be accessed by dialing
844-512-2921 or for international callers by dialing 412-317-6671; the
passcode is 1806790. The replay will be available until Thursday, May
11, 2017. The conference call will also be webcast live from the
Company's website at www.chuys.com
under the investors section. An archive of the webcast will be available
through our website shortly after the call has concluded.

About Chuy's

Founded in Austin, Texas in 1982, Chuy's owns and operates 83
full-service restaurants across 16 states serving a distinct menu of
authentic, made from scratch Tex-Mex inspired dishes. Chuy's highly
flavorful and freshly prepared fare is served in a fun, eclectic and
irreverent atmosphere, while each location offers a unique, "unchained"
look and feel, as expressed by the concept's motto "If you've seen one
Chuy's, you've seen one Chuy's!". For further information about Chuy's,
including the nearest location, visit the Chuy's website at www.chuys.com.

Forward-Looking Statements

Certain statements in this release that are not historical facts,
including, without limitation, those relating to our anticipated
financial performance, are forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995 that involve
risks and uncertainties. Such statements are based upon the current
beliefs and expectations of the management of the Company. Actual
results may vary materially from those contained in forward-looking
statements based on a number of factors including, without limitation,
the actual number of restaurant openings, the sales at the Company's
restaurants, changes in restaurant development or operating costs, such
as food and labor, the Company's ability to leverage its existing
management and infrastructure, changes in restaurant pre-opening
expense, general and administrative expenses, capital expenditures, or
our effective tax rate, changes in the number of diluted shares
outstanding, strength of consumer spending, conditions beyond the
Company's control such as timing of holidays, weather, natural
disasters, disease outbreaks, epidemics or pandemics impacting the
Company's customers or food supplies, acts of war or terrorism and other
factors disclosed from time to time in the Company's filings with the
U.S. Securities and Exchange Commission. Investors should take such
risks into account when making investment decisions. Stockholders and
other readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date on which
they are made. The Company undertakes no obligation to update any
forward-looking statements, except as required by law
.

Non-GAAP Measures

We prepare our financial statements in accordance with GAAP. Within our
press release, we make reference to non-GAAP restaurant-level operating
profit and restaurant-level operating margin. Restaurant-level operating
profit represents income (loss) from operations plus the sum of general
and administrative expenses, restaurant pre-opening costs and
depreciation and amortization. Restaurant-level operating profit is
presented because: (i) we believe it is a useful measure for investors
to assess the operating performance of our restaurants without the
effect of non-cash depreciation and amortization expenses; and (ii) we
use restaurant-level operating profit internally as a benchmark to
evaluate our restaurant operating performance and to compare our
performance to that of our competitors. Additionally, we present
restaurant-level operating profit because it excludes the impact of
general and administrative expenses, which are not incurred at the
restaurant level, and restaurant pre-opening costs. Although we incur
pre-opening costs on an ongoing basis as we continue to open new
restaurants, the pre-opening costs are not a component of a restaurant's
ongoing operating expenses. The use of restaurant-level operating profit
thereby enables us and our investors to compare operating performance
between periods and to compare our operating performance to the
performance of our competitors. The measure is also widely used within
the restaurant industry to evaluate restaurant-level productivity,
efficiency and performance. The use of restaurant-level operating profit
as a performance measure permits a comparative assessment of our
operating performance relative to our performance based on our GAAP
results, while isolating the effects of some items that vary from period
to period without any correlation to core operating performance or that
vary widely among similar companies. We present restaurant-level
operating margin for the same reasons we present restaurant-level
operating profit.

Restaurant-level operating profit and restaurant-level operating margin
exclude various expenses as discussed above that may materially impact
our consolidated results of operations. As a result, these measures are
not indicative of the Company's consolidated results of operations. We
present these measures exclusively as supplements to, and not
substitutes for, net income or income from operations computed in
accordance with GAAP. As a supplemental disclosure, restaurant-level
operating profit should not be considered as an alternative to net
income or income from operations as an indicator of our performance or
as alternatives to any other measure determined in accordance with GAAP.

     

Chuy's Holdings, Inc.

Unaudited Condensed Consolidated Income Statements

(In thousands, except share and per share data)

 
Thirteen Weeks Ended
March 26, 2017     March 27, 2016
Revenue $ 86,904 $ 78,054
 
Costs and expenses:
Cost of sales 21,825 19,998
Labor 29,699 25,680
Operating 12,032 10,556
Occupancy 6,121 5,305
General and administrative 4,872 4,533
Marketing 631 583
Restaurant pre-opening 1,102 1,433
Depreciation and amortization 4,161   3,477
Total costs and expenses 80,443   71,565
Income from operations 6,461 6,489
Interest expense, net 16   15
Income before income taxes 6,445 6,474
Income tax expense 1,895   1,942
Net income $ 4,550   $ 4,532
 
Net income per common share: Basic $ 0.27   $ 0.27
Net income per common share: Diluted $ 0.27   $ 0.27
 
Weighted-average shares outstanding: Basic 16,855,275   16,503,226
Weighted-average shares outstanding: Diluted 17,002,256   16,803,756
 
   

Reconciliation of GAAP income from operations to
restaurant-level operating profit:

 
Thirteen Weeks Ended
March 26, 2017     March 27, 2016
 
Income from operations as reported $ 6,461 $ 6,489
General and administrative 4,872 4,533
Restaurant pre-opening 1,102 1,433
Depreciation and amortization 4,161   3,477  
Restaurant-level operating profit $ 16,596   $ 15,932  
 
Restaurant-level operating margin (1) 19.1 % 20.4 %
 
(1)   Restaurant-level operating margin is calculated by dividing
restaurant-level operating profit by revenue.
 
         

Chuy's Holdings, Inc.

Unaudited Selected Balance Sheet Data

(In thousands)

 
March 26, 2017 December 25, 2016
Cash and cash equivalents $ 14,182 $ 13,694
Total assets 247,296 240,728
Long-term debt
Total stockholders' equity 161,868 157,065

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