Q2 2020 Bloomin' Brands Inc Earnings Call
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Greetings and welcome to the Bloomin brands fiscal second quarter 2020 earnings Conference call.
At this time all participants are in listen only mode. It brief question answer session will following management's prepared remarks.
It is now my pleasure to introduce your host Mark graph group Vice President Investor Relations. Thank you Mr. graph you may begin. Thank you and good morning, everyone with me on todays call or David Dino, Our Chief Executive Officer, and Chris Meyer Executive Vice President and Chief Financial Officer by now you should have access to our fiscal second quarter.
2020 earnings release.
It can also be found on our website at Bloomin brands Dot com and the Investor section.
Throughout this conference call, we'll be presenting results on an adjusted basis, an explanation of our use of non-GAAP financial measures and reconciliations to the most directly comparable GAAP measures appear in our earnings release on our website as previously described.
Before we begin formal remarks, I'd like to remind everyone that part of our discussion today will include forward looking statements, including a discussion of recent performance.
Statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from our forward looking statements. Some of these risks are mentioned in our earnings release.
Others are discussed in our SEC filings, which are available at FCC Dot Gov. During today's call will provider brief recap of our financial performance for the fiscal second quarter 2020, and a discussion regarding current trends.
Once we've completed these remarks, we'll open up the call for questions with that I'd now like to turn the call over to David Dino.
Well, thank you Mark and welcome to everyone listening today, our priorities remain unchanged as we continue to navigate these challenging times, we're focused on taking care of our people and serving food and a safe environment that protects both our team members and customers.
The investments made over the past several years to enhance the customer experience and we're actively pursue the emerging delivery opportunity had been critical to our success in navigating pandemic.
At the outset in March we were able to quickly pivot to an off premise is only business model as dining rooms were forced to close.
The rapid growth, we experienced an off premises sales allowed us to keep substantially all of our locations open during this time.
Starting in May States began the process of partially reopening their economies our decision not to furlough or lay off any employees. During this pandemic has allowed us to quickly prepare restaurants to reopen dining rooms in a safe and efficient manner.
As of July 19th 2020, almost all of our U.S. company operated restaurants have reopened with limited in restaurant dining capacity.
During this time, we continued to maintain elevated safety measures, including additional sanitation and disinfected think practices using gloves and facial protection for our employees as well as contact with the payments options for our customers. In addition, dining room seating configuration has been modified to adhere to social distancing reduced capacity.
These standards.
Customers have responded and taking notice. These additional safety measures. This is translated to improving demand as overall weekly sales have consistently increased since dining rooms reopened it out back for the most recent week ending July 19th comparable restaurant sales were down 10.7% versus the prior year and locations.
Opened with limited in restaurant dining capacity.
Importantly, these locations are also maintaining a high off premises mixed with both delivery and to go we will continue to leverage our strong capabilities to retain the off premises growth. We achieved during the pandemic off premises remains a large opportunity and a significant part of the go forward strategy.
The improved sales recovery, coupled with disciplined cost management enable us to generate positive cash flow in June. This represents a great step in stabilizing the business and Rightsizing our cost structure. The pandemic force us to operate the business differently, which provides an opportunity to reassess the operating model. One area. We are where we are gaining additional insights.
They are on simplification.
This encompasses everything from optimizing the menu and enhancing the labor model to the marketing strategy and how we support our restaurants. These efforts have contributed to reduce complexity improve consistency and increased profitability across revenue channels. We are leveraging these learnings to drive more operating efficiency in the restaurant in the current environment and as we emerge.
In a post corporate world.
None of this progress would be possible about the terrific work done by our team members and the restaurants and the dedicated employees and the restaurant support center, they remain incredibly nimble and agile and finding ways to support guest as we navigate through this challenging environment.
The enthusiasm and commitment they offer everyday to bring the life to life hospitality service and experience is what makes our restaurants so successful.
Thank you to everyone for all your hard work.
Turning to Brazil, much like the U.S. and the rest of the world. The Brazilian economy is being impacted from the effects of the pandemic.
The country has seen increases and reported cobot cases, which resulted in state and local governments and acting measures to reduce the spread of the virus. This included the closure of restaurant dining rooms, and a shift to an off premises only model is more difficult to execute off premises in Brazil, given that most of our restaurants are located within malls during.
Time, we were able to successfully build to carry out business from scratch in just a few short weeks.
Recently as in the us dining rooms are beginning to safely reopened and more than 70% of our locations are offering in restaurant dining.
For the week ended July 19th comparable restaurant sales at Brazil, OPEC locations within restaurant dining were down 44%.
We continue to see an increase in sales volumes and the team is actively addressing cost opportunities to manage cash.
Based on current trends, we believe our Brazilian business has adequate liquidity day navigate through this pandemic and we do not anticipate any further cash infusion into the business.
OPEC remains resilient and continues to be one of the highest regarded brands by consumers in Brazil.
In summary, our goal is to emerge as a stronger company and more formidable competitor on the other side. This crisis, we will accomplish this with the following priorities in mind first continued to upgrade our food menu in service in all of our brands.
We made a significant investments against these areas over the past four years to enhance brand positioning.
This cycle of continuous improvement is aimed at enhancing our value proposition that consumers, while taking minimal pricing.
Second continue to capture the opportunities in our industry, leading delivery and carry out business. This pandemic has proven the importance of this channel and the role of convenience for our consumers. We are focused on leveraging our strong off premise of capabilities to further grow this opportunity.
Third make even more progress in our marketing and digital technology efforts. For example, we are making changes to the online ordering platform to enhance stability and performance in this critical channel. We've also implemented new tools that will enable us to pursue targeted digital marketing efforts that provide a high return on investment.
Fourth lead the way and taking care of our people and providing the benefits they need attracting and keeping a talented and diverse workforce is the key to success in this business.
Fifth continue to enhance our liquidity position and strengthen the balance sheet. Our improved sales performance combined with the recent bond offering and steps taken to tightly managed cash has enhanced our liquidity position. This also provides ample financial flexibility moving forward and enables us to capitalize on future opportunities.
And finally, we will accomplish all this while adhering to strict safety measures protecting team members and comes to customers remain the top priority, we want consumers to feel safe in any channel whether that is in our restaurants or in the convenience of their own home.
And with that I'll turn the call over to Chris Thanks, Dave and good morning, everyone before I discuss our Q2 results I want to provide some perspective on recent sales trends and how we are successfully navigating the current environment.
We began the process of reopening our dining rooms in early may in accordance with state and local guidelines as of this morning, 92% of our company operated restaurants have dining rooms open and effectively all of these locations our operating with some level of reduced seating capacity.
As these dining rooms of reopened we've seen steady improvement in the same store sales results throughout our portfolio.
While we were operating with an off premise. This only business model in late April our combined us comp sales were down approximately 50% over the last few weeks, our combined us comp sales results have been down between 17, and 19% importantly over the last three weeks, we've been able to retain over 50% of the.
Off premises volumes that we built while our dining rooms were closed in April we are pleased with the improvement in our sales trends as well as our ability to maintain a significant portion of our off premises growth.
Recently, there's been an escalation in cobot 19 cases, particularly in states, such as Florida, Texas, and California, we're paying close attention to developments in these states, especially Florida, where we have 21% of our company owned restaurants to this point the increase in Koby cases has not.
Had a material impact on our Florida comp sales results month to date July comp sales in Florida had been roughly in line with the balance of the system. In addition, we have seen little change in Florida trend from where we were in June.
We are seeing similar trends in Texas in California, where we have a large outback franchise presence as well as 20% of our Fleming's locations. We're seeing more of a sales impact as that state is largely open for off premise us only.
It is important to recognize that this is a rapidly changing environment. Both in terms of the number of covert cases as well as the response being put in place by some state and local governments.
As we have shown throughout this pandemic, we will stay agile with our business model and prioritize taking care of our people in serving food in a safe environment that protect both our team members and our customers.
Turning now to Q2 financial performance total revenues decreased 43% to $578 million combined us comp sales for the quarter were down 39.4%.
GAAP diluted loss per share for the quarter was one dollar and a five cents versus 32 cents of diluted earnings per share in 2019.
Adjusted diluted loss per share was 74 cents versus 36 cents of adjusted diluted earnings per share last year.
As it relates to our operating expenses there were a few areas worth calling out.
Since the onset of this pandemic, we've been focused on simplification efforts to improve efficiency and lower cost. This has had a positive impact on several areas of our piano.
For example, despite lower overall check averages cost of goods sold was only 10 basis points higher than last year. The streamline menus. We have utilized since the onset of this pandemic have helped reduce food waste to record low levels.
The Labor line also benefited from our simplification efforts hourly labor as a percentage of sales was down 190 basis points in June from pre cobot levels, excluding relief pay paid to hourly employees.
This improvement was driven by a reduction in food prep hours.
Operating expenses were higher due to sales deleveraging and increases in to go and cleaning supplies. These increases were offset by 23 million dollar reduction in marketing expense within the quarter.
Despite the significant de leveraging and RPL from lower sales our focus on expense controls allowed us to generate positive restaurant level operating margin in the quarter.
On the DNA from Q2 was down $19 million from last year net of adjustments. This included a roughly $5 million benefit from the cancellation of our managing partners conference in 2020.
Other areas of benefit within Gionee include a significant reduction in travel expenses related to coded as well as the ongoing impact of our cost savings initiatives that we discussed in our February earnings call.
Our adjusted tax rate for the quarter was 31.2%. This is a product of our negative pre tax income as well as additional tax credits such as our FICA tip credit.
One other PML item worth, noting is our other revenues category, which is down $14 million year over year due to lower royalties and marketing contributions from franchisees. We have been actively working with our franchise partners throughout this pandemic each situation is unique but as we work through potential franchises.
Assistance options, we're going to record royalty income as the cash is received instead of recording a receivable when sales and profit trends improve we would expect a corresponding increase in royalty and marketing contributions.
We permanently closed 30 restaurants within the quarter, including 25 company owned locations and five franchise locations impairments related to these closures as well as other fixed assets impairments restructuring charges and inventory spoilage made up most of the adjustments to EPS within the quarter.
Turning to our balance sheet since our last update on June 11th we have improved our total liquidity position to $502 million, which includes $138 million of domestic cash and $364 million of availability on our revolving credit facility our improved sales.
Performance combined with steps taken to tightly manage our cash usage has enhanced our liquidity and provides us ample financial flexibility moving forward given this stability, we do not intend to provide interim financial updates before we report our Q3 earnings in summary, although this situation has been.
Challenging our improving trends amid this pandemic reinforces the relevance and strong consumer appeal of our brands and we are looking forward to emerging as a better stronger operations focused company and with that we will open up the call for questions.
Thank you at this time of the conducting a question and answer session. If you like to ask the question. Please press star one on your telephone keypad and the confirmation tone indicate your lines in the question Q.
You mean press star to if you'd like to move your question from the Q.
Just mentioning speaker equipment, maybe necessary to pick up your handset before pressing the star keys.
So that we may address questions from as many participants as possible. We ask that you limit yourself to one question and one follow up questions.
One moment, please what we pull for questions.
Thank you and our first question is from the line of Jeffrey Bernstein with Barclays.
Thank you very much good morning.
I had two questions. One question one follow up actually the question just being on the restaurant margin you talk about.
The relative resilience and low single digit positive margin despite the quarterly.
US Comped down 40 ish percent just wondering if you can give anymore color on the greatest area, maybe a relative strength.
And if the comp stabilize at the current I guess, you're running down in the teams levels. What do you think is the appropriate restaurant margin, whether you can share sensitivity or perhaps what was the comp in margins specifically in June. So we have a frame of reference obviously the comps swung wildly through the second quarter. So it's hard to assess but if you can give kind of a current status in terms of what the.
Margin would be on the relative comp that would be great and then I had one follow up yes, we'll dig in and figure out what the the Piecyk margin was that we can give you that perspective, but what I would tell you Jeff as our goal the efficiencies that we saw certainly NP six our goal is to retain as much of that efficiency as possible as we move forward, we learned a tremendous amount over this timeframe.
I read about ways that we can do things more effectively more efficiently a lot of it was driven by the menu simplification work, that's absolutely something we want to preserve moving forward, that's going to help and cost of goods sold in terms of waste reduction and it's going to help and labor in terms of fewer prep hours. So those areas are absolutely key focuses for us the other big.
Cogdell than when you look at the restaurant operating expense line is your marketing expense and I think that we're just going to have to play a wait and see approach as it relates to marketing obviously, if we have high ROI ideas related to that we feel are worth pursuing we're going to invest marketing dollars behind those but right now with the restaurants at that.
City, they're fairly full we don't feel the necessity to really invest a lot of marketing dollars at this point in time, but moving forward that could change and obviously that could change our perspective on how we invest marketing dollars, but if you look at the PNM I'll certainly in Q2, the marketing pick up to $23 million, we called out in terms of marketing expense efficiency is a big big.
Driver in terms of T. Six restaurant margins were 13.5%.
Last year was 16.1%. So obviously, we made a lot of progress there now now again keep in mind that as you think about P. For P. five T. Six there are some changes in terms of fixed and variable cost because piece is a five week.
Period as opposed to four week periods that you'd see in the other periods.
Got it but the idea that period six at a 13% plus restaurant margin.
And comps are seemingly in line to a little bit better than that now it's not unreasonable to assume you could sustain a double digit restaurant margin in the back. If there is definitely we are unique to pay six where you're likely to see restaurant margins pullback meaningfully yes look I think it at these volume levels. We've obviously proven that we can generate positive cash flow in this environment.
But I think a lot of our go forward profitability is going to depend on what fixed cost come back into our business and we talked about marketing, but other things like training expenses travel expenses things that maybe hit a little below the restaurant margin line. Those are all things that we have to weigh in terms of when we bring those things back into the into the fold.
And as the situation improves we're going to evaluate which of these levers if any we will deploy throughout the year with the goal being that we're going to set ourselves up for success. When we emerged from this pandemic.
I think Jeff.
What really points to is what a terrific job our team is doing.
If you look at the change in sales trends.
Obviously consumers want to come and hat and enjoy in restaurant dining so you'll see if you see the improvement shale sales trends during the quarter you see the off premises business continuing to do well and you see a corresponding improvement in profitability. That's what we hope to do the balance of the year and our team is doing a great job getting that done.
Got it and then my follow up just on that exact point.
Being in New York, We don't see a lot of people keen to go out for in restaurant dining, but I got the impression a lot of markets are different so, Florida, and Texas, specifically I know you talked about capacity reductions really haven't had minimal impact on the overall sales trends, which is very encouraging I was wondering.
Whether there's any incremental color on that or maybe other states are seeing some pressure with the press on a broader infection spike across the us or like you said, maybe just don't see the slowdown because you're still at limited capacity and therefore, the demand is still exceedingly seating capacity, even though there might be some signs of a consumer pull back any kind of color on.
That would be great.
Yeah, Jeff what we've learned is when you open appropriately within restaurant dining in the clean safe environment for consumers you offer the food that we offer and the service that we offer people want to come on our restaurants and Chris mentioned on the prepared remarks that the sales trends were were good in Florida, Texas, there hasn't been an appreciable.
Change our team is a great job in the restaurant, providing a great environment for our customers and people will come in and enjoy some diet I mean, it clearly what we're seeing and.
So we hope this continue to see that going forward, we're certainly going to our part to provide a great environment for our customers and our employees and just a little color on the geographic trends that you brought up.
Generally speaking the states that opened up early have outperforms, Tennessee, Georgia, a lot of the states that have outperformed in the south we actually had a 129 restaurants across the portfolio post positive comps this past week and over half of those were in the south. The Midwest is also doing pretty well candidly, Ohio in particular, but to the point.
Raise the northeast does remain challenged certainly as we're in restaurants on expense lower to resume.
And in some cases, not even reopened yet and then the other thing I would call out as what we called out in the prepared remarks in terms of California. The closure those dining room certainly from a company on perspective at Fleming's is having an outside outsized effect on the comp.
Understood. Thank you very much.
Yep.
Our next question from the line of Sharon Zackfia with William Blair. Please proceed with your questions.
Hi, good morning.
Yes.
As mentioned really impressive to see how quickly out back in particular has rebounded and its comp trends I'm. Just curious as you think about the components of the business.
And how.
Seating capacity is.
As a result.
Where are the hurdle courier for concepts and kind of getting back to pre.
Around as Iris levels sounds like for flat means is alcohol a big.
And I think you can't recapture Im just trying to figure out like how are you can go.
The current environment, because it's been very impressive that I'm not sure.
How much further low hanging fruit if there if there is any.
Thank you Sharon for that.
Yes, we do believe we can go further in the current environment.
What we have seen is.
Capacity constraints on the weekends during higher volumes rightly that we'll have that will hold us back a little bit. So we've seen some of that our beer liquor wine mix is not quite as high as it once was but we're working very hard on that.
But I look at the ingenuity of our people I'm thinking about in particular, Fleming's Prime steakhouse and what they're doing.
With outdoor dining what more things, we can do with our marketing programs. We are really leading hard into digital and we're learning a lot that's helping us on marketing. So Sharon I guess the main point is what we're trying to lean forward is we're trying to lean forward and keeping our of large ever off premises business, we're trying to really plus up our digital market.
Efforts, we're trying to be nibble nimble like Fleming's is what there with their work.
In dining in restaurant dining and I think our hurdles are the capacity on the weekends and then rebuilding our beer liquor one.
I guess, just delve in a little bit further on bonds pension funding, which had been lagging a little bit.
Give us some perspective on what percent of lemons businesses typically business related.
And then for balance sanctions anything in particular, you call out I mean is it generally is for more celebratory experiences and we're just not seen as many of the currently or why do you think pensions lag.
Rob lines and now back yes, I think the main thing there is they've done a fantastic job getting your off premises business going looks really didnt exist prior to.
Yes.
The pandemic, but it's still there share off premise business is still less than what you see it opex and data and that crop as an addition, it's a concept that enjoys a robust.
The whole mix in their business and we haven't been able to build that all the way back when you look at in restaurant dining, which gives us still much heart. The bonefish team is doing just as well as.
The other casual dining brands and their interest in restaurant dining performance on Fleming's I don't have off the top my head how much is business dining, but I know the team is working very hard to kind of rethink that and one of the things. It's been a really cool innovation is the Hudson sex success with virtual Fleming.
Dining and we've done some of that so it's they're really trying to innovate around around the core chair.
Okay. Thank you. Thank you.
The next questions from the line of John Glass with Morgan Stanley. Please proceed with your question.
Hi, Thanks, Thanks, very much good morning, good morning, because you'd mentioned is there was a cohort of about backs that were positive I can't or the number maybe just remind us but what's different about those stores. For example, those one delta house in dining capacity restrictions or is there to go businesses outsized or did they were the creative about outdoor seating and other play.
What's different about those restaurants that allow that is actually comped positive.
Well I think what we're finding John is great restaurants are great restaurants and.
They do yet.
Sales gains in restaurant dining Devin very strong and loyal customer cohort and they have done a fabulous job on off premises. Okay. So it's not like the ones fighting against the other both our building and as a result, you have a situation where.
Both things are working at the restaurant the managing partner is doing a fantastic job and you're building sales even with some of the restrictions that are going on so it's really partner driven and the history of the restaurant driven more than anything else, John Yes, and just a follow up with the numbers John So it's 129 restaurants across the U.S concepts, so how backdrops.
Lemmings Bonefish 105 of those 129 locations are outback steakhouse locations.
Okay. That's helpful incremental when can you just remind us what is it to go business in dollars and the average weekly sales of the Outback. So like around 60000 simply did that again its open what is the dollars for that to go business how would that.
Trended over the past four six periods as you talked about the emerging 50% of the prior to go business. Yeah. Let me give you some perspective on kind of how we think about the progression of those numbers. So if you go prior to covert.
We are doing about $10 million a week in total off premises sales and then obviously we shifted to an off premise is only model in March and obviously puts but those investments of that we've made in that paid off in a really big way, we tripled the off premises business and it peaked at about $32 million a week and off premises in April prior the dining reopening.
So now obviously, we have 92% of the dining rooms back open.
We this past week, we did $23 million in off premises dining on $52 million of total sales. So that mix right. Now is about 55 in restaurant, 45% off premises and I just want to add.
If you look at business like problems and I was talking to the crop as management team yesterday joined that call.
Andy partners everything I mean, the investments we made off premises the carry out the delivery business that shift is going to stay that is something that's going to stay with casual dining people enjoy our food and the fact that we'd be able to make these gains. During this time the investments that we've made it really paid off for our company.
Great. Okay. Thank you.
Sure.
Question comes from the line of John Ivanhoe with good Morgan. Please proceed with your question Hi, Hi, Thank you so much and having been outside of Nashville last week, and it's great to see how busy out backs in fact actually were in that market.
So the question is really on simplification broadly and you did you kind of highlight you. Many many simplification work you left waste around Cogs to your prep hours from labor and obviously less marketing.
You know I understand that most of that is going to stay but my question is how much more you have to go on is there more that you can do on the menu is there more that you can do around not just reducing hours around prep it actually changing some of the structure of both the back of the house in the front of the house of.
Really reducing the number of labor hours on a given level of customer transaction versus what you've done before in other words.
What inning are way.
Terms of this menu simplification work actually driving further margin improvements relative to what you saw in June and July. Thanks.
Yes, John.
One of the things that we're trying to do as a company is emerged from the pandemic is even stronger more focused company and the work you're talking about a spot on.
I can't get into details, but I can tell you that Opex steak House for instance, we are doing work on menu back of house and things.
Very proactively because we like what we see and we think we can offer consumers the choices they want and need in a great environment, even a more profitable way because of some of the menu simplification work, we've done because of some of the labor scheduling that we're looking at and because of some of the equipment work that we can do.
But I don't want to getting the more details on that because it's the work is underway, but it's going to happen and all of our brands and we're using have time to aggressively move forward on that because I think you make an excellent point.
Thank you.
Our next questions from the line of Alex Slagle with Jefferies. Please proceed with your question.
Hey, Thanks to the question everyone's well.
Yes, if you could talk to a strategic opportunities to invest are there and you're off premise business and Levered list demand. There grain developments you can speak to what a procedural change is the changes in equipment or restaurant layout to enhance your capabilities.
Sure.
Like I mentioned earlier is a big opportunity for us that we're capturing and will continue to capture.
I think you have to look in a few different fronts number one you have to make your at your restaurants are set up for success. So.
The goal rooms, making sure the assets are laid out to delivery and everything else. That's that's number one number two is.
Our digital marketing efforts and our partnerships with third party providers and our own work is really underway and we're very happy with our partnerships with our third party providers and we'll continue to.
Work through that number three is.
We don't want to wish.
This fortunate any restaurant company, but there will be changes in the restaurant footprint and we're going to have a chance to reposition assets relocate restaurants, which was so successful for us prior to this but they're going be more opportunities. So we'll be able to put our restaurants in a more convenient place that more and more updated restaurants were certainly going to pursue that and then on.
The operating front I know all of our brand leaders are thinking very carefully about how they can think through.
In providing a better delivery and to go servicing their labor models I.
I think those are the things that we're doing to make sure that this is really.
Top of mind and I just think it's also a mindset.
Spend a number of years in pizza hut delivered yet to have a mindset about doing delivery and stuff and and I think our team. Our opex team in particular has done a fantastic job retaining their in restaurant sales and also getting the incrementality coming out of the off premise business. So those the four or five thing that we're doing right now and that we're also going to position ourselves through.
Only for the future because it's very clear our consumers want our food in their homes or in the restaurants, there would be ready to do both.
Got it thank you.
The next question comes from the line of Brian Vaccaro with Raymond James. Please proceed with your question.
Thanks, and great Threed connected you guys.
Ask about capacity utilization and what measures you've taken to address occupancy limits and I guess have you installed plexiglas barriers and how much is that benefited utilization and could you also comment on what measures you've taken to optimize outdoor dining.
Sure.
Four things Brian.
Number one we look at table turns right, we don't want to Russia anybody on the restaurant, but were capacity constraints were very we had measurements against that would take a look at what's going on there to the flexi glasses in place.
Appropriately our restaurants three outdoor dining is clearly in place and we've got some great pictures from our people.
And can really creative outdoor dining things, we've got a restaurant up in Chicago for insist that bonefish grill, its isn't doing an amazing job in their outdoor dining.
Having you would have done during vered virtually closing doing volumes, even higher than what they were doing prior to all this.
So those are the steps we're taking measuring.
Times.
Turning a table turnover times from doing something with the asset and plexiglass and we're doing some things about or dining all the while conforming to local states safety standards, making sure things are clean and our customers and our employees feel safe.
And the other thing that I would add to that is that as we have migrated on this journey, we've been slowly reintroducing lunch back into the equation as well. So when you think about it capacity utilization also includes daypart utilization, so putting lunch back into the mix as an important part of that puzzle as well.
Okay, and I wanted to circle back to Florida, as well and the recent trends there obviously encouraging to hear it's holding up relatively well, but I was curious if you crack at crack down into the dynamic versus off premise are you seeing dine in bit more but a pretty meaningful channel shift over to off premise or is dine in also holding up relatively.
Well, yes, they stayed relatively stable there hasn't been a whole lot of migration to off premises small if anything.
Okay, Okay and last one just on DNA in the low 50 million range here in on adjusted basis is that it then decent run rates I expect going forward or are there maybe additional savings opportunities on your radar, perhaps we could see it ticked up a little bit from here as compensation or other dynamics normalized along with sales yeah. It probably makes.
To give you some of the relative components of the Q2 DNA. So you can get some perspective on kind of what sticks and what doesn't so to your point there was about $19 million of favorability year over year in Gionee. They are two buckets that you probably want to break that down into in February obviously, we laid out the anticipated $20 million of cost saves that we're going to.
Benefit our 2020 results most of those savings going ahead and Gionee.
So those savings are on track in Q2, we had nearly $11 million of benefits related to those efforts and so 5 million of that we talked about which was the cancellation of the managing partners Conference you had about two and a half million dollars of lower professional fees and legal fees.
And then you had lower compensation expense as we work to reduce our overhead that was about three and a half million Bucks. The conference expenses and the professional fees are largely isolated to the second quarter, but I think you can expect the compensation benefits to continue throughout the year. The other large bucket of gionee savings related to its fish.
Concede gained during code so specifically, there's probably about $7 million in total related to reduced travel reduced meetings expense lower training expenses, and then lower compensation expense.
So it really depends in terms of those expenses on a go forward basis.
How long this pandemic carries on because the longer that we're able to see some of these efficiencies.
In meeting expense and travel expense, obviously, that's going to benefit our DNA numbers moving forward as well, but at some point in time as this business continues to normalize those expenses will be reintroduce back into the business. So some of it for sure the three and a half million I think is absolutely safe to say, it's going to continue.
Beyond that it really it really honestly depends I think the I think I'd add Brian is we're learning a lot during the time, but our cost structure and everything so we're we're.
We're we've made some really great progress starting in February as going to continue so.
More to follow on this as time passes.
Alright, thanks, very much I'll pass along thank you.
Thank you next question is from the line of Jeff Farmer with Gordon Haskett. Please proceed with your question.
Morning, and thank you just a couple of quick follow up question. So what does the off premise sales mix breakdown between curbside pickup in house delivery and third parties delivery. So across all three of those channels and how should we be thinking about the relative margin performance across all three of those channels.
On the on the margin side.
They are very attractive now as attractive as in restaurant dining because they don't have the alcohol mix like we do potentially at some of the restaurant dining, but Jeff that clearly where the customers going and we've got some very favorable.
A third party contracts that we do a great job doing our own delivery. So.
We're very pleased with the performance the sales and profit performance how that Chad.
Yeah and on the on the mix, we're we've seen a steady increase in delivery.
The overall mix of the total off premise of sales and in particular third party delivery. This most recent we just as an example, when it's fairly reflective of what we've seen over the last month or so to go is about 55% of the overall mix in house delivery was 13% and then you had 30% was third.
Parties. So obviously you can see thats massively increased as we've been turning on that that lever and we've seen some customer behavior has changed a little bit amid this pandemic and those person is our percentage of our to go percentage of the total to go but yes.
Understood and that makes perfect sense. Thank you for that color and just one more you guys did touched on it but can you provide more color on Brazil as it relates to sales recovery prospects in coming months I realize you don't have.
The the so called Crystal ball, but just in terms of thinking about what the back half of of 20 is going to look like and then more specifically what average unit volume or same store sales recovery level would be required to get that segment back to where that country at least back to breakeven restaurant level margins.
Yeah. They their peer team are doing a great job down there.
So Paulo, and Rio have open back up with some restrictions more restrictions and to haul the real.
And then we've seen a stair step increase in sales.
Gain.
And don't forget that there they had a relatively small delivery and no carry out business was all theyre basically a mall centered.
Business and malls in Brazil are far different just as remind everybody other than us it's much more entertainment placement thing where people go.
But we're seeing the pickup in restaurant dining and as more restaurants get added they go state by state as well.
As more restaurants get added in the restrictions get less onerous, we will see a pickup in.
In sale now I think Jeff, we all know that'll depend on how the risk how and when the restrictions are lifted and how thinking forward, but the team is clear.
In the us the customers in Brazil want to come back in the restaurants and enjoy our enjoy today and then one thing I would say just in terms of thinking about.
Profitability moving forward.
They do a larger volume in those restaurants than we do here in the U.S. So they are a little more efficient in terms of leveraging their fixed cost. So I would imagine that these sales that they would need would be less than what you would need here in the U.S. to add to recover and get back to profitability and I just want to and Chris mentioned his remarks, but.
Importantly, we have not had to make additional cash infusion on Brazil, and nor do we believe given current trends, we see making any more cash infusion for the foreseeable future they're standing on the wrong.
Alright, thank you.
Our next questions from the line of Lauren Silvernail with Credit Suisse. Please proceed with your question.
Thanks, So much for the question following up on the on premise composition, you thought that the 50% of off premise sales gain being maintained is there any different than the to go versus the delivery cadence in terms of how we should think about the sustainability.
Hey, Dan.
No. It's there both they're all more holding up.
That's clearly our goal and we talked earlier in the call about the steps, we're taking to make sure. We can achieve this while restaurants open up.
Okay, Great and then are you willing to share aerodyne rewards membership is in a quarter and then any changes in strategy regarding the leveraging technology within the restaurant going forward.
Sure.
Rewards is over 11 million members grew its growing more rapidly. During this time that did prior to this it's a very successful program is something we're going to continue to.
Support and also think through how we can take a forward I think our digital work, they're going to be doing will be big part of that if we get the customer information we have a lot of information with that and we're very pleased with the programming investments that we've made and we're going to make it even better.
This space.
And any changes to how you're going to leverage in restaurant technology, whether it is there a tablet or anything that you're getting to a team members.
And are they going I think we always look at our Pos device to see if there's something there, but and we've done some of the.
Yes, we've done some of the contact list.
Payments and things right that's all there.
But I don't see anticipate additional and big investments and tablets and things.
But I do think that for us.
I think where you'll see some big big progresses in digital marketing in the technology behind that.
Great. Thank you so much thank you.
Next question comes from the line of Brett Levy with MKM Partners. Please proceed with your question.
Great. Thanks.
Thanks for taking the time for the question and sharing that information.
Glossed over this briefly earlier when you were thinking when you were talking about some changes to your portfolio, but could you delve a little deeper into how you're thinking about the current portfolio not just in terms of brands.
But also in terms of existing units that you have what needs to be done structurally at these units are you having conversations with landlords either that existing rents for that future project and what that could mean for your your unit economics going forward and then.
When you think about where you are now.
Do you think you still need to tear down additional units.
When do you think returning to unit growth.
Makes more sense or do you think optimization is probably something we think about for 20 and 21. Thanks, Yes sure.
So I think for us the biggest opportunity as I mentioned earlier is the new unit relocation opportunities, especially at Outback Steakhouse, there's going to be opportunities in the marketplace and we're very well positioned for that.
I think everybody was loosened these calls over the year through our relocation program, a very successful and we anticipate that.
Going forward.
As far as.
Optimization of assets, I think Chris Chris and the finance team along with our real estate team has done a really good job staying on top of anything that need to be closer addressed I really don't anticipate much in that area going forward, we're very pleased with our portfolio now.
I think that the effect business in particular is an opportunity for us as we get into beyond this pandemic two to growth.
Secondly, we are doing work with our landlord as of June we were paying rents and there's no issues or anything, but we are taking the opportunity to restructure leases and reduce our cost structure, we're pursuing that with the with some gusto and our team is doing wonderful job. There. So so Brad theres a cost saving opportunity.
And then there is an investment opportunity behind relocations, new units et cetera.
If you think about just furthering on what you said about some of the structural moves.
What percentage of your system do you think needs significant overhauls to make off premise much more seamless.
And do you think that what percentage of the quickly do you think has the really the box and the bones right now, where that's where that makes sense and how much of it has to be adjusted or relocate or just something that you'll just have to work through the current infrastructure. Thanks, well. We we've worked very hard this at this delay.
Everything is not new.
Three four years old until we've worked very hard and making sure our assets were.
In their construction to make sure that that we can deliver and have carry out now we can always make it better and that's one of the things I mentioned earlier about looking at relocations are looking at bump outs and thing, but breadth theres very few restaurants that need major structural changes to achieve the delivery and carry out.
Opportunities, we haven't you see that in our numbers I mean, you see that in the sales gains we see now.
For all the started we had identified up to 100 opexa could be look relocated from many different reasons better dine in but our delivery of newer asset everything else and so we're going to pursue that like I mentioned earlier with a great deal of determination.
I can assure you that the asset configurations, we have today can achieve those sales volumes and delivery carry out otherwise we wouldn't be seeing those numbers, we're going to continue to improve that though going forward.
Thank you very much.
Our next question is from the line of Matt Difrisco with Guggenheim. Please proceed with your question.
Thank you I'm, a little bit of a follow up there I guess just want to be clear also as far as the success you've had in the to go business and delivery off premise in aggregate.
Anything in there as far as promotional activity that you were doing that might be considered less aggressive going forward.
Or you have already begun to dial it back from maybe earlier on in those higher peak levels or is the sort of the 50% of the health holding those 50% sort of in a comparable promotional environment.
And then Oh, yes, the only thing and I would note is that certainly at the outset. It as we were doing free free delivery certainly are in restaurant or do it yourself, we were doing free delivery early on we're migrating away from that now the other thing I would say is that when you look at a third party aggregators nude new users are the first time visitors can get that.
Free delivery option after that theyre, they're paying a delivery fee.
Okay, and then sort of just a follow on to that focusing on that 55% overall to go, especially the ones who are doing a pick up at your store I realize there's no alcohol. So the check is going to be kind of funky, but if you look at the entrees is there anything there that you can see as far as reading into that consumer.