Q1 2020 Earnings Call

I'm all participants have been placed on listen only mode and we'll open the floor for your questions and comments. After the presentation. It is now my pleasure to turn the floor over to your host Microware maam the floor is yours.

Thank you Paul and good morning, everyone.

Welcome to the earnings call for Brinker Internationals first quarter fiscal year 2020.

With me on today's call or Wyman, Roberts, Chief Executive Officer, and President and Joe Taylor Chief Financial Officer.

Results for the quarter were released earlier this morning and are available on our website at Brinker Dot com as usual Wyman and Joe will first make prepared comments related to our operating performance and strategic initiatives. We we'll then open the call for your questions.

Before beginning our comments it is my job to remind everyone of our safe Harbor regarding forward looking statements. During our call management may discuss certain items, which are not based entirely on historical facts.

Any such items should be considered forward looking statement within the meaning of the private Securities Litigation Reform Act of 1995.

All such statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated.

Such risks and uncertainties include factors more completely described in this mornings press release and the company's filings with the SEC and of course on the call. We may refer to certain non-GAAP financial measures that management uses in its review of the business and believes will provide insight into the companys ongoing operation and with that said I will.

Turn the call over to one alright, Thanks, Mike Hi, Good morning, everyone and thank you for joining US fiscal 20 is off to a solid start for brinker right in line with our expectations for the year total revenues for the quarter was 786 million.

Year over year increase of 4.3% comp sales were positive 2.3% with adjusted net earnings per share of 41. Since these results were primarily driven by another quarter of differentiated execution, Jody with comp sales up 2.9%, marking our sixth consecutive quarter of positive.

Comps.

So we're well into our lab, we seeing these trends continue into October .

I mean, we're pleased with our performance across the country and we drove particularly strong regional performance in the critical markets of California, Texas and New England.

From a traffic perspective, we ended the quarter flat we were relatively soft early in the quarter like the rest of the industry, but we saw sequential improvement throughout the quarter and then September with positive traffic.

And during the quarter, we drove more than a 300 basis points gap to the category in both sales and traffic our fifth consecutive sales beat in seventh consecutive traffic.

And as we head into our higher volume quarters were more than confident that we have plenty of momentum to deliver the sales and earnings growth we've outlined for the year.

The performance, we're delivering today as a direct result of the relentless focus on the strategy. We laid out for you nearly two years ago to deliver best in class operational execution to leverage our scale to offer compelling everyday value and to leverage our digital expertise to offer convenience the way our guests want it primarily through takeout and delivery.

Best in class as as an operations team, we're more aligned ever the around our core operating systems and a focused set of metrics that pinpoint where we're performing well and reveal our opportunities.

I feel good about the progress we've made as we watch gas metrics rise to an all time high again.

I feel even better about the path forward, because it's clear there's room to take operations from a good place to a great place.

As our operational playbook remains focused and consistent the team now knows how to win an all time highs are no longer good enough, they're ready to raise their own bar and see just how high they can take our guest satisfaction.

We're also raising the bar on our ability to deliver new quality food with flavor profiles, while maintaining our commitment to keep our operations simple.

For example, we just rolled out a new improved chicken products, we're now pounding chicken breast in house and handwriting them to order, which creates a much higher quality product and we're leveraging this on all our menu items that feature a crispy chicken breast and we introduce an awesome new chicken sandwich that we call cheeky blue.

So we didn't do a broad menu launch that adds complexity for operators and confusion for guests instead, we upgraded the quality of a key product and introduced one bold new menu item to keep consumers engaged and drive frequency.

We will continue to Leverages balance innovation strategy that brings new news improves the quality of our food.

At a pace our operators can execute with excellence.

But the primary driver of our first quarter results came from our strategy to offer convenience the way our guests want it and our ability to leverage the strength of our technology platforms to meet their expectations.

First quarter marked our eighth consecutive quarter of positive takeout growth.

And we continue to see upside for this segment of the business.

Our delivery business also achieved a tremendous start during the first quarter, which is one channel turned on.

We're bringing to bear the digital expertise, we have been methodically building over the past couple of years and it's a significant differentiator for us.

Currently two thirds of our take.

Of our off premise sales are coming through digital channels, which makes it operationally more efficient and provides data for future marketing efforts.

Delivery is a powerful channel for our category the players who do it right open the door to a drastically larger number of Neal experiences and greater guest frequency.

At this point all of our metric say, we're performing really well as a delivery option, we're executing at a high level and the breadth of our menu mix and strong value positioning make chili's a compelling deliberate choice.

And we're just getting started.

We're working hard to optimize profitability through alternative packaging and new staffing models, while we test additional initiatives to leverage the long runway for growth we see in this segment.

Around the World our partners continue to grow the Chili's brand. They opened 11 chili's restaurants during the first quarter and we see these growth trends continuing.

The ongoing demand for the Chili's brand internationally is a great Testament to the believe our partners have in the strength of the brand as well as the business.

And here at home, we closed our acquisition of 116 restaurants in the Midwest and we're excited to welcome. These team members and their communities into the Brinker family.

We've deployed a strong leadership support team for these restaurants to accelerate their transition into our system and leverage the upside of these exist of the existing team.

We feel good about the earnings potential these additional restaurants add to our business.

Im just as confident today, if not more so than when I was wondering introduced our strategy to strategy to use nearly two years ago.

We continued to deliver consistent results and outperform the industry.

We've created a solid foundation that can withstand this challenging environment and we've got a clear line of sight to ongoing returns for our shareholders and now I'll turn the call over to Joe to give you more details Joe. Thanks, Thanks, lime and good morning, everyone.

Let me start my quarterly overview with a couple of key insights underlying the success of our results reported. This morning first the solid performance of our first quarter positions us very well as we move through the balance of the fiscal year to deliver the goals, we outlined during our last call and second at Chili's sales and traffic momentum.

Built through the quarter as our operators continue to executed a level that is differentiating the brand in the eyes of the guest providing the value and dining experiences warranting their time and dollars. This today over day execution is growing sales effectively managing the middle of the TNL and generating meaningful cash flows and support.

Of our investment and capital allocation strategies.

As reported in this mornings press release first quarter adjusted earnings per share came in at 41 cents in line with our expectations for the quarter.

As we previously indicated the quarter was impacted by incremental stock comp expense when compared to prior year as certain executives are now retirement eligible under our plans as such we are required to take the total expense for these grants made to these executives immediately instead of over the vesting period.

Our stock base grants are made in the first quarter every year.

This incremental expense of $3.5 million negatively impacted EPS by eight cents for the quarter, but will subsequently reduced the year over year impact as this expense in our remaining quarters.

At the top of the P. and I will total revenues in the first quarter were $786 million, a 4.3% increase versus the prior year.

This is driven by comp sales growth for brinker of 2.3% and the additional capacity from the restaurants acquired from our former franchise partner in early September .

While these mid West region restaurants, only impacted the last three weeks of the quarter. This starts a nice level of capacity growth that will continue the rest of the fiscal year. We expect these newly owned restaurants will record approximately $250 million accompanies sales in the current fiscal year.

Off premise sales growth was the primary driver of overall comp sales performance with a year over year growth rate in excess of 25%.

Off premise sales both to go and delivery now represent approximately 15% of total sales.

At the brand level Chili's continue to topline momentum reporting quarterly net comp sales of 2.9% lapping a solid positive 2% in the prior year and gapping, the casual dining industry by close to 4%.

Traffic was flat for the quarter, which is positive to the industry by over 300 basis points from a regional perspective, the brand was strong across the country and GAAP the casual dining segment in every region.

Maggianos first quarter results were below our expectations with net comp sales of negative 1.8%.

The brand utilize fewer marketing resources in this quarter to offset industry sales softness had a greater short term impact from the migration to our exclusive delivery contract with door dash.

Our restaurant operating margin for the quarter was 11% inline with our quarterly and full year expectations.

Within the operating margin performance cost of sales experienced a year over year net inflation of approximately 30 basis points produce was the main driver the increased primarily due to near term increases and all caught us and tomatoes.

Overall, the commodity market is behaving as expected with lower levels of deflation working into the system that being said, we've established higher levels of commodity contracting to protect against volatility for key products. We are now 95% contracted across our commodity basket for the current quarter.

78% contracted through the end of the fiscal year.

As it relates to various proteins, we are 86% contracted for the remainder of the fiscal year.

Restaurant labor was flat year over year, driven by sales leverage and lower employee health costs wage rates continue as the primary inflationary headwind in the manageable 3.5% range for the quarter.

Improved year over year operating performance also increased our chili's manager bonus payout an incremental four cents quarterly EPS cost we are pleased to incur.

Restaurant expenses for the quarter were favorable 20 basis points compared to the prior year. We have started to see the benefits of leverage from topline growth increased rent from our sale leaseback transaction hired to go packaging costs and third party delivery fees were offset by leverage and the effective management of other expense categories now.

That the Midwest franchise acquisition is complete our restaurant operating margin will benefit from the additional sales leverage provided by these restaurants over the course of our three remaining quarters.

As I mentioned earlier the court.

We are demonstrated the cash generating capabilities of the brand with good year over year growth in our key cash flow metrics.

Operating cash flow for the quarter was almost $87 million all free cash flow grew significantly to just over $66 million.

Meaningfully strengthening our ability to deliver our forecasted annual level of free cash flow.

Adjusted leverage at quarter end increased approximately 20 basis points due to the incremental debt associated with the closing of the franchise acquisition.

Adjusted leverage totaled 4.15 times, which is expected to be the high point for the year, we plan to reduce our adjusted debt metric from operational cash flows as we move through the year with a year end leverage target of 4.0 times.

The effective this quarter, we adopted a assay a 42, the new lease accounting standard as a result, we now recognize operating leases on the balance sheet based on the present value of lease payments over the lease term.

You can find more details regarding this accounting change in this mornings press release and in the seem to be filed 10-Q.

Overall, the impact of the lease accounting standard on our results of operations and cash flows is not significant.

In summary, I'm very pleased with the star to our fiscal year, and our continued focus on delivering quality value and convenience for our guests as we move through the year. These efforts should differentiated brands performance with the expectation of continued market share gains positive topline growth effective PNM management and achievements.

Our goal for the year.

With our comments are not complete let's open the call for your questions, Paul I'm going to turn it back over to you to facilitate.

Sorry.

Ladies and gentlemen disorders now open for questions you have any questions or comments. Please press star one on your phone at this time.

We are still opposing your question you. Please pick up your handset after listening on Speakerphones to provide optimum sound quality. Please hold while we pull for questions.

And the first question is coming from Jeff Farmer, Jeff. Your line is life. Please announce your affiliation and pose your question.

Yes, Gordon Haskett earlier in the call you commented that trends continued in October .

Just curious brought some incremental detail on that.

Hey, Jeff.

Yes, no more detailed and that we tend to not do a whole lot in quarter as you know, but the trends that we laid out in the first quarter are pretty much in line with what we're experiencing here in October .

That's about as deep as we're going to go so.

But again it off to a good start.

Okay. One more question then so I appreciate that it's only been a month since delivery functionality went live in.

In the Chili's mobile App.

Well what percent of your delivery sales mix is coming from the Chili's up in web site versus the jordache marketplace, and where do you think that can trend in coming quarters.

Yeah, we're probably not going to give that level of detail. It's early as you said, Jeff on on kind of all of our.

Kind of convenience initiatives as we call and whether to go delivery.

Partners.

And independent the stuff, we're doing on our own. So I think we're going to kind of play that out here over the next little while we'll probably give you more insight as we get pass some of the some of the testing stages and get a better sense for whats probably more ongoing but we're very pleased with with the overall results we've experienced.

Both.

With third party as well as our own.

Takeout and delivery initiatives today, and we're really excited about what we've got to become.

Alright, thank you.

Thanks, Jeff.

Thank you and the next question is coming from Stephen Anderson Stephen Your line is life. Please announce your affiliation and pose your question, yes, so with the Maxim group I want to a follow up on your comments on the food commodity costs now in the last few quarters, we've talked about the potential impact from the swine flu coming out.

China just wanted to see.

If you have an additional follow comment so from that is and whether you much change overall commodity costs outlook.

Hey, good morning, Steven we Havent haven't changed anything from a commodity outlook standpoint, again, as we indicated before and we continue to believe we'll get will see us low level put it in the one 2% range kind of commodity inflation as we move throughout the.

A year frankly, most of that is based more on the low points of where commodity pricing was coming apps off the last three years than it is on asaph, we're watching that very closely as I indicated we've taken you know we're ahead of where we typically are at this point from a a contracting standpoint, particularly as it relates.

To our proteins, we want to make sure Devry extent, we can that we're eliminating potential volatility from the equation. So airing on that side. Obviously there are a couple segments of the complex ground beef being one of them that.

This is not a comes in long term contraction home market, but we're very comfortable steel with what we're seeing in those areas too so.

Pretty much right on on course, with what we expected it to be and.

Incrementally protected on the downside if if that would develop great. Thank you I'll follow up afterwards, I've only Q.

Okay.

Thank you. The next question is coming from Brian Vaccaro, Brian . Your line is life. Please announce your affiliation and pose your question.

Hi, Thanks, and good morning, Raymond James just on that commodity contract Joe I. Appreciate the color you gave us through the end of fiscal 20. Just curious have you have you made any progress or or tried extend even further some of those contracts, particularly around the proteins maybe.

The coverage ratio.

Back half of catalyst there 20 at this point.

Yes, without getting into great detail we have.

We are looking at add some of those term contracts and we have taken some steps as it relates particularly to some of the proteins to go out through the.

Well into two calendar F 20 in some of those to the course of the end of calendar at 20. So.

Yes, again, it's an environment that we want to.

Maintain and certainty as we can for our operator, so yeah, we're looking at that and we'll continue to look at that.

Okay, and then Wyman you alluded to some opportunities that you saw to improve operations. Further could you could you elaborate on that and then also just give an update on the timing of the rolling up the handheld or just any other t. operations issued initiatives you see in fiscal 2008.

Hey, Brian .

Well I mean, I think that what I was referring to is just as we locked down the systems that the operators are focused on and really stay focused on.

Some of the fundamentals it just it this allows us to.

Pinpoint if you will where where there are challenges both from the system side, but also from from an operations side and that's where we we put our energy and our support we're seeing.

Tremendous results really our operators have done an amazing job delivering a better guest experience as I mentioned, our guest satisfaction levels or are not just.

Creeping over all time highs are really significantly better than we've ever seen in that that bodes well, we know for for future visitation. So that's kind of what a what I was referencing when I talked about the opportunity to get operations, even better than they are doing today, which is.

It really is a nice job with regard to the initiatives some of that we laid out probably a more at the conference or at the analyst day, We're moving forward on a couple of those technology fronts, new tabletop devices or are you know looking to be rolled out here third quarter.

On the handheld are continuing to evolve, we'll we'll have more to share on that probably in the third and fourth quarter, but we feel good about the progress we're making on the technology front.

Across a lot of different initiatives and those two examples as well as.

The leverage on our CRM.

As well as the work we're doing to leverage digital in the convenience avenues.

Okay, and then just too on the model real quick Joe that shift and the timing of stock based comp does that show up in an outsized way in any specific quarter rest of fiscal 20 or will that be layered in surfaced through the next few quarters.

Now the only outsized as this quarter in the Jna aside the equation. So yes, you make.

Yes, you make up for it over the life of the rest of those grants, which are kind of multi year and so you don't see it in a an outsized, but it's it's a slight benefit to the second third and fourth quarters.

Okay, and then as it relates to depreciation DNA line for the year, there's quite a wide range of estimate that seems on the street, which you'd be willing to tighten that up just to make sure. We're on the same pager, what's embedded in your fiscal 2000 guidance on DNA. Thank you.

Yes, I think right now we're sticking with the guidance that we provided for you on that regard obviously, we're layering in.

The Midwest region as part of that.

A year over year Delta.

Plus some of the normal.

Thanks.

Sure.

We're seeing due to our development and Reimage program and things of that nature. So.

Not a lot of an incremental specificity, there, but I do expect it to to be up.

Probably you know yeah.

Yes, I would expect it to be at probably in that and the high single millions CNL in that $5 million to $8 million ranges, we kind of kind of move throughout the year.

All right that's helpful. Thank you.

Thanks.

Thank you and the next question is coming from Gregory Francfort Gregory Atlanta Slide please announce your situation.

Hey, it's a great frame from bank of America.

Maybe just two questions. The first for for Wyman actually maybe both for one but just on gas metrics you alluded to kind of earlier in the prepared remarks kind of you're seeing stronger performance can you maybe flush out a little bit about what you're seeing what's you're pointing to there and then and then just on delivery I know you guys don't want to get into a lot of the detailed on on mix or percentage.

Sales, but can you talk about how customers are using delivery right now and kind of in early learnings from that launch and if there's any daypart mix sort order or sort of focus and how customers are using the chili's brand for delivery right now thanks.

Sure Hey, Greg well you know obviously, we look at a lot of different metrics, but but we're very focused with our operators on on several key in restaurant metrics that we get from our gas and we have a real robust the survey size with almost 20 per.

One of our guests, giving us feedback every day, so and that and the movement is across the board. It's on food it's on service.

It's on the number of guests that are experiencing any kind of a difficulty.

Pretty broad based improvement our value scores.

Our region or have reached all time highs as well so we feel really good about the experienced they're getting into value. They see in that experience. We also focused on external metrics. We have some proprietary tracking that we do relative relative to the industry, but we also look at a social scores and what though.

What the social environment is kind of saying about us and those those metrics have also moved up nicely in conjunction with what we're seeing in restaurants, so kind of track of several different ways. In every way we look at it we feel pretty good about the.

Factory that the operations team has been delivering over the last year and continue to move on.

With regard to how delivery is being used it's pretty broad based we're seeing it a across the country. You know some talks a little bit more as you would expect than others, especially with the within exclusive partnership.

But.

The usage during the day parts, primarily dinner, but still strong at lunch and again, we see opportunities and what we're excited about now as we're just we're just starting this this journey right so and with all the data that we have in our partner has and how we share it and what we can do with that to make this business grow and b.

More effective.

At a really marketing to the delivery consumer we're.

Excited about what we can do as we go forward.

That covers what you were looking for.

Yes, great. Thank you.

Greg.

Thank you and the next question is coming from Chris Ocull as Chris. Your line is life. Please announce your affiliation and pose your question.

Thanks at Stifel.

Wind in the consolidated comp sales for the quarter were lower than the full year guided range. So.

Are you still comfortable with that range and what opportunities do you see to improve maggianos performance given the industry appears to remain weak.

Yeah, No. We're we're in moving the ballpark kind of the topper and top end of our our guidance in terms of comp sales. So we feel comfortable with the guidance, we've given I'm not sure how would that a close to 3% at Chili's, We're we're very comfortable.

The guidance number.

In hand.

With with regard to Maggianos it wasn't a little tougher quarter. There was some headwinds as Joe mentioned you know when we went from.

Multiple third party deliver reserves at the Maggianos and the business has been.

Developed for really many years to just a single a partner they took a little bit of there was some headwind there for them that were quickly kind of moving through with our partner and that was probably one of the biggest things at their challenge with no Maggianos. It's all about the holiday season, it's all about what happens here.

Sure a in this outsized quarter come they feel good about the work they're doing to drive traffic within their restaurants by becoming more focused on the business on the weekend and being especially efficient.

Really pushing their catering in their banquet business out even more aggressively as a market that.

Into their communities. So theres a lot of things going on that are going to drive the business in the critical holiday season for them and then we've got some longer term things that we're doing to help the brand kind of stay fresh and compete in it really a pretty challenging upscale casual environment. So overall, we feel good about the work that's going on at Maggianos.

A little tougher quarter, but feel pretty good about what they're walking into as they had towards the holidays.

Yeah, Chris It again.

And Chris and I'd, just add a little a context.

On your question about the Cop one we've got we're very comfortable with where that comp as set aside for the rest of the year.

We don't well on this but for contacts I give it to you I mean, there was a 20 basis point impact at the Brinker level from weather also so.

Again, we performed very well throughout the quarter, despite that but just to give you some context.

As to how that was impacted yes, and it was actually a little bit harder hit at Maggianos right that took a little bit of a bigger hit on the weather front just based on their locations.

Just to make sure I'm clear the guidance for comps the 1.75, 2.5% that's for Chili's only not for the consolidated group now that that's the Brinker forecast Jay.

Okay. Okay.

And then one I apologize if I Miss is now under Chili's digital platform is offering delivery when do you expect to start advertising the service more aggressively.

Well, we're already out there Chris talking about the delivery on our platform both in national advertising as well as through the various.

Digital channels that we use so we're out there today.

Are you seeing mix shift there are stronger performance on the digital platform at Chili's then you are.

From the from I mean is the mix inline with what you were hoping for in terms of.

Usage at the digital platform at Chili's yen.

Again, we're probably going to not get you know.

Too detailed on all the specifics, but we're we're pleased with what's going on with in both for the third party aspect of delivery as well as what we call white label, our own on our own website.

Okay, and then just lastly July I know, there's several items that affect comparability during the quarter and I know you provided some details on that but can you remind is what the incremental sale leaseback impact was for the quarter.

Yeah last year, we took a gain net gain gain minus transaction costs, a little over $13 million in the in the first quarter, if you're looking at the reported numbers, obviously, we dial that out from a from an adjusted standpoint.

That's.

Thats the biggest wind and then you have.

Obviously, what I've talked about from a stock comp standpoint, and you have incremental rent.

From the sale leaseback of about 4 million. So this is the last quarter that you get that year over year lap of incremental Rand and it impacted to us about 4 million from that specific items. This year.

Perfect. Thanks, guys.

Great. Thanks Russ.

Thank you and the next question is coming from David Palmer, David Your line is life. Please announce your affiliation and pose your question.

Thanks Evercore ISI.

Question on the comps.

Company same store sales trends they were much higher than the franchise you mentioned a few regionals that were stronger.

<unk>.

Because.

You mentioned or is there other factors, we should think about the.

Yep.

Yeah, there there's a couple of things obviously, there's regionality the pick up on delivery isn't the same across every market and where people are at in the process isn't the same.

The leverage on our CRM, our or Chili's rewards program doesn't kind of play out.

Equally if you will a in every marketing with every franchise partner, so they're different variables that come into play.

Overall overtime, we yield if you kind of study you see we tend to kind of.

We may have a quarter here or there where the franchise community is a little further out but over time it tends to kind of even out and we all tend to move into the same space.

Okay. It maybe a little more volatile it maybe a little more volatile now that were.

You know, we've we've reduced the size of our franchise world.

[noise], Joe I wanted to ask you on.

The initial guidance you gave for fiscal 2000.

You guys did better than that on the labor side slightly worse on the Cogs side.

Restaurant.

Level margin guidance range is still intact.

Are there things that might change the trend from here.

Caused the RJ acquisition I'm, just trying to think about how things will play out from here. Thanks.

No I think the guidance we provided for restaurant operating margin is still very much intact.

Guided flat to down 20.

They were down 10 year over year and this can this quarter say I mean right right in line with that.

We have the benefit coming from the topline leverage of the acquisition that will really now start to play into you know was marginal and and the first quarter because only a couple of weeks that starts to play at a much heavier rate I think some of the commodity.

Inflation, we saw this last quarter.

Can be more episodic anytime you're dealing with produce you get a little more volatility there so.

You can't.

You should assume that's a run rate kind of going forward. So we're comfortable really across all of those lines from the way the operators are managing the middle of the piano now where we see exposures within the commodity market that we've locked down from a contracting standpoint, and the continued top line growth we're expecting.

In the Leveragability. It brings said so comfortable there is always going to be puts and takes throughout at the mill that put 'em BNL, but we have a great Atlanta side and how to manage those puts and takes as we go forward.

Thank you.

Like that.

Thank you and the next question is coming from.

Will slabaugh will please announce your affiliation and pose your question.

Steven Thanks.

Question on the tree for 10, we didn't hear a lot on the call about the platform, but I'm, assuming it's still mixing while I was wondering if you would comment about that versus what you said Oh I'm sorry, what you had been seeing previously and how you think menu innovation going forward is going to work into that this year.

Hey, well great question.

Three for 10 is absolutely doing a what it's been.

In targeted to do and continuing to perform Bert performed very well consistent in terms of mix as we've seen we've mentioned before it's it's not a current offer in delivery third party delivery I'm. So thats kind of an interesting a twist if you will to how we how we market and leverage three for 10.

And in the various channels.

With regard to innovation.

Again, we haven't done a whole lot from a innovation perspective over the last couple of quarters, but that doesn't mean, we haven't been working hard at it the cautionary team in the Mark team have done a great job weren't test with some very exciting ideas that will come forward here in the back half of the year that will that could play on three for 10.

And could be a stand alone, but we see a real opportunity in the future to come back in and leverage innovation in a more aggressive way right. Now we're obviously the more focused on some of the convenience aspects of driving the business, but we'll be layering in some innovation in the near future.

And well, let me let me jump on top of that also with pointing out one of the things I think you saw there in the release was the 60 basis points, a positive mix and I think thats indicative now we've talked about this now we're starting to realize and we're getting we're now through the lap of really the aggressive introduction of three for 10 that had the.

I had the mix implications last year, and so now that you're more into a steady state great Foundation and results coming out of three for two and.

But now you can start to see the work we're doing around other opportunities within the mix category that can can give us that that you know as we've always thought that slight benefit that we look for in a quarter over quarter basis. So this last year. This last quarter. Some nice PA results coming out of add ons coming out of apps coming out of the out.

Halt program. So those are the kinds of things that I think you'll see more front and center now there were into kind of a a run rate as it relates to three for 10.

Got it that's helpful and and then a question on the margins Joe <unk>. It looked like I know you had some moving pieces going on in the quarter, but it looks like only about 10 basis points I forgot roughly flattish year over year is that how you would look at that and is it I guess I guess the margin side of things trending along about how you thought it would start the year.

Yes, and again, assuming a restaurant operating margin, yes, very much SASSA. So that a 10 basis point difference again, some episodic things and and and Cogs, but.

Really a cross that line there marched pretty much how we would expect to see ago.

Good here. Thank you.

Alright. Thanks.

Thank you and the next question is coming from John I haven't co. John Your line is life. Please announce your sluggish and I'm pose your question Hi, Thank you website with JP Morgan I wanted to get back to some of the comp commentary you know Wyman you are you I think unusually specific.

Right kind of talking about the September quarter in terms of how things trended with July being your week month September actually ending with positive traffic, which is important obviously and it sounded like you know and I don't want to put words in your mouth did not positive traffic continue in October .

Do you view, the second quarter, a more difficult comparison than the first which you know just you know looking at simple math it kind of would then.

When we kind of think about you know the second quarter comparisons in the different moving pieces that you have you know should we expect to just the a nominal results similar to the first quarter or it might comparisons for any number of regions.

Got to be a little bit lower or higher.

Hi, John well I don't know if I'll get as detailed as that but I will just say, yes, we wanted to give a little more color into the first quarter, just because of some of the industry trends in some of the concerns I think people, we're having as they kind of watch some of the broader industry metrics and we kind of.

Period, some of that those same trends obviously from from a much higher position as we outperformed the category, but we did and installed place with positive traffic and sunk strong sales and we continue to see positive traffic installed sales into October . So that's the that was the message we.

Turning to share there with regard to the second quarter, a we don't see a whole lot of additional headwind you know this was kind of the.

The question that was supposed to us over you know several quarters ago with what's going to happen when you Apple we've lapped and now we're pretty much into that lap and we don't.

Anticipate significant changes in our ability to continue to perform in the rate we performed in the first quarter. There's some strange things that happened in the quarter with regard to timing of holidays, but they're all within the quarter. So.

We'll see some things are on our own a month to month, but I think within the quarter it should be relatively clean.

Okay. So I'm not so in other words, nothing that really jumps out to you in November and December and so the comparisons even if they look optically harder, they're not necessarily optically harder.

Not as we look at it.

Okay, Alright, that's important then and then secondly, obviously there was a tremendous amount of attention at the analyst day focused on Jordache, you guys kind of remaining in the carousel, maybe even getting some advertising from them in terms of they try to build out their own platform. If you could just remind me what the status of that is and if theres anything you know what.

Upcoming from there and that could drive the yet chili's brand going forward.

Yeah, again wont wont get it to two specific but I'll just say the partnership is when we are very pleased with you know it's early stage, but we like the work that's being done on their side to support the brand and we're comfortable with that both brands actually then.

And you know they're working hard now there we were testing with door das primarily with Chili's and the integration with Chili's was done pretty much. The day. We went live Maggianos has just now integrated there their system into the door Das systems. So it's a it's been a little bit of a lag there and they've done a nice job.

Partnering with us to get the technology fixes in place to get Maggianos to the same place and now we continue to partner with them on various different marketing aspects and initiatives as we move forward. So we'll we'll continue to leverage the partnership both to to to drive our business as well.

As to what we can to help support the door that.

Business. Thank you.

Thanks, John could see.

Thank you the next.

Next question is coming from Nicole Miller Nicole Your line is life. Please announce your affiliation and pose your question.

Hi, Thank Jaffray. Thank you and good morning, I'd go back to one of your earlier comments around packaging I've always interesting ticket circle back here the ability to try the cost down for delivering on in terms of packaging what does that look like and then.