Q1 2021 Bloomin' Brands Inc Earnings Call

April 29, 2021

[music].

Greetings and welcome to the Bloom and brands fiscal first quarter 2021 earnings conference call.

At this time all participants are on a listen only mode. A brief question and answer session will follow management's prepared remark it.

It is now my pleasure to introduce your host Mark Graff Group Vice President of Investor Relations. Thank you. Mr. Graff you may now begin.

Thank you and good morning, everyone with me on today's call are David Deno, Our Chief Executive Officer, and Chris Meyer Executive Vice President and Chief Financial Officer.

By now you should have access to our fiscal first quarter 2021 earnings release.

It can also be found on our website at Bloom and brands Dot com in the investors section.

Throughout this conference call, we will 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 on our earnings release on our website as previously described.

Where 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 trends. These 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 SEC Gov.

During today's call we will provide a brief recap of our financial performance for the fiscal first quarter 'twenty one of discussion regarding current trends and of select Q2 2021 guidance metrics. Once we've completed these remarks, we'll open up the call for questions and with that I'd now like the call turn the call over to David Deno.

Well, thank you Mark and welcome to everyone listening today, the first quarter was a strong start to the year and we had very good results across many measures results further reinforce our belief that the strategies and tactics are working and set us up well to achieve our near and long term commitments.

You to the teams on the restaurants and restaurant support center for your unwavering commitment to serving our guests your dedication to free and great Hospitality service and experience every day is what makes our restaurants. So successful. Thanks to all of you for your hard work.

The first quarter performance was the culmination of a multi year effort to elevate the guest experience grow healthy traffic and pursue operational on simplification efforts to improve margins and profitability. This was accomplished by first and foremost taking care of our people and customers. We did not furlough any employees during the pandemic.

And this decision has contributed to low turnover may.

The maintaining of motivated and well trained and engaged employee base is critical to our long term success as sales volumes are now exceeding pre pandemic levels. These actions provide a competitive advantage to retaining talent as the industry faces some staffing challenges.

Second we are focused on providing great food and service to customers in the dining room, while maintaining our off premise of volumes, we made significant investments pre pandemic to capitalize on the growing off premise of demand as consumers shifted towards convenience or to go on delivery businesses are performing very well and the high off premise was retention levels are contributing to the strong.

Sales outperformance.

Third we have been aggressive in pursuing opportunities to further optimize how we run in support of our restaurants, we are realizing efficiencies through simplification efforts and across operations menus and marketing effort offers this has led to lower waste reduce prep and training hours and improved execution. These benefits translate into lower cost in the <unk>.

Restaurants and on the restaurant support center we.

We will continue to look for ways to reduce complexity improve consistency and increased profitability across revenue channels.

As a result of these actions we had higher than expected volumes in January of significant margin and profit improvement in the first quarter, we believe the strategic and operational framework, we outlined last quarter can deliver consistent performance in the quarters ahead.

As the country reopens, we remain focused on optimizing revenue channels across both in restaurant and off premises. Our goal is to preserve preserve off premises volumes as dining room capacity growth. The carrabba's team has done an exceptional job on this area in the first quarter Carrabba's off premise of sales, where our portfolio of high of 42% of the <unk>.

Revenue, we will enhance and strengthen the company's delivery and Carryout business by first continuing to provide great food and service for example, the family bundle platform at Bonefish offers convenience and attractive price point. The offering provides a fully prepared meal for five starting at $29 99 with six different options to choose from.

And second by expanding our technology and digital efforts, we improved our online ordering system for Outback and Carrabba's in late March this technology creates a faster and simpler ordering process and resulted in a higher average check we are seeing strong consumer adoption with approximately 65% of all of <unk>.

<unk> premises sales in Q1 handled through our digital channels, representing 147% growth versus the prior year.

In addition, we are on the process of updating the outback mobile app to improve off premises execution for our customers and our operators, we expect the new app to be available in Q3 of this year.

As we increase of off premises revenue. We will also continue to grow our dine in business one of the key drivers as the new menu at Outback, which is performing ahead of expectations. We design the menu to reinforce our steak leadership through more accessible premium cuts and larger portions of while also lowering menu prices. We are seeing strong customer preference as guests are trading up to.

Larger cuts of steak enjoying larger portions and increasing attachment rate on appetizers and beverages. In addition, the efficient menu design reduces complexity, which improves execution and consistency. This results in an improved customer experience, we will be doing similar work at our other brands.

The positive momentum of our initiative is carrying into the second quarter through the first four weeks second quarter U S. Comparable sales are up 12, 6% on a two year basis versus 2019 is clear customers want to come back to restaurants, and we are confident in our ability to provide a safe and welcoming dining experience.

Now turning to Brazil, beginning of March the country experienced the second spike in COVID-19 cases, which caused the government to impose new lockdowns to slow the spread of the virus.

This led to significantly reduce the codes in restaurant dining capacity for majority of the country.

During this period of our restaurants, primarily operating in an off premises only capacity.

However in recent weeks, we've seen in restaurant dining restrictions of the beginning to ease.

This has resulted in improving weekly sales volume per store from 'twenty one.

The $35000 over the last four weeks. In addition on April 24th Sao Paulo, which is our largest market announced they are reopening in restaurant dining capacity to 25%. This provides further optimism about the future continued pace of the recovery.

We expect these reduced sales volumes, while temporary to disproportionately impact Brazil second quarter results. As a reminder, last year when Brazil underwent the first wave of COVID-19, we had to operate with an off premises only business model as capacity restrictions eased sales improved quickly we would expect a similar recovery once brasilia emerges from this <unk>.

<unk> wave of the virus.

Given the following first we have a leading market position in Outback remains a highly regarded brand with strong consumer appeal.

The competitive landscape could look very different on the other side of the pandemic, we expect that a large number of restaurants as high of 30% will remain permanently closed in Brazil. This reality combined with the high level of pent up demand for our brands could provide meaningful and rapid growth opportunities for this business on the other side of the pandemic.

Third we have an incremental of revenue channel on off premises that did not exist before the pandemic and believe we can retain a large portion of this business moving forward, even as restaurant dining growth.

Lastly, we are of great local team in Brazil, we are confident that they will not only navigate the pandemic, but also capture the major opportunities. We will have once the crisis is over.

Finally, returning to the U S.

We have the financial power and capability to build our development pipeline in 2021 and beyond later, Chris will talk about the very successful refinancing that we just completed.

As the environment stabilizes, we are finding opportunities for development in the U S Outback, new restaurants, relocations, along with new Fleming's in our stronghold markets will be the priority in.

In addition, we will be building of few Aussie Grill test units.

Internationally, we will continue to expand our great business in Brazil, and they are able to fund their development and.

In summary, we are off to a terrific start.

We are making significant progress against key initiatives to enhance the customer experience simplify operations and optimize our cost structure. The learnings developed through the pandemic have put us on an even better position to capture these opportunities to drive total shareholder return.

I can assure you we will not rest on our success and will be aggressively pushing forward. We are confident we will emerge of better stronger operations focused company.

And with that I'll turn the call over to Chris. Thanks.

Thanks, Dave and good morning, everyone I would like to start by providing a recap of our financial performance for the fiscal first quarter of 2021 Q1 U S comp sales finished up three 3%. This result reflected a significant improvement from the down 12, 9% $3 seven weeks of Q1 that we discussed on our <unk>.

February earnings call. This improvement was driven by a combination of an improvement in our recent trends as well as the lapping of the onset of the pandemic in March 2020.

Moving into Q2 traditional one year comp sales calculations will be less instructive as we lap the pandemic. Although we will continue to provide this one year view, we will also share of both a two year comp sales perspective, as well as average weekly sales to capture a more complete picture of our performance.

On a two year basis as compared to 2019 Q1 comp sales were down seven 3% two year comp sales improved significantly as we moved into March. In addition average weekly sales per restaurant increased from approximately $62000 in January to $75000 per $1000 in March.

There are three primary factors driving that improvement.

First we are benefiting from several sales levers that are in place throughout our portfolio such as the impact of the new Outback menu and our introduction of tender Shack also the investment in and growth of our off premise of this business is among the most important of these levers over the course of Q1, we saw relatively consistent week.

Off premises sales volumes, even as in restaurant sales returned to the dining rooms reopened we started and ended the quarter, averaging roughly $23000 per restaurant per week and off premise of sales off premises represented 35% of our U S sales in Q1, which is only down 2% from <unk>.

Q4. This occasion is proving to be highly incremental and will remain a key part of our growth strategy moving forward.

Second we ended the quarter with 100% of our domestic company owned restaurants opened with in restaurant dining. This is up from 85% at year end. We have also seen an easing of capacity restrictions, while continuing to adhere to state and local rules, which vary across our portfolio.

Third the latest round of government stimulus has been a catalyst for sales increases we saw on Inc. A large increase in weekly sales volumes over the final two weeks of Q1. After the stimulus was distributed importantly, we have seen this momentum carry forward into the second quarter through the first four weeks of Q2, our two year use of <unk>.

Comp sales has been plus 12, 6% and in the U S. We have continued to average $75000 of week in sales per restaurant.

Now turning to our brands Outback Q1 comp sales were up four 1% and Carrabba's comp sales were up eight 9% on a two year basis, Outback and Carrabba's were down five 8% and 0.6% respectively. The two year sales results at both brands were ahead of the major competitive benchmarks.

As has been the case since the onset of the pandemic. These brands relied heavily on our strong off premise of this business total Q1 off premises sales were 38% of revenues at Outback and 42% of revenue at Carrabba's.

At Bonefish Grill comp sales were down two 9% in Q1 and down 16, 3% on a two year basis. The in restaurant experience and bar centric culture of Bonefish has been impacted more by capacity restrictions that are other casual dining brands. Despite this we have built an impressive off premises business at bonefish and it.

The 25% of their sales in Q1.

Fleming's comps were down two 3% in Q1 and down 15% on a two year basis, given their large, California presence, 17% of Fleming's locations were closed for in restaurant dining until mid March we are pleased with their ability to drive sales despite the significant headwind.

As it relates to other aspects of our Q1 performance total revenues decreased 2% versus last year to $987 million GAAP diluted earnings per share for the quarter was 63.

Versus 44 of diluted loss per share in 2020.

Adjusted diluted earnings per share was <unk> 72 cents versus <unk> 14 of adjusted diluted earnings per share last year adjusted.

Operating income for the quarter was $91 million. This.

<unk> exceeded our adjusted operating income from 2019 of $89 million. We achieved this level of operating income on $141 million less revenue than 2019, adjusted operating income margin was nine 2% in Q1 versus two 7% in 2000.

27, 8% in 2019 this improvement relative to 2020 is driven by our ongoing efforts to drive efficiency into our business through simplification.

In terms of our Q1 adjusted performance by cost category Cogs was 170 basis points of favorable year over year, driven primarily by waste reduction and increases in check average following the rollout of the new Outback menu as we indicated last call. Our commodities are largely locked for 2021, and we expect little.

To no inflation for the year.

The labor line was 300 basis points favorable year over year similar to Cogs. We also benefited from simplification efforts. This showed up in a reduction in food prep hours. We are also finding efficiencies in off premises labor as that business continues to grow. In addition, we are lapping relief payments to our hourly employees from 2012.

<unk>.

Operating expenses were 160 basis points of favorable due primarily to a $19 million reduction in domestic marketing expense year over year. In addition, we had favorability in areas such as R&M and utilities. This favorability was offset by increases in to go supplies and third party delivery fees related to the <unk>.

Growth in off premises.

On the G&A front Q1 was down $3 $3 million from last year net of adjustments. This includes the ongoing benefit of cost savings initiatives that we have detailed on prior calls we remain on track to achieve $15 million of cost savings in 2021, and reaffirm that our G&A expense should be.

Between $225 million and $230 million for the full year.

Overall, we were pleased with our first quarter results and importantly, it keeps us on track for our long term margin commitments, we laid out for investors last quarter.

On the franchise front as California, Reopens, we are seeing improved sales performance for our 46 locations in the state over the last several weeks, our California market has been comping positive on a two year basis, we will be collecting on deferred royalty amounts as that business recovers or non California franchise locations, both domestically and.

Internationally continue to perform well and we are collecting royalties from these locations.

Turning to our capital structure, we recently completed a refinancing of our credit facility and added a new $300 million bond into our stack. The credit facility has a five year $1 billion facility with a $200 million term loan a and a $800 million revolver the.

Facility carries an interest rate of LIBOR, plus $2 50, and the rate will decrease as we pay down debt.

The bond matures in 2029 and carries an interest rate of five and an 8%. These moves have diversified our capital structure staggered debt maturities insured ample liquidity and secured our balance sheet for the foreseeable future.

Moving forward, we will continue to pay down debt with all excess free cash flow until we are at or below our targeted leverage ratio of three times net debt to EBITDAR.

As our EBITDA continues to improve we are confident that we can make significant progress towards achieving our objective in 2022. Once we reach our targeted ratio we will evaluate further debt paydown or other uses of cash to enhance shareholder value.

Turning to Q2 as I discussed we have seen significant domestic sales momentum to start the second quarter. In addition, we maintain a high degree of visibility and our margin improvement journey. Given this we have provided guidance for the second quarter. We expect Q2 total revenues to be at least $1.03 billion.

This outcome for total revenues assumes a weekly average sales volume of approximately $72000 in the U S for the remaining nine weeks of the quarter and a weekly average sales volume of $35000 over the last few weeks of the quarter in Brazil. The U S volume assumption for the balance of the <unk>.

<unk> is a slight decrease from current volumes on the assumption that there will be some resumption of traditional seasonality as we get into the summer months should this seasonality not materialize there will be upside to this outlook.

We expect EBITDA to be at least $130 million consistent with our Q1 EBITDA total the primary reason, we do not expect a higher EBITDA flow through on sales increases between Q1, and Q2 is driven by the short term COVID-19 specific challenges we face in Brazil also as Dino <unk>.

And there had been staffing challenges within the industry here in the U S, but any costs associated with hiring had been built into our Q2 guidance. We expect our U S segment sales profit and operating margin to be better than Q1.

We expect GAAP EPS to be at least 54 cents.

And adjusted EPS to be at least 60 the.

The only adjustment to EPS that we are currently expecting in Q2 is two our diluted share count under GAAP. We are not allowed to consider the share count benefit of the hedge that we entered into related to our convertible bond we have taken that benefit into the share count used to derive adjusted EPS, which in this case is a six.

<unk> impact on Q2 EPS in Q2, we expect that adjusted diluted share count will be approximately 99 million shares but share count is highly dependent on our weighted average share price for the quarter in our last earnings release, we provided a table that outlines expected dilution from the convert.

At various stock prices.

We believe our Q2 guidance reflects continued optimism for our current performance in the U S and a cautious near term outlook on Brazil as they finish out their quarter given the ongoing uncertainty related to the pandemic and the shape of the recovery. We are not going to provide an outlook beyond Q2, we do however want to reinforce.

Our confidence in the margin framework, we laid out for investors last quarter. As a reminder, that framework suggested that one sales achieved 2019 levels. Our adjusted operating margin will be between six 3% and six 8%.

This is a 150 to 200 basis point improvement from 2019 levels. We are also committed to a longer term framework to achieve seven 5% operating margins as sales improve over 2019 levels. This framework includes expansion of restaurant margins lower depreciation expense and ongoing.

Favorability in G&A.

In summary, this was another strong quarter for Bloom and brands and we are well on our way to becoming a better stronger operations focused company and with that we will open up the call for questions.

Ladies and gentlemen, the floor is now open for questions. If he would like to ask a question. Please press star one on your telephone keypad at this time.

The confirmation tone will indicate your line is in the question queue you.

You May press star two if he would like to share them with your question from the queue for.

For participants using speaker equipment, it may be necessary for pick up your handset before pressing the star keys.

In the interest of time, we do ask that you limit yourself to one question and one follow up.

Once again that is star one to register a question at this time.

Our first question is coming from Jeffrey Bernstein of Barclays. Please go ahead.

Thank you good morning good.

Good morning.

Two questions one just on.

On the off premise side of things.

In terms of the dollar retention because obviously that's more important than percentages here, but I think you mentioned you started and ended the quarter of 23000 per week I'm just wondering.

Maybe where that was pre COVID-19.

And where you think that 23000 of settled once your dining rooms of fully reopened I'm just trying to gauge what you think the incremental sales could be on top of the full return of dine in and then I had one follow up.

Sure Good morning, Jeff.

We believe.

We've made the investments in off premise is carryout and delivery over the years, it's an incremental occasion.

And our goal is to retain as much of that weekly volume as possible.

And we've been very successful.

Dining rooms, reopen to retain much of that and.

We anticipate that being an incremental occasion as the dining rooms, reopen and gives us the impetus for same store sales growth and is one of the big reasons of why we're seeing 12, 6% sales growth versus 2019 right. Now. So it is an incremental occasion and our goal is to hang on to as much of it is possible, yes, and Jeff just to give you more specificity.

On the actual numbers.

As you recall outback was 15% or so of sales pre COVID-19 Carrabba's was a little north of 20% of sales pre COVID-19, we didn't have off premises business to speak of at Bonefish and Fleming's. So I think that the number on a weekly sales volume standpoint, probably in that $13000 per store per week range somewhere around there.

Got it so you've got an incremental maybe $10000 per store per week.

On the Outback and presumably Carrabba's right now relative to pre COVID-19.

Yeah, that's right and we think the carrabba's opportunities, especially meaningful.

Got it and then my follow up is just on the.

The margin opportunity off of that incremental sales.

And then if you were to see those incremental sales hold which.

Obviously, there's some skepticism.

The scope of skepticism that that's fully sustainable, but if they were to hold on I'm. Just wondering how you think about the margin on those incremental sales.

Presumably there's less apps desserts and drinks and things like that and you have some fees for whatever third party delivery there might be but just trying to get a feel for what you think the incremental flow through would be of what that adds to your margin. If you were to hold on to those sales. Thanks, yeah on you're talking specifically about off premise is correct. We're talking specifically about off premise, yes, yes, yes, so couple of.

The things one I think it does vary a little bit by by channel, but what I would say is the.

Call it 20% of the 35% debt, we had this quarter and off premise mix was our to go curbside and the curbside margin is effectively and we've talked about this before effectively as good as your in restaurant experience. We've really got that thing wired Theres, obviously less labor associated with it but from a margin flow.

True standpoint, we're pretty much indifferent from a to go standpoint versus in the restaurant I would say from a third party standpoint, it is a little bit lower but it is certainly pretty pretty good relative to relative to expectations I think that what we talked about a couple of years ago, there being a higher take rate, but thats for us thats not an issue.

We feel very good about our third party of margin, so definitely an opportunity to generate some pretty high flow through on these off premise of sales. He justified just want to add one thing to the skeptics out there about off premise I mean, we have made significant investments in our digital efforts.

And we improved our online ordering system. This this quarter to make it easier to do a lot of different things we hadn't done before we're also making other digital investments that will enable the off premises business. So this is not a static event. This is something we're going to continue to build and growth.

And you said, 20% of the 35%.

Just wanted to clarify that it's up more than half of the 35% not 20% of 35% correct, yes more than half of the more than half of the 35 per cent.

Great. Thank you.

Sure.

Thank you. Our next question is coming from Alex Slagle of Jefferies. Please go ahead.

Good morning, and congrats.

The margins I wanted to focus on labor I mean, I have to go back five or six years, the see anything on this.

Flow.

So given like the tightening labor availability and the demand.

Perhaps the combined in.

This would mark a low point for some time and can you talk about the dynamics of what kind of volumes you need to maintain the level of margin or other initiatives you have in place the balance kind of getting the service level, where you want it.

Maintaining the strong margins.

Yeah sure. Thanks for the question so here's the here's the response I gave as you Digest. The Q1 results we are in a very different world.

With regards to labor than we were of pre pandemic.

There's no question that we are running and will continue to run a more favorable an efficient labor model than we did in 2019.

The simplification efforts with the menu is driving favorability, we have a reduction in prep hours and just generally speaking there are more efficiencies now with how we staff our restaurants. So given that Q1 sales exceeded our expectations. It's not surprising we ran this level of favorability on labor and in terms of kind of the trending on how we think about that.

This favorability could continue to a large degree in Q2 now it now as Dave indicated we're going to have some step up in training given the volume increases, but thats all incorporated into the guidance. So we feel pretty good about where we are with labor the other.

Other thing I want to add is.

Much like our off premises business, we're making investments in our restaurants to help them enable our labor labor costs to manage that but also improve customer service, we're making investments in back of the house equipment and looks like our digital efforts on off premises, we're making investments in technology to help our front of the house servers. So we have the scale of <unk>.

Knowledge to move this forward and as Chris said this is a completely different environment than it was pre pandemic.

Thanks, that's helpful I'll pass it along.

Thank you. Our next question is coming from Brett Levy of MKS.

On partners. Please go ahead.

Just one follow up and then a question. The follow up is you just mentioned for.

Net of has tech investments can you go a little bit more into detail in terms of magna.

The magnitude of the investments what do you think you could you could see in terms of either productivity of savings and pacing and then I have a follow up.

Yes, it's a little too early to say specific numbers, Brett as what we think the the technology of savings we will be we believe it will be significant there are two areas. One the phone customers phone is a big part of that so they can control of the customer experience in and do the pay at the table on the table is other kinds of things and as we do and we've got the scale of technology.

And resources to do that and then we've got to look at technology enablers for our servers will be at the <unk>.

<unk> or whatever it might be to help with them as they go forward. So those of the two things are doing breath test, we're very optimistic about it but it's a little too early to say exactly what the numbers would look like.

Say in terms of capital we are going to deploy within our capital budget. This year, we've talked about the numbers, but we're going to deploy anywhere from $20 million to $30 million towards it initiatives. This year.

Great and then just going back to the the macro side of it.

Sales.

Environment.

Can you give a little bit more clarity, we're starting to see more states go into this 100% capacity of just saw Atlanta sports says that Theyre stadiums are going there. After the stadiums are going on there. So can you give a little bit more clarity for color into how youre seeing the.

The general makeup across the country the <unk>.

More on the less impacted the earlier in the later.

The markets. Thank you.

Yes first of all I'll turn over to Chris for some of the details, but we're seeing the benefit of it.

As the country opens up people want to come back into the in restaurant dining we're keeping our off premise of sale, which is sales of just so Greg.

But we were seeing that throughout our system, we're seeing it throughout our concepts and I'll turn it over to Chris and I will talk about some more some more details, but it's been a good tailwind for us yes.

Yeah, and just to give you some perspective of we've.

<unk> talked about there being more of a regional skew the performance and that still seems to be the case and again. It has lots of do with the fact that that a lot of these states are open up with 100 per cent or so so capacity still with social distancing and things like that but they are generally youre able to get a little better throughput into those boxes states like Georgia just to give you a perspective. This last call up this last for.

For weeks or so.

Quarter to date States, like Georgia, Tennessee, Texas, Alabama, They all have Q2 quarter to date comps in that 15% to 20% range on the two year basis.

Florida continues to do very well, although it is a little bit regional south, Florida, a little bit slower, but we've seen a rebound in Orlando Tampa Jacksonville continue to be very strong and then of course, you have the flip side, where it's the same same states. We've talked about where you have a little more in terms of restrictions.

Your New Jersey, Michigan, Minnesota, those have been a little behind in terms of our overall sales performance, but still even behind there in that either slightly down on the two year basis or positive in the low single digits on the two year basis. So we're seeing sort of a sea change across the portfolio, but there definitely is some regional bias.

And then just one last clarification can you give us the number in terms of where you see total capacity right.

Right now in terms of seating and then I'll turn it for the Q yeah.

<unk> of capacity I'd say isn't at 77% to 75% range.

Thank you. Our next question is coming from Brian Vaccaro of Raymond James. Please go ahead.

Thanks, and good morning, I wanted to ask of of the labor market sits.

The situation.

Just help frame, where you stand in terms of your current staffing lever levels pre COVID-19 and how you plan to manage the current situation I think hiring trends of is always a big cost for the industry, maybe just perspective on how much higher versus normal of that had run in the near term and any other per SEC perspective, you see work.

Highlighting.

Good morning, Brian well first of all let me say one of the big competitive advantages, we had which was a very smart move on on our company's behalf was that we did not furlough or let anybody go during the pandemic. So that gave us the higher staffing base of more committed employee base high.

Higher retention and low very low turnover. So that base is extremely important as we go forward now we do participate in the restaurant business and our comp store sales are up 12, 6%. So far this quarter and Chris also mentioned that you can't look at 2019 staffing levels and say that we will return to those levels given that's such a.

Different world than the pandemic. So we are staffing where we need to be we don't have any significant problems. Our team is doing a great job of addressing the opportunities and as we go forward the guidance. The labor cost guidance is labor costs are in our guidance and as part of our model going forward, but I think.

The decision to hang on to our people not let anybody goal was crucial as we got at this point.

Yeah.

Alright, and a lot of moving pieces, obviously, comparing the business day versus pre COVID-19. The sales channels that are coming in and the different efficiencies. Some of which are unique to you is the streamline the business et cetera, but I guess the question that I had was.

Is there a way to frame the business today is generating any of these that are say around 10% above 19 level taking into consideration the reduced prep hours of the efficiencies.

Associated with off premise on server labor et cetera is there a way to frame sort of the cost per week dynamic that compared to 19 for an average restaurant that you run that you would need to get back to to comfortably run a of these in the high single digit sort of 10% versus pre COVID-19.

Yeah.

I don't have an immediate answer to that in terms of cost per week, I guess, what I, what I would say Brian is as you think about our go forward efficiencies in our go forward margin structure I would just fall back on the commentary we gave last quarter. When we laid out a very detailed framework by category in terms of how we.

Think this could come together and play out but kind of to your 0.1 thing. We did say, though is that we had an opportunity to get to seven 5% operating margins as the sales environment improved over 2019 levels, indicating that we do believe there was the ability to further leverage the P&L as sales volumes improve.

And look we're seeing that right now obviously, so I would say.

In terms of sort of not the cost per week answer, but really just in terms of framing. The go forward margin opportunity with the context of the environment, we see today.

Alright fair enough and then just one quick follow up if I could just could you provide a quick update on tender shack, where the weekly volumes are trending for that business as it moves through the first quarter and quarter to date relative to the prior targets you provided thank you sure.

We continue to do well on tender shack across all of our dimensions b of financial impact of our restaurants, the acceptance by our consumers and the running it by the operators they're.

They are doing a really good job on that when the restaurant dining occasion opened back up the sales of tender shack did soften a bit we do believe that the $75 million annualized sales goal is attainable, but we have some work to do on that.

With the restaurants reopening we've got to increase the brand awareness, we've got to add some potentially some additional products. We got to look at a predictor pickup opportunity in our restaurants and we're looking at some partnerships, but most importantly, our sales volume right now are above our.

They are profitable they are above or the the goals that we need to set and we expect to see further improvement so far in the tender shack opportunities.

Alright, thank you.

Once again, ladies and gentlemen that is star one if you would like to register a question at this time.

Our next question is coming from Sharon Zackfia of William Blair. Please go ahead.

Good morning, and congratulations on the strong first quarter on an incredible April.

I guess it would be helpful to the kind of get some insight into what restaurant level margin lots of Mike for you domestically in April and I'm wondering I know you've talked about.

This shift in marketing the focus more on digital but I'm wondering if there were any other shifts that you've done on them.

Premises has rebounded whether you've pulled away at all from kind of off premises marketing or made any other changes to the way youre addressing the consumer.

Yes, Hi, Sharon Thank you for the company we appreciate it.

The sales growth or the digital efforts that were going on that we're doing will continue there.

There is going to be post pandemic, certainly a shift in digital versus network TV or cable television and things like that and we're very well prepared to make even more investments in that category. We have very good sense of what our return on investments look like from the marketing standpoint, and we're going to support our dine in business <unk>.

Our off premise business will do both and we will continue to examine the marketplace and continue to spend primarily up against our digital efforts as we move forward and on the on the restaurant level margin. We're still on the process of closing the books for April but what I would tell you is the early read would suggest that we are on track to achieve what we talked about on the prepay.

Remarks, which is we do expect to see improvement in margins in Q2 from Q1, driven a lot by the the higher sales levels and a continuation of some of the efficiencies that we saw in Q1.

Okay. Thank you.

Thank you. Our next question is coming from Rahho CRO of J P. Morgan. Please go ahead.

Good morning, guys.

For taking my question this is Ron.

For John Island from JP Morgan.

I'm just curious two wanted to understand better on.

<unk>.

So the the way to quantify what kind of.

The contribution.

Some of those are from say a component of lag of hiring on the inflation.

That's the kind of stuff.

<unk>.

But kind of efficiency improvements I'm, just trying to get it back on Samsung.

<unk>.

Divergence between the borders.

<unk>.

Yeah, Yeah. So I think that if you think about labor in Q1, I would say the majority of the favorability that we're seeing relative to 2019 levels is driven by the simplification efforts that we're seeing.

In terms of and in terms of the hiring that we may have to do with the the costs in terms of hiring the training costs those are not prohibitive, they're not going to be a massive.

Number in our P&L results. That's why we felt confident we could build them into the guidance and still have margin expansion in the second quarter. So so again there are some increases in costs. There are some there is some element of sales being a little ahead of inflation, but the majority of our labor favorability that you see in Q1 is being driven by.

Our simplification efforts.

Understood. Thanks, guys.

Thank you. Our next question is coming from Karen Holthaus of Wells Fargo. Please go ahead.

I'll go for that.

Darren on for Jon Tower and.

Another margin question for you and maybe instead of kind of working forward working backwards.

The work in the quarter you were outperforming both of that quite great assets, great, 8% margin target and the then the longer term on it.

I understand the seasonality of the play, but if we start to look at that more by cost bucket could you sort of frame. It as the line items, where do you think you might have been overshooting in the quarter.

Well.

Your point of spot on I do think that there is the seasonality of the business, where Q1 will tend to over perform from a margin perspective, I don't think anything we saw in Q1 changes us from that long term framework, we provided where we said hey look we do believe there's 50 basis points or so of restaurant margin expansion in the long term.

Model I think youre going to see that in Cogs youre going to see that in labor youre going to see that on advertising with some give back in restaurant operating expenses, so with that with that framework everything really came together kind of halfway said it was going to come together now we just have the sales to support the hypothesis that we laid out for investors last quarter. So I think we're in pretty good.

On that front I think Karen too.

We're making the investments in our business to continue to enhance margins and improve customer service, we talked about the digital investments. This will help us on managing ways to help us on the labor.

Cost going forward, all different kind of aspects of our business. So not all of we enjoying the margin benefits right. Now we are investing behind the business of set us up for the long term to continue this kind of margin margin performance that we've been having.

And then one just quick.

Question on the off premise can you share the just the percentage of scale that one of the off premise at Outback and Carrabba's in the first quarter and then in the April quarter to date number.

Yeah, Outback was 38% of revenue and Carrabba's was 42% of revenue.

And what was the havoc on April.

For the quarter and then also on the April number.

Yes, we will get that we will get that day, if we don't have that.

Alright, thank you.

Thank you at the.

As part of my pleasure to turn the floor back over to Mr. Deno for closing comments.

Well. Thank you for attending everybody. We appreciate your time and look forward to updating you in July on our second quarter results.

Ladies and gentlemen, thank you for your participation and interest in Bourbon brands.

Disconnect your lines of all golf for the webcast at the time and have a wonderful day.

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[music].

Greetings and welcome to the Bloom and brands fiscal first quarter 2021 earnings conference call.

At this time, all participants on a listen only mode.

Brief question and answer session will follow management's prepared remark.

It is now my pleasure to introduce your host Mark Graff Group Vice President of Investor Relations. Thank you. Mr. Graff you may now begin.

Thank you and good morning, everyone with me on today's call are David Deno, Our Chief Executive Officer, and Chris Meyer Executive Vice President and Chief Financial Officer.

By now you should have access to our fiscal first quarter 2021 earnings release.

It can also be found on our website at Bloom and brands Dot com in the investors section.

Filings, which are available at SEC Gov.

During today's call we will provide a brief recap of our financial performance for the fiscal first quarter 'twenty one of discussion regarding current trends in the select Q2 2021 guidance metrics. Once we've completed these remarks, we'll open up the call for questions and with that I'd now like the call turn the call over to David Deno.

You to the teams in the restaurants and restaurant support center for your unwavering commitment to serving our guests your dedication to free and great Hospitality service and experience every day is what makes our restaurants. So successful. Thanks to all of you for your hard work.

The first quarter performance for the culmination of a multi year effort to elevate the guest experience grow healthy traffic and pursue operational and simplification of efforts to improve margins and profitability. This was accomplished by first and foremost taking care of our people and customers. We did not furlough any employees during the pandemic.

And this decision has contributed to low turnover.

Maintaining of motivated and well trained and engaged employee base is critical to our long term success as sales volumes are now exceeding pre pandemic levels. These actions provide a competitive advantage to retaining talent as the industry faces some staffing challenges.

Go on delivery businesses are performing very well and the high off premise was retention levels are contributing to the strong sales outperformance.

Third we have been aggressive in pursuing opportunities to further optimize how we run in support of our restaurants, we are realizing the efficiencies through simplification efforts and across operations menus and marketing for offers this has led to lower waste reduce prep and training hours and improved execution. These benefits translate into lower cost on the.

Our restaurants and on the restaurant support center.

We will continue to look for ways to reduce complexity improve consistency and increased profitability across revenue channels.

And second by expanding our technology and digital efforts, we improved our online ordering system for Outback and Carrabba's in late March this technology creates a faster and simpler ordering process and the resulted in a higher average check we are seeing strong consumer adoption with approximately 65% of all.

Off premises sales in Q1 handled through our digital channels, representing 147% growth versus the prior year.

In addition, we are on the process of updating the outback mobile app to improve off premises execution for our customers and our operators, we expect the new app to be available in Q3 of this year.

As we increase off premises revenue. We will also continue to grow our dine in business one of the key drivers as the new menu at Outback, which is performing ahead of expectations. We designed the menu to reinforce our steak leadership through more accessible premium cuts and larger portions of while also lowering menu prices. We are seeing strong customer preference as guests are trading up to.

Larger cuts of steak enjoying larger portions and increasing the attachment rate on appetizers and beverages. In addition, the efficient menu design reduces complexity, which improved execution and consistency. This results in an improved customer experience, we will be doing similar work at our other brands the.

Positive momentum of our initiative is carrying into the second quarter through the first four weeks second quarter U S. Comparable sales are up 12, 6% on a two year basis versus 2019 is clear customers want to come back to restaurants, and we are confident in our ability to provide a safe and welcoming dining experience.

Now turning to Brazil, beginning of March the country experienced the second spike in COVID-19 cases, which caused the government to impose new of Lockdowns to slow the spread of the virus.

This led to significantly reduce the codes in restaurant dining capacity for majority of the country.

During this period of our restaurants, primarily operated on an off premises only capacity.

However in recent weeks, we've seen in restaurant dining restrictions the beginning to ease.

This has resulted in improving weekly sales volume per store from 21000 to $35000 over the last four weeks. In addition on April 24th Sao Paulo, which is our largest market announced they are reopening in restaurant dining capacity. The 25%. This provides further optimism about the future continued pace of the.

A recovery.

We expect these reduced sales volumes, while temporary to disproportionately impact, Brazil second quarter results.

As a reminder, last year when Brazil underwent the first wave of COVID-19, we had to operate with an off premises only business model.

As capacity restrictions eased sales improved quickly we would expect a similar recovery once the Brazilian emerges from this recent wave of the virus.

These near term headwinds do not diminish our long term enthusiasm for the business, we remain optimistic and expect Brazil to emerge stronger with an even better market position when the pandemic subsides given the following first we have a leading market position in outback remains a highly regarded brands with strong consumer appeal.

Second the competitive landscape could look very different on the other side of the pandemic, we expect that a large number of restaurants as high as 30% will remain permanently closed in Brazil. This reality combined with the high level of pent up demand for our brands could provide meaningful and rapid growth opportunities for this business on the other side of the pandemic.

Lastly, we are of great local team in Brazil, we are confident that they will not only navigate the pandemic, but also capture the major opportunities. We will have on once the crisis is over.

Finally, returning to the U S.

We have the financial power and capability to build our development pipeline in 2021 and beyond later, Chris will talk about the very successful refinancing that we just completed.

As the environment stabilizes, we are finding opportunities for development in the U S. Outback, new restaurants of relocations, along with new Fleming's in our stronghold markets will be the priority in.

In addition, we will be building of few Aussie Grill test units.

Internationally, we will continue to expand our great business in Brazil, and they are able to fund their development and.

In summary, we are off to a terrific start.

I can assure you we will not rest on our success and will be aggressively pushing forward. We are confident we will emerge a better stronger operations focused company.

And with that I'll turn the call over to Chris. Thanks.

Thanks, Dave and good morning, everyone I would like to start by providing a recap of our financial performance for the fiscal first quarter of 2021 Q.

Q1 U S comp sales finished up three 3%. This result reflected a significant improvement from the down 12, 9% $3 seven weeks of Q1 that we discussed on our February earnings call. This improvement was driven by a combination of an improvement in our recent trends as well as the lapping of the onset of the pandemic.

In March 2020.

On a two year basis as compared to 2019 Q1 comp sales were down seven 3% two year comp sales improved significantly as we moved into the March. In addition average weekly sales per restaurant increased from approximately $62000 in January to $75 per $1000 in March.

Three primary factors driving that improvement for.

First we are benefiting from several sales levers that are in place throughout our portfolio such as the impact of the new Outback menu and our introduction of tender Shack also the investment in and growth of our off premises business is among the most important of these levers over the course of Q1, we saw relatively consistent weekly.

<unk> premises sales volumes, even as in restaurant sales returned to the dining rooms reopened we started and ended the quarter, averaging roughly $23000 per restaurant per week and off premise of sales off premises represented 35% of our U S sales in Q1, which is only down 2% from Q.

For this occasion is proving to be highly incremental and will remain a key part of our growth strategy moving forward.

Second we ended the quarter with 100% of our domestic company owned restaurants open with the in restaurant dining. This is up from 85% at year end. We have also seen an easing of capacity restrictions, while continuing to adhere to state and local rules, which vary across our portfolio.

Sales has been plus 12, 6% and in the U S. We have continued to average $75000 of week in sales per restaurant.

Now turning to our brands Outback Q1 comp sales were up four 1% and Carrabba's comp sales were up eight 9% on a two year basis, Outback and Carrabba's were down five 8% and 0.6% respectively. The.

The two year sales results at both brands were ahead of the major competitive benchmarks as has been the case since the onset of the pandemic. These brands relied heavily on our strong off premises business total Q1 off premises sales were 38% of revenues at Outback and 42% of revenue at Carrabba's at.

Bonefish Grill comp sales were down two 9% in Q1 and down 16, 3% on a two year basis. The in restaurant experience and bar centric culture of Bonefish has been impacted more by capacity restrictions that are other casual dining brands. Despite this we have built an impressive off premises business at bonefish and it represented.

25% of their sales in Q1.

<unk> comps were down two 3% in Q1 and down 15% on a two year basis, given their large, California presence, 17% of Fleming's locations were closed for in restaurant dining until mid March we are pleased with their ability to drive sales despite the significant headwind.

As it relates to other aspects of our Q1 performance total revenues decreased 2% versus last year to $987 million GAAP diluted earnings per share for the quarter was 63.

<unk> 44 cents of diluted loss per share in 2020.

Adjusted diluted earnings per share was <unk> 72 cents versus <unk> 14 of adjusted diluted earnings per share last year adjusted.

Operating income for the quarter was $91 million. This result exceeded our adjusted operating income from 2019 of $89 million. We achieved this level of operating income on $141 million less revenue than 2019, adjusted operating income margin was.

Nine 2% in Q1 versus two 7% in 2020 and seven 8% in 2019. This improvement relative to 2020 is driven by our ongoing efforts to drive efficiency into our business through simplification.

No inflation for the year.

<unk>.

Growth in off premises.

Between $225 million and $230 million for the full year.

Overall, we were pleased with our first quarter results and importantly, it keeps us on track for our long term margin commitments, we laid out for investors last quarter.

Internationally continued to perform well and we are collecting royalties from these locations.

Turning to our capital structure, we recently completed a refinancing of our credit facility and added a new $300 million bonds into our stack. The credit facility has a five year $1 billion facility with a $200 million term loan a and a $800 million revolver debt.

Facility carries an interest rate of LIBOR, plus $2 50, and the rate will decrease as we pay down debt the.

The bond matures in 2029 and carries an interest rate of $5 on an 8%. These moves have diversified our capital structure staggered debt maturities insured ample liquidity and secured our balance sheet for the foreseeable future.

Moving forward, we will continue to pay down debt with all excess free cash flow until we are at or below our targeted leverage ratio of three times net debt to EBITDAR.

As our EBITDA continues to improve we are confident that we can make significant progress towards achieving our objective in 2022. Once we reach our targeted ratio, we will evaluate further debt pay down or other uses of cash to enhance shareholder value.

Turning to Q2 as I discussed we have seen significant domestic sales momentum to start the second quarter. In addition, we maintain a high degree of visibility in our margin improvement journey. Given this we have provided guidance for the second quarter. We expect Q2 total revenues to be at least $1.03 billion.

<unk> is a slight decrease from current volumes on the assumption that there will be some resumption of traditional seasonality as we get into the summer months should the seasonality not materialize there will be upside to this outlook.

Mentioned, there have been staffing challenges within the industry here in the U S, but any costs associated with hiring had been built into our Q2 guidance. We expect our U S segment sales profit and operating margin to be better than Q1.

We expect GAAP EPS to be at least 54 and adjusted EPS to be at least 60.

The only adjustment to EPS that we are currently expecting in Q2 is two our diluted share count under GAAP. We are not allowed to consider the share count benefit of the hedge that we entered into related to our convertible bonds. We have taken that benefit into the share count used to derive adjusted EPS, which in this case is a <unk>.

<unk> at various stock prices.

The favorability in G&A.

Ladies and gentlemen, the floor is now open for questions. If he would like to ask a question. Please press star one on your telephone keypad at this time.

The confirmation tone will indicate your line is in the question queue you.

You May press star two if he would like to remove your question from the queue for.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the starkey.

In the interest of time, we do ask that you limit yourself to one question and one follow up.

Once again that is star one to register a question at this time.

Our first question is coming from Jeffrey Bernstein of Barclays. Please go ahead.

Thank you good morning good.

Good morning.

Two questions one just on.

On the off premise side of things.

In terms of dollar retention, because obviously, that's more important than percentages here, but I think you mentioned you started and ended the quarter of 23000 per.

Per week I'm just wondering.

Maybe where that was pre COVID-19.

And where you think that 23000 of settled once your dining rooms of fully reopen just trying to gauge what you think the incremental sales could be on top of the full return of dine in and then I had one follow up.

Sure Good morning, Jeff.

We believe.

We've made the investment in off premise is carryout and delivery over the years, it's an incremental occasion.

And our goal is to retain as much of that weekly volume as possible.

<unk> been very successful as dining rooms, reopen to retain much of that and.

We anticipate that being an incremental occasion as the dining rooms, reopen and gives us the impetus for same store sales growth and is one of the big reasons of why we're seeing 12, 6% sales growth versus 2019 right now so it's an incremental occasion and our goal is to hang on to as much of it is possible, yes, and Jeff just to give you more specificity.

On the actual numbers. So as you recall outback was 15% or so of sales pre COVID-19 Carrabba's was a little north of 20% of sales pre COVID-19, we didn't have off premises business to speak of at Bonefish and Fleming's. So I think that the number on a weekly sales volume standpoint, probably in that $13000 per store per.

Per week range somewhere around there.

Got it so you've gotten the incremental maybe $10000 per store per week.

The.

Outback and presumably Carrabba's right now relative to pre COVID-19.

Yes, that's right and we think the carrabba's opportunities, especially meaningful.

Got it and then my follow up is just on the the margin opportunity off of that incremental sales.

I mean, if you were to see those incremental sales hold which.

Obviously, there's some skepticism.

The scope of skepticism that that's fully sustainable, but if they were to hold I'm. Just wondering how you think about the margin on those incremental sales.

Presumably there's less apps desserts and drinks and things like that and you have some fees for whatever third party delivery of there might be but just trying to get a feel for what you think the incremental flow through would be of what that adds to your margin. If you were to hold on to those sales. Thanks, Yeah, and you're talking specifically about off premise is correct. We're talking specifically about off premise, yes, yes, yes, so a couple.

Things one I think it does vary a little bit by by channel, but what I would say is the.

Call it 20% of the 35% that we had this quarter and off premise mix was our to go curbside and the curbside margin is effectively and we've talked about this before effectively as good as your in restaurant experience. We've really got that thing wired Theres, obviously less labor associated with it but from a margin flow.

<unk> standpoint, we're pretty much indifferent from a to go standpoint versus in the restaurant I would say from a third party standpoint, it is a little bit lower but it is certainly pretty pretty good relative.

Relative to relative to expectations I think that what we talked about the couple of years ago, there being a higher take rate, but thats for us thats not an issue we feel very good about our third party margins, so definitely an opportunity to generate some pretty high flow through on these off premise of sales. He justified just want to add one thing to the skeptics out there but off premise.

I mean, we have made significant investments in our digital efforts.

And we improved our online ordering system. This this quarter to make it easier to do a lot of different things that we hadn't done before we're also making other digital investments that will enable the off premises business. So this is not a static in the event. This is something we're going to continue to build and growth.

And you said, 20% of the 35%.

I just wanted to clarify that's set for more than half of the 35% not 20% of 35% correct, yes more than half of the more than half of the 35 per cent.

Great. Thank you.

Sure.

Thank you. Our next question is coming from Alex Slagle of Jefferies. Please go ahead.

Thanks, Good morning, and congrats.

The margins I wanted to focus on I guess labor I mean, I have to go past five or six years, the see anything on this.

Flow.

So given like the tightening labor availability and the demand on it.

The past the combined in.

I imagine this would mark a low point for some time and can you talk about the dynamics of what kind of volume that you need to maintain the level of margin or other initiatives you have in place the balance kind of getting the service level, where you want it.

Also the main panel the strong margins.

Yeah sure. Thanks for the question so here's the here's the response I gave as you Digest. The Q1 results we are in a very different world.

With regards to labor than we were of pre pandemic.

No question that we are running and will continue to run a more favorable an efficient labor model than we did in 2019.

Between the simplification efforts with the menu is driving favorability, we have a reduction in prep hours and just generally speaking there are more efficiencies now with how we staff our restaurants. So given that Q1 sales exceeded our expectations. It's not surprising we ran this level of favorability on labor and in terms of kind of the trending and how we think about that.

The other thing I want to add is much like our off premises business, we're making investments on our restaurants to help them enable our labor the labor costs to manage that but also improve customer service, we're making investments in back of the house equipment and looks like our digital efforts on off premises, we're making investments in technology to help our front of the <unk>.

Servers, so we of the scale and technology to move this forward and as Chris said this is a completely different environment than it was pre pandemic.

Thanks, that's helpful I'll pass it along.

Thank you. Our next question is coming from Brett Levy of MK on partners. Please go ahead.

Just one follow up and then a question the follow up is you just mentioned.

Front of House Tech investments can you go a little bit more into detail in terms of Mag.

The magnitude of the investments what do you think you could you could see in terms of either productivity of savings and pacing and then I have a follow up.

Yes, it's a little too early to say specific numbers, Brett as what we think the the technology of savings will be we believe it will be significant there are two areas. One the phone customers phone is a big part of that so they can control of the customer experience and do the pay at the table on the table is other kinds of things and as we do we've got the scale of technology.

<unk> resources to do that and then we've got to look at technology enablers for our servers.

Great and then just going back to the the macro side of it.

Sales environment.

The environment.

Can you give a little bit more clarity, we're starting to see more states go into this 100% capacity of just saw Atlanta sports says that Theyre stadiums are going after the stadiums are going on there. So can you give a little bit more clarity for color into how youre seeing the.

The general makeup across the country the mall.

And the less impacted the earlier in the later.

The markets. Thank you.

Yes first of all.

Now I'll turn it over to Chris for some of the details but yes.

We're seeing the benefit of it.

As the country opens up people want to come back into the in restaurant dining we're keeping our off premise of sale, which is sales of just so Greg.

But we were seeing that throughout our system, we're seeing it throughout our concepts and I'll turn it over to Christian I'll talk about some more some more details, but it's been a good tailwind for us yes.

Yeah, and just to give you some perspective of we've talked about there being more of a regional skewed of performance and that still seems to be the case and again. It has lots of do with the fact that a lot of the states are open up with the 100% or so sort of capacity still with social distancing and things like that but they are generally youre able to get a little better throughput into those boxes states like Georgia, just to give you perspective the flash.

Call. It this last for.

For weeks or so.

Quarter to date state like Georgia, Tennessee, Texas, Alabama, They all have Q2 quarter to day comps in that 15% to 20% range on a two year basis.

Florida continues to do very well, although it is a little bit regional south, Florida, a little bit slower, but we've seen a rebound in Orlando Tampa Jacksonville will continue to be very strong and then of course you have the flip side, where it's the same same states. We've talked about where you have a little more in terms of restrictions.

The New York, New Jersey, Michigan, Minnesota, those have been a little behind in terms of our overall sales performance, but still even behind there in that either slightly down on the two year basis or positive in the low single digits on the two year basis. So we're seeing sort of a sea change across the portfolio, but there definitely is some regional bias.

And then just one last clarification can you give us the number in terms of where you see total capacity.

Right now in terms of seating and then I'll turn it to the queue.

Yes, the active capacity I would say is in at 77% to 75% range.

Thank you. Our next question is coming from Brian Vaccaro of Raymond James. Please go ahead.

Thanks, and good morning, I wanted to ask of the other the labor market sits.

The situation can you just help frame where you stand in terms of your current staffing lever levels versus pre COVID-19 and how you plan to manage the current situation I think of hiring trends of is always a big cost for the industry, maybe just perspective on how much higher versus normal that had run in the near term and any other per se.

<unk> perspective, you see worth highlighting.

Good morning, Brian well first of all let me say one of the big competitive advantages, we had which was a very smart move on on our company's behalf was that we did not furlough of let anybody go during the pandemic. So that gave us the higher staffing base of more committed employee base.

The different world and the pandemic. So we are staffing where we need to be we don't have any significant problems. Our team is doing a great job of addressing the opportunities and as we go forward the guidance the labor cost guidance.

Costs are in our guidance and as part of our model going forward, but I think the decision to hang on to our people not let anybody goal was crucial as we got to this point.

Okay.

Is there a way to frame the business today is generating <unk> that are say around 10% above 19 level taking into consideration the reduced prep hours of the efficiencies.

Associated with off premise, obviously less server labor et cetera is there a way to frame sort of the cost per week dynamic debt compared to <unk> 19 for an average restaurant that you run that you would need to get back to comfortably run <unk> in the high single digit sort of 10% versus pre COVID-19.

Sure.

Yeah.

I don't have an immediate answer to that in terms of cost per week, I guess, what I, what I would say Brian is as you think about our go forward efficiencies in our go forward margin structure I would just fall back on the commentary we gave last quarter, we laid out a very detailed framework by category in terms of how we.

And look we're seeing that right now obviously, so I would say.

As of sort of not the cost per week answer, but really just terms of framing. The go forward margin opportunity with the context of the environment, we see today.

Alright fair enough and then all of us.

The one quick follow up if I could just could you provide a quick update on tender shack.

For the weekly volumes are trending for that business.

Through the first quarter and quarter to date relative to the prior targets you provided thank you sure.

We continue to do well on tender shack across all of our dimensions b of financial impact of our restaurants, the acceptance by our consumers and the running it by the operators.

They're doing a really good job on that when the restaurant dining occasion opened back up the sales of tender shack did soften a bit we do believe that the $75 million annualized sales goal is attainable, but we have some work to do on that.

With the restaurants reopening we've got to increase the brand awareness, we've got to add some potentially some additional products. We've got to look at a predictor pick up opportunity in our restaurants, and we are looking at some partnerships, but most importantly, our sales volume right now are above our <unk>.

The profitable theyre above or the the goals that we need to set and we expect to see further improvement so far in the tender shack opportunities.

Alright, thank you.

Once again, ladies and gentlemen that is star one if he would like to register a question at this time.

Our next question is coming from Sharon Zackfia of William Blair. Please go ahead.

Hi, good morning, and congratulations on the strong first quarter and then incredible April.

I guess it would be helpful to the kind of get some insight into what restaurant level margins. Most of Mike for you domestically in April and I'm wondering I know you've talked about this shift in marketing the focus more on digital but I'm wondering if there were any other shifts that you've done as on premises has rebounded whether you've pulled away on.

All from kind of off premises marketing or made any other changes to the way youre addressing the consumer.

Yes, Hi, Sharon Thank you for the company we appreciate it.

The sales growth of the digital efforts that were going on that we're doing will continue.

There is going to be post pandemic.

A shift in digital versus network, TV or cable television and things like that and we're very well prepared to make even more investments in that category. We have very good sense of what our return on investments look like from the marketing standpoint, and we're going to support our dine in business and our off premise business, we will do both.

We will continue to examine the marketplace and continue to spend primarily up against our digital efforts as we move forward.

And on the on the restaurant level margin, we're still on the process of closing the books for April, but what I would tell you that the early read would suggest that we are on track to achieve what we talked about in the prepared remarks, which is we do expect to see improvement in margins in Q2 from Q1, driven a lot by the the higher sales levels and a continuation of some of the.

<unk> sees that we saw on Q1.

Okay. Thank you.

Thank you. Our next question is coming from Rahul <unk> of J P. Morgan. Please go ahead.

Good morning, guys. Thanks for taking my question. This is Ron.

John I Havent got from JP Morgan.

Curious two wanted to understand better on what.

So the way to quantify what kind of.

Contribution.

Some of those hard from say completely lag of hiring on the inflation.

That's the kind of stuff.

But kind of efficiency improvements I'm, just trying to kind of sand.

<unk>.

Divergence between the both of these items.

Yeah, Yeah, so I think that is.

As you think about labor in Q1, I would say the majority of the favorability that we're seeing relative to 2019 levels is driven by the simplification efforts that we're seeing.

In terms of and in terms of the hiring that we may have to do with the the costs in terms of hiring the training costs those are not prohibitive, they're not going to be a massive.

Number in our P&L results. That's why we felt confident we could build them into the guidance and still have margin expansion in the second quarter. So so again there are some increases in costs. There are some there is some elements of sales being a little ahead of inflation, but the majority of our labor favorability that you see in Q1 is being driven by.

Our simplification efforts.

Understood. Thanks, guys.

Thank you. Our next question is coming from Karen Holthaus of Wells Fargo. Please go ahead.

I'll go for that.

Karen on for Jon Tower and.

Another margin question for you and maybe instead of kind of working forward working backwards on the day.

The work on the quarter you were outperforming the bulk of that.

The first 0.8% margin target, even the longer term on <unk>.

Well.

Model I think youre going to see that in Cogs youre going to see that in labor youre going to see that on advertising with some give back in restaurant operating expenses, so with that with that framework everything really came together kind of how we said it was going to come together now we just have the sales to support the hypothesis that we laid out for investors last quarter. So.

I think we're in pretty good shape on that front I think Karen too.

Costs going forward all of different kind of aspects of our business. So not all the enjoying the margin benefits right. Now we are investing behind the business of set us up for the long term to continue this kind of margin margin.

The performance that we've been having.

And then one of just quick.

A question on the off premise can you share the debt the percentage of sales that was off premise at outback and Carrabba's in the first quarter and then in the April quarter to date number.

Outback was 38% of revenue and Carrabba's was 42% of revenue.

And what was the other for April.

For the quarter and then also on the April number.

Well, we will get that will get that day, if we don't have that.

Alright, thank you.

Thank you at this time I'd like to turn the floor back over to Mr. Deno for closing comments.

Well. Thank you for attending everybody. We appreciate your time and look forward to updating you in July on our second quarter results.

Ladies and gentlemen, thank you for your participation and interest in moving brands.

Connect your lines of log off the webcast at this time and have a wonderful day.

Q1 2021 Bloomin' Brands Inc Earnings Call

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