Christine Cho

Christine Cho of Goldman Sachs inquired about the performance of recent value promotions, such as the '20 for 20' bundle, asking about their impact on average ticket, traffic, and franchisee economics. She followed up by asking if increased consumer anxiety was causing a noticeable shift in the percentage of checks utilizing deals or if specific consumer cohorts were responding more actively.

Answer

President and CEO Michael Skipworth stated that value bundles like '20 for 20' are a core part of their playbook and performed very well, noting they are designed to be margin-accretive and actually resulted in a higher average check than typical orders. SVP & CFO Alex Kaleida added that they have not seen a meaningful shift in deal mix, though the previously noted pressure on lower-income Hispanic consumers persists, with those guests managing their tickets but still engaging with the brand.

Christine Cho from Goldman Sachs inquired about Yum! Brands' long-term unit growth goals, specifically if 5% remains the target, and asked about the major factors influencing the pace of expansion. She also sought insights into the most notable white space opportunities globally, both by market and brand.

Answer

CEO Chris Turner affirmed the strong development trajectory, noting 95 countries with development and a record year for KFC gross development. He highlighted the importance of strong unit economics, citing successful unlocks in Italy and South Korea through new franchise partnerships. Turner emphasized abundant white space for KFC globally (targeting 75,000 units) and growing opportunities for Taco Bell, including international expansion and strategic U.S. acquisitions.

Christine Cho asked about the long-term unit growth goal, specifically if 5% remains the right anchor, and inquired about major factors impacting expansion pace, as well as notable white space opportunities globally from both market and brand perspectives.

Answer

CEO Chris Turner confirmed a strong development trajectory, noting 95 countries with development this year (up from 90 last year) and KFC being ahead of Q3 last year in gross development, on track for a record year. He mentioned Taco Bell net new units are up almost 30 year-over-year. He reiterated that strong unit economics are the lifeblood of growth, citing examples like Italy and South Korea where new partners unlocked significant unit growth and AUV improvements. He estimated at least 75,000 KFCs globally with white space in almost every market, and highlighted Taco Bell International's accelerating same-store sales growth and U.S. white space opportunities.

Christine Cho requested details on Taco Bell's strategy to capture its $5 billion long-term beverage opportunity, including differentiation, scale, timeline, and key learnings from the Live Mas Cafe pilot.

Answer

CEO David Gibbs described Taco Bell as uniquely positioned for beverage growth, building on the success of Baja Blast. He explained that the Live Mas Cafe pilot produced 'stellar' results, prompting an aggressive expansion plan to 30 locations. The recent launch of Refrescas is another key part of this strategy. Gibbs also mentioned that KFC is testing a similar beverage program called 'Quench,' indicating a broader company focus on the category.

Christine Cho inquired about the evolving consumer spending behavior of younger cohorts (under 35) over the past few months, and whether this trend represents an increasing headwind for the coffee industry in the near term, informing Starbucks' go-forward strategy.

Answer

Brian Niccol, Chairman and CEO, noted a positive response in transactions and sales across all generational cohorts, including younger consumers, over the recent quarter. He emphasized that younger consumers are more choiceful, making it crucial for Starbucks to deliver a great experience and value, which he believes is reflected in the observed transaction growth.

Christine Cho inquired about the spending behavior of younger consumers (under 35) over recent months, how this informs Starbucks' forward strategy, and if it represents an increasing headwind for the coffee industry in the near term.

Answer

Brian Niccol, Chairman and CEO, Starbucks, observed a positive response in transactions and sales across all generational cohorts in the most recent quarter. He emphasized the importance of delivering a great customer experience and value to these choiceful consumers, ensuring they feel their spending at Starbucks is worthwhile, which has been reflected in transaction growth.

Christine Cho from Goldman Sachs asked about the key factors that gave management the confidence to expedite the Green Apron Service rollout and how its ongoing success will be measured.

Answer

CEO Brian Niccol explained the decision was driven by strong pilot results, which demonstrated the ability to effectively hire, train, and deploy partners, complemented by the success of the SmartQ order sequencing technology. This combination led to positive transaction movement. He stated that success will be tracked via a new 'growth scorecard' focusing on key drivers like customer metrics, staffing, and speed, which are proven to drive transaction growth.

Christine Cho of Goldman Sachs asked about the decision to expedite the 'Green Apron Service' rollout, the key metrics from pilots that provided confidence, and how ongoing success will be measured.

Answer

Chairman & CEO Brian Niccol explained the acceleration was due to strong pilot results demonstrating the ability to hire, train, and deploy effectively. The combination of new staffing models and SmartQ technology drove positive transaction movement. He added that ongoing success will be tracked via a new 'GROW report' focused on key drivers of same-store sales, allowing the new model to be in place for the critical fall season.

Christine Cho asked about the major investment areas needed to restore traffic momentum and improve store infrastructure, and also sought confirmation on the future of the previously announced $1 billion annual cost efficiency program.

Answer

CEO Brian Niccol reiterated that investments in throughput, pricing, marketing, and the cafe experience will drive traffic. CFO Rachel Ruggeri added that while efficiency remains a priority to fund investments, the specific $1 billion target will be reassessed as part of the new 'back to Starbucks' plan. The focus is on continuous efficiency to support growth and future margin expansion.

Christine Cho inquired if the Chinese ownership of Generac's engine supplier is a concern for larger customers, and whether a hyperscaler contract is necessary before doubling capacity.

Answer

President and CEO Aaron Jagdfeld confirmed that the engine supplier's ownership has been discussed with customers, noting that global supply chain reliance is common. He mentioned the supplier's expanding manufacturing base beyond France and potential future ownership structures, stating it's not a showstopper. While a hyperscaler commitment would provide more comfort for doubling capacity, he emphasized that the expansion is structured to be repurposable for other business growth or internal needs, and traditional C&I markets also require growth.

Christine Cho asked if the Chinese ownership of Generac's engine supplier is a concern for larger customers and whether a hyperscaler contract is necessary before doubling capacity.

Answer

President and CEO Aaron Jagdfeld addressed the engine supplier's ownership, noting their global manufacturing expansion and potential future ownership structures to mitigate concerns, stating it has not been a showstopper. Regarding capacity doubling, he would 'certainly feel better' with a hyperscaler commitment but emphasized that the expansion is structured to be repurposable for other business growth or internal needs, with CFO York Ragen adding that traditional markets will also drive demand.

Christine Cho asked about the post-launch feedback for the new queso compared to testing, ways to improve the process, and the feedback mechanisms in place. She also requested an update on the North of Six initiative.

Answer

CEO Kevin Hochman acknowledged that while testing for the new queso was positive, market feedback from long-time skillet queso users was not, leading to the decision to bring back the old queso. He emphasized the robust stage-gate process and quick response to market learnings. Regarding North of Six, he mentioned ongoing updates like installing tankless water heaters and replacing community tables. CFO Mika Ware added that learnings from North of Six have helped rebuild the labor model for efficiency.

Christine Cho inquired about the post-launch feedback for the new queso compared to testing, ways to improve the process, and the feedback mechanisms in place. She also asked for an update on the North of Six initiative's progress.

Answer

Kevin Hochman, President and CEO of Brinker International, acknowledged that while testing was positive, in-market feedback revealed long-time skillet queso users were not satisfied, leading to the decision to bring back the original. He emphasized continuous learning and guest listening. Regarding North of Six, he highlighted initiatives like installing tankless water heaters and replacing large community tables. Mika Ware, EVP and CFO, added that North of Six learnings helped rebuild their labor model for efficiency.

Christine Cho of Goldman Sachs requested more details on the store reimage plans for fiscal 2026, including the timeline, scope, investment levels, and expected sales lift for the priority assets.

Answer

CFO Mika Ware and CEO Kevin Hochman explained that the reimage program is in an early learning phase. The company will remodel four test restaurants in the Dallas area with varying scopes to determine the right package before scaling. They are focused on getting the plan right before moving with speed and do not expect to reach a 10% annual run rate until the start of calendar 2027. Specific investment and return details will be shared later.

Christine Cho expressed admiration for Flower Child's resilient comparable sales trends, significantly outpacing the fast-casual segment, and asked for insights into its driving strength and current Q4 trends. She also inquired about North Italia's value proposition and any plans to communicate value differently given the current focus on lower price points.

Answer

David Gordon, President, attributed Flower Child's strength to its differentiation, menu variety, strong price points (without needing aggressive pricing), and high levels of hospitality and food quality, noting strong brand affinity in new and existing markets. For North Italia, he mentioned leveraging the menu with promotions like a small plate and pasta lunch for $25, using internal marketing, and ongoing menu innovation with seasonal changes to attract guests.

Christine Cho expressed admiration for Flower Child's resilient comparable sales and sought insights into its relative strength amidst broader fast casual deceleration, including Q4 trends. She also asked about North Italia's value proposition and plans to communicate value differently.

Answer

David Gordon, President, attributed Flower Child's strength to its differentiation, menu variety, strong price points, and high hospitality/food quality, expecting continued strong brand affinity. For North Italia, he highlighted promotions like a $25 lunch special and new seasonal menus as ways to communicate value and attract guests.

Christine Cho of Goldman Sachs asked if management agrees with observations that casual dining is holding up better than QSR in the current macro environment and what structural or behavioral changes might explain this.

Answer

EVP and CFO Matt Clark agreed with the observation, suggesting several structural reasons. He noted a long-term consumer shift toward eating away from home, particularly in full-service, and that the casual dining consumer is less sensitive to economic pressures affecting lower-income cohorts. He also cited a cultural shift where dining out is an ingrained part of people's routines, supporting stability in the business.

Christine Cho inquired if the labor efficiency tailwinds from 2024 are expected to continue and asked how the company is approaching its value messaging amidst a more value-focused industry narrative.

Answer

President David Gordon stated the goal for 2025 is to maintain the record-low attrition levels achieved in 2024, supported by a stable macro environment and strong internal programs. He explained that The Cheesecake Factory's value proposition is multi-faceted, including a broad range of price points, large shareable portions, and the overall dining experience, which resonates well with guests without changing key messaging.

Christine Cho followed up on the Q1 2026 revenue outlook of $250 million, asking if this represents expected sell-through or if destocking is anticipated to continue into the first half of next year. She also inquired about the timing for more details on the prepaid lease structure with partners and how safe harbor would apply to this entity, particularly for forecasting annual demand.

Answer

President and CEO Badri Kothandaraman indicated that for Q1 2026, he expects equilibrium or slightly higher sell-through than the $250 million outlook. Regarding the prepaid lease, Mr. Kothandaraman stated that announcements would come from partners, hopefully in Q4, and reiterated Enphase's support for both physical work test and 5% safe harbor methods based on partner preference and tax approval.

Christine Cho asked if Enphase Energy's Q1 2026 revenue outlook of $250 million represents expected sell-through or if continued destocking is anticipated in the first half of next year. She also inquired about the expected update timeline for the prepaid lease (PPL) structure and the safe harbor approach (physical work test vs. 5%) for PPL.

Answer

Badri Kothandaraman, President and CEO, stated that for Q1 2026, he expects equilibrium or slightly higher sell-through than the $250 million outlook. Regarding the prepaid lease structure, Mr. Kothandaraman indicated that announcements would come from Enphase's partners, hopefully in Q4 2025. He reiterated that Enphase supports both the physical work test and 5% safe harbor methods, depending on the TPO partner's preference and tax comfort, and plans to do so for PPL.

Christine Cho asked for clarification on the manufacturing plan for the new IQ Battery 10C amid new tariffs and questioned what was driving the Q2 gross margin decline beyond the stated 2% tariff impact.

Answer

President and CEO Badri Kothandaraman confirmed the initial 10C rollout will be a non-domestic version, with a domestic content version to follow in 2-3 months. He explained the additional margin pressure in Q2 is because the new 4th-gen batteries, shipping in smaller initial quantities, will have a slightly higher tariff impact compared to the existing pre-tariff inventory of 3rd-gen products.

Christine Cho inquired about the timeline for gaining approval for the new Meter Collar from California utilities, asking about the expected duration and necessary steps before sales can begin. She also asked if the $95 million safe harbor deal was primarily a reaction to recent changes in domestic content rules.

Answer

Chief Products Officer Raghu Belur explained that after achieving the primary UL certification, Enphase is now engaged in utility-specific testing with all three California IOUs, which are at different stages. He described the experience as positive. President and CEO Badrinarayanan Kothandaraman added that the safe harbor deal was a broad 'risk mitigation strategy' that could encompass factors including domestic content and future ITC changes.

Christine Cho inquired about Enphase's battery business, asking for clarity on the Q4 shipment guidance versus sell-through, the drivers behind the U.S. revenue surge, and the inventory situation in Europe.

Answer

President and CEO Badri Kothandaraman explained that Q3 battery shipments were for channel restocking, and Q4 shipments of 140-160 MWh reflect a normalized equilibrium between sell-in and sell-through. The 43% U.S. revenue increase in Q3 was due to ending the practice of under-shipping, aligning shipments with actual demand. In Europe, where sell-through fell 34%, Enphase is deliberately under-shipping to manage elevated channel inventory.

Christine Cho from Goldman Sachs requested an update on loyalty program customer acquisition and asked how the company plans to convert new sign-ups into more frequent guests.

Answer

Co-Founder, CEO & Director Jonathan Neman reported that new member sign-ups remain strong at around 20,000 per week, primarily driven by in-store conversions. To further boost acquisition and improve experience, a scan-and-pay feature will be rolled out later this year. He added that the company is actively testing personalized offers for different customer cohorts to drive frequency and expects the loyalty program to become a significant digital flywheel for the business.

Christine Cho asked for clarification on the lighter Q3 unit openings and for a discussion of the puts and takes for restaurant-level margin in 2025, following seven consecutive quarters of year-over-year improvement.

Answer

CFO Mitch Reback stated that the Q3 opening pace was in line with internal models and expectations, with openings intentionally scheduled late in the quarter. He declined to provide specific 2025 margin guidance at this time, indicating it would be shared on a future earnings call.

Christine Cho from Goldman Sachs asked for the factors that influenced the decision to accelerate the Carrols refranchising process and requested an assessment of the current demand from potential franchisees.

Answer

CFO Sami Siddiqui explained that the acceleration is a direct result of strong demand from multiple sources: internal leaders at Carrols, new prospective franchisees, and existing high-performing Burger King operators. Executive Chairman Patrick Doyle added that the opportunity for Carrols' own high-potential talent to become owners creates a powerful incentive that is driving strong operational performance within that portfolio.

Christine Cho asked for more details on sales growth and market share trends across various categories at Tim Hortons, such as PM food and cold beverages. She also inquired if the brand is seeing elevated competitive pressure in any particular daypart within the Canadian market.

Answer

CEO Josh Kobza reported that Tim Hortons grew its dollar share in hot brewed coffee year-over-year. He acknowledged some softness in breakfast sandwiches but expects improvement from new promotions. He highlighted that the focus for the rest of the year will be on cold beverages for the summer and PM foods, with new launches planned for both. CFO Sami Siddiqui added that the PM food share did increase in the quarter, driven by the impact of flatbreads and loaded bowls, indicating successful growth in that daypart.

Christine Cho asked about consumer behavior trends, specifically any spending shifts observed across different income cohorts and whether the company was seeing repeat business and increased frequency from lower-income consumers who were initially attracted by value deals.

Answer

CEO Josh Kobza provided a brief response, stating that there was 'nothing too new to call out this quarter in terms of income cohort performance' and that the trends observed have remained consistent over the last few months, indicating no significant shifts to report.

Christine Cho asked for help bridging the gap between the previously disclosed sell-through number and the Q3 revenue guidance, given that European inventory is now normalized. She also inquired about the company's foreign exchange hedging strategy as it begins exporting U.S.-made products.

Answer

CEO Shuky Nir explained the gap by noting that some distributors have not yet fully normalized inventory and that levels fluctuate based on seasonality and anticipation of new products. CFO Asaf Alperovitz confirmed that the company will lose its natural FX hedge but has an active policy to hedge major currencies and will adapt its methodology to manage the new revenue flows.

Christine Cho inquired about the growth of commercial storage, SolarEdge's competitive strategy amid high tariffs on peers, and any potential impact on the new battery rollout. She also asked for a breakdown of the 4-6% gross margin impact from tariffs between China and other regions.

Answer

CEO Yehoshua Nir stated that while the company is pleased with commercial battery growth, it does not provide specific product numbers. He confirmed the new Nexus battery is on track for Q4 2025 shipments. Regarding tariffs, he explained the margin impact estimate is based on known rates (145% from China, 10% from others) and that the supply chain team is actively seeking alternative sources without compromising quality.

Christine Cho inquired if the over $100 million in prepayment/deferred revenue on the cash flow statement was tied to safe harbor agreements and asked about the expected cadence of 45X monetizations in 2025.

Answer

CFO Ariel Porat clarified that while some of the prepayment amount was related to safe harbor, it was not the full amount, as it also includes other customer agreements. Regarding 45X, he stated the company believes it can monetize credits in subsequent quarters, contingent on market demand.

Christine Cho of Barclays questioned the timing of the European price cuts, asking if the decision was driven by the recent accounting review and whether, in hindsight, the cuts should have been implemented earlier.

Answer

Interim CEO Ronen Faier asserted that the decision was business-driven, not accounting-driven. He explained that the company initially used promotions instead of permanent price cuts to avoid harming distributors holding higher-cost inventory. The decision to finally cut list prices was made after observing continued market decline in Europe and determining that the previous promotional strategy was no longer sufficient. He stated he was not sure the outcome would have been different if the cuts were made earlier.

Christine Cho of Goldman Sachs asked how Dutch Bros prioritizes investments to maintain its competitive edge in beverage innovation, like protein coffee and energy drinks, and what framework guides its new product decisions.

Answer

CEO Christine Barone described their innovation process as a mix of "art and science." It involves monitoring market trends, followed by rigorous customer panel testing, name testing, and concept testing. She emphasized that they innovate simultaneously across all platforms (coffee, energy, etc.) because customers drink across categories, allowing them to feature different innovations throughout the year.

Christine Cho inquired about potential factors that could affect the new restaurant development pipeline for 2026 and beyond, such as changes in franchisee store economics or demand for new units.

Answer

EVP & CFO Ian Borden expressed high confidence in meeting the 2025 target of 2,200 openings and the long-term goal of 50,000 restaurants. He stated that development decisions are based on long-term returns, which remain in line with expectations for new units. Chairman & CEO Chris Kempczinski added that a recent leadership review confirmed that multi-year development pipelines are in 'really good shape,' supported by granular analysis of open trading areas.

Christine Cho asked for details on the new go-to-market strategy, including the culinary calendar, the shift to paid media advertising, and how returns will be tracked. She also sought to clarify if higher G&A guidance was tied to this new ad spend.

Answer

CEO Rob Lynch explained the company is testing top-of-funnel paid media for the first time to support its 18-month culinary calendar, aiming to shift comp growth from pricing to traffic. CFO Katie Fogertey confirmed the higher G&A guidance reflects this incremental media investment but clarified that any potential revenue or profit lift from the new advertising is not yet included in the company's outlook.

Christine Cho from Goldman Sachs asked about the expected contributions of new COO Jason Kidd and potential tweaks to long-term strategy. She also followed up on making 'Summer of Extras' a regular event and the outlook for marketing spend.

Answer

CEO Scott Boatwright stated that Jason Kidd's extensive retail experience is expected to bring a fresh perspective and create a 'step change' in operational performance. Regarding marketing, he confirmed that learnings from 'Summer of Extras' will inform future digital strategy and that marketing spend could increase to 3% or more, provided it continues to be return-focused.

Christine Cho from Goldman Sachs asked about the percentage of orders tied to promotions and the rationale for bringing back the 'Best Deal Ever' in July, questioning if it was aimed at customer acquisition or driving frequency.

Answer

CEO Russell Weiner stated that the mix from their two main national deals has remained consistent over time. He explained that the 'Best Deal Ever' was reintroduced to meet consumer demand for value, but also to align with the 'most delicious food' pillar of their strategy, as the deal allows for up to seven toppings, which customers perceive as both a great value and a way to enhance deliciousness.

Christine Cho asked about the drivers of strength in Canada and whether there is a path for international unit growth to reaccelerate now that the bulk of DPE's store closures are complete.

Answer

Chief Executive Officer Russell Weiner attributed Canada's success to its adoption of the 'Hungry for MORE' strategy. On unit growth, Chief Financial Officer Sandeep Reddy confirmed the DPE closures are mostly done but said the company is in a 'wait-and-see mode' on DPE's future opening plans, while other markets like India and Japan remain healthy.

Christine Cho from Goldman Sachs Group asked for more color on the international same-store sales slowdown, inquiring about specific markets driving the pressure and the expected trajectory. She also asked if international unit growth, excluding partner DPE, was trending in line with expectations.

Answer

CFO Sandeep Reddy identified macro pressures in Europe and Asia, as well as geopolitical tensions in the Middle East, as the primary drivers of the slowdown that began in August. He stated the company is resetting its international same-store sales growth expectations to 1-2% for the next 15 months. Regarding unit growth, he confirmed that the primary driver of the guidance adjustment remains DPE, and trends outside of that partner are not materially different from expectations.

Christine Cho of Goldman Sachs asked for observations on consumer behavior across different age groups, seeking to understand if younger guests were a key driver of recent positive trends in casual dining.

Answer

CFO Raj Vennam responded that consumer behavior is primarily driven by household income rather than age. He reiterated that growth in casual dining is occurring across most income levels, with the exception of households earning below $50,000, and that higher-income households are showing more growth. He noted age is more of a correlation to income than a distinct factor.

Christine Cho from Goldman Sachs asked for observations on performance across different dayparts, such as breakfast and late night, and inquired about any particular pressures or market share trends.

Answer

Chief Customer and Digital Officer Ryan Ostrom responded that sales pressure has been spread evenly across dayparts, with some weakness at lunch and dinner. He noted recent successes with LTOs like the Nashville hot mozzarella sticks and a Red Bull partnership. He reiterated the plan to focus on a barbell strategy balancing premium ticket-driving items with value offerings to drive traffic.

Christine Cho of Barclays PLC questioned the long-term viability of Fluence's domestic/imported cell blending strategy, asking how it would compete if new, cheaper battery capacity is built outside of China. She also asked if customers could potentially source domestic and imported cells separately and perform the mixing themselves.

Answer

CEO Julian Nebreda expressed confidence that the company's blending strategy will remain competitive, noting that Fluence will also benefit from lower global prices on the imported portion of its mix. He emphasized that Chinese producers have limited room for further price reductions. Nebreda dismissed the idea of customers mixing their own batteries, stating that Fluence's value is not in the commodity cells but in its proprietary Battery Management System (BMS), integration expertise, logistics, and service capabilities, which ensure high system availability.

Christine Cho asked if the planned acceleration of foreign cell imports is included in the $300 million working capital forecast. She also inquired about the level of customer interest in domestic content products and if demand has shifted since the election.

Answer

President and CEO Julian Nebreda confirmed the accelerated imports are factored into the working capital needs. He described customer demand for domestic content as 'very, very strong' and stated that this interest has not changed significantly since the election, as these are long-term project decisions.

Christine Cho of Barclays requested details on how EPC, supplier, and PPA contracts handle tariff risks and potential project delays. She also asked about the amount of cushion in PPA prices to absorb cost increases before facing offtaker pushback.

Answer

Connor Teskey, an executive, and Hannah Labuschagne, Global Head of Procurement, detailed two primary risk mitigation strategies: either locking in fully wrapped contracts where the supplier bears tariff risk, or embedding PPA price adjusters that pass costs to the offtaker. Labuschagne specified that contracts typically cover all tariff changes post-signature and that strong global supplier relationships prevent significant delays. Teskey added that there is 'more than enough' cushion to pass on costs, as renewables are significantly cheaper than alternatives, a margin that continues to widen.

Christine Cho of Barclays requested details on how EPC, supplier, and PPA contracts are structured to handle tariff pass-throughs and potential project delays. She also asked about the amount of cushion in PPA price adjusters before offtakers might push back on price increases.

Answer

Executive Connor Teskey outlined two primary strategies: either locking in all costs upfront to transfer risk to the supplier, or embedding PPA price adjusters to pass costs to the customer. Executive Hannah Labuschagne added that contracts are specific, covering all tariff changes, and that strong global supplier relationships allow for swift renegotiations without significant delays. Teskey asserted there is 'more than enough' cushion to pass through costs, as renewables' cost advantage over other power sources is significant and growing.

Christine Cho requested details on how EPC, supplier, and PPA contracts handle tariff risks, specifically regarding pass-through clauses and potential project delays. She also asked about the amount of cushion in PPA price adjusters before offtakers might push back.

Answer

Connor Teskey, an executive, and Hannah Labuschagne, Global Head of Procurement, detailed two primary risk mitigation strategies: locking in fully wrapped EPC contracts where the supplier bears the risk, or embedding PPA price adjusters to pass costs to the customer. Labuschagne specified that contracts typically cover all tariff changes post-signature and that strong supplier relationships prevent significant delays. Teskey added there is 'more than enough' cushion to pass on costs, as renewables' cost advantage continues to widen.

Christine Cho of Goldman Sachs asked how the 10-15% menu reduction is factored into guidance and how the company will balance this simplification with the need to drive traffic and maintain a compelling value proposition.

Answer

CEO Mike Spanos explained that menu simplification is complementary to improving the guest experience. By removing low-mix, low-satisfaction items that also create operational complexity, the company can improve quality and consistency, which enhances guest perception and morale while also reducing back-of-house labor costs. This synergy is expected to support, not hinder, the value proposition.

Christine Cho of Goldman Sachs asked about the synergies across the company's brand portfolio (Texas Roadhouse, Bubba's, Jaggers) and how they help the younger brands scale and replicate the guest experience.

Answer

CEO Gerald Morgan explained that while corporate resources support all three brands, the strategy is to build separate support structures for each to understand their unique business needs. Growth is dictated by having the right people, strategy, and execution for each concept. He noted they have distinct Heads of Operations for Roadhouse, Bubba's, and Jaggers/International to ensure each business gets the investment and focus required to grow successfully.

Christine Cho asked whether project delay timelines are based on company discretion or firm customer input, and questioned at what point an indefinite delay becomes a cancellation.

Answer

CEO Brandon Moss clarified that timelines are determined by weekly reviews of customer construction schedules, not company discretion. CFO Dominic Bardos explained that backlog is supported by firm contracts, making cancellations rare. Awarded orders, which are pre-contract, can be delayed or moved back to the pipeline if a project's status changes, but are not typically cancelled outright.

Christine Cho of Barclays inquired about the drivers of gross margin outperformance relative to the 'high 20s' guidance. She asked for factors that could lower margins in the second half of the year and requested a clearer definition of 'structural gross margin.'

Answer

CFO Chuck Boynton attributed the strong Q1 and Q2 margins to excellent execution, a significant uptake in high-margin TrueCapture software, and accumulated 45X benefits that will not repeat. He noted that about 300 basis points of Q2's outperformance are unlikely to recur. He defined 'structural gross margin' as the blended average margin profile (high 20s to low 30s) expected from the company's typical 2/3 U.S. and 1/3 international business mix.

Asked about the Constant Prepayment Rate (CPR) assumption in their return metric and the rationale for changing their securitization strategy to go deeper into the capital stack.

Answer

The company confirmed they have lowered their CPR assumption to reflect the current market, which depresses the calculated return. The change in securitization strategy is driven by the fact that corporate capital is currently much more expensive than asset-level capital, making it logical to maximize proceeds from securitizations.

Christine Cho of Barclays inquired about the strategy to increase contracted capacity to 90% and the potential pricing for this incremental volume. She also asked for the rationale behind the long-term run-rate marketing margin guidance of $2.00-$2.50/MMBtu.

Answer

President & CEO Jack Fusco attributed the higher contracting target to operational reliability. He and EVP & CCO Anatol Feygin noted significant flexibility in structuring new deals. Feygin and SVP & CFO Zach Davis expressed confidence in the long-term margin guidance, citing the cost-competitiveness of U.S. LNG and the durability of their cash flows.

Christine Cho asked for clarification on the seasonality of SPA liftings throughout the year under normal operations. She also sought to confirm the accounting treatment for canceled cargoes, specifically if the $50 million revenue recognized in Q1 was for future cancellations.

Answer

EVP & CCO Anatol Feygin explained that SPA volumes are largely ratable but have some minor 'winter loading' in Q1 and Q4. EVP & CFO Michael Wortley confirmed that, per accounting rules, revenue for canceled cargoes is recognized upon receiving the cancellation notice, which can lead to accelerated revenue recognition, and that the $50 million in Q1 was an example of this.