Cheesecake Factory (CAKE) Earnings Transcript

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DATE

Wednesday, Feb. 18, 2026, at 5 p.m. ET

CALL PARTICIPANTS

• Chairman and Chief Executive Officer — David M. Overton
• President — David M. Gordon
• Executive Vice President and Chief Financial Officer — Matthew Eliot Clark

TAKEAWAYS

• Total Revenues -- $961.6 million for the quarter, including $17.3 million from gift card breakage; revenues excluding this benefit were $944.3 million and within prior guidance.
• Adjusted Diluted EPS -- $1 for the quarter, at the upper end of management’s outlook.
• Adjusted Net Income Margin -- 5.1% for the quarter, near the top of expected range.
• The Cheesecake Factory Comparable Sales -- Decreased 2.2% in the quarter.
• Adjusted Annualized AUVs (The Cheesecake Factory) -- $12.2 million, with an off-premise sales mix of 22%.
• North Italia Comparable Sales -- Decreased 4% in the quarter, with traffic down 6%, price up 4%, and mix down 2%.
• North Italia Annualized AUVs -- $7.6 million, with adjusted mature location profit margin at 17.5% for the quarter and 17% for the year.
• Flower Child Comparable Sales -- Increased 4% in the quarter; two-year comps rose 15%.
• Flower Child Annualized AUVs -- $4.3 million in the quarter, $4.6 million for the year, and adjusted mature location margin was 17.5% for the quarter, 18.5% for the year.
• Other FRC Sales -- $99.4 million, up 17% year over year; annualized AUVs for new FRC openings exceeded $8.7 million.
• External Bakery Sales -- $17.2 million in the quarter.
• Total Restaurant Openings -- Seven new restaurants opened in the quarter: two Cheesecake Factory, two North Italia, three FRC; annual total was 25 openings, representing roughly 7% unit growth.
• Preopening Costs -- $9.4 million in the quarter versus $7.6 million for the prior year period.
• Record Annual Financials -- Full-year revenues reached $3.75 billion, up 5%; adjusted EPS rose 10% to $3.77; adjusted EBITDA was $354 million.
• Shareholder Returns -- $24 million returned via dividends and repurchases in the quarter; over $206 million for the year.
• Available Liquidity -- $582 million at period end, including cash of $215.7 million and $366.5 million available on the revolver.
• Debt Outstanding -- $644 million principal, comprised of $69 million due 2026 and $575 million due 2030.
• 2026 Guidance – Revenue -- Company projects $3.9 billion at the midpoint, plus or minus 1%.
• 2026 Guidance – Restaurant Openings -- Up to 26 new units expected: six Cheesecake Factory, six to seven North Italia, six to seven Flower Child, and seven FRC; about 75% of openings planned in the second half.
• 2026 Capital Expenditures -- Anticipated at $210 million, supporting development and maintenance.
• 2026 Guidance – Net Income Margin -- Estimated at 5% of sales, with tax rate assumption of about 10%.
• 2026 Commodity Inflation -- Modeled in the low to mid-single digit percent range; for Q1 specifically, commodities expected to run at about 2.5% inflation.
• 2026 Labor Inflation -- Estimated net labor inflation at low to mid-single digits.
• 2026 G&A Expenses -- Forecasted to be about 6.5% of sales.
• Menu Pricing Strategy -- For The Cheesecake Factory, 2026 menu price increase expected at roughly 3%, lower than the prior year; effective net impact with negative mix is approximately 2%.
• Bites and Bowls Menu Initiative -- Management observed “year-over-year growth in appetizer attachment rates and improved entree ordering patterns.”
• Cheesecake Rewards App -- Launch slated for the second quarter, accompanied by dedicated marketing and promotional offers.
• Q1 2026 Weather Impact -- CFO Clark said, “the weather to date through Q1 we believe is about a 1% net impact negative, net impact on the entire quarter.”
• Restaurant Closures -- Four closures (two Cheesecake Factory, one Grand Lux Cafe, one Blanco) occurred at the end of January; management does not anticipate additional closures in 2026.

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RISKS

• CFO Clark stated that Q1 guidance includes the estimated impact of inclement weather experienced Matthew Eliot Clark: so far in the quarter and four restaurant closures and further quantified weather as a 1% net impact negative, for Q1 sales.
• Negative comparable sales at The Cheesecake Factory and North Italia in the quarter signal challenged traffic and industry softness, as reinforced by management’s reference to casual dining deceleration and the Black Box Casual Dining Index’s 40 basis point sequential decline.
• Mix is expected to remain a headwind: Clark detailed, we do think that the negative mix will continue, but at a lesser rate as we progress through the year. and guidance incorporates a negative 1% mix estimate due to lower check averages from new menu items.

SUMMARY

Cheesecake Factory (NASDAQ:CAKE) management reported quarter and full-year results at or above internal expectations, but explicitly signaled underlying sales pressures, particularly for The Cheesecake Factory and North Italia. Plans for net unit expansion in 2026 remain aggressive, with the majority of new stores opening in the latter half of the year and capital deployment rising accordingly. Strategic focus was placed on menu innovation, digital engagement through the Cheesecake Rewards app, and operational discipline as key drivers for future performance. Balance sheet liquidity was highlighted as sufficient to support both growth and increased shareholder returns, with 2026 guidance projecting stability in margins but acknowledging continued commodity and labor cost headwinds.

• CFO Clark’s commentary indicated that same-store sales projections for 2026 is more like what we saw in Q2 of last year. suggesting modest positive comp expectations around 1% if macro conditions stabilize.
• Management directly linked profitability improvements to year-over-year improvements in labor productivity, wage management, retention, and guest satisfaction.
• Comparable sales volatility was ascribed to including weather-related impacts lingering Los Angeles fire aftermath, and recent unit openings cannibalizing existing locations, especially within North Italia.
• Discussion of menu pricing revealed a conscious slowdown of price increases below industry levels, leveraging customer value perception and positive ordering trends from new bites and bowls offerings.
• All company brands are now included in the DoorDash partnership, aligning off-premise and digital channels across the portfolio, with delivery mix at 10% of Q4 sales and total off-premise at 22%.

INDUSTRY GLOSSARY

• Gift Card Breakage: Revenue recognized from unused portions of gift cards where redemption is unlikely, typically due to changes in consumer redemption patterns.
• AUV (Average Unit Volume): The average sales or revenue generated by each restaurant unit over a specified period, often annualized to allow comparability between units or concepts.
• Adjusted EBITDA: Earnings before interest, taxes, depreciation, and amortization, further adjusted to exclude certain non-recurring or non-cash items such as acquisition-related expenses and impairments.
• Four-wall Margin: Restaurant-level operating profit as a percentage of sales, excluding corporate overhead and non-operating items.
• FRC: Fox Restaurant Concepts, a multi-brand restaurant group subsidiary owned by The Cheesecake Factory Incorporated.

Full Conference Call Transcript

David M. Overton, our Chairman and Chief Executive Officer, David M. Gordon, our President, and Matthew Eliot Clark, our Executive Vice President and Chief Financial Officer. Before we begin, let me quickly remind you that during this call, items will be discussed that are not based on historical facts and are considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results could be materially different from those stated or implied in forward-looking statements as a result of the factors detailed in today's press release, which is available on our website at investors.thecheesecakefactory.com and in our filings with the Securities and Exchange Commission.

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 which exclude acquisition-related items, impairment of assets and lease termination expenses, and other items. Explanations of our use of non-GAAP financial measures and reconciliations to the most directly comparable GAAP measures appear in our press release on our website as previously described. David M. Overton will begin today's call with some opening remarks, and David M. Gordon will provide an operational update.

Matthew Eliot Clark will then review our fourth quarter financial results and provide commentary on our financial outlook before opening the call up to questions. With that, I turn the call over to David M. Overton. Thank you, Etienne. We closed out the year with a solid fourth quarter delivering stable top line performance

David M. Overton: and profitability. While the restaurant industry continued to face a more challenging operating environment, including weather-related impacts, our business remains steady with revenue for the quarter finishing within our expected range. I am very proud of how our teams navigated through the environment and continue to deliver delicious memorable experiences for our guests. Our operators managed the factors within their control exceptionally well, driving year-over-year improvements in labor productivity, wage management, retention, and guest satisfaction. This strong operational execution supported margins and adjusted diluted net income per share finishing toward the higher end of our expectations. This performance reflects the resilience of our high-quality concepts and the strength of our operators.

Reflecting on 2025, it was a year of progress for our company. Despite a dynamic macro backdrop and a highly competitive restaurant landscape, we delivered strong results. Sales growth across our core concepts, and the most new restaurant openings in a single year supported record annual revenue and adjusted diluted earnings per share. And our operators' consistent execution throughout the year drove meaningful profitability growth. Adjusted restaurant-level profit margins at The Cheesecake Factory increased 60 basis points year over year to 17.6% with margin expansion also realized at North Italia and Flower Child. Culinary innovation remains a core strength and an important differentiator for our business.

The new menu items we introduced across a wide range of categories and price points continue to resonate well with guests and support our broad appeal. These offerings reinforce the breadth and the value of our menu, while keeping it relevant and competitively positioned without relying on discounting. Turning to development. During the fourth quarter, we opened two Cheesecake Factory restaurants, two North Italia locations, and three FRC restaurants. Subsequent to quarter end, we opened one Flower Child and closed four restaurants, including two Cheesecake Factory restaurants, one Grand Lux Cafe, and one FRC restaurant. With seven new restaurants opened in the fourth quarter, we finished the year with 25 new openings delivering approximately 7% unit growth for 2025.

Looking ahead, we expect to open as many as 26 restaurants in 2026. With a strong development pipeline in place we remain confident in our ability to achieve our development goal. We also anticipate one to two Cheesecake Factory restaurants to open internationally under licensing agreements. Finally, underscoring our confidence in the strength and consistency of the business, we announced an increase to our share repurchase authorization and raised our quarterly dividend for the first quarter. These decisions reflect our disciplined approach to capital allocation and our ongoing commitment to returning capital to shareholders while continuing to invest thoughtfully in the long-term growth of our company. I will now turn the call over to David M. Gordon to provide an operational update.

David M. Gordon: Thank you, David. Through strong operational leadership and disciplined execution, our teams drove meaningful performance improvements this quarter, including continued gains in overall guest satisfaction. This progress was underpinned by our strong staffing position and further advancements in our industry-leading retention across both hourly staff and management. This stability enables our operators to reinforce the core operational standards that define The Cheesecake Factory, so our guests consistently experience the exceptional hospitality that we are known for. As David noted earlier, our recent menu additions have been well received and we are building on that momentum by refreshing our bites and expanding our bowl options as part of our current menu rollout.

Results have been encouraging, with year-over-year growth in appetizer attachment rates and improved entree ordering patterns. Moving on to Cheesecake Rewards. We have made meaningful progress during the past twelve months, highlighted by strong membership growth and improved engagement. We have continued to enhance the guest experience while strengthening our technology and team capabilities, giving us better insight into member behavior. As we look ahead, we remain confident in the program's trajectory, and we will use our expanded capabilities to further refine offers and deepen member engagement. To support this evolution, we expect to launch a dedicated rewards app in the coming months with the objective of creating a more seamless and connected experience for our guests.

I will now turn to sales trends. Industry sales decelerated in the fourth quarter as reflected by the Black Box Casual Dining Index declining sequentially by 40 basis points from the third quarter. The Cheesecake Factory's comparable sales were negative 2.2% in the fourth quarter, down from 0.3% in the third quarter, demonstrating relative stability in comparison to the industry sequential declines. Adjusted annualized AUVs were $12,200,000 for the quarter, supported by an off-premise sales mix of 22%, a slight improvement from recent quarters. North Italia fourth quarter annualized AUVs totaled $7,600,000.

Comparable sales declined 4% reflecting broader industry sales trends, continued pressure from sales transfer related to recently opened restaurants, as well as the lingering impact of the Los Angeles fires. We remain focused on disciplined operational execution and investing in our people. With manager and hourly staff retention remaining near historical highs, we are confident in our ability to compete effectively in a more challenging and competitive environment. In the fourth quarter, we opened two new North Italia restaurants to strong demand, with aggregate average weekly sales exceeding $182,000 for an annualized AUV of over $9,000,000. These results reinforce our confidence in the significant demand for an on-trend contemporary Italian concept like North Italia.

Restaurant-level profit margin for the adjusted mature North Italia locations was a solid 17.5% for the quarter, bringing the full-year average to 17% right at the midpoint of our long-term objective of 16% to 18%. Flower Child continued to perform exceptionally well and meaningfully outpaced the fast-casual segment. Fourth quarter comparable sales increased 4% for a two-year comp sales increase of 15%. This strong sales performance translated into annualized AUVs of $4,300,000 for the quarter and $4,600,000 for the full year. Restaurant-level profit margin for the adjusted mature Flower Child locations was 17.5% for the fourth quarter, bringing the full-year average to an impressive 18.5%.

And lastly, we expanded our FRC portfolio with the opening of three new restaurants in existing markets, including a Culinary Dropout and a Henry. All three restaurants opened to strong demand, with average weekly sales equating to an annualized AUV of over $8,700,000. And with that, let me turn the call over to Matt for our financial review. Thank you, David. Let me first provide a high-level recap of our fourth quarter results versus our expectations I outlined last quarter. Total revenues were $961,600,000 inclusive of $17,300,000 of gift card breakage revenue as a result of a change in historical redemption patterns. Excluding this benefit, fourth quarter revenues of $944,300,000 finished within the range we provided.

Adjusted net income margin was 5.1%, and adjusted diluted earnings per share was $1, both finishing toward the higher end of our expectations. And we returned $24,000,000 to our shareholders in the form of dividends and stock repurchases. For the fiscal year, we delivered total revenues of $3,750,000,000, up 5% from the prior year. Adjusted diluted earnings per share increased 10% year over year to $3.77. And adjusted EBITDA totaled $354,000,000 and we returned more than $206,000,000 to shareholders in the form of dividends and stock repurchases in 2025. Now turning to some more specific details around the quarter. Fourth quarter total sales at The Cheesecake Factory restaurants were $681,400,000, up 2% from the prior year.

Excluding the gift card breakage benefit, total sales at The Cheesecake Factory restaurants were $664,200,000. Comparable sales, which is not impacted by the gift card breakage adjustment, declined 2.2% versus the prior year. Total sales for North Italia were $88,200,000, up 8% from the prior year period. Other FRC sales totaled $99,400,000, up 17% from the prior year. And sales per operating week were $139,100. Flower Child sales totaled $45,500,000, up 19% from the prior year and sales per operating week were $83,400. And external bakery sales were $17,200,000. Now moving to year-over-year expense variance commentary.

Specifically, cost of sales decreased 70 basis points with 40 basis points attributable to the gift card breakage benefit to revenue, with the remainder primarily driven by favorable commodity costs and mix shift, partially offset by higher beef costs. Labor as a percent of sales declined 40 basis points with 60 basis points attributable to the gift card breakage benefit. The remaining difference was primarily driven by higher group medical expenses, partially offset by the continued improvement in retention, supporting labor productivity gains and wage leverage as well as lower payroll taxes. Other operating expenses declined 20 basis points with 50 basis points attributable to the gift card breakage benefit, partially offset by timing of marketing spend.

G&A as a percent of sales increased 70 basis points primarily driven by the write-down of gift card inventory. Depreciation increased 10 basis points from the prior year. Preopening costs were $9,400,000 in the quarter, compared to $7,600,000 in the prior year period. We opened seven restaurants during the fourth quarter, versus nine restaurants in 2024. The year-over-year variance reflects differences in the mix of concepts opened during the respective quarters. And in the fourth quarter, we recorded a pretax net expense of $24,600,000 related to impairment of assets and lease termination expenses, FRC acquisition-related items, gift card breakage, and gift card inventory adjustments. Fourth quarter GAAP diluted net income per share was $0.60.

Adjusted diluted net income per share was $1. Now turning to our balance sheet and capital allocation. The company ended the quarter with total available liquidity of $582,200,000, including a cash balance of $215,700,000 and approximately $366,500,000 available on the revolving credit facility. Total principal amount of debt outstanding was $644,000,000, including $69,000,000 in principal amount of convertible notes due June 2026 and $575,000,000 in principal amount of convertible notes due 2030. CapEx totaled approximately $25,000,000 during the fourth quarter for new unit development and maintenance. During the quarter, we completed approximately $11,200,000 in share repurchases and returned $12,800,000 to shareholders via our dividend. Now let me turn to our outlook.

While we will not be providing specific comparable sales and earnings guidance, we will provide our updated thoughts on our underlying assumptions for Q1 and full year 2026. Our assumptions factor in everything we know as of today, including net restaurant counts, quarter-to-date trends, our expectations for the weeks ahead, anticipated impacts associated with holiday shifts, and the recent softness in industry sales trends and the current consumer environment. Specifically, for Q1, we anticipate total revenues to be between $955,000,000 and $970,000,000. This includes the estimated impact of inclement weather experienced so far in the quarter and four restaurant closures that occurred toward the end of January. These closures included two Cheesecake Factories, one Grand Lux Cafe, and one Blanco. Next, at this time, we expect effective commodity inflation of low single digits for Q1 as our broad market basket remains very stable. We are modeling net total labor inflation of low to mid-single digits when factoring in the latest trends in wage rates and minimum wage increases as well as other components of labor. G&A is estimated to be approximately $63,000,000 to $64,000,000. Depreciation is estimated to be approximately $28,000,000. We are estimating preopening expenses to be approximately $4,000,000 to $5,000,000.

Based on these assumptions, we would anticipate adjusted net income margin to be about 5% at the midpoint of the sales range provided. For modeling purposes, we are assuming a tax rate of approximately 5% to 6%, and weighted average shares outstanding of approximately 48,500,000. Turning to fiscal 2026, based on similar assumptions and no material operating or consumer disruptions, we anticipate total revenues for fiscal 2026 to be approximately $3,900,000,000 at the midpoint of our sensitivity modeling. For sensitivity purposes, we are using a range of plus or minus 1%. We currently estimate total inflation across our commodity basket, labor, and other operating expenses to be in the low to mid-single digit range and fairly consistent across the quarters. We are estimating G&A to be about 6.5% of sales, partially driven by our sales growth outlook impacted by the timing of restaurant openings and closures as well as periodic true-ups related to stock-based compensation.

Depreciation is expected to be about $115,000,000 for the year. And given our unit growth expectations, we are estimating preopening expenses to be approximately $35,000,000 to $36,000,000. Based on these assumptions, we would expect full-year net income margin to be approximately 5% of the sales estimate provided. For modeling purposes, we are assuming a tax rate of approximately 10% and weighted average shares outstanding relatively flat to 2025.

With regard to development, as David stated earlier, we plan to continue accelerating unit growth this year.

At this time, we expect to open as many as 26 new restaurants in 2026, with roughly three quarters of those openings planned for the second half of the year. This includes as many as six Cheesecake Factories, six to seven North Italias, six to seven Flower Childs, and seven FRC Restaurants. And we would anticipate approximately $210,000,000 in cash CapEx to support unit development as well as required maintenance on our restaurants. Note, this CapEx range includes some new restaurant construction expenses which may be classified as operating lease assets instead of additions to property and equipment in the statement of cash flows.

In closing, we delivered solid financial and operational performance for both the fourth quarter and full year, reflecting stable top line performance and strong execution. We also generated a record adjusted EBITDA of $354,000,000, reinforcing the consistency of the business and supporting disciplined growth and increased capital returns to our shareholders. Our portfolio of high-quality concepts, seasoned operators, and financial position provide a solid foundation as we look ahead. As we move forward into 2026, we remain focused on comparable sales growth, margin expansion, and long-term shareholder value creation. With that said, we will take your questions.

Operator: Thank you. If you would like to ask a question, again, press 1. We ask that you limit yourself to one and one follow-up. For any additional questions, please requeue. And your first question comes from the line of Andrew Marc Barish with Jefferies. Please go ahead.

Andrew Marc Barish: Hey, guys. Just wondering if you can kind of update us on sort of the go-forward structure with with FRC and you know, kind of changes you have made there and you know, what is going on with management team and such.

Matthew Eliot Clark: Sure. Hey. It is Matt. Thanks for the question. Appreciate it. Well, we are first of all really pleased with the overall performance of the business unit out of Phoenix. All of the lines of business are meeting or exceeding our expectations. And I think we will all look back on this being, you know, one of the most successful restaurant acquisitions. It is right now, it is steady as it goes. I think as you know, we put someone in place from Cheesecake to work with the team there in a senior operations role and that continues to go excellently. And we will continue to look at opportunities to add benefits via scale or expertise in operations.

At the same time, we will continue to look at that team to innovate and incubate the way that they have. So I think we are really pleased with where things are at and we will continue to try to create value through all of those contests.

Andrew Marc Barish: Thanks.

David M. Overton: Thank you very much.

Operator: Your next question comes from the line of Sara Senatore with Bank of America. Please go ahead.

Sara Senatore: Thank you. The first question is, you mentioned strong that supported margins. I guess given the restaurant-level margin was quite healthy, and also that you have seen, I think, a positive response to some of your maybe more accessible price point additions to menus. Is there an opportunity to invest in value or at least to sort of mark value as more centrally as you communicate with your consumers, just something we have seen is, you know, other casual diners kind of emphasizing abundant value or, you know, quality value.

Just given it looks like you have a little bit of room on the margin and then I do have a quick follow-up.

David M. Gordon: Sure. Hi, Sara. This is David Gordon. Thank you for the question. Certainly, we are very pleased with the reception the bites and bowls have gotten across all of the restaurants. And when we rolled those out, we did roll them out with a little heightened sense of awareness. We put them on a separate menu card so guests could see them right away. We marketed them a little more clearly in all of our social channels. And I think that is one of the reasons we had such great awareness.

And we are seeing strong attachment rates because they do provide great Cheesecake Factory value, and that value comes certainly in the price point on the bowls, but also on the portion size. On the bites and bowls that are great for sharing. We are seeing people attach the bites to their check. As we look to continue to roll out the menu, which we are doing right now, we have some new bites and bowls that are happening. So we are going to lead into that value wherever we can.

And maybe move some of those items into the main menu and create another menu card so that we have that heightened sense of awareness for guests that are dining in or through our social channels.

Sara Senatore: Great. Thank you. And then, just, to confirm the North Italia same-store sales, I guess, it is more of a housekeeping. I think last quarter, you said sales transfer was maybe two percentage points and the fires were one. Are those roughly the same magnitude? Similarly, the daypart mix more weakness in the lunch. Are all those factors kind of consistent this in the fourth quarter as well?

Matthew Eliot Clark: Yes. Sara, this is Matt. I would say yes. That is very true. And I think the positive news there, though, is that as we are midway through the first quarter, we are seeing evidence that there was truly the cannibalization of the fire as the comp is recovering. So positive there. Just to double down on what David Gordon said, think the strategy is working on menu innovation. We said we would see some negative mix. We did. But in both December and now again in January, we are seeing incident rates year over year growing. And that means the guests are coming in and seeing tremendous value. Right? Because they are ordering those items at a higher So I think we are doing everything we thought we would do, and it is working.

Operator: Thank you. Your next question comes from the line of Brian Harbour with Morgan Stanley. Please go ahead.

Brian Harbour: Yeah. Hey. Good afternoon, guys. Matt, just a quick one. Do you have a rough estimate for how much the weather impact was in this current quarter?

Matthew Eliot Clark: You are talking about Q1, Brian, just to confirm?

Brian Harbour: Yes. Like, how much you factored into your guide?

Matthew Eliot Clark: Yeah. For sure. So what we did is to really look at it on a net basis because clearly there, you know, every year there is inclement weather and right now, the weather to date through Q1 we believe is about a 1% net impact negative, net impact on the entire quarter. So that assumes, you know, no more weather impact. We did see, you know, some record closures, think we probably had 120 restaurants closed on the peak day. So it was pretty profound. And so that is built into it, though.

Brian Harbour: Okay. Understood. What, you know, you talked about kind of evolving the bites and bowls. What has done best on that menu? How are you sort of, you know, shifting that or, you know, what are you seeing customers gravitate to?

David M. Gordon: I think everything has been very, very popular to be honest. So it is not one particular item, but a couple of bowls have done very, very well. All the bites have done well. So you know, that large menu variety is what people love about Cheesecake Factory. And they seem to be enjoying the bites and the bowls the exact same way.

Matthew Eliot Clark: I personally think the truffle fries are the best, Brian.

Operator: Your next question comes from the line of Andrew D. North with Baird. Please go ahead.

Andrew D. North: Great. Thanks for taking the question. I wanted to circle back to your comments on the broader consumer environment. You highlighted the slowdown in industry trends from Q3 and volatility in Q1 to date, particularly due to weather. So at this point, when you look at the business from an underlying perspective, do you believe you have seen any fundamental change in the consumer spending backdrop at this point? And maybe what do you believe has caused some of the softer industry trends in recent months? And then maybe just what does your current outlook for the balance of the year contemplate as it relates to the external environment given all the puts and takes out there? Thank you.

Matthew Eliot Clark: Sure, Drew. Great question. This is Matt. I think if you dial back to our last call, I think we gave some color on why we think the consumer sentiment would be soft for the fourth quarter. And if you kind of think about where the comp came in Cheesecake, we said we thought it would be about a 1% delta in terms of real performance from Q3. We had about 1% of weather impact in Q4. And about 50 basis points of a holiday shift impact. So pretty much right where we would have anticipated it to be. Again, many factors in terms of whether you want to believe it is the K economy or the government shutdown.

And we have a lot of historical data to understand those trends. I do think coming out into the first quarter here, that our performance is notably better. And I think the environment, I do not know. I cannot really speak to other companies. But I think our performance, if you interpolate the guidance, is more like what we saw in Q2 of last year. And so it feels like what we felt maybe was a two-quarter event. It is more like a one quarter at this point in time, where we sit today.

And so that is what our full-year guidance also expects is that we kind of are seeing it in Q1 which is pretty steady and pretty good across all of our concepts through the balance of the year.

Operator: Your next question comes from the line of James Ronald Salera with Stephens. Please go ahead.

James Ronald Salera: Guys, good afternoon. Thanks for taking my question. Wanted to circle back on the bowls and bites. You had mentioned that you are seeing know, attachment with those And I was hoping maybe you could help us break out on Cheesecake, the traffic and transaction in the quarter, with an eye to the mix component. Should we expect to see mix as kind of a continued headwind as we roll into FY 2026 as we kind of balance maybe some greater attachment with the lower check size from the bowls and bites, and maybe that drives some transactions as well.

Matthew Eliot Clark: Sure, Jim. This is Matt. Q4 pricing was about 3.5% to 4% and mix was a negative 1.8% and then traffic was the delta from that. So as anticipated, we still did see some negative mix. I would say though that is a full quarter number and we had just rolled out the new menu items really ending in early September. So, you know, we did not have a lot of traction if we think about our average guest comes once a quarter. So as I noted, I think just importantly, what we saw in December and now again in January is an actual improvement year over year in incident rates.

So some of the pricing investment will be offset by increased ordering. So we do think that the negative mix will continue, but at a lesser rate as we progress through the year. Importantly too, as we look at January, when you look at alcohol plus non-alcohol beverages, it was almost a break even on incident rate. So I think it is really guests are coming in and getting that full Cheesecake experience. So I know, we are kind of saying if you think about the guide, probably a negative 1% for the year on a mix perspective, based on continuing to roll out the bowls and the bites, but getting some positive on the order rates.

James Ronald Salera: Okay. Good. That is very helpful. And then just a follow-up. As we think about some demand drivers in 2026, I know there has been a lot of conversations around incremental demand from people getting tax refunds, you know, larger than expected tax refunds. Have any kind of historical, you know, data that you can look at when there were big refund seasons in the past. Is that something that actually tends to show up in the restaurants, or is that maybe just more the talking point than a reality from what you guys see on the ground?

Matthew Eliot Clark: Yeah. I mean, think, you know, great companies control their Jim. And so we do not really ever count on getting any benefits from the tax refund. I think what we are seeing in our performance given also that it started way before that, that the improvements are based on our execution and our menu innovation and the things that we are doing. And just normally given the income cohort associated with most of our portfolio, I just do not think it is as pronounced and we have not seen nor do we see correlations to gas prices, things like that, either.

James Ronald Salera: Okay. Good. I appreciate the thoughts. I will hop back in the queue.

Operator: Your next question comes from the line of Jeffrey Bernstein with Barclays. Please go ahead.

Jeffrey Bernstein: Great. Thank you. My first question is just on the restaurant margin. Specifically around what your assumptions are for the quarter and the year. It does seem like now all the three brands that you are reporting are comfortably sitting in that 17% to 18% range. Just wondering how we should think about that as the portfolio and by brand. Any puts and takes in terms of how that should play out as we look through 2026 and then I had one follow-up.

Matthew Eliot Clark: Sure, Jeff. This is Matt. Thanks for the question. Let us just start with the full year. I think, you know, as we set out our guidance last October, you know, we are happy to say that we are right on plan. 25 basis points of four-wall margin is our expectation for the restaurant levels. A little bit of pressure in G&A as we know we gave some specific guide there, really just accounting, you know, we have had tremendous retention in the restaurants. We have also had tremendous retention at corporate.

And so there is this thing called a forfeiture rate with the equity comp that will true up a little bit, but it is really sort of non-operating, but it is the P&L. And then all the other pieces kind of net out. So very, very clean outlook for us. The caveat comes on quarter-to-quarter basis. Obviously, other OpEx can be a little bit bumpier. In the first quarter, again, the 25 basis points coming in cost of sales, a little bit of pressure on labor and lapping group medical, but really the difference there is about 50 basis points in other OpEx, which is timing of marketing spend and some utilities.

Jeffrey Bernstein: And then, you know, you can do the math on the preopening and other pieces. So pretty much a flattish year-over-year net income guide and then that slight improvement for the full year. So Got it. And my follow-up is just on the the menu pricing. Obviously, the flip side to the greater emphasis on value, but I think you mentioned that The Cheesecake Factory was running price in the 3.5% to 4% range. Maybe just quantitatively, what are you expecting as we run through this year? And qualitatively, your confidence in being able to take whatever particular lever you are targeting, or maybe that is a gross amount you expect that on a net basis, you will not necessarily pass all that through. But just conceptually, how are you thinking about that pricing and actually, what will that pricing be?

Matthew Eliot Clark: Yeah. Jeff, so it is Matt. So this year, Cheesecake will be about 3%. So we are bringing that down, which I think, number one, we saw the inflation numbers where food away from home is still up 4%. And to your point, we are investing in lower price points on an average basis. As I said, maybe that is 100 basis points of negative mix. So we look at that as probably an effective 2% if you combine the mix and the price together, which is going to be well below where the industry is. And we are aided there by, well, beef is higher, it is not as big of a piece for us.

And dairy is measurably lower. So our market basket I think is aiding us in that endeavor. And I think we feel like that is definitely an achievable level and we have that pricing power based on where we are seeing the sales trends today. The attachment rates today, guests are perceiving the value there.

Jeffrey Bernstein: Thank you.

Operator: Your next question comes from the line of Lauren Silberman with Deutsche Bank. Please go ahead.

Lauren Silberman: Thanks a lot. You called out the four closures to date. Were these all anticipated, and any other closures that are anticipated for the balance of 2026?

David M. Gordon: Lauren. Yeah. This is David Gordon. Yeah. They were all anticipated. And we do not anticipate any future in 2026.

Lauren Silberman: Great. Just on the comp side, are there any callouts in terms of differences across regions or dayparts? And I guess in the markets that have not been impacted by weather, are you seeing trends hold up with you know, pretty stable?

Matthew Eliot Clark: Well, and this is Matt. It is a little complicated because weather has been everywhere, I feel like, and so you have to really splice it. I mean, California has had the rains at different points in time and you had much more southern weather impact than we normally do. I would say, generally the overall business has been predictable. I mean, I think we were in the range we expected to be in despite a little bit more weather. You know, right now we feel good about the guidance that we are giving and all of our regions I think are doing well.

So, you know, you are going to have those sort of hits and misses based on, you know, whether it is school holidays or whatever those schedules are. But nothing that I would call out specifically.

Lauren Silberman: Okay. Great. And then just final one. Going back to North, how are you thinking about comps for that business into 2026? I know there is a cannibalization dynamics. Those continue? Any differences in where new units are expected to open? Thanks.

David M. Gordon: So the new units specifically are about fifty-fifty in new and existing markets. So we continually evaluate where any potential cannibalization might be. As we look at any new sites, would anticipate for this year probably a little bit less than we had with the openings that were a little more impactful for the past twelve months that we have seen. And, you know, our goal is to get North a little bit more stabilized than it has been, probably a little more impacted versus Cheesecake, more in line with the rest of the industry. So at North, we continue to be working also on menu innovation, working a little bit on that lunch daypart, because that was where we felt a little bit of the pressure over the past few quarters.

And continued bar innovation as well. We have seen a nice little comeback in bar incident rates at North, which is good. It is an important part of the concept, and our bar mix is about 23%. It has been very, very stable. So we are working on innovation in that area as well, as we believe that it will continue to be very relevant to the concept.

Matthew Eliot Clark: Just for modeling, I think, like I said, you know, we have seen the impacts of the fire and the cannibalization rolling off. It kind of assumes sort of like more like first half of last year's performance in our model.

Operator: Your next question comes from the line of Christine Cho with Goldman Sachs. Please go ahead.

Christine Cho: Yes. Thank you for the question. So, David, you mentioned your plans to launch the dedicated rewards app in a few months. Could you elaborate a little bit more on the timeline and if you have any planned marketing investments around the launch.

David M. Gordon: Sure, Christine. Our goal would be to get it launched in the second quarter. Think that we are feeling pretty confident that is going to be the case. And we will launch it with a strong social media presence, what we think will be a nice strong offer for people to download the app onto their phone, and probably a little bit of in-restaurant marketing as well.

Christine Cho: Great. And then in the last quarter, I think you have called out some regional trends coming from the government shutdowns. Has that normalized as you exited the quarter? Thank you.

Matthew Eliot Clark: Yes. I think we have seen pretty stable performance across the portfolio. Again, ex the weather, which everybody is seeing at different times at different places.

Operator: Your next question comes from the line of Jeff Farmer with Gordon Haskett. Please go ahead.

Jeff Farmer: Thank you. Matt, just as a follow-up, I think you referenced that Q2 2025 same-store sales were roughly plus 1%. Were you saying that plus 1% is the implied 2026 same-store sales number? Did I get that right or wrong?

Matthew Eliot Clark: That is right. If you do the math, that is about where you are going to come into. That is right.

Jeff Farmer: Oh, okay. And then just following up on the rewards app launch. Tougher question, but in terms of setting the expectation level for us, how impactful could this be to visit frequency, average check, whatever metric you want to point to? Just how meaningful could this be from what you guys have understood?

David M. Gordon: Sure, Jeff. This is David. I think that our goal is to continue to make members' experience as seamless as possible and give them as much value as they can as members. I would not anticipate we are going to share any of those finer details in the near future just like we have not in the recent past, but we are going to be very focused on the app making the guest experience easier. So easier access to reservations for them, being able to see things like their order history, repeat their order history for off-premise. We are excited to get it going in Q2.

And if and when we start sharing any of those numbers, we will be sure to share them on one of these calls.

Jeff Farmer: Alright. Thank you.

Operator: Your next question comes from the line of Brian Mullan with Piper Sandler. Please go ahead.

Brian Mullan: Hey. Thank you. Just a question on Flower Child. Wondering if you could just talk about the vision here over the next several years. You know, what have you learned about the formats and locations that work best for this brand? You know, how much can you standardize that versus kind of needing to customize based on location and just as a part of that, you know, what would you need to see to really start to ramp that development pace above the six or seven for this year?

David M. Gordon: Sure, Brian. That is a great question. Certainly, we are enthusiastic and very pleased with the performance of Flower Child. It continues to exceed expectations in new and existing markets, which I think is very promising. As we moved into new markets even when there has been no Flower Child within miles or states, the reception has been very, very strong. So it is resonating with consumers. Think, for a few reasons.

One, it is very healthy, on-trend, and delicious, and it is an experiential fast-casual dining experience. It is not transactional. Today, we continually say that we believe all of our guests are looking for experiences versus transactions.

And then the operations team really has put in place a lot of systems over the past twenty-four months to enable consistent execution. There is probably a little bit more of that to go, but up to this point, the guest experience, when we look at the type of reviews we are getting in social media or even just through our own channels are very, very And that is because of the consistent execution. So we feel good that the concept is certainly a place where it can accelerate. The only thing that is holding us back from going a little bit more than maybe a 20% growth rate would be we want to make sure we have the right people power in place.

And we need the right leadership at the GM and executive chef level to open up those very visual, very busy fast-casual units, do it really, really well for consistent brand execution. That is most important to us. If we are able to ramp that up over time, could it be a little faster than 20% eventually? Perhaps. But for now in the near term, we feel confident in that 20% number, and that is what we are most focused on.

Andrew Marc Barish: Thank you.

Operator: Your next question comes from the line of Dennis Geiger with UBS. Please go ahead.

Dennis Geiger: Great. Thanks, guys. Appreciate the commentary on mix. Matt, I just wanted to confirm, did you say how much of the mix pressure was bowl and bite versus group order versus maybe alcohol and dessert the quarter? I know you spoke to alcohol for January. But just in the fourth quarter, is there a breakdown by bucket as far as the mix impacts go?

Matthew Eliot Clark: Hey, Dennis. No. I did not provide specifically, but, you know, my qualitative commentary would be we saw alcohol stabilize, dessert was very steady, so we know where most of it is coming from. But I do not have the exact number in front of me, but we know those macro trends would indicate that, you know, a lot of it is coming from the pricing differential of the new product.

Dennis Geiger: Got it. Very helpful. And then I guess assume it is a similar answer, but just on the 2026, as you think about maybe a best guess of that down 1% mix, is that the same largely from the new product on the bites and bowls more so than like a group order dynamic as you think about that estimate for 2026?

Matthew Eliot Clark: Yes. That is right. Exactly. So, I mean, it is a, no. There is an offset from the pricing, but as you start to see the order rate pick up kind of neutralizes some of it. So that is what we are anticipating.

Brian Michael Vaccaro: Very helpful. Thanks, Matt.

Operator: Your next question comes from the line of Rahul Krotthapalli with JPMorgan. Please go ahead.

Rahul Krotthapalli: Good afternoon, guys. You guys are very early on DoorDash, and I believe that with the exclusivity, there has been lot of discussion in the industry around some and also across of your peers on how you want to rethink fees, menu pricing, and whatnot. Can you give some detail on how you guys are thinking about this? And also remind us on where the delivery mix is today.

David M. Gordon: Sure, Rahul. This is David Gordon. Great question. You are right. We certainly have been in a long-standing relationship with DoorDash. It has been a terrific relationship, and that relationship has allowed us to leverage, I think, what is great about the value of Cheesecake Factory's menu and pricing and not take extra price which many of our competitors have had to do in the delivery channel. So that would be our intent moving forward. We would like to not have to take any more price than we take today, which is only about 2% to 3% versus the in-restaurant menu. When we look at total off-premise for Q4, it was 22% of sales.

And that mix of that 22%, 10% is delivery, up about 1% from Q3, and the rest is split relatively evenly through online ordering and phone pickup. So that has been very consistent. Those numbers have been very consistent, and that mix has been consistent over time.

Rahul Krotthapalli: Is there any that you can extend this partnership across all your other brands down the line? I believe only Cheesecake and Grand Lux were on the agreement. Just any updated thoughts there.

David M. Gordon: Sure. Well, actually, all the concepts are covered in the agreement today. So everything we own is part of the DoorDash agreement today.

Rahul Krotthapalli: Thank you.

Operator: Your next question comes from the line of Brian Michael Vaccaro with Raymond James. Please go ahead.

Brian Michael Vaccaro: Hi. Thanks, good evening. I wanted to ask about the 26 unit gross, and I thought it was interesting to see Cheesecake Factory's unit growth stepping up a bit. Maybe you just could give a little bit more on the opportunity you see there and maybe level set the size of units that you are opening and kind of the AUV or unit economic targets on these units. I know there has been some successful unit openings over the years in pockets that open up. But maybe just kind of what you are seeing in terms of that outlook for 2026.

David M. Gordon: Sure, Brian. So we are excited to be opening up six Cheesecakes this year. And as great sites become available for Cheesecake Factory, because of the flexibility in size, everything from 6,500 up to 10,000 square feet, we can build The Cheesecake Factory at any great site. For this coming year, most of these are in that 7,000–10,500 square foot range for all six of them, on average.

Matthew Eliot Clark: And, Brian, from a returns perspective, this is Matt. We have been super happy with the sales level they have been able to generate, effectively the average AUVs and average margins. And so we are sitting right between the 20%–25% cash on cash we have been targeting, and feel great about the ability to continue to open at that level.

Brian Michael Vaccaro: Alright. That is helpful. Appreciate that. And then on the margin outlook, Matt, could you comment specifically on just your expectation for commodity inflation? Specifically? Any quarterly variability to keep in mind on the commodity front on year?

Matthew Eliot Clark: Sure. Commodities would be about 2.5% or so overall. And pretty steady throughout the year. God willing.

Brian Michael Vaccaro: Knock on wood. Knock on wood. Alright. And then last one for me. I am sorry if I missed it, but could you also provide the comp components for North Italia in the fourth quarter? Thanks again.

Etienne Marcus: Hey, Brian. This is Etienne. I will give you the components here. So traffic was negative 6%. Price is about 4%. And the mix was negative 2% for the quarter.

Brian Michael Vaccaro: Thank you. Sure.

Operator: And ladies and gentlemen, that concludes our question and answer session. And that concludes today's call. Thank you for your participation, and you may now disconnect.

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