TXRH 10-K & 10-Q changes, risk factors and insider trading

We cannot assure you that we will be able to open new restaurants that are profitable in accordance with our expansion plans. We have experienced delays in opening some of our restaurants in the past and may experience delays in the future. These delays impact the timing of new restaurant openings and the related pre-opening expenses. Delays or failures in opening new restaurants could adversely affect our growth strategy. One of our biggest challenges in executing our growth strategy may be locating and securing an adequate supply of suitable new restaurant sites that satisfy our financial targets. Competition for suitable restaurant sites in our target markets may be intense.

OurGiven the impact of these various factors, our average unit volume and comparable restaurant sales may not increase at the rates achievedseen in theprior past,periods, which maycould affect ourconstrain sales growth and will continue to be a critical factor affecting ourimpact profitability. Our business is also subject to seasonal fluctuations.fluctuations, Historically,as historically, sales in most of our restaurants have beenseen higher levels during the winterfirst monthshalf of eachthe year. Holidays,Variables such as holidays, changes in weather, severe weather,weather events, and similar conditions may impactdrive sales volumeshigher seasonallyor lower in somecertain operating regions.regions Accordingly,at different times. Therefore, the results forof one fiscal quarter areshould not necessarilybe viewed as indicative of resultsforthcoming to be expected for any other quarterquarters or for anythe year as a whole, and comparable restaurant sales forin any particular future period may decrease.decline. InShould the future,our operating results may fall below the expectations of securities analysts and investors.investors In that event,in the future, it could result in a decrease in the market price of our common stock could decrease.stock.

The development of additional restaurant concepts, including Bubba’s 33 and Jaggers, created internally or acquired as a part of our other strategic initiativesinitiatives, may not be as successful as our experience in the development of the Texas Roadhouse concept. These concepts may have lower brand awareness and less operating experience than most Texas Roadhouse restaurants. In addition, they may have a higher initial investment cost and/or a lower per person average check amount. AsPursuing a result, the development and/or acquisition of additional restaurantnew concepts may notdivert contribute to our average unit volume growthcapital and/or profitability in an incremental way. We can provide no assurance that these units will be accepted in the markets targeted for expansion and/or that we or our franchisees will be able to achieve our targeted returns when opening new locations. In the future, we may determine not to move forward with any further expansion and/or acquisition of additional restaurant concepts. These decisions could limit or delay our overall long-term growth. Additionally, expansion and/or acquisition of additional restaurant concepts might divert our management’smanagement attention from other business concerns or initiatives and could have an adverse impact on our core Texas Roadhouse business.operations.

Additionally, weWe may evaluate other means to leverage our competitive strengths, including the expansion of our products across other strategic initiatives or business opportunities (including retail initiatives utilizing our intellectual property). The expansion of our products may damage our reputation if products bearing our brands are not of the same quality or value that guests associate with our concepts or if our partners are accused of any actual or alleged misconduct. In addition, we may experience dilution of the goodwill associated with our concepts as they become more common and increasingly accessible.

As of December 31,30, 2024,2025, we operated a total of 93101 company restaurants in Texas and 4850 company restaurants in Florida. As a result, we are particularly susceptible to adverse trends and economic conditions in those states, including any state mandatedstate-mandated changes in minimum and tipped wage rates and other laws and regulations that have a direct or indirect impact on our operations as well as economic pressures that may result in lower sales and profits at our restaurants. In addition, given our geographic concentration in these states, negative publicity regarding any of our restaurants in either Texas or Florida could have a material adverse effect on our business and operations, as could other occurrences in either Texas or Florida such as health epidemics or pandemics, local strikes, energy shortages or extreme fluctuations in energy prices, droughts, earthquakes, hurricanes, tornados, fires, or other natural disasters.

Our ability to fund our operating plans and to implement our capital allocation strategies depends on sufficient cash flow from operations and/or other financing, including the use of funding under our credit facility. We also may seek access to the debt and/or equity capital markets. There can be no assurance, however, that these sources of financing will be available on terms favorable to us, or at all. Our capital allocation strategies include, but are not limited to, new restaurant development, payment of dividends, refurbishment or relocation of existing restaurants, franchise acquisitions, payment of dividends, and repurchases of our common stock, and franchise acquisitions.stock. If we experience decreased cash flow from operations, our ability to fund our operations and planned initiatives, and to take advantage of growth opportunities, may be delayed or negatively affected. In addition, these disruptions or a negative effect on our revenue could affect our ability to borrow or comply with our covenants under our credit facility. If we are unable to raise additional capital, our growth could be impeded.

The lenders’ obligation to extend credit under our credit facility depends on our maintaining certain financial covenants. If we are unable to maintain these covenants, we would be unable to obtain additional financing under this credit facility. The credit facility permits us to incur additional secured or unsecured indebtedness outside the credit facility, except for the incurrence of secured indebtedness that in the aggregate is equal to or greater than $125.0 million and 20% of our consolidated tangible net worth or circumstances where the incurrence of secured or unsecured indebtedness would prevent us from complying with our financial covenants. If we are unable to borrow additional capital or have sufficientinsufficient liquidity to either repay or refinance the then outstanding balance at the expiration of our credit facility, or upon violation of the covenants, our growth could be impeded and our financial performance could be significantly adversely affected.

Our success depends, in part, upon the popularity of our food products. Continued social concerns or shiftsShifts in consumer preferences awayor fromsocial concerns regarding our restaurantsrestaurants, food sourcing, or foodbeef offerings, particularly beef,offerings could harmreduce ourdemand. business.Medical Consumer preferences regarding food sourcing in response to environmentalconditions or welfaretreatments concernsthat couldrestrict alsoconsumption harmof ourcertain business. Additionally, current and new medical treatmentsfoods may cause consumers to avoid or consume less of our products.products and current and new medical treatments such as GLP-1 agonists may shift consumer preferences.

InFactors that could adversely affect the demand for our products in future periods,periods theinclude U.S. and global economies could further suffer from a downturn inrecessionary economic activity. Recessionary economic cycles,cycles; higher interest rates,rates; higher fuel and other energy costs,costs; sustained labor inflation,inflation; increases in commodity prices,prices; higher levels of unemployment,unemployment; higher consumer debt levels,levels; consumer confidence; consumer purchasing and savings habits; home values; credit conditions; stock market performance; higher tax rates and other changes in tax laws,laws; imposition of tariffs,tariffs; financial market volatility,volatility; political or military conflicts,conflicts; social unrest,unrest; government spending,spending; a low or stagnant pace of economic recovery and growth,growth; or other economic factors that may affect consumer spending or buying habits could adversely affect the demand for our products.habits. In addition, there is no assurance that any governmental plans to stimulate the economy will foster growth in consumer spending or buying habits. As in the past, we could experience reduced guest traffic or we may be unable or unwilling to increase the prices we charge for our products to offset higher costs or fewer transactions, either of which could reduce our sales and profit margins. Also, landlords or other tenants in the shopping centers in which some of our restaurants are located may experience difficulty as a result of macroeconomic trends or cease to operate, which could in turn negatively affect guest traffic at our restaurants. All of these factors could have a material adverse impact on our business, results of operations, financial condition, or liquidity.

In addition to having to comply with these licensing requirements, various federal and state labor laws govern our relationship with our employees and affect operating costs. TheseFor example, federal and state wage and hour laws includeand regulations govern such matters as minimum wage and tipped wage requirements, overtime pay,overtime, meal and rest breaks, proper exempt classifications,classification, child labor, pay for all hours worked (including overtime), and proper handling of tips. A significant number of our hourly restaurant personnel receive tips as part of their compensation and are paid at or above a minimum wage after giving effect to applicable tips. Other federal and state labor laws and regulations govern such matters as health benefits, unemployment taxes, workers’ compensation, work authorization and eligibility requirements, working conditions and safety standards, equal employment opportunities, anti-discrimination and harassment requirements,harassment, and workingother conditions.similar legal requirements. A number of factors could adversely affect our operating results, including:

TheAs federalplaces of public accommodation, our restaurants are required to comply with the applicable requirements of the Americans with Disabilities Act prohibits("ADA") discriminationand onrelated state accessibility statutes. Under the basisADA and related state laws, we must provide equal access to our goods and services to disabled guests, which means complying with the applicable ADA Standards for Accessible Design when constructing or undertaking remodeling of disabilityour in public accommodations and employment.restaurants. Although our restaurants and other places of accommodation are designed to be accessible to thedisabled disabled,guests, we could be required to make unexpected modifications to provide service or equal access to, or make reasonable accommodations,accommodations forfor, disabled persons.guests.

Increasing legal complexity will continue to affect our operations and results. We could be subject to legal proceedings and enforcement actions that may adversely affect our business, including class actions,actions; administrative proceedings,proceedings; government investigations, employment andinvestigations; personal injury claims,claims; claims alleging violations of federal and state laws regarding consumer, workplace, and employment matters,matters immigration(including, matters,but no limited to, wage and hour claims, discriminationclaims and similardiscrimination, matters,harassment, and/or retaliation claims); immigration matters; landlord/tenant disputes,disputes; disputes with current and former suppliers,suppliers; claims by current and former franchisees,franchisees; data privacy claims,claims; and intellectual property claims (including claims that we infringed upon another party’s trademarks, copyrightscopyrights, or patents). Additionally, we are subject to Securities and Exchange Commission ("SEC") and NASDAQ reporting and disclosure requirements. Inconsistent standards imposed by state and federal governmental authorities can adversely affect our business and increase our cost of compliance and exposure to litigation which could result in significant judgments, including punitive and liquidated damages, and injunctive relief.

We are primarily subject to federal, state, and local income and other taxes in the United States. Our effective income tax rate and other taxes in the future could be affected by a number of factors, including changes in the valuation of deferred tax assets and liabilities,liabilities; changes in tax laws or other legislative changes,changes; and the outcome of income tax audits. Any significant increases in income tax rates, changes in and/or interpretations of income tax laws, or unfavorable resolution of tax matters could have a material adverse impact on our results of operations, financial condition, or liquidity.

FailureCorporate to properly address environmental, social, and/or governance ("ESG ")responsibility matters could adversely affect our brand, business, results of operations, and financial condition.

Entities across all industries are facing increased attention related to environmental, social, and/or governance ("ESG") matters including packaging and waste,waste; animal health and welfare,welfare; human rights,rights; reproductive rights,rights; diversity and inclusion efforts,efforts; climate change,change; greenhouse gases,gases; and land, energy, and water use. In addition, we have faced enhanced pressure to not only provide expanded disclosures around ESG matters and establish goals or targets with respect to ESG matters but also pressure to scale back our programs and/or initiatives relating to the same.

Evolving consumer and investor interest and preferences as well as governmental regulation and scrutiny may result in additional disclosure, due diligence, reporting, and specific target-setting with regard to our business and supply chain that could result in additional costs to comply with such demands. However, our ESG-relatedESG related programs and initiatives and disclosures relating to the same may also result in brand and/or reputational risks and demands. Failure to balance these competing demands could result in consumer or investor scrutiny and/or litigation and could have an adverse effect on our business. EstablishingAdditionally, establishing targets or making other public commitments due to these demands, without a full or complete understanding of the cost or operational impact of changes in our supply chain or operating model, could also adversely affect our business and financial condition. In addition, some individuals, shareholder activists, government officials, and regulators have expressed opposing views and actions with respect to ESG matters which includes the proposal or enactment of "Anti-ESG" policies and initiatives. We may face increased scrutiny, reputational risk, and other demands from these parties regarding our ESG initiatives.

Labor is a primary component in the cost of operating our business. We devote significant resources to recruitingattracting, retaining, engaging, recognizing, training, and trainingdeveloping our restaurant managers and hourly employees. Increased labor costs due to competition, unionization, increased minimum and tipped wages, changes in hourly and overtime pay, state unemployment rates, sick pay or other employee benefits costs (including workers’ compensation and health insurance), company staffing initiatives, changes in government immigration enforcement efforts, or otherwise any regulatory changes resulting from any of the foregoing would adversely impact our operating expenses. In addition, failure to adequately monitor and proactively respond to employee dissatisfaction could lead to poor guest satisfaction, higher turnover, litigation, and possible unionization efforts, which could negatively impact our results of operations.

Increased competition for qualified employees caused by a shortage in the labor pool exerts upward pressure on wages paid to attract and retain such personnel, resulting in higher labor costs, together with greater recruitment and training expense.and development expenses. We could suffer from significant indirect costs, including restaurant disruptions due to management or hourly labor turnover and potential delays in new restaurant openings. A shortage in the labor pool could also cause our restaurants to be required to operate with reduced staff which could negatively impact our ability to provide adequate service levels to our guests resulting in adverse guest reactions and a possible reduction in guest traffic counts. Additionally, personal or public health concerns might make some existing personnel or potential candidates reluctant to work in enclosed restaurant environments.

Our success depends on our ability to attract, motivate,retain, engage, recognize, train, and retaindevelop qualified employees to keep pace with our growth strategy. If we are unable to do so, our results of operations may also be adversely affected.

Risks Related to Technology, PrivacyCybersecurity, and Intellectual PropertyPrivacy

We rely heavily on information systems in all aspects of our operations, including point-of-sale systems, digital apps, financial systems, marketing programs, e-commerce, and various other processes and transactions. This reliance has significantly increased in recent years as we have had to depend to a greater extent on systems such as online ordering, contactless payments, and online waitlists as our guests are increasingly using our website and digital applications to place and pay for their orders. Our point-of-sale processing in our restaurants includes collection of cash, credit cards, debit cards, gift cards, and other processes and procedures. Our ability to efficiently and effectively manage our business depends significantly on the reliability, security, and capacity of these systems. As our business needs continue to evolve, these systems will require upgrading and maintenance over time, consequently requiring significant future commitments of resources and capital. As we become increasingly reliant on digital ordering and payment as a sales channel, our business could be negatively impacted if we are unable to successfully implement, execute, or maintain our consumer-facing digital initiatives. Additionally,In theaddition, we rely on third-party cloud, hosting, content delivery, and telecommunications providers, and disruptions, outages, or degradations at these providers could impair our digital ordering and point-of-sale systems. The increased use of remote work has also increased the susceptibility of our infrastructure to disruption.

The failure of these systems to operate effectively, maintenance problems, upgrading or transitioning to new platforms, or a material breach in the security of these systems could result in delays or errors to guest service and reduce efficiency in our operations. In addition, as we implement new technology platforms and AI programs to improve productivity and overall guest experience,productivity, there can be no guarantees that these platforms will operate as reliably or be as operationally impactful as intended.intended and such platforms may increase our operational, privacy, cybersecurity, and intellectual property risks, including errors, bias, data leakage, and claims related to training data and generated outputs, and may increase expenses. We may also be dependent on third-party AI models and vendors, whose availability, reliability, performance, or terms of use may change.

We have disaster recovery procedures and business continuity plans in place to address physical and technological crises, including tornadoes and other natural disasters, and back-up off-site locations for recovery of electronic and other forms of data information. However, if we are unable to fully implement our disaster recovery and business continuity plans, we may experience delays in recovery of data, inability to perform vital corporate functions, tardiness in required reporting and compliance, failures to adequately support field operations, and other breakdowns in normal communication and operating procedures that could have a material adverse effect on our financial condition, results of operations, and exposure to administrative and other legal claims. Certain scenarios, such as extended cloud disruptions, domain name system failures, payment processor outages, or a critical vendor’s insolvency, may fall outside the assumption of our plans. Cyberinsurance may be unavailable, insufficient, or subject to significant retentions, sublimits, or exclusions and may not cover all costs or lost profits.

Our systems and those of our vendors may be vulnerable to a variety of threats and the rapid evolution and increased adoption of artificial intelligenceAI technologies may intensify our cybersecurity risks. These risks can include unauthorized access, theft, use, destruction, or other compromises of our systems and can occur through a variety of methods, including attacks using malware, ransomware, denial of service attacks, or phishing incidents. While we have not hadidentified a cybersecurity incident that has had a material impact on our operations,operations to date, there can be no assurances that such incidents will not occur in the future. Any such attack or disruption could cause an interruption of normal business operations, damage to our reputation, and a loss in guest confidence. Additionally,We weare could bealso subject to litigationevolving disclosure and governmentgovernance enforcementrequirements actionsrelated asto acybersecurity, and failure to timely assess and disclose material cybersecurity incidents or to maintain effective processes could result of any such failure. Any such event could cause us to incur significant unplanned expenses in excessregulatory ofscrutiny, our insurance coverage, which could have a material impact on our financial conditionlitigation, and resultsreputational of operations.harm.

We could be subject to litigation and government enforcement actions as a result of any such failure. Any such event could cause us to incur significant unplanned expenses in excess of our insurance coverage, which could have a material impact on our financial condition and results of operations. Additionally, our ability to expand and update our information technology infrastructure in response to our growing and changing needs could be inhibited in the event of a cybersecurity incident. This could lead to a delayed implementation of new service offerings, disruptions to guest experiences including via our website and applications, and the diversion of resources that would otherwise be invested in expanding our business and operations.

Some business processes are currently outsourced to third parties, including such processes as information technology,technology; credit, debit, and gift card authorization and processing,processing; insurance claims processing,processing; unemployment claims processing,processing; property, sales, and payroll tax filings,filings; vendor payment processing,processing; and other accounting processes. We continually evaluate our other business processes to determine if additional outsourcing is an appropriate option to accomplish our goals. These third-party vendors may be subject to cybersecurity risks and any interruptions or malfunctions in their operations may cause interruptions of our normal business operations for which we may have limited or no control.

We may incur increased costs to comply with privacyprivacy, data protection, and data protectionAI laws and, if we fail to comply or our systems are compromised by a security breach, we could be subject to government enforcement actions, private litigation, and adverse publicity.

New, modified, and existing privacyprivacy, data protection, and data protectionAI laws and regulations at the local, state, federal, and international levels may result in significant costs and compliance challenges and adversely affect our business and financial condition. An expanding patchwork of privacy and AI laws and targeted statutes imposes differing obligations related to notice, consumer rights and appeals, data minimization, sensitive data restrictions, targeted advertising, and certain profiling, and such requirements continue to evolve. These obligations vary materially by jurisdiction and may increase compliance complexity and costs, potentially impede the development and offering of new products or services, and adversely impact the guest experience. These privacy laws and regulations, which are constantly evolving,regulations may be interpreted by regulatory authorities in new and differing manners, including the issuing of rulings that invalidate prior laws or regulations or increase penalties, and such interpretations may be inconsistent among jurisdictions. We may incur increased costs to comply with increasingly demanding privacy laws and regulations and such compliance may impede the development and offering of new products or services and may adversely impact the guest experience. We could also be subject to government enforcement actions, private litigation, and adverse publicity including reputational damage and loss of guest confidence.

We receive and maintain certain personal, financial, or other information about our guests, vendors, and employees. In 2024,2025, approximately 88%89% of our transactions were by credit or debit cards. In addition, certain of our vendors receive and/or maintain certain personal, financial, and other information about our employees and guests on our behalf. The use and handling, including security, of this information is regulated by privacy and data protection laws and regulations in various jurisdictions, as well as by certain third-party contracts, frameworks, and industry standards, such as card network rules and the Payment Card Industry Data Security Standard. Hardware, software, or other applications we develop and procure from third parties or vendor’s third-party applications could be subject to vulnerabilities or cybersecurity incidents or may contain unknown defects in design or manufacture or other problems that could unexpectedly compromise information security. Unauthorized parties may also attempt to gain access to our systems and facilities through fraud, trickery, or other forms of deceiving our employees or vendors.

The restaurant industry is intensely competitive. We compete with many well-established food service companies on the basis of taste, quality, and price of products offered, guest service, atmosphere, location, take-out and delivery options, and overall guest experience. Our competitors include a large and diverse group of restaurant chains and individual restaurants that range from independent local operators that have opened restaurants in various markets to well-capitalized national restaurant chains. We also face competition from meal kit delivery services as well as the supermarket industry. In addition, improving product offerings of fast-casual and quick-service restaurants, together with negative economic conditions could cause consumers to choose less expensive alternatives. As our competitors expand their operations, we expect competition to intensify. We also compete with other restaurant chains and other retail establishments for quality site locations and employees. Our competitors may generate or more effectively implement business strategies that improve the value and the relevance of their brands and reputation, relative to ours. This includes our competitors’ ability to adapt and respond to new technological developments, including artificial intelligence,AI, to develop new customer insights that allows them to better respond to changing guest expectations.

Health, socialsocial, and environmental concerns relating to the consumption or sourcing of beef or other food products could affect consumer preferences and could negatively impact our results of operations.

Food safety and sanitation is a top priority, and we dedicate substantial resources to help our guests enjoy safe, quality food products. However, food-borne illnesses and food safety issues occur in the food industry from time to time. Any report or publicity, whether true or not, linking us to instances of food-borne illness or other food or beverage safety issues, including food tampering or contamination, could adversely affect our concepts and reputation as well as results of operations. In addition, instances of food-borne illness, food tampering, or food contamination occurring solely at restaurants of our competitors could result in negative publicity about the food service industry generally and adversely impact our revenue and profits. Increased public and regulatory scrutiny of substances associated with food and food packages could also lead to supplier disruptions, product reformulations, recalls, litigation, reputational harm, or new regulatory requirements that increase our costs.

We operate on a fiscal year that ends on the last Tuesday in December. Fiscal year 20242025 was 53 weeks in length and, as such, the fourth quarter of fiscal 2024 was 14 weeks in length. Fiscal years 2023 and 2022 were both 52 weeks in length, and the fourth quartersquarter were bothwas 13 weeks in length. Fiscal year 2024 was 53 weeks in length, and the fourth quarter was 14 weeks in length.

We have entered into area development and franchise agreements for the development and operation of Texas Roadhouse restaurants in numerous foreign countries and one U.S. territory. We have also entered into domestic and international area development agreements for Jaggers, our fast-casual concept.Jaggers.

In 2024,2025, we opened 3128 company restaurants while our franchise partners opened 14four restaurants. The company restaurants included 2620 Texas Roadhouse restaurants, fourseven Bubba’s 33 restaurants, and one Jaggers restaurant. The franchise restaurants included 11three international Texas Roadhouse restaurants, including one restaurant in a U.S. territory, twoand one domestic Jaggers restaurants, and our first international Jaggers restaurant.

At our high volume restaurants, we continue to look for opportunities to increase our dining room capacity by adding on to our existing building and/or to increase our parking capacity by leasing or purchasing property that adjoins our site. We also continue to make a number of building modifications and/or expansions to existing restaurants in order to better accommodate increased dine-in and to-go sales. These modifications include room expansions which add additional guest seating, the addition of to-go areas,seating and cooler expansions to accommodate higher inventory levels.

In recent years, we have relocated severala number of existing Texas Roadhouse locations at or near the end of their associated lease or as a result of eminent domain which allowed us to move to a better site, update them to a current prototypical design, construct a larger building with more seats and greater number of available parking spaces, accommodate increased to-go sales, and/or obtain more favorable lease terms. We continue to evaluate these opportunities particularly as it relates to older locations with strong sales.

In calculating restaurant margin, we exclude certain non-restaurant-level costs that support operations, including pre-opening and general and administrative expenses, but do not have a direct impact on restaurant-level operational efficiency and performance, including general and administrative expenses.performance. We exclude pre-opening expenses as they occur at irregular intervals and would impact comparability to prior period results. We exclude depreciation and amortization expenses, substantially all of which relate to restaurant-level assets, as they represent a non-cash charge for the investment in our restaurants. We exclude impairment and closure expenses as we believe this provides a clearer perspective of the Company’s ongoing operating performance and a more useful comparison to prior period results. Restaurant margin as presented may not be comparable to other similarly titled measures of other companies in our industry. A reconciliation of income from operations to restaurant margin is included in the Results of Operations section below.

Franchise Royalties and Franchise Fees. Franchise royaltiesRoyalties consist of royalties,franchise royalites, as defined in our franchise agreement, paid to us by our domestic and international franchisees.franchisees, as well as royalties related to our royalty-based retail products. Domestic and international franchisees also typically pay an initial franchise fee and/or development fee for each new restaurant or territory. Revenues related to our royalty-based retail products are also included within franchise royalties and fees.

Restaurant Other Operating Expenses. Restaurant other operating expenses consist of all other restaurant-level operating costs, the major components of which are supplies, utilities, profit sharing incentive compensation for our restaurant managing partners and market partners, utilities, credit card fees, general liability insurance, advertising, repairs and maintenance, property taxes, and outside services.

General and Administrative Expenses. General and administrative expenses comprise expenses associated with corporate and administrative functions that support development and restaurant operations and provide an infrastructure to support future growth. This includes salary, incentive-basedincentive-based, and share-based compensation expense related to executive officers and Support Center employees, salary and share-based compensation expense related to market partners, software hosting fees, professional fees, group insurance, and the realized and unrealized holding gains and losses related to the investments in our deferred compensation plan.

Equity Income from Investments in Unconsolidated Affiliates. Equity income includes our percentage share of net income earned by unconsolidated affiliates and our share of any gain on the acquisition of these affiliates. As of December 31, 2024 and December 26, 2023, weWe owned a 5.0% to 10.0% equity interest in 14 and 20 domestic franchise restaurants.restaurants as of December 30, 2025 and December 31, 2024, respectively.

Total revenue increased $741.7$504.7 million or 16.0%9.4% to $5.9 billion in 2025 compared to $5.4 billion in 2024 compared to $4.6 billion in 2023 primarily due to an increase in store weeks and comparable restaurant sales andpartially anoffset increaseby lapping the benefit of the additional week which added $114.7 million in storerevenue weeks.in Comparable2024. Store weeks and comparable restaurant sales and store weeks increased 8.5%5.0% and 7.5%,4.9%, respectively, at company restaurants in 2025 compared to 2024. The increase in store weeks was due to new store openings and the acquisition of franchise restaurants. The increase in comparable restaurant sales was due to an increase in guest traffic along with an increase in per person average check. The increase in store weeks was due to new store openings and the benefit of the additional week in 2024. The additional week added $114.7 million in revenue and a 2% benefit to store week growth.

Net income increaseddecreased $128.7$28.0 million or 42.2%6.5% to $405.6 million in 2025 compared to $433.6 million in 2024 compared to $304.9 million in 2023 primarily due to higherlower restaurant margin dollars, as described below, partially offset byand higher depreciation and amortization expenses andpartially higheroffset generalby andlower administrativeincome expenses.tax expense. In addition, income tax expense decreased due to the decrease in profitability. Diluted earnings per share increaseddecreased 42.5%5.8% to $6.47$6.10 from $4.54$6.47 in the prior year primarily2024 due to the increasedecrease in net income.income partially offset by the impact of share repurchases. Diluted earnings per share growth was positivelynegatively impacted by approximately 5%4% as a result of the additional week.week in 2024.

Restaurant margin dollars increaseddecreased $207.8$10.1 million or 29.4%1.1% to $905.7 million in 2025 compared to $915.8 million in 2024 compared to $708.0 million in 2023 primarily due to an increase in food and beverage costs and lapping the benefit of the additional week in the prior year partially offset by higher sales. Restaurant margin, as a percentage of restaurant and other sales, increaseddecreased to 15.5% in 2025 compared to 17.1% in 2024 compared to 15.4% in 2023.2024. The increasedecrease in restaurant margin, as a percentage of restaurant and other sales, was primarily drivendue byto highercommodity sales. The benefitinflation of a higher average guest check6.1% and labor productivity more than offset wage and other labor inflation of 4.6%3.7% andpartially commodityoffset inflationby ofhigher 0.7%.sales.

In addition, capital allocation spend in 20242025 included capital expenditures of $354.3$388.0 million, franchise acquisitions of $107.5 million, dividends of $162.9$180.3 million, and repurchases of common stock of $79.8$150.0 million.

The increase in restaurant sales for 20242025 was primarily attributable to an increase in store weeks and an increase in comparable restaurant sales. The increase in store weeks was driven by the opening of new restaurantsstore openings and the 2% benefitacquisition of thefranchise additional week in 2024.restaurants. The increase in comparable restaurant sales growth was driven by an increase in guest traffic count along with an increase in our per person average check as shown in the table below.

Per person average check for 20242025 includes the benefit of menu price increases of approximately 2.2%1.4% and 0.9%1.7% implemented in Q2 20242025 and Q4 2024,2025, respectively. We implemented menu price increases of approximately 2.2% and 2.7%0.9% in Q2 20232024 and Q4 2023,2024, respectively. In addition, we plan to implement a menu price increase of approximately 1.4%1.9% in earlyQ2 April.2026.

In 2024,2025, we opened 3128 company restaurants, which included 2620 Texas Roadhouse restaurants, fourseven Bubba’s 33 restaurants, and one Jaggers restaurant. In 2024,2025, we had store week growth of approximately 7.5%5.0% across all concepts, including a benefit from franchise acquisitions in 2025, offset by lapping the impact of 2% from the additional week. In 2025, we expect store week growthin of approximately 5% across all concepts, including a benefit of 2% from the acquisition of 13 domestic franchise restaurants at the beginning of our 2025 fiscal year.2024.

Franchise Royalties and Franchise Fees

Food and beverage costs, as a percentage of restaurant and other sales, decreasedincreased to 35.0% in 2025 compared to 33.4% in 2024 compared to 34.6% in 2023.2024. The decreaseincrease was primarily driven by commodity inflation of 6.1% in 2025, due to higher beef costs, and shifts within the menu, partially offset by the benefit of a higher average guest check partially offset by commodity inflation of 0.7% in 2024 primarily due to higher beef costs.check.

In 2025,2026, we expect commodity inflation of 3%approximately to 4%7% for the year with prices locked for approximately 40%45% of our forecasted costs and the remainder subject to floating market prices.

Restaurant labor expenses, as a percentage of restaurant and other sales, decreasedincreased to 33.3% in 2025 compared to 33.1% in 2024 compared to 33.4% in 2023.2024. The decreaseincrease was primarily driven by wage and other labor inflation of 3.7% in 2025, partially offset by the benefit of a higher guest check and labor productivity partially offset by wage and other labor inflation of 4.6% in 2024.productivity. Wage and other labor inflation was driven by higher wage and benefit expense due to labor market pressures along with increases in state-mandated minimum and tipped wage rates and increased investment in our people.

In 2025,2026, we anticipate our labor costs will continue to be pressured byexpect wage and other labor inflation of 4%3% to 5%.4%.

Restaurant rent expense, as a percentage of restaurant and other sales, decreasedincreased to 1.6% in 2025 compared to 1.5% in 2024 compared to 1.6% in 2023.2024. The decreaseincrease was driven by higher rent expense at our recently acquired restaurants and newer restaurants, partially offset by the increase in average unit volume partially offset by higher rent expense at our newer restaurants.volume.

Restaurant other operating expenses, as a percentage of restaurant and other sales, decreased to 14.9%14.6% in 20242025 compared to 15.0%14.9% in 2023.2024. The decrease was driven by lower incentive compensation expense, the increase in average unit volumevolume, and lower general liability insurance expense of $2.7 million, partially offset by higher incentivecredit compensationcard expensefees and higherutilities general liability insurance expense. The increase in incentive compensation expense was due to favorable operating results and the increase in general liability insurance expense was due to unfavorable claims experience and an increase in retention levels.expenses.

Impairment and closure costs, net were $1.2$0.3 million and $0.3$1.2 million in 20242025 and 2023,2024, respectively. In 2025, impairment and closure costs, net related to restaurant relocations. In 2024, impairment and closure costs, net included $0.8 million related to the impairment of a building at a previously relocated store and $0.4 million related to ongoing closure costs for stores which have been relocated. In 2023, impairment and closure costs, net primarily related to ongoing closure costs for stores which have been relocated.

General and administrative expenses, as a percentage of total revenue, decreased to 4.2%3.9% in 20242025 compared to 4.3%4.2% in 2023.2024. The decrease was driven by the increase in average unit volumevolume, lower incentive compensation expense, and a separation payout of $2.6 million in Q1 2023, related to the retirement of an executive officer, partially offset by higherlower restricted stock expense and incentive compensation expense. The increase in restricted stock expense was primarily due to shiftinglapping the impact of the shift in the timing of our restricted stock grants from quarterly to annually.

Interest income, net was $3.1 million in 2025 compared to $6.8 million in 2024 compared to $3.0 million in 2023.2024. The increasedecrease was driven by increaseddecreased earnings on our cash and cash equivalents and decreased borrowings on our revolving credit facility in 2024.equivalents.

Equity income was $2.9 million in 2025 compared to $1.2 million in 20242024. comparedThe to $1.4 millionincrease in 2023. The decrease in 20242025 was primarily driven by a $0.6$2.2 million gain on the acquisition of foursix of these affiliates in 2023 partially offset by increaseddecreased earnings onfrom these remainingfewer affiliates.

Our effective tax rate increaseddecreased to 13.8% in 2025 compared to 15.3% in 2024 compared to 12.5% in 2023.2024. The increasedecrease was driven by aan decreaseincrease in the impact of the FICA tip tax credit, due to increased profitability. In 2025, we expect an effective tax rate of 15% to 16% based on forecasted operating results.credit.

We manage our restaurant and franchising operations by concept and as a result have identified Texas Roadhouse, Bubba'sBubba’s 33, Jaggers,and andJaggers as separate operating segments. In addition, we have identified our retail initiatives as a separate operating segments.segment. OurFinally, reportablewe segmentshave areidentified Texas Roadhouse and Bubba's 33.33 as reportable segments. The Texas Roadhouse reportable segment includes the results of our company and franchise Texas Roadhouse restaurants. The Bubba's 33 reportable segment includes the results of our company Bubba's 33 restaurants. Our remaining operating segments, which include the results of our company and franchise Jaggers restaurants and our retail initiatives, are included in Other. In addition, corporate-related assets, depreciation and amortization, and capital expenditures are also included in Other.

ManagementThe chief operating decision maker ("CODM") uses restaurant margin as the primary measure for assessing performance of our segments. Restaurant margin (in dollars and as a percentage of restaurant and other sales) represents restaurant and other sales less restaurant-level operating costs, including food and beverage costs, labor, rent, and other operating costs. Restaurant margin is used by our chief operating decision makerCODM to evaluate restaurant-level operating efficiency and performance.performance, assist in the evaluation of operating trends over time, and in making capital allocation decisions. Capital allocation decisions include approving new store openings and the refurbishment, expansion, or relocation of existing restaurants. A reconciliation of income from operations to restaurant margin is included in the Results of Operations section above.

In our Bubba’sTexas 33Roadhouse reportable segment, restaurant margin dollars increaseddecreased $12.5$13.4 million or 36.8%1.5% in 2024.2025. The increasedecrease was primarily due to higher salesfood and improvedbeverage laborcosts productivitydriven by commodity inflation and lapping the benefit of the additional week in the prior year, partially offset by wagehigher and other labor inflation.sales.

Net cash provided by operating activities was $730.1 million in 2025 compared to $753.6 million in 2024 compared to $565.0 million in 2023.2024. The increasedecrease was primarily due to ana increasedecrease in net income,income and an unfavorable change in working capital partially offset by an increase in depreciation and amortization expense, and a favorable change in working capital.expense.

Our future capital requirements will primarily depend on the number and mix of new restaurants we open, the timing of those openings, and the restaurant prototype developed in a given fiscal year.year, and potential franchise acquisitions. These requirements will include costs directly related to opening, maintaining, or relocating restaurants and may also include costs necessary to ensure that our infrastructure is able to support a larger restaurant base.

We intend to satisfy our capital requirements over the next 12 months with cash on hand, net cash provided by operating activities, and ifas needed, funds available under our revolving credit facility. In 2025,2026, we expect capital expenditures of approximately $400 million.

Net cash used in financing activities was $357.8 million in 2025 compared to $275.7 million in 2024 compared to $267.4 million in 2023.2024. The increase is primarily due to an increase in share repurchases and an increase in our quarterly dividend payments partially offset by the $50 million repayment of our revolving credit facility in 2023.dividends.

On February 14,19, 2024,2025, our Board authorized the payment of a quarterly dividend of $0.61$0.68 per share of common stock compared to the quarterly dividend of $0.55$0.61 per share of common stock declared in 2023.2024. The paymentpayments of quarterly dividends totaled $162.9$180.3 million and $147.2$162.9 million in 20242025 and 2023,2024, respectively. On February 19,18, 2025,2026, our Board declared a quarterly cash dividend of $0.68$0.75 per share of common stock.

WeOn maintainApril 24, 2025, we entered into an agreement for a revolving credit facility (the "credit facility") with a syndicate of commercial lenders led by JPMorgan Chase Bank, N.A. and PNC Bank, N.A. TheThis credit facility issuperseded anand unsecured,replaced revolvingour previous credit agreement and has a borrowing capacity of up to $300.0 million with the option to increase by an additional $200.0 million subject to certain limitations, including approval by the syndicate of lenders. The credit facility has a maturity date of May 1, 2026.facility.

Texas Roadhouse, Inc. is a growing restaurant company operating predominantly in the casual dining segment. Our late founder, W. Kent Taylor, started the Company in 1993 with the opening of the first Texas Roadhouse restaurant in Clarksville, Indiana. Since then, we have grown to three concepts with 822832 restaurants in 49 states, one U.S. territory, and ten foreign countries. As of MarchJune 31,30, 2026, our 822832 restaurants included:

Throughout this report, the 13 weeks ended MarchJune 31,30, 2026 and AprilJuly 1, 2025, are referred to as Q1Q2 2026 and Q1Q2 2025, respectively. The 26 weeks ended June 30, 2026 and July 1, 2025, are referred to as 2026 YTD and 2025 YTD, respectively. Fiscal year 2026 will be 52 weeks in length, with the quarters 13 weeks in length. Fiscal year 2025 was 52 weeks in length, with the quarters 13 weeks in length.

Net income increaseddecreased $9.8$2.2 million or 8.6%1.7% to $123.4$121.9 million in Q1Q2 2026 compared to $113.7$124.1 million in Q1Q2 2025 primarilyas duethe toincrease higherin restaurant margin dollars, as described below, partiallywas more than offset by higherincreases in pre-opening, depreciation and amortization expensesamortization, and higher general and administrative expenses. Diluted earnings per share increaseddecreased 9.6%0.7% to $1.87$1.85 in Q1Q2 2026 from $1.70$1.86 in Q1Q2 2025 due to the increasedecrease in net income andpartially offset by the impact of share repurchases.

CapitalCash provided by operating activities was $180.1 million and capital allocation spend included capital expenditures of $80.2 million, franchise acquisitions of $71.8$98.7 million, dividends of $49.4$49.3 million, and repurchases of common stock of $28.2$42.6 million.

Restaurant and other sales increased 12.9%11.2% in Q1Q2 2026 compared to Q1Q2 2025.2025 and 12.1% in 2026 YTD compared to 2025 YTD. The following table summarizes certain key drivers and/or attributes of restaurant sales at company restaurants for the periods presented. Company restaurant count activity is shown in the restaurant unit activity table above.

The increase in restaurant sales for Q1Q2 2026 and 2026 YTD was primarily attributable to an increase in comparable restaurant sales and an increase in store weeks. The increase in comparable restaurant sales was driven by an increase in guest traffic count along with an increase in our per person average check as shown in the table below. The increase in store weeks was driven by new store openings and the acquisition of franchise restaurants.

To-go sales as a percentage of restaurant sales were 14.6%14.3% in Q1Q2 2026 compared to 13.6%13.3% in Q1Q2 2025. To-go sales as a percentage of restaurant sales were 14.4% in 2026 YTD compared to 13.4% in 2025 YTD.

Per person average check includes the benefit of a menu price increase of approximately 1.9% implemented in Q2 2026 and menu price increases of approximately 1.4% and 1.7% implemented in Q2 2025 and Q4 2025, respectively. In addition, we implemented a menu price increase of approximately 1.9% at the beginning of Q2 2026.

In Q12026 2026,YTD, we opened fournine Texas Roadhouse company restaurantsrestaurants, three Bubba’s 33 company restaurants, and acquiredone fiveJaggers domesticcompany franchise Texas Roadhouse restaurants.restaurant. In 2026, we expect store week growth of 5% to 6%6%, acrossincluding allthe concepts.benefit from franchise acquisitions.

Royalties and franchise fees decreased $0.8$1.0 million or 11.3%12.6% in Q1Q2 2026 compared to Q1Q2 2025.2025 Theand decreasedecreased by $1.8 million or 12.0% in Q12026 2026YTD compared to Q1 2025 wasYTD. The decreases were primarily due to decreased royalties related to the franchise stores that were acquired.

Food and beverage costs, as a percentage of restaurant and other sales, increased to 35.3%35.4% in Q1Q2 2026 compared to 34.1%34.0% in Q1Q2 2025.2025 and increased to 35.3% in 2026 YTD compared to 34.0% in 2025 YTD. The increaseincreases waswere primarily driven by commodity inflation of 6.2%7.0% in Q1Q2 2026,2026 and 6.6% in 2026 YTD, due to higher beef costs, partially offset by the benefit of a higher average guest check.

In 2026, we expect commodity inflation of 6%approximately to 7%,5%, with prices locked for approximately 65%60% of our remaining forecasted costs and the remainder subject to floating market prices.

Restaurant labor expenses, as a percentage of restaurant and other sales, decreased to 32.9%32.5% in Q1Q2 2026 compared to 33.3%32.9% in Q1Q2 2025.2025 and decreased to 32.7% in 2026 YTD compared to 33.1% in 2025 YTD. The decreasedecreases waswere primarily driven by the benefit of a higher average guest check and labor productivity partially offset by wage and other labor inflation of 3.8%3.9% in Q1both 2026.Q2 2026 and 2026 YTD.

Restaurant rent expense, as a percentage of restaurant and other sales, decreased towas 1.5% infor Q1all periods presented. In Q2 2026 comparedand to2026 1.6%YTD, inhigher Q1rent 2025.expense Theat decreaseour newer restaurants was primarily drivenoffset by the increase in average unit volume partially offset by higher rent expense at our newer restaurants.volume.

Restaurant other operating expenses, as a percentage of restaurant and other sales, decreased to 14.0%14.2% in Q1Q2 2026 compared to 14.4%14.5% in Q1Q2 2025.2025 and decreased to 14.1% in 2026 YTD compared to 14.5% in 2025 YTD. The decreasedecreases waswere primarily driven by lower general liability insurance and incentive compensation expense, as well as the increase in average unit volume and lower general liability insurance expensevolume, partially offset by higher credit card fees.fees and utilities expenses.

Pre-opening expenses were $6.6$8.5 million in Q1Q2 2026 compared to $6.8$5.5 million in Q1Q2 2025.2025 and $15.1 million in 2026 YTD compared to $12.3 million in 2025 YTD. The increases were driven by an increase in our pipeline of new store openings. Pre-opening costs will fluctuate from quarter to quarter based on specific pre-opening costs incurred for each restaurant, the number and timing of restaurant openings, and the number and timing of restaurant managers hired.

Depreciation and amortization expenses, as a percentage of total revenue, increased to 3.5% in Q1both Q2 2026 and 2026 YTD compared to 3.4% in Q1both 2025.Q2 2025 and 2025 YTD. The increaseincreases waswere driven by higher depreciation expense at our newer restaurants and intangible asset amortization expense related to the acquisition of franchise restaurants partially offset by the increase in average unit volume.

General and administrative expenses, as a percentage of total revenue, decreasedincreased to 3.7%4.3% in Q1Q2 2026 compared to 3.9%4.2% in Q1Q2 2025.2025 The decreaseand was primarily driven by the increase4.0% in average2026 unit volumeYTD and in 2025 YTD, respectively. In Q2 2026 and 2026 YTD compared to Q2 2025 and 2025 YTD, higher legal settlement expense and higher incentive and stock compensation expense was partially offset by lower rent expense due to the purchase of our Support Center in 2025 partially offset by higher incentive and stockthe compensationincrease expense.in average unit volume.

Interest income, net was $0.5$1.0 million in Q1both Q2 2026 and Q2 2025 and was $1.6 million in 2026 YTD compared to $1.3$2.3 million in Q12025 2025.YTD. The decrease in 2026 YTD compared to 2025 YTD was driven by decreased earnings on our cash and cash equivalents and borrowings on our credit facility.

Equity income was $0.1$0.2 million in Q1Q2 2026 compared to $0.2$1.4 million Q1Q2 2025.2025 and was $0.3 million in 2026 YTD compared to $1.7 million in 2025 YTD. The decreasedecreases waswere driven by lapping a $1.2 million gain on the acquisition of three of the affiliates in Q2 2025 and fewer affiliates due to the acquisition of six of these affiliates in the prior year.

Our effective tax rate was 14.3%13.5% in Q1Q2 2026 compared to 14.9% in Q2 2025 and was 13.9% in 2026 YTD compared to 14.8% in Q12025 2025.YTD. The decreasedecreases in the tax raterates waswere driven primarily by an increase in the impact of the FICA tip tax credit partially offset by a decrease in the excess tax benefit on stock compensation, the expiration of the workers’ opportunity tax credit,compensation and an increase in non-deductible officers’ compensation.

In 2026, we expect an effective tax rate of approximately 14% to 15% based on forecasted operating results.

In our Texas Roadhouse reportable segment, restaurant margin dollars increased $23.9$17.0 million or 10.6%7.1% in Q1Q2 2026.2026 and increased $40.9 million or 8.8% in 2026 YTD. The increaseincreases waswere due to higher sales partially offset by higher food and beverage costs due to commodity inflation. In addition, restaurant margin, as a percentage of restaurant and other sales, decreased to 16.3%16.5% in Q1Q2 2026 from 16.7%17.1% in Q1Q2 2025.2025 and decreased to 16.4% in 2026 YTD from 16.9% in 2025 YTD. Restaurant margin percentage was primarily impacted by commodity inflation partially offset by higher sales.

In our Bubba’s 33 reportable segment, restaurant margin dollars increased $1.2$0.5 million or 9.6%3.2% in Q1Q2 2026.2026 and increased $1.7 million or 6.2% in 2026 YTD. The increaseincreases waswere due to higher sales partially offset by higher food and beverage costs and anhigher increaserestaurant inlabor general liability insurance expense.expenses. In addition, restaurant margin, as a percentage of restaurant and other sales, decreased to 15.2%15.3% in Q1Q2 2026 from 16.1%16.7% in Q1Q2 2025.2025 and decreased to 15.2% in 2026 YTD from 16.4% in 2025 YTD. Restaurant margin percentage was primarily impacted by the increased expenses noted above, which were partially offset by higher sales.

Net cash provided by operating activities was $259.1$439.2 million in Q12026 2026YTD compared to $237.7$366.0 million in Q12025 2025.YTD. This increase was primarily due to increases in net income, depreciation and amortization expenses, and deferred income taxestaxes, partiallyand offseta by an unfavorablefavorable change in working capital.

Net cash used in investing activities was $146.8$242.0 million in Q12026 2026YTD compared to $155.6$259.5 million in Q12025 2025.YTD. The decrease was primarily due to the acquisition of 17 franchise restaurants in 2025 YTD compared to five in 2026 YTD and an increase in proceeds from sale leaseback transactions partially offset by an increase in Q1capital 2026.expenditures.

We require capital principally for the development of new company restaurants, the refurbishment or relocation of existing restaurants, and the acquisition of franchise restaurants. We either lease our restaurant site locations under operating leases for periods of five to 30 years (including renewal periods) or purchase the land when appropriate. As of March 31, 2026, we had developed 156 of the 723 company restaurants on land that we own.

Net cash used in financing activities was $32.5$129.5 million in Q12026 2026YTD compared to $106.3$174.9 million in Q12025 2025.YTD. The decrease was primarily due to borrowingnet borrowings of $50.0 million on our credit facility and a decrease in indirect repurchases of shares for minimum tax withholdings related to our stock compensation program partially offset by an increase in share repurchases.repurchases and an increase in quarterly dividend payments.

On February 18, 2026, our Board approved the payment of a quarterly cash dividend of $0.75 per share of common stock compared to the quarterly dividend of $0.68 per share of common stock declared in 2025. The payment of quarterly dividends totaled $49.4$98.7 million and $45.2$90.3 million in Q12026 2026YTD and Q12025 2025,YTD, respectively.

On MayAugust 6,5, 2026, our Board approved the payment of the Q2Q3 2026 cash dividend of $0.75 per share of common stock. This payment will be distributed on JuneSeptember 30,29, 2026, to shareholders of record at the close of business on JuneSeptember 2,1, 2026.

On February 19, 2025, our Board approved a stock repurchase program for the repurchase of up to $500.0 million of our common stock. This stock repurchase program has no expiration date and replacesreplaced the previous stock repurchase program which was approved in 2022.

During Q12026 2026,YTD, we paid $28.2$70.8 million, excluding excise taxes, to repurchase 161,215415,133 shares of our common stock. During Q12025 2025,YTD, we paid $50.2$60.0 million, excluding excise taxes, to repurchase 281,091342,789 shares of our common stock. As of MarchJune 31,30, 2026, $351.8$309.2 million remained under our authorized stock repurchase program.

As of MarchJune 31,30, 2026, we had $50.0 million in outstanding borrowings under the credit facility and had $397.6 million of availability, net of $2.4 million of outstanding letters of credit, respectively.credit. As of December 30, 2025, we had no outstanding borrowings under the previous credit facility and had $447.6 million of availability, net of $2.4 million of outstanding letters of credit.

The lenders’ obligation to extend credit pursuant to the credit facility depends on us maintaining certain financial covenants, including a minimum consolidated fixed charge coverage ratio and a maximum consolidated leverage ratio. The credit facility permits us to incur additional secured or unsecured indebtedness, except for the incurrence of secured indebtedness that in the aggregate is equal to or greater than $125.0 million and 20% of our consolidated tangible net worth. We were in compliance with all financial covenants as of MarchJune 31,30, 2026.

As of MarchJune 31,30, 2026 and December 30, 2025, we were contingently liable for $7.6$7.5 million and $7.8 million, respectively, for five lease guarantees. These amounts represent the maximum potential liability of future payments under the guarantees. In the event of default, the indemnity and default clauses in our assignment agreements govern our ability to pursue and recover damages incurred. No material liabilities have been recorded as of MarchJune 31,30, 2026 and December 30, 2025 as the likelihood of default was deemed to be less than probable and the fair value of the guarantees is not considered significant.