Cheesecake Factory Inc (CAKE) Q2 2026 Earnings Call Transcript

Hello, everyone. Thank you for joining us and welcome to the Cheesecake Factory Incorporated earnings call for Q2 of 2026. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Etienne Marcus, VP of Finance and Investor Relations. Etienne, please go ahead.

Good afternoon. Welcome to our second quarter fiscal 2026 earnings call. On the call with me today are David Overton, our David Gordon, our president. Before we begin, let me quickly remember forward-looking statements. Use litigation reform at CheesecakeFactory.com. All forward-looking statements made on this call speak only as of today's date, and the company undertakes no duty to update any forward-looking statements. In addition, during this conference call, we will be presenting results on an adjusted basis. Least termination expenses begin today's call and David Gordon will provide a...

Thank you, Etienne. We delivered an outstanding second quarter with revenue, margins, and earnings all exceeding our expectations. Quarterly revenues surpassed $1 billion for the first time and adjusted diluted earnings per share increased 24% year over year. The Cheesecake Factory restaurants led our performance, delivering comparable sales growth of 5.8% and positive traffic. Our strong top-line sales this quarter reflect disciplined execution across our restaurants. As a result, traffic trends improved, and we captured market share. The increase in sales, along with gains in labor productivity and food efficiency, drove solid flow through, increasing the Cheesecake Factory's restaurant-level margin to 20%, its highest level in a decade. One of the key drivers of this momentum has been the positive response to our recent menu additions, demonstrating the strength of our culinary innovation. Our new offerings highlight the breadth and relevance of our menu, helping to drive frequency, attract new guests, and reinforce value through innovation rather than discounting. Later this week, we will celebrate National Cheesecake Day with the debut of our brownie crunch chocolate cheesecake. We're especially excited about this year's flavor and believe it will resonate well with our guests. Turning to development, we opened four restaurants during the second quarter, including two North Italia locations, a Flower Child and a Henry. Subsequent to quarter end, we opened one Cheesecake Factory location. We remain on track to open as many as 26 restaurants this year, consistent with our longer term objective of 7% annual unit In summary, we delivered a record-setting quarter and entered the second half of the year from a position of strength. Our success remains rooted in the fundamentals that have defined us for decades – exceptional hospitality, high-quality food, and memorable dining experiences. We are building on that foundation with menu innovation, deeper guest engagement through our rewards program and operational excellence across our restaurants our results demonstrate that our strategy is working and reinforce our confidence in our ability to drive growth and create shareholder value with that i will now hand the call over to david gordon to provide an operational update thank you david increasing 2.7 the black box casual dining index by 350 basis

points. This performance contributed to averaging a new all-time high, elevating our already $5 million. We believe these results reflect three key areas, operational execution and industry-leading retention. Knowing menu innovation, the continued growth and evolution's launching three years ago, the program has become an increasingly effective driver of guest loyalty and frequency, supported by our digital capabilities, and more personal needs remain intensely focused on executing at a high level every day. From food quality and pace of retention, amongst us deliver a high level. We believe our experience continues to sell yearly menu updates, keep our offerings with evolving guest preference. Innovations recently introduced bold from this new category are visiting more frequently, reinforcing the importance of continued menu innovation. Moving on to Cheesecake Reward. Adoption exceeded our expectations, driving strong member acquisition and engagement, and creating a powerful new channel for the app is already providing valuable insights into guest behavior and enabling us to deliver increasingly personalized targeted offers positive guest feedback and rising engagement platform as a meaningful long-term growth driving social media influencer partnerships targeted digital campaigns and key promotional moments to amplify awareness of menu innovation and rewards offerings this coordinated approach across marketing operations and technology helps strengthen guest engagement and brand visibility looking ahead we believe the combination of operational excellence continued menu innovation growing rewards engagement and increasingly sophisticated marketing capabilities position us well to sustain momentum and deliver long-term profitable growth performance of our other concept point nine million dollars in comparable sales we continue to see healthy demand in new generating average weekly sales well above 200 retention has improved among both managed we're building on strategies and learnings that have proven effective at the cheesecake factory and flower child to develop targeted initiatives to drive improvement at north italia these include more value-oriented menu offerings and accessible price points such as lower priced pasta options and lunch specials to enhance affordability and strengthen guest perception of value. We are also increasing targeted marketing to build brand awareness and drive conversion. At the local level we are expanding our marketing efforts through in-mall digital advertising, restaurant weeks, and community events. Test these initiatives during the second half of the year. While we believe they can support over the next several quarters as we begin to see the impact of these efforts. Our focus is on strengthening the brand for durable long-term growth. 15.6% for the quarter versus 18.2% for the prior year. The change reflects sales deleverage and continued to perform exceptionally well and once again meaningfully outpaced the FASCOM sales increase of 17% to annualized AUVs of $5.3 million. Restaurant level profit margin for the adjusted mature flower child locations was 20.1% in the positioning within Fast Casual. The stretch menu is a range of offerings, thoughtfully designed restaurants that provide a more elevated experience than traditional Fast Casual. Combined with discipline execution in our restaurants, these attributes are driving repeat visits we're continuing to build on the concepts talent pipeline and operating capabilities while leveraging the cheesecake factory scale systems and expertise to support his expanded about the opportunity ahead and flower child's potential for meaningful we opened another location of the henry in wilmette a suburb of chicago to solve the demand with average weekly sales trending at 200 000 for the first six weeks for an annualized auv of over 10 million dollars

turn the call over to matt for thank you david quarter results versus our expectations five percent year over year and record adjusted ebitda of 118 million dollars up 18 percent specific details around 18 or 101 as a percent of sales of one point liquidity and 90 million to 14 four percent higher compensation dilution in the low to about 160 210 continues to support we are seeing across to continue investing in our business.

We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device.

Please stand by while we compile the q a roster your first question comes from the line of john tower with city john your line is open please go ahead great thanks for taking the question i appreciate it um maybe just a quick clarification and and then a question uh matt i think you had said it in the prepared remarks the net interest market margin target for the year was 5.4 percent on the mid point of the range you discussed the slide deck uh that you guys published this afternoon i think was closer to five percent so i just wanted to make sure that i heard you correctly we unfortunately caught that uh slide deck okay great thanks um and and maybe you know obviously it's great to see the the cheesecake factory brand get back to positive traffic growth um in in the period i'm curious you know how much you would attribute that to you know maybe a short-term lift related to the launch of the app and that coming out and obviously potentially having a very strong early on redemption. I believe there's a cheesecake, a free slice of cheesecake if you signed up to the rewards program through the app early on versus, you know, you have quite a few other things going on in your business. And importantly, I'm also curious if you could speak to how, you know, whether or not you're seeing younger guests come through the door more consistently than what you've seen in the past and maybe benchmarking that against the industry.

Sure, John, this is David Gordon. Thanks. I think that moving into the quarter, I think all three of the items that I touched on in my prepare, starting with continues to be a focus that I think our guests are appreciating. And that in combination with With a strong industry-leading retention, our restaurants are as stable as ever. So I think that we always like to talk about that first because Delicious is the foundation of everything at Cheesecake Factory. Secondly, the culinary innovation has been very compelling and great offerings for guests from the flavor profiles to the price points. And I think we're seeing the benefits of that and we'll continue down that menu innovation path. And to your point on Cheesecake Rewards, certainly there was a good amount. We did our best to launch that in a way that we thought was the most appropriate, and we got us some terrific awareness. But ongoing, we continue to see terrific engagement from guests that have downloaded the app and are appreciated. You mentioned the complimentary birthday slice and being able to engage with the reward when they're in the restaurant and redeem much more easiest into the app has been greatly appreciated. So the team's executing well against that. The younger guests and some of our own internal research that we've looked at, we know that social channels has been, and you may have seen some of the more recent activity over the past quarter, some of that planned and some of that unplanned. And that certainly is resonating. Those younger can think we're benefiting.

I'll follow up later. Appreciate it.

Your next question comes from the line of Brian Vaccaro with Raymond James. Brian, your line is open. please go ahead.

Thanks very much and good evening. And congrats on the meaningful comp acceleration at Cheesecake. Could you provide a little more color on the monthly cadence that you saw through the quarter? And Matt, maybe you could give us the mix and price dynamics. But beyond just some quantification, could you provide a little more color on the levers that you're polling and social media channels specifically, and any metrics you can share around, you know, social media engagement, impressions, et cetera, to help us frame how much that could be up year on year?

Sure, Brian, this is what we did see. And so, you know, our expectations to continue through this. And I think some of that, as you mentioned, maybe two to three X in terms of mentions on on social media. Linda Candioti, who's a famous executive with the company and been with David for all these years.

Yeah, I have seen some of those, so thank you for highlighting that. And if I could just ask a quick follow-up just on the updated annual margin guidance, could you just walk us through some of the key line items, you know, COGS labor, other OpEx, and any unusual lumpiness that we should be mindful of in either Q3 or Q4. Thanks very much.

Yeah, let me start with our breakage last time. We did see some of them on 60 basis points. That continues to be reinvested in the business and continuing to look to invest.

I'll pass along. Thank you.

Your next question comes from the line of Andy Barish with Jeffries. Andy, your line is open. Please go ahead.

Hey, guys. Nice results. And just on that last comment, Matt, are you willing to share kind of where you are on marketing, you know, expense as a percentage of sales within that line, just given, you know, it hasn't been a big focus in the past for the brand?

Sure, sure. We sort of think about it.

Got it. And then just finally, any commentary on sort of World Cup, you know, given you're in all of the markets it was and then into July, any thoughts on the momentum in the business that you're willing to share with us?

Interestingly, I mean, we did track this at a very, very detailed level, Andy, because we knew we were going to get the.

Thank you.

Your next question comes from the line of Lauren Silberman with Dutch Bank. Lauren, your line is open. Please go ahead.

You might be muted.

Can you hear me here? Okay, sorry. Congrats on the quarter. Just really impressive comps. A lot of contributing factors, social media innovation, rewards, ops. When did you start to see the inflection? It's just a material improvement with the best comps in years, and it looks like you could be implying something like 7% comps in Q3 and mid-singles in Q4. I guess, am I doing that right? And it's not even just like monthly, I guess, just underlying when did you start to see the real change with the flywheel?

Yeah, I mean, I think as is. Do you think even going back on a weather, he's seeing some of the basis, you know, cake would have been between two and a half and three. in just a couple of the – a piece that with the timing with some of the social activity and some of the new media campaigns that we did said about a free slice of cheesecake is now we're seeing increased activation.

Your stock is also outperforming some of these AI companies, so kudos to that. And then just to follow up, I guess, are you guys ordering anything – or are you seeing any differences in how customers are ordering from your menu or different parts of the menu with the increased traffic?

Hi, Lauren. This is David. it's really nothing unique other than maybe some media channels uh whether that's a couple desserts or a couple of entrees that have been very popular over the past month when people are sort of hacking those items we see some of that great and then just final one from a mixed perspective now back to kind of flattish is that your expectation as we think through the back half of the year yeah i would say you know as we've seen that with the increased order awesome thank you very much

your next question comes from the line of drew north with baird drew your line is open please go ahead thanks for taking the question and congrats on the strong results i wanted to ask a follow-up on cheesecake factory and maybe a follow-up to lauren's question on how we should be thinking about pricing in the back half maybe between q3 and q4 maybe bigger picture if the traffic momentum in the business would change how you think about the opportunity to reinvest in the consumer by pricing further below inflation, maybe exiting this year or into next? And any perspective on your philosophy there would be helpful.

Yeah, so we'll be just under 3% in Q3, where we'll be at 3%. You know, we'll continue to evaluate, you know, the pricing, you know, we take it twice a year, continue to, in making sure that our restaurants...

That's helpful. And maybe just one more from me. With you operating a portfolio of brands, I thought it might be interesting to know what insights or learnings you may be taking from the recent successes at Cheesecake Factory and what might be or might not be applicable to other brands. So maybe if you could just add some context as to what you think could work at North Italia or some of your other concepts or what might be unique to Cheesecake Factory and their recent success, thanks.

Sure, Drew, this is, this is David Gordon. I think that's, uh, eight years now, uh, work at Cheesecake Factory that we've now begun to implement at some of the other concepts to even some of the more recent learnings and some of the marketing approach or the guests understand the value proposition, understand the Cheesecake Factory for the, a lot of the people practices are things that we've taught as we got at Cheesecake factory for the past 40 plus years and using those same systems and people practices and with supply chain and technology updates i think we've done a really good job over the past 12 months really leveraging the scale of cheesecake and empowering the teams at frc to take on some of the systems and processes that we know work well for thanks for that i'll pass it on your next question comes

from Sarah Senatore with Bank of America. Sarah, your line is open. Please go ahead.

Thank you. I guess maybe two questions, if I may. It seems to be the trend. I wanted to ask one about like sort of the, again, the culinary innovation. It sounds like a lot of what you referred to are things that have been on the menu for a while, which I guess is, you know, consistent with you saying kind of the flywheel. But I wanted to confirm that that was the case, the bowls and the bites. And it really has to do with more of the, maybe some of the app or the social media attention really driving, you know, take up for some of the menu items as opposed to something brand new. And I guess related to that, there's sort of a view that, you know, sometimes social media attention can be transitory. Have you done anything in terms of like standing up a social media listening team or something new that, you know, that kind of gives you confidence that this type of momentum can sustain. You know, we certainly have seen that with other casual diners, but just kind of curious about the infrastructure.

Sure, Sarah. This is David Gordon again. Just to remind everyone that we changed the menu at Cheesecake Factory about six months ago, and we're launching a new menu as well. I think one of the things we've done for the past couple of years now when we launched Bites and Bowls was put a lot of those menu items on a separate menu with the awareness, But we'll also, sorry, on the menu to make sure it may be in America to be able to do that. That's been the hallmark of Cheesecake Factory since its founding. As far as the marketing team, we have a very strong foundation today of social listening teams that we have in place that are listening to what's being reinvesting and valuable for us, and not just resting something for a month or a particular quarter. We think that we have a very strong team in place to continue the conversation and make sure that it's resonating with guests and we're getting the type of that we think will continue our success moving forward.

Great. Thank you. Sorry. Just on the trends, I guess, any thoughts on macro? I know Matt has in the past kind of talked about the environment, you know, feeling better or worse or, you know, where you've seen maybe slower. Hard to think that it might be, you know, slowing given your trends, but any thoughts on that would be helpful.

Thank you. yeah i think that the environment started the year the the underlying you know i do think there is a little bit of an average your key operations teams to the guests and there's opportunity there

and thank you your next question comes from the line of brian harbour with morgan stanley brian your line is open please go ahead what like the like the rewards program like what the usage is there, and also, I guess, you know, the app more recently, are there any stats you could provide around, you know, percent of customers that are using those, or anything you could say about that?

Yeah, hi, Brian, this is David. Unfortunately, we're still not, we feel good about the level of engagement, the amount of signups we're seeing, people using the app on a regular basis, so we're, and I wouldn't anticipate we'll be sharing any of those numbers anytime soon. We'll continue to track them. If and when that time comes, we'll certainly share them with you.

What would you attribute, you know, kind of Flower Child's performance to, right? It's remained quite strong, I think, you know, much better than, like, the fast casual segment. But I know there's, you know, it's a bit of a fast casual plus type of concept. You know, is that performance pretty consistent across the store base, or, you know, what would you attribute that to?

Yeah, that's a great question. The new market, we continue to believe that Flower Child is very differentiated from your typical fast casual. The guests are appreciating the vast menu choices and also the varying a Mother Earth bowl, deciding to get a protein plate. I think it's meeting guests also from many different need states when it comes to going out, sitting down at dinner. We talk frequently about the dinner mix being much more than your typical fast casual, closer to 33rd fast casual. The 55% off-premise mix continues to be very, very steady. The teams are executing there very, very well. And I think the dine-in experience, people want experiential dining, even in that fast, casual setting, to be very positive on it and would anticipate that continue to be the trend over time.

Brian, this is Matt. The only thing I would add to that, which I think is a real positive for the growth opportunity that we see with Flower Child, In those markets where we have a little bit more densification, we actually have more repeat visitation. So we have no concerns about continuing to move into existing markets and continuing to build.

Thank you.

Your next question comes from the line of Dennis Geiger with UBS. Dennis, your line is open. Please go ahead.

Great. Thanks, guys, and congrats. Kyrus, if anything more to share on the new customers that you've been attracting? I know there was a question earlier on the younger customer, but curious more broadly as it relates to the new customers, anything that you would call out on how they're using the brand different than your core existing customer? And maybe it's a little early here, but do you have a sense for repeat frequency yet with that newer customer?

You know, we are looking at the initial glimpses of the data show that we continue to attract and include guests' engagement, and I think that's reflect frequency, and we know the reward attracting the technology-savvy higher income continue to show.

To get them to repeat and come back and come visit us maybe at a time when they haven't before and keep them top of mind, cheesecake top of mind from an awareness standpoint, and the app really allows us to do that.

Very helpful, guys. And then just a quick second question. Just within your guidance for the third quarter, I think we can maybe loosely back into it, but just given all the focus on the core cheesecake strength, any thought with respect to maybe level setting comp expectations for the core cheesecake brand in the third quarter, how you're thinking about that within the context of the revenue guidance? yeah i mean it above what the average was thank you matt appreciate it guys your next question

comes from jeffrey farmer with gordon haskett jeffrey your line is open please go ahead great uh thanks and good afternoon guys i'm just just bigger picture um in terms of thinking about the segment or the casual buying segment as a whole factors beyond sort of favorable income and age demographics do you think have really been driving some of this broader relative the segment has seen the the value equip you know the price points making sure that you have actively

just picking it up until you look at the totality of that and what people want to do in their life and get those little indulgences those little like mini vacations for an hour you know across for a second it does sound like the mobile app is attracting both new new customers for you guys and probably driving some increased frequency from some of your existing customers.

But was there anything about the mobile app launch that surprised you, either positively or negatively, here through the first four months of the launch?

Because on the day we launched, we would have been one of the top three downloaded apps. It continues to just grow and grow and grow. And I think the app has been when we first started. The same thing has happened with the app. And I think after, you know, 45-plus years, Cheesecake Factory continues to be more relevant today as an experiential dining leader as much as they ever have. And I think we're executing against that really, really well. So the launch of the app was a pleasant surprise. We're expected to be strong, and we would continue to expect it to continue to be strong.

And, Joe, this is Matt. Just one more note on that. just a shout out to our IT and marketing and finance teams for working collaboratively on an app that's getting tremendous reviews. So the amount of focus on the details, the guest experience is very, very strong. And so we took a lot of time to make sure we got it right. And I think, you know, we did. I appreciate it. Thank you.

Your next question comes from the line of John Ivanko with J.P. Morgan. John, your line is open. Please go ahead.

Hi, thank you very much. At least from our observation, some of the products that we've seen go viral, in some cases, are 20 years old on the Cheesecake Factory menu, which is just fascinating to me. So obviously, you guys continue to talk about menu innovation and going to where the consumer is in terms of new products, but how does that kind of inform you in terms of where the menu should go. I mean, could we potentially do more by, I guess, adding more to the menu, in other words, expanding the menu, or might there be an opportunity to kind of get back, you know, to maybe an original core or whatever that is and get the same or even more with even less? So when we kind of think about a menu, either expanding and contracting and, you know, various kind of opportunities on either side that you might get from that, you know, how do you kind of envisioned the future of the Cheesecake Factory menu.

Thanks, John.

I postulated both, so.

I think that the breadth of the menu is very, very strong. And you're right, the item has been on the menu for 20 plus years. I think what we can do is continue to put compelling menu items on. Value in a wide variety. Pool of what potentially could become something that's more variety, that there's never a veto vote, and I think there's always going to be something on that menu that could become viral. There were some new things we heard about, also menu items that now will continue, executed well, but will make no difference. Eugene, against that.

Thank you. And I think a direct follow-up on this. So a lot of the call has been about, you know, social and digital type of marketing, including obviously your app, social media, what have you. Do you have an opportunity to go back and use traditional paid media, you know, for people that don't necessarily consume their media on the social media platforms? Is there, you know, an audience that might be receptive to kind of going back to the other side of top of the funnel type of marketing to perhaps drive even more awareness and usage of the brand?

I think it's an either or. I think it's an and. I think we are still doing some traditional, although we may be a little louder and traditionally done over time. From those 50, we want to make sure we're touching all those funnels all the time and we'll continue that approach.

Thank you.

Your next question comes from Jim Salera with Stevens. Jim, your line is open. Please go ahead.

Good afternoon. Thanks for taking our question. I wanted to ask a follow-up on Brian's earlier question on Flower Child. Are you able to give us the comp breakdown for the same restaurant sales at Flower Child with a particular eye on how much traffic is contributing? And as a second part to that, you mentioned the AUVs are up to like 5.3 million on an annualized basis. Can you contextualize what the upper band of the restaurants are doing just so we can help think about, you know, the additional upside from where we are today, given the strength?

Sure. We'd be happy to share a couple of those details. This is Matt. They continue to add guests over time to them in our locations to get to them.

Given the gap there and that most of the upside is coming from traffic, have you thought about what restaurant level margins could look like, you know, for more mature flower child locations, given that they're already, you know, kind of above the core cheesecake and how that might contribute, you know, to the portfolio as a whole as that brand continue to scale and grow as a piece of the portfolio? know.

Yeah, Jim, this is an important point. And, you know, we've talked about this a little bit before, but, you know, we're at a, you know, there's a huge amount of 20% if we can continue to grow.

Okay, great. Appreciate the thoughts. Thank you.

Your next question is from the line of Sharon Zakvia with William Blair. Sharon, your line is open. Please go ahead.

Hey, thanks for taking the question. I guess I'm curious, and I know you don't want to share a lot about rewards. So I'm going to maybe phrase something a bit differently. When we think about the uptick you're having at the core cheesecake concept, is there a way to dimensionalize what you're seeing with rewards versus lapsed users or new to brands? And then Matt, when I think about the implied fourth quarter comp kind of, excuse me, coming off a little bit from from the current trend is that just inherent conservatism or is there something that you think is not durable with what you're seeing right now no i think we're just early stage there's no point in getting ahead of our skis at this point in time from a did shut down all right thank you this concludes our q a and our call thank you for attending you may now

disconnect.