Texas Roadhouse, Inc. (TXRH) Cash Flow Statement

The OCF/NI ratio has ranged from 1.03x in 2025Q2 to 3.60x in 2026Q2, suggesting that reported earnings understate cash generation, likely due to significant non-cash charges like D&A and favorable working capital swings. This robust conversion implies that earnings are backed by actual cash inflows, though the variability warrants monitoring for sustainability.

The FCF trajectory shows a sharp V-shaped recovery, with 2025Q3 representing a low point due to elevated capex and weak operating cash flow. The subsequent quarters show improving FCF margins, reaching 15.5% in 2026Q2, which suggests that the company's growth investments are beginning to generate returns. However, the volatility in FCF margins (ranging from 1.0% to 15.5%) indicates that quarterly performance can be lumpy, and investors should focus on the longer-term trend.

The capex-to-revenue ratio has been volatile, with a notable outlier in 2025Q4 (20.2%) likely due to timing of store openings or land purchases. The average capital intensity is higher than peers like Darden (8.5% FCF margin) but aligns with TXRH's growth strategy. The elevated capex in 2025Q4 may have temporarily depressed FCF, but the subsequent recovery in 2026Q2 suggests that these investments are being managed effectively. The company appears to be prioritizing expansion, which could pressure near-term FCF but support long-term growth.

The working capital adjustments are highly variable, with positive contributions in most quarters but a significant negative in 2025Q2. This variability is likely due to timing of payables and receivables, as well as inventory management. The positive working capital changes in recent quarters (e.g., $36.5M in 2026Q2) have boosted operating cash flow, but the inconsistency suggests that management may be using working capital levers to smooth cash flow. Investors should monitor whether these swings are sustainable or if they indicate underlying operational issues.

The company has consistently paid dividends and repurchased shares, with total shareholder returns averaging around $100M per quarter. In 2026Q2, dividends and buybacks totaled $170.5M, slightly exceeding the prior quarter's $77.6M, indicating an increased commitment to returning capital. Meanwhile, capex remains elevated, suggesting that TXRH is funding both growth and shareholder returns from operating cash flow. The acquisition activity (net cash outflows) in recent quarters, though small, adds another dimension to capital deployment. Overall, the company appears to be managing its capital allocation effectively, though the sustainability of these payouts depends on continued strong cash generation.

The cumulative OCF/NI ratio over the last five quarters is approximately 2.1x, meaning that for every dollar of net income, TXRH generated over two dollars of operating cash flow. This divergence is primarily due to non-cash charges like D&A and favorable working capital changes. While this suggests high earnings quality, it also implies that the company's earnings may be understated relative to its cash-generating ability. However, investors should be cautious, as such large divergences can sometimes indicate aggressive working capital management or one-time items that may not persist.