Q4 2021 Bloomin' Brands Inc Earnings Call

February 18, 2022

Greetings and welcome to the Bloom brands fiscal fourth quarter 2021 earnings Conference call. At this time all participants are in a listen only mode. A brief question and answer session will follow management's prepared remarks. It is now my pleasure to introduce your host.

Mark Graf senior Vice President of Investor Relations. Thank you Mr. Graff you may 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 fourth 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 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 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.

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 fourth quarter 2021, an overview of company highlights and 2022 guidance. Once we've completed these remarks, we'll open up the call for questions and with that I'd now like to turn the call over to <unk>.

David Deno.

Well, thank you Mark and welcome to everyone listening today as noted in this morning's earnings release adjusted Q4 2021 diluted earnings per share was <unk> 60 versus 32 in Q4 2019 up 88% were.

We also saw good sales growth in Q4 as sales outpaced the industry by 240 basis points on a two year basis. This success is directly tied to the planning and hard work that has taken place in our company over the last few years.

Back in 2019, we presented a comprehensive plan to build a stronger leaner operation centric company.

One focused on providing even better food and service to customers I will talk about those plans in a minute it's.

It's clear our strategies are working and this gives us confidence in our ability to deliver on key commitments and drive even more sales growth.

Stepping back we're a far different and better company today than we were in 2019.

I want to highlight this in a few key measures to Dimensionalize the progress we have made.

In 2021, we earned $2 70, a share versus $1 54, a share in 2019, which is a two year growth of 75% on an adjusted basis.

U S comp sales finished up four 5% versus 2019 and were up 35% versus 2020.

Adjusted operating margins finished at nine 1% versus four 8% in 2019, our operating margins now compare favorably to many in the industry.

And finally, we have a much stronger balance sheet, we generate significant free cash flow and paid down approximately $300 million in debt in 2021 as.

As a result, our credit metrics have improved and are now below our goal of three times lease adjusted leverage as Chris will lay out in a bit. This now enables us to return cash to shareholders, while paying down additional debt.

These results would not have been possible without the talented and dedicated employees in our restaurants and restaurant support center your commitment to serving guests with the highest level of service hospitality and experience is what makes our restaurants so successful.

As we look forward, we will further capitalize on the success of 2021, specifically our focus will be on executing against the following key priorities to deliver sustainable growth.

First grow in restaurant sales by improving service levels and food offerings over the last few years, we have made investments in these areas to elevate the customer experience across the portfolio, especially at Outback. We also look for ways to simplify the business to improve execution and consistency.

These concerted efforts have translate into market share gains, where we outperformed the industry by 590 basis points on a two year basis versus 2019 and.

In addition, we continue to upgrade our asset base investments in Remodels are offering good returns and relocation to outback are providing outsized sales lifts and volumes exceeding $4 5 million.

Second grow our leading off premises business, we capitalize on our strong carry out delivery capabilities. During the pandemic retention levels. In this important channel are contributing to sales outperformance U S off premises sales were over $1 billion in 2021 up 147% versus 2019.

We enjoyed sales gains in both Carryout and delivery importantly profit margins in this channel are approaching the margins of the in restaurant business. This was the result of initiatives that were completed the last few quarters and.

In addition, we are aggressively pursuing catering opportunities as return to work growths Carrabba's saw 46% growth in catering sales in 2021 versus 2019.

We offer significant value through a bundled platforms and our expanding relationships to increase market awareness and drive penetration.

We expect off premises to remain a large and growing part of the business going forward.

Third leverage operating margins gains by growing sales and reducing costs. This starts by growing healthy traffic across the in restaurant and off premise channels. We also reduced reliance on discounting and promotional <unk> and pivoted advertising spend towards more targeted higher ROI digital measures.

In addition, we remained disciplined in managing the milk P&L and are aggressively pursuing efficiencies in food labor and overhead.

Fortunately, we will rollout several initiatives in the coming quarters. These include new cooking technology, including advanced grills, and ovens to improve food quality and productivity and.

In addition, we will be deploying kitchen display systems for meal pacing and handheld technology for our servers. These innovations to further improve customer service and reduce cost.

And finally become an even more digitally savvy company and 2021, approximately 70% of total U S off premises sales were through digital channels.

<unk> sales were $750 million 2021 up 268% versus 2019.

Over the past year, we implemented a new online ordering system and mobile App support our digital business. These technology initiatives are aimed at creating a frictionless customer experience, while also enhancing customer engagement.

We have outperformed expectations and the new App has over $1 4 million downloads you can expect to see more activity on these fronts in the coming quarters.

The priority of the above will be our guide for 2022 and beyond because of the momentum we have in so many areas and our stronger balance sheet. We are in a position to begin growing our restaurant base in a meaningful way once again.

We will provide more details on our new unit development plans for 2022 and beyond during our first quarter call in April in the meantime, just let me say, our new unit priorities will be outback Fleming's in Brazil.

And Chris is incorporate the impact of our development plans in the 2022 guidance that he will discuss in a few minutes.

In summary, Q4 was another terrific quarter and this momentum sets us up well for 2022.

We remain ruthlessly focused on executing against our key initiatives. We are optimistic about our ability to continue capitalizing these opportunities and drive total shareholder return.

And with that I'll now turn the call over to Chris who will provide more detail on Q4 and provide some thoughts on 2022.

Thanks, Dave and good morning, everyone I would like to start by providing a recap of our financial performance for the fiscal fourth quarter of 2021, given the significant impact of Covid on Q4 2020 results most of our discussion today, we will compare against the fourth quarter of 2019, which we believe provides better context to our underlying.

Performance.

Total revenues in Q4 were $1.05 billion, which was up two 4% from 2019, driven by a five 3% increase in U S. Comparable restaurant sales our same store sales results increased significantly over the last half of Q4, excluding holiday shifts.

This increase was driven by two factors first a mid November outback traffic and check average improved significantly after we lapped a heavy promotional activity from 2019.

Second we took additional pricing actions in November and December to offset higher inflation I will provide more detail on the ongoing impact of these price increases when I discuss 2022 guidance.

Turning to off premises revenues were 29% of sales at Outback and an impressive 36% of sales at Carrabba's. This channel continues to be very sticky and both of these results were flat versus Q3 overall off premises was 26% of our U S volume in Q4 importantly, a highly <unk>.

Criminal third party delivery business continues to grow and was 11% of U S revenues in Q4 versus 10% in Q3 off premises as a large part of our ongoing success and will remain a key part of our growth strategy moving forward and.

And a final note on Q4 sales, Brazil, Q4 comps were up eight 5% versus 2019, Brazil's fourth quarter reflected the combination of strong execution and a reduction of COVID-19 related operating restrictions.

As it relates to other aspects of our Q4 financial performance GAAP diluted earnings per share for the quarter was 59 versus 32 in 2019 adjusted diluted earnings per share was <unk> 60.

Versus 32 of adjusted diluted earnings per share in 2019. This significant improvement represented a fourth quarter record for the company.

Adjusted operating income margin was seven 8% in Q4 versus four 2% in 2019 and adjusted restaurant level operating margin was 16, 5% in Q4 versus 13, 9% in 2019 the improvement in margins was driven by a few key items.

Our five 3% increase in two year same store sales drove significant leverage in the quarter.

Second we continue to benefit from our efforts to drive efficiency into our business. For example, food waste continues to be at record low levels and our menu simplification work has reduced hours in the restaurants.

In addition, the cost savings efforts that we have previously discussed helped drive G&A expense down $4 3 million from 2019, and finally marketing expenses were down $23 million from 2019.

These benefits helped to offset a more inflationary operating environment commodity inflation in Q4 was four 9% and labor inflation was eight 5% in Q4. Both of these were higher than anticipated when we entered the quarter.

In terms of our capital structure, we generate significant free cash flow and paid down approximately $300 million in debt in 2021 as a result, our credit metrics improved and are now below our goal of three times lease adjusted leverage.

Our healthy balance sheet provides increased flexibility to return cash to shareholders through share buybacks and dividends as well as pursue business opportunities that will enhance shareholder value and our press release. This morning, we announced that we reinstated our quarterly dividend to <unk> 14, a share and authorized a new 120.

$5 million share repurchase program.

Turning to our 2022 guidance, we expect total revenues to be between four three and 435 billion. This includes an expectation of positive same store sales versus 2021, and a significant sales recovery in Brazil, as they lap COVID-19 related capacity restrictions.

We expect commodity inflation of between 11% and 13%. This is higher than our previously communicated range of 10% due to increased pressure on several categories, including chicken seafood dairy and oil. We have however completed most of our 2022 contracts for beef and we expect beef.

Inflation for 2022 will be in the mid to high teens. As a reminder, we benefited from a relatively benign commodity inflation number in 2021 of one 7%, giving our contracting strategy. This will lead to an outsized year over year comparison in 2022 in terms of.

2022 commodity needs. We have currently contracted roughly 70% of our food basket for the year.

In terms of the pacing of commodity inflation, we would expect the first half of 2022 to have higher inflation in the back half commodities ran 1% deflationary for the first half of 2021, and we're roughly three 5% inflationary over the back half of the year as we lap. This it will have a big.

Impact on the shape of 2022.

Labor inflation is expected to be in the high single digit range. This is running higher than the levels. We were seeing at our last earnings call. This is the collective impact of wage legislation in a tight labor market.

In terms of the pacing, we would expect labor inflation to be higher in the first half of the year than it will be in the back half. However, the overall level of labor inflation should be more consistent throughout the year than what we would expect with commodities.

To address the inflationary headwinds, we have taken pricing actions across our concepts with the pricing. We took in Q4 and an expected increase later this quarter. Our total effective pricing will be 5%. We would expect to maintain this level of pricing into the fourth quarter of 2022, when we will reevaluate Argo.

Forward strategy it became clear that the 3% pricing, we previously discussed with not be enough to offset the increased inflationary pressures our industry is facing.

Given that we had not taken a material menu price increase since 2019, we are confident that 5% is appropriate.

As it relates to other aspects of our guidance, we expect EBITDA to be between $495 million $515 million, we expect our effective income tax rate to be between 16% and 17%.

We expect GAAP EPS to be between $2 13, <unk> and $2 22, with adjusted EPS of between $2 35, and $2 45.

This adjusted EPS guidance represents 15% to 17% compound annual growth from 2019.

The difference between our GAAP and adjusted EPS relates to accounting treatment of share count from our convertible bonds.

We expect capital expenditures of between $225 and $240 million. This was driven by approximately 30 gross restaurant openings half of which are international as well as a $70 million investment in the restaurant technology that Dave discussed.

Now turning to our thoughts on the first quarter, we expect Q1 revenues to be between one one and $113 $5 billion. During the first several weeks of Q1, we did have impacts from the omicron variant. This impact appears to be largely behind us and is reflected in our Q1 guidance.

We also expect adjusted EPS to be between 70% and 75.

As a reminder, the cadence of our inflationary pressures will be more pronounced in the first half of the year. This is reflected in our Q1 guidance in.

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

Thank you at this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.

Confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.

In the interest of time, we ask that you each keep to one question and one follow up thank you.

First question comes from the line of Jeffrey Bernstein with Barclays. Please proceed with your question.

Great. Thank you good morning.

My question relates to operating margins as we look to 'twenty two.

Clearly you saw a significant improvement in 'twenty, one and definitely a part of the question is whether or not you'd be at a sustained that so I'm wondering if you can just.

Talk to what you expect the full year operating margin to be in 'twenty two.

And maybe the confidence you have to sustain that considering that inflation is now more heavily anticipated than prior and then I had one follow up.

Sure.

Good morning, Good morning, Jeff This is Chris.

As we talked about last time hitting that 8% operating margin goal is a key part of our long term earnings framework and if you look at the 2022 guidance.

To your point, despite what I would say is record inflation on it but if you look at the top end of our guidance. The EBITDA guidance range allows you to get to that 8% margin for the year and if you think about that dynamic last quarter I laid out sort of the puts and takes in terms of the inflation environment and how the pricing would be used to offset that really the only change versus that.

That outlook from last quarter is the fact that I have more inflation in my business and commodities and in particular labor versus what we were expecting last quarter and I've taken additional pricing to help offset that and I think the only variable left in that calculus. After you factor that in is really just traffic and mix shift.

We talked about omicron, the number that we believe omicron impacted our business. This year. It was probably about $29 million $30 million between omicron and a little bit of weather early on in the quarter. So that already kind of puts you a little bit behind the eight ball and that's why our revenue guidance is where it is but if you look at if you look at the overall guidance from margin perspective.

We feel good like you can be in that seven 5% to 8% range over the full year. It really just depends on how traffic plays out over the back half.

Got it but if the EBITDA hit the higher end of that you think you can hold on to that 8%, which was kind of that long term framework correct, yes, Jeff. It's clearly our expectation that that's a target we will hit over the long term Chris has laid out the earnings format that gets us there for this year and what you need to expand.

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

The 5% surprisingly is on the lower end of some of what your peers are taking so thats encouraging.

Your confidence that that might not need to be further increases.

Or your willingness if necessary to take some especially would stake.

<unk> I would expect you to say that you were going to be floating stake in anticipation that prices ease.

Led you to ultimately decide to lock in steak prices I think you said mid to high teens inflation, which obviously seems extraordinary but any color on stake and the related pricing would be great. Thank you sure on the pricing piece, yes, we.

Our formula is pricing plus productivity offset inflation and we tried to be as modest as possible on pricing because we want to be a great value equation for our consumers and that's extremely important and we've worked very hard to try and protect that obviously, we had to take the 5% price.

This year because of some of the extraordinary inflation.

Things in front of us, but I laid out some of the productivity things, we have coming up on our restaurants back in the kitchen with our cooking equipment and a handheld in the front of the house. So that's enabled us to keep.

<unk> are pretty pretty muted obviously, we've got to survey the marketplace, but we hope we don't have to take much more than that but we'll have to watch and see what happens I'll turn it over to Chris now to talk about the supply chain and our cost of what that mean, well I think specific as it specifically as it relates to beef for us and we've talked to you guys about this before having some.

Ply assurance has benefited us greatly over the course of the last couple of years, but the good news is is that we're 100% locked on beef, we have that supply assurance, but we do try to structure. The contracts that will help allow us to participate in a portion of the upside.

Beef prices fall towards the back half of the year I think that's just a byproduct of having great supply chain partners and I think we're being prudent in our approach.

And Jeff I, just want as you consider the year on year gain an increase in supply in our supply chain costs.

As Chris mentioned, we had a really good supply chain performance in 2021 of one 7%. So we do have to lap some of that but the team has done a great job keeping on top of things and we have not had any product issues to speak of any.

Any significance in our company, so were serving our menu each and everyday.

Understood. Thank you so much.

Thank you. Our next question comes from the line of Brett Levy with MTN Partners. Please proceed with your question.

Great. Thanks so.

You talked about your expansion on your extension targets with the Outback Fleming's in Brazil.

But you've obviously seen some great successes on Carrabba's.

What are your thoughts on that.

What youre seeing from Carrabba's, how you're looking at it its growth prospects.

Both the in store in the off premise and.

What did you see in the near term what did you see really across the general landscape regional and.

Different customer cohorts.

As the back half of that question on Carrabba's or is it against across the broader company.

That was that was across all segments.

Okay.

First of all on Carrabba's I mean, the team did a magnificent job in 2021, I mean hats off to the Carrabba's team it was great.

And to have the level of sales that they've achieved and profitability that they've achieved is really an unlock for our company.

What I challenge them in a friendly way as you've had a great year now you're going to lap it you're going to grow it.

And when you do that there'll be there'll be opportunities to expand the business.

And our team there is working with Mark Graf our head of business development on what that could look like.

We obviously was the <unk>.

<unk>, 37% off premise, yes, I mean, the mix that promise for off premises and Carryout and delivery is 37% catering is way up we've got a whole new business here that we've never had before.

And they are doing a great job in restaurant dining. So so Brett that is a piece of our portfolio that is now an opportunity that you talked to US two years ago, we wouldn't say, it's a great business, but.

It may not be the place that we are today.

As a friendly challenge.

Got to lap it and grow it we certainly believe they will and then Mark has got to work with them on the asset prototyping things to go forward, that's what we're going to be doing on the broader customer cohort.

Our arps on channels piece.

Delivery third party delivery to younger crowd.

We see different times a day on the in restaurant dining people are coming back into the restaurants. There is a mix between carryout and delivery carryout in restaurant dining dose, which back and forth a little bit, but you saw the growth in the business in delivery and Carryout and you'll see what the opportunities are going forward while we.

Build back.

The business from a geographic perspective, the southeast continues to do really well and we're seeing some pickups in the Midwest and the northeast. So I hope that answers. The question on the cohorts, if there's anything else that you'd like to know.

Thank you very much.

Thank you. Our next question comes from the line of Alex.

Slagle with Jefferies. Please proceed with your question.

Thanks, Good morning.

<unk> on your people strategy I mean people are pretty much the most important ingredient for success right now in the industry. It seems like.

Yes.

Bold people first stance at the onset holding on to all your staff.

Yes, it seems to be paying dividends now as we've shifted for the new phase one staffing Brian Im curious, what youre doing that differentiates lululemon and elevated since brands in the eyes of the employees I mean, we hear I guess a lot of the same tactics across the industry I'm, just curious what youre doing differently.

Given <unk> taken.

<unk> taken a bit of a bolder stance in the past.

Yes sure.

First of all culture, and how you treat people is job one okay. I mean, obviously economics and how people are paid as is important but culture and the environment you create in the restaurants is really what we got to do.

And we and we will continue to build on that culture and frankly the decisions. We made the pandemic help build that culture and that belief and how do you know our retention levels and turnover levels are among the very best in the industry. So that's job one and then turning to the economics I think we do a very good job with.

The person that we call our managing partner.

They get their leadership their compensation systems, we do a good job with people at our associates that are hourly level, you've the front of the house back of the house. The area. We need to work on is that kind of a second level of management and we're going to be continuing to do that to make their lives.

As enjoyable as possible because they were the heroes and heroines. During this pandemic that work so hard and so we're looking at their quality of life. The shifts that they are working we are looking at.

Expanding our manager bonus program all of those things are are something that we're looking at to improve our culture, even more and retain our people.

Great and then just a follow up on Brazil, just if you have any.

First quarter commentary expectations things, we should look out for.

Yes.

They're doing great the only thing to say.

We've got the best market position in the industry down there.

We've got a lot of well positioned restaurants.

Comps in Q4 were up eight 5% of the two year basis, we have 26, 5% on a one year basis strong trends continue down there, we're adding restaurants right and left Peter and his team are doing a fabulous job there.

They are doing their version of <unk> called the <unk> and <unk>.

Taken the Aussie Grill business down there, which is our fast casual business and done that so.

I just think that.

It's been a fabulous business for us and right now in a two year basis are up 10%. So.

In the first quarter, so where to date, so they're just doing a great job and it's a real it's a real jewel for us in the company.

Great. Thanks.

Thanks.

Thank you. Our next question comes from the line of John Glass with Morgan Stanley . Please proceed with your question.

Thanks, and good morning all.

First question is Chris. Thank you for all the detail on 'twenty two in terms of guidance, how do you think about.

The shape of the sales.

Growth in 'twenty to do some big labs, particularly in the second and third quarter across your brands.

Related to that you've reduced I think you indicated you reduce marketing pretty significantly versus 19 is with marketing come back and your plans in 'twenty two as part of a formula to continue to grow the business off of that reopening labs later this year.

Yeah, Hey, John stage first of all one of the things I've learned during this pandemic has to pay attention to your revenue trends.

Because of the lapse what year over year going a little crazy. So my comments next have nothing we feel very good about our revenue trends this year.

But clearly when you look at.

At the back half of March April and May with the stimulus checks and everything else 2021 did have an uptick in sales. It doesn't mean at all for one minute that we're not completely bullish about 2022, but that's the fact pattern that we've got.

Continue to look at and then so the lap in 2020, the comp lap in Q2 and into Q3 will be more difficult not because revenue trends are expected to change, but because we're going to be lapping. Some some extraordinary stimulus on the marketing side, yes, we do have some of the marketing coming.

Back on.

The balance of the year.

John is far different than we were in 2019, we developed a digital capability. That's really terrific. We have a really good understanding of our customers. We've gone to that channel hard we're now multichannel.

Environment, where we've got delivery Carryout thats very digital heavy along with our in restaurant dining. So we're going to turn that back on we're going to look at our return on investment that we see on on marketing and the ideas that we have and we're going to be we're going to be investing behind that we don't anticipate doing broad scale discounting or anything like that its around ideas.

<unk> ideas and marketing ideas, so we're going to take that quarter by quarter. We've got a very good sense of what the returns look like in the channels that we can use to make it work and I think the only thing I would add to that is when you think about marketing expense overall the position. We're in now with some of these marketing ideas is that you can get a return on investment that not only yields a pause.

Is that a result of the company, but it also doesn't necessarily have to be margin dilutive right and I think that's a real sweet spot that we would aspire to maintain as the year progresses, which is why we can flex marketing up or down depending on the environment, depending on what we see and we can yield a good result for the company that they can maintain margin as well.

And my second question is how.

How do you think about the tailwind potentially for the dine in business to come back.

I believe it's a more profitable does it I guess, you've got higher beverage attach you may have a higher check overall, so just looking at comps that tell the whole story, how do you think about the benefits you might see or the differential in margin you might see as the dining room business comes back more than it did in 2021.

Yes for us.

Okay.

John revenue trends are really tough to predict and we've tried to give investors our best sense of what's going on we would love to see tailwind if people.

As the virus calms down and people come back in the restaurants, and yes, it's a higher margin, but I want to underscore we've worked our tail off to have the off premises business.

It may be as close to margin as possible as an in restaurant business, but yes, we do get the drink we do get the check build and everything else, but John I am very hopeful that we have tailwind in beyond our guidance that'd be great, but I think we've put our best thinking forward on in restaurant dining I think the biggest thing for US as you look at our channels will continue to see.

That delivery business move up, especially third party. It's been very good for US there is a bit of a trade off between carryout and in restaurant, So they'll go back and forth a little bit but.

That will be that will be something we have to watch, but we're very hopeful that the in restaurant piece comes back and then lastly, I'd be remiss, if I didn't talk about catering.

It's a big channel for US crops is nailing it in Outback is moving aggressively so that'll be something that we're going to be doing as well.

Can you just remind us what was kidding percentage sales pre pandemic as sort of an understanding of how big that business was.

Tiny tiny.

Not even a tiny tiny tiny.

I don't know the number off top my head, but it was virtually negligent.

Built during the pandemic.

Thank you.

Thank you. Our next question comes from the line of John <unk> with Jpmorgan. Please proceed with your question.

Thank you very much.

In your prepared remarks, David season has just run back to my desk in your prepared remarks.

Specifically pointed out.

Fleming's Outback in Brazil, not really in that order in terms of opening restaurants, and where your focus would be so I guess that leads to two interesting questions. I mean do you have an intention to now own Brazil at least in the medium term in your portfolio as the economics, there have comeback so stronger and.

The emission of Bonefish and Carrabba's from a portfolio management perspective are you, perhaps thinking about some alternatives that you may have.

With those mid scale.

Our mid scale, I mean maintenance a domestic brands.

John .

Brazil, well you know our market position down there you had been down there you've seen it.

<unk> got great understanding of it.

It's coming back strong.

We've always said.

When it comes back we're going to ride it we're going to look at it we're going to grow like we are going to develop it and then we're going to just watch and see what happens we've got great Optionality down there. The team has built a great business. So we don't have any we're not marketing the business right now we're not doing any of that but the business is growing so well so rapidly from both the same store sales standpoint, and a unit expansion standpoint.

Both.

By the way Outback and what we call a bronchial, which is carrabba's is just really really doing well.

We have a as I mentioned on the call in Q1, we're going to talk to more of our development plans. So let me at least spend a minute talking about it.

Outback we've developed.

A smaller business.

<unk> box that is carryout and delivery friendly that really encompasses the new kitchen equipment and operating systems that we have we've been opening them. It works and it works at high volumes and we're very optimistic about it so that expansion plan is going to move forward.

You talked about relocations over the years that continues to do really well. So that's 0.1 on Opex Fleming's.

I hope our investors step back and take a look at blending performance versus others in a very good fine dining industry. The results are second to none and the team has done a fantastic job the new openings do really well and we're going to be building Fleming's in some core markets in California, Texas and Florida.

In Nevada.

Those of you in Florida are going to enjoy even more more fleming's and we're doing really well back John the Fleming's down the street from you in Miami is really doing fantastic fantastic on Brooklyn, now, let me talk about that.

The two smaller brands.

They have changed their economics and sales have changed completely during the pandemic, they're completely different business than they were in 2019 revenues profits, we talked about carrabba's earlier, that's a completely different business bonefish again revenues profits and they've built a pretty nice takeaway and delivery.

<unk>.

But as I mentioned earlier, they are going to lap that theyre going to grow it and we got to make it work that doesn't mean that mark <unk> is going to sit behind weight behind them and wait to see what happens, but we want to see this but these businesses continue to grow and John they are in a completely different spots than they were three years ago as far as sales of economics those two brands.

That was very helpful. Let me pivot if I can.

You mentioned several initiatives, which you've talked about before and I wanted to see if we could get a timing.

And kind of expected basis point impact from the grill and the ovens. The handhelds. The caveat, obviously understanding there's a lot of delays in general in terms of getting technology, especially equipment and implementing that so any update we can do there and I think I heard you say $70 million of Capex is that specifically related to that.

Three items and would that Capex number drop from 'twenty two to 'twenty three.

Yes, that's specifically related to those three items.

Our goal is to take each of them individually KBS will rolling first.

The handhelds depending on availability.

A great deal of progress there and him in the restaurants that will be rolling out over the next four to six quarters and the <unk>.

Depending on the availability and.

Supply chain for our new grills and ovens that'll be rolled out over the next couple of years.

We're meeting with the manufacturer of those.

Items next week, and obviously I'm going to be encouraging encouraging them strongly to move very fast.

So that's the timing so again kgs next within this year Handhelds next 456 quarters and.

The grilles in kitchen equipment in the next couple of years, hopefully faster as we roll it through that Capex will drop a bit but.

But as the <unk>.

Portfolio growth.

Find more restaurants, we probably will have a more new unit capital next year, assuming the returns are there.

As far as the basis point improvement John .

I, probably don't want to get in that kind of detail because of some of the competitive stuff, but we're expecting at least a 20% return on investment on those on those type of those type of equipment measures. Chris do you want to add anything else well I would just say a big part of we talked about the profit bridge last quarter about what it would take to get back to those marsh.

<unk> levels, and we talked about needing productivity and we talk about menu pricing in the level of menu pricing one of the things that we've always focused on that has allowed us to not have to take outsized levels of pricing as our productivity initiatives. The productivity initiatives that we have on deck for 2022, and then into 2023 are highly enabled by these technology investments.

So if you think about the $30 million or so that we would like to get this year in overall productivity. It is fueled by these initiatives and then there will be a tail into next year as we roll out and deploy additional units.

Lastly, John what will do because this is outback the stuff that works in the other brands will take the other brands.

And that will be job number two here so our capital plans and everything else will will vary as we go forward, but given the level of innovation and the talent we have in the company to make this work and the financial resources. We have now we can move quickly on these kind of things.

Thank you very much.

Sure.

Thank you. Our next question comes from the line of Lauren Silberman with Credit Suisse. Please proceed with your question.

Thank you I just wanted to follow up on the first quarter.

<unk> just omicron largely behind you at this point can you just talk about where recent trends are running relative to pre omicron level and if you've seen any outsize differences in certain brands or regions.

The last.

It's an interesting tale here for US January we saw the impact of <unk>, Chris talked about the 2000 $930 million impact on between omicron in a bit on weather.

The last few weeks for us has been very good.

Hopefully those trends will continue were very bullish on those trends.

And the only thing that we have in front of us is.

As you know as we talked with John glass sales do pick up a bit in in Q2 into March and into Q2 from the 2021, but our revenue trends are very good.

So look.

Last few weeks have been very good we expect those revenue trends to continue we talked about where.

Where it's happening.

In the country, we talked about the southeast being stronger we talked about the Midwest and the northeast picking back up a bit.

And fine dining has been the best of the breed yes.

Yes in the lap the lap from last year really starts kind of in that mid mid March time period.

The important thing is and again, we look at the business a little differently, sometimes although we do communicate things to the street on a same store sales basis, we do look internally at volumes.

From my perspective, just looking at the volumes sort of pre omicron in Omicron, and then post them across the volumes post on Micron has been very healthy and we've maintained that volume gap versus sort of a black box benchmark and thats really encouraging in fact that gap has actually increased a little bit. So we feel good about where we are.

Great and then just on labor can you expand on what Youre seeing in the labor environment, that's different than what you saw last quarter, prompting higher inflation and just more broadly what you're seeing with respect to our attention or hourly employees as well as managers relative to historical level.

Yes.

It's a tale of the quarter as kind of a tale of two cities during the quarter.

It was rugged in January .

Not that people are getting really really sick, but we follow the guidelines and we had some staffing challenges because people are out they didn't leave the company, but they were out and so we had to.

Supplement that a little bit the labor staffing for us the first part of the quarter was probably the most difficult as far as staffing availability, but thats getting better as I talk to our operators and our leaders in the restaurants.

Still a very frothy market and a market that it's a war for talent and you'll see the impact on inflation, but things are getting I think they are getting a bit better from a labor standpoint.

Thank you guys.

Thank you. Our next question comes from the line of Brian Mullan with Deutsche Bank. Please proceed with your question.

Hey, thanks.

Could you just let us know your thinking on G&A spend in 2022 that is embedded in that guide.

And then in the prepared remarks, you spoke to continuing to look for efficiencies I know you've made great progress already on G&A, but is there an opportunity to get that number down further towards say, 5% of sales or something closer overtime.

If not is there something unique blue Moon.

That would prohibit that.

So first question 2022 got $2 35 to $2 40 feels like the right number for G&A for this year and then I would say in terms of the overall goal of the goal is 5% of sales on G&A now. The good news is as you don't you don't have to get there by continuing to reduce G&A, although we do feel like theres still a little bit of opportunity there.

I think really for us it's about growing top line that can get you there, but yes, a little bit above.

Okay. Thanks, and then great great improvement on the balance sheets very notable congrats and kudos I see the reinstatement of the dividend.

It looks like that might be about a $50 million plus ongoing annual use of capital can you just talk about why that's the right use of capital for Bloom in right now versus more aggressive share repurchases at this valuation or just more.

Our rate of deleveraging just how you thought about that.

Yes, no. It's a really good question and I think that look it all starts with the work we did throughout 2021 to Delever the balance sheet. So right now we're at $805 million of debt. That's about the lowest we've been since we've been a public company and we achieved that three times target ahead of schedule and so now to your point, we are in a position to evaluate other uses.

Cash in.

We generate a significant amount of cash.

Our guidance for 2022 has us tracking to that $500 million or so of EBITDA in the first priority as we think about when we have that kind of cash flow is deploying things via capex for new restaurants, and the technology investments we talked about so in 2022, that's going to be $225 million that you have taxes and interest and call that this lag.

<unk> was 80%, 85% so between 75 and $100 million that interest and tax number is going to be so that leaves you a $175 million to $200 million of cash in hand to deploy to the business to shareholders via dividends share repurchases or other uses and I think that we talk about the dividend of 2014.

It represents in our mind, a modest step up from where we were previously because we had a sort of an annual dividend of <unk> 11 per share back in 2019. So that's a modest step up from there and I think honestly. It provides a yield that is in line with our peer group and we believe it is a sign of confidence in the stability of our cash flow.

That we could commit to this dividend on an ongoing basis and to your point, it's about $50 million and I think that we would like to see if we can grow that over time and so when you think about okay, well that leaves that still leaves a pretty significant amount of cash to evaluate other opportunities. So we feel like the $125 million share repurchase authorization.

Given our current valuation it's a good use of cash. It also helps and we'll get into this in a second it helps offset pretty significant dilution from the convertible bond offering and so the toggle that we may play as we get to the back half of the year is we're going to take a good look at this convertible bond offering because we do think that there even though.

There's a lot of uncertainties surrounding the dilution of that converts it may be having a bit of an overhang on the stock and so we're going to sit back at sort of the middle of the end of the year and evaluate whether or not paying a premium to potentially get out of pieces of that convert we don't have the right to get out until may of next year, but we could potentially negotiate some things we will think of.

That as the year progresses relative to other alternatives such as share repurchase activity.

I think that for us the pandemic has taught us to be flexible and we're going to continue to look through the lens of what is the best for the company and our shareholders given our healthy balance sheet, yes.

Want to say, Chris that was you guys have done it.

Great job getting if you look where we were two years ago.

We now have.

We paid down debt.

We got that leverage ratio below our long term guide of three.

We're reinstituting reinstituting a dividend.

Now announced a share buyback plan and we've got the muscle to pursue the capital opportunities we talked about earlier in the call. So.

That's why you hear us.

Bullish on where we are and we can do going forward.

Thank you.

Thank you. Our next question comes from the line of Brian Vaccaro with Raymond James. Please proceed with your question.

Thanks, and good morning, or just circle back on the 22 EBITDA guidance.

Could you walk us through sort of the dollar bridge versus 'twenty, one like we did in the third quarter just as it relates to pricing do you expect your dollar inflation Cogs labor productivity gave us G&A, obviously, but could you just walk through some of those puts and takes getting you to around that 500 505 mid point.

Yes sure. So if you think about the what we said last time inflation. We said it was going to be about $170 million headwinds. The number now is $230 million, which is by far by massive increments. The most inflationary environment. We've had since we've been a public company and that broke down it's about $120 million or so at the mid.

Point of our commodity number of commodity inflation labor inflation, we were thinking it was going to be 45, that's now going to be around $80 million headwind and then you've got just typical operating expense inflation, which is going to be a little more elevated but that gets you to the balance of the of the number of $30 million or so to get you to the 230 and then how do you offset that so we talked about the levers last time, but.

I'll go through them again pricing, we said was we're going to get about $100 million.

At a pricing that number is now going to be about $155 million benefit with that 5% price increase Brazil, we talked about recovery in Brazil between $30 million to $40 million would be the guests that we would get back from Brazil, assuming that that business continues like it has been continuing.

Early this year than we talked about productivity earlier in the earlier question being that call it $25 million to $30 million benefit that you get and there was some incentive comp reload that we face.

Favorable move because we paid higher incentive comp in 2021, we would normalize those targets for 2022 that would be a $10 million benefit for us. So that gets you back pretty close to neutral and then the question is well okay. What is EBITDA come down and that really is just all about sales traffic within the business. There's two there's two things to traffic and mix Theres two things to think about it.

As the year progresses, one is there going to be management of check right as the year progresses, just given we took a 5% price increase and then the other big piece is traffic related to omicron, we already talked about a pretty massive $30 million revenue impact that flows through at a pretty high level, that's going to be a headwind and then I think the rest of it is.

We've given our best thoughts on guidance as it relates to the full year the back half of the year as you're hearing from everyone else in our category is a little bit of an unknown, but look we feel really good about all the pieces. We can control all the middle of the P&L type activities that the cost savings the prudence.

On the balance sheet all of those levers that we can control we feel excellent about the real wildcard for us as we enter the back half of the year is just going to be check average where does that flush out and then mix. The good news is for US is check average to this point early in Q1 is held on really strong.

Alright. Thank you that's very helpful. I wanted to circle back on the Q1 trends to some unique AWS seasonality versus other companies.

Our universe I guess just to make sure. We're on the same page could you give us a sense of where AWS are quarter to date at Outback and Carrabba's and maybe a sense of just the degree of improvement that you've seen in recent weeks have you seen any slowdown in Brazil on AUM occur.

Non Brazil, we haven't seen any any particular slowdown in business trends continue to be very strong.

Over to Chris to talk about any any volume.

Yes, I mean, it's interesting Brian the first so.

The first week of our year ended on January the second you've got to strip that out because that's just a massive week for us because of the coming out of that that's always the busiest one of the busiest weeks of the year for us if you take that out and then you take out. This most recent week because theres Valentine's noise on weekend in 2013, I think I can confidently say that outback as well.

As sort of the total company AWS has been improving on a pretty regular basis. If you look at kind of where we are now outback has been in that mid 70000, a week range, which is a really good result, and again thats sort of pre we typically see a volume pop the weeks a few weeks after you get through the Valentine's day.

Day.

Shift and again like I said the important thing to consider in this is that that gap, both at outback and across our total portfolio that gap relative to what you would look at it a black box for example has maintained and grown which is really encouraging.

Alright, Thats, great and I guess, the last one going back to the kitchen equipment.

<unk> tested and studied sort of that opportunity do you have a tighter sense of the labor efficiencies in a number of bodies in the back of the house et cetera that you might be able to realize in terms of efficiencies and optimizing the labor model as you rollout I understand it's over a few years, but do you have a tighter sense.

Those efficiencies at UBS here Brian .

Right.

Just don't want to get into that because of that that kind of detail is pretty competitive, but we do have targeted a 20% return on investment on that kind of.

Capital investments. So I think you can kind of begin to noodle around what that might look like in the back of the restaurant.

And importantly, like I mentioned earlier not only just tested this is in and this is in high volume restaurants. So we're seeing the what.

What we need this type of equipment.

Alright, Thank you I'll pass along.

Thank you. Our next question comes from the line of Jeff Farmer with Gordon Haskett. Please proceed with your question. Thank you a handful of follow up questions. The first one was on that I believe you said 150 $155 million of menu pricing benefit all in in 2022 with the menu price increases but.

What does that assume in terms of price increase levels at Outback and Carrabba's can you provide us concept across those or can you provide us any context across those two concepts.

Yes, it's a little higher than the Outback is so big that the average price increase is going to pretty be reflective of a pretty much about back but it is a little bit higher at outback, maybe a little lighter at the at the other casual dining brands.

And then just to be clear so have you already pursued or are you.

Sort of currently rolling out the newest price increase at Outback is that happened already or is it happening now.

March.

March Okay, and then just.

Other topic that was touched on but staffing levels at the concepts.

So all your peers are asked about this in a lot of people will point to staffing levels versus pre COVID-19 levels, but given that sales volumes were up pretty materially versus pre COVID-19 levels.

How do you think about what the most efficient staffing levels are.

As you move forward.

And where our staffing levels right now sort of vis vis those those efficient staffing levels that you would you would think about or what you would need moving forward in 2022.

Yes, Jeff first of all we're a completely different business in 2019, if you look at the menu changes we made to simplification equipment investments some of them. We've done so I'll go back to 2019 looking at staffing levels.

Isn't really make a good comparison, so basically what we do is we.

Look at our our labor engineering in the back of the restaurant in the front of the restaurant and compare versus wherever staff and we're in really good shape and our staffing levels. It doesn't mean, we don't have work to do et cetera, I'm, not saying that but we're very close to where we need to be and the team has done a great job on that but to go back and compared to 2019 would not be something that would be.

Wise for Us what we do is we build the staffing models.

The business that we have today with the equipment that we have today and compare that versus where we're at and we talked earlier about the strong culture that we're trying to build in the company and we do enjoy and our retention levels in our turnover levels are really in good shape.

And just last one related so as we've moved past Homochrome here.

Hiring just whats sort of the high level takeaway there in terms of number of applicants.

Qualified applicants.

How much easier has it gotten too actually.

Bring new staff members onboard as we've moved past <unk>.

If it has.

Yes, Jeff it's gotten better.

It was tough for a while there obviously, our retention levels and turnover levels really helped us, but as we look for talent.

It's been it's been a war for talent, but if things have gotten better the last few weeks and months.

And we think we're very well positioned to to do that.

It doesn't mean that all of our all of our issues are solved no not at all but on a relative basis, the labor environment from a talent recruitment standpoint is getting better alright.

Alright, thank you.

Thank you. Our next question comes from the line of Jared Garber with Goldman Sachs. Please proceed with your question.

Alright, Thanks for the question and congrats on another strong quarter I wanted to just get a quick.

Modeling question.

On pricing I know, you're taking other incremental price in March which you've talked about can you just help frame what the effective pricing should look like for the first quarter I think there'll be 5% once you pass through that that incremental price, but just wanted to make sure. We're understanding the first quarter implications properly and then I had to sort of one follow up.

Yes, it will be approaching that 5% I'd say and then going in Q2, it will be the full 5%. So four five to five somewhere in there.

Okay Cool that's helpful and then if we go back.

Maybe a year or 18 months, you took menu prices down at Outback <unk> sort of improve the value proposition there to kind of shrink the gap between some of the best Steakhouse gears can you just.

Update us on maybe what youre seeing in your own data or your industry data.

As it relates to sort of how consumers are viewing the value proposition at outback versus some of your primary steakhouse competitors.

Yes no.

Made significant progress with that menu change.

The team did a very good job on it at mix was up appetizer mixes up drink attachments are up.

Our trading up to higher cuts of steak or larger stakes.

No longer.

Managing things in pursuing value initiatives, because some of our pricing was out of line.

They just did a very thoughtful job and we're seeing that benefit in the company both from a sales and profitability standpoint and mix.

And also the other thing that they did that was really smart was the combos that they add to the menu have really been great.

It's a prominent part of our menu and the team has done a great job obviously, when we constructed our price increase at Outback, we had all that in mind, we wanted to preserve that as much as possible because it's been a nice advantage for us.

And I'd say the tactically speaking the way that you deploy some of that is you can just move we have menu pricing tiers across the country. You can just sort of play with those tiers or not.

[noise] away any of the key tenants of the price increases that you are the price decreases that we put in place.

Great that makes sense and then just one sort of follow up as we think about heading further into into the year with some potential pressure on the lower income consumer.

David you guys don't have maybe some pricing power obviously I appreciate the commentary that you took very little price last year, so sort of on a two year basis, it's quite low.

But just how are you thinking about sort of those laps.

We head into the heart of the <unk>.

Fiscal 'twenty, two and and maybe some pressure on the consumer and some potential trade down just wanted to get your thoughts on how youre contemplating some of that thinking into your guidance. Thank you.

Thank you.

One reason why we were so deliberate on our price increase changes.

And also offering value in other ways to the combos, we talked about or some of the menu stuff that we did it at outback.

We don't intend on getting into a discounting situation or anything else.

It's all about great food served at a terrific price with some really great marketing ideas.

We're going to be we're going to be continuing to do and that's where that equation has worked out very well for us and thats. One of the reasons. That's a big reason why we were very deliberate on our price increase.

Great. Thanks.

Okay.

Thank you. Our next question comes from the line of Sharon Zackfia with William Blair. Please proceed with your question.

Alright, I think we are going in alphabetical order again.

So most of my questions.

But I did want to inquire about kind of the the menu simplification that you've been so good at doing over the past few years and how that might enable more robust product innovation and menu innovation.

Now does that can you give us your thoughts on how that might have cleared the decks for that and if we should expect any kind of.

More frequent cadence of new product news now in 2022.

Yes.

Clearing the deck is exactly great way of saying it Sharon and yes, we do want new product news around what we do so well in our concepts.

So we'll continue to do some steak innovation and things like that Outback, we've got some combo meal ideas the blooming idea.

How we spice things everything is always kind of fun.

Those kind of ideas are an important part of outback going forward. When we can't have and to your point is we can't have renewed menu proliferation that takes us away from the core great.

Opportunity for people to serve our customers.

On the the other thing that is coming up Sharon is on the Carryout and delivery standpoint, all kinds of opportunities on family bundles packaging all of those things are just that's a whole new channel for US and then when you add on the digital experience that.

That will be important so.

That those are some of the things that we're thinking about you can play the same thing to our other brands.

Lastly, I want to say that we will make sure that we don't go in FERC order next time, when we have our call and we will address that sharing our apologies.

I appreciate that thanks.

Thank you. Our final question. This morning comes from the line of Andrew <unk> with BMO capital markets. Please proceed with your question.

Hey, good morning, and thanks for squeezing me in here.

Two follow up questions on Brazil, and the first one.

You mentioned easing restrictions there.

Can you help how much your restrictions continuing to impact sales trends and do you have a central how much capacity that has come out I guess im of the industry in Brazil, I guess I'm, just trying to figure out where those volumes could be headed that's number one and number two obviously a lot of cost conversation in the U S. But what does that look like in Brazil, I think I noticed that the relative to 19.

Average check is down so I'm just curious what the environment's like there is there any need to take price and how the margin implications look yes.

Yes.

On the on the business itself.

Crystal.

We will identify how much is capacity has come out of the business, but the trends have been very very good.

There as they have progressed through the the virus that has been strong.

Do the team is probably best in class in our company frankly on identifying pricing opportunities studying where they lie et cetera, we can learn a lot from them and so they do work that through as much as possible without losing the the value equation. So I will turn it over to Chris.

Talk about what the impact on the capacity looks like for the overall category.

Well, so I think just a couple of stats, Brazil right now is effectively 95% plus capacity I think that it's Rio and Sao Paulo or are at a 100%, but it's really just a question of.

The other outlying areas and that's the only a residual we have left I think from a total industry capacity standpoint.

It's really difficult to get good data on this but what we have seen and heard is a they.

They did not have the same level of benefits that they provided to employers throughout the COVID-19 time period. So there were a lot of closures in the restaurant industry down there. So unlike here, where maybe that number is lower that number could be 20%, 30% of restaurant capacity potentially coming out of the category down there which of course.

From our perspective provides a great opportunity for us, but it remains to be seen how much of that comes to fruition as well and I think the third thing in terms of the overall environment from an inflation pricing Tpa standpoint, yes look they have inflation down there as well I think it's that high I would say again high single digit inflation overall seems right. They are taking an appropriate level of pricing I think.

Ironically, they're in that 5% or so price range now the PPA of Brazil overall does get a little bit influence. Because this is a business that went from zero off premise dining to now what 16% or so I think of the overall business is off premises. So that does have a big impact on check and it lowers a little bit so I think that overall that's the.

The way, we would think about the environment in Brazil, very similar to the U S. But obviously the opportunity from a capacity perspective moving forward, it's pretty good.

Great. Thank you very much.

Thank you, ladies and gentlemen that concludes our question and answer session I will turn the floor back to Mr. Gugino for any final comments.

Thank you everybody for the questions and interest today, we really appreciate it and hopefully we gave you a good sense of what's going on in our company and we look forward to talking to you. After our first quarter call in April have a good day.

Thank you. This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.

[music].

Greetings and welcome to the Blue Moon brands fiscal fourth quarter 2021 earnings Conference call. At this time all participants are in a listen only mode. A brief question and answer session will follow management's prepared remarks. It is now my pleasure to introduce your host Mark Graff Senior Vice President of inverse.

Relations. Thank you Mr. Graff you may begin.

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

Before we begin formal remarks, I'd like to remind everyone.

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 fourth quarter 2021, an overview of company highlights and 2022 guidance. Once we've completed these remarks, we'll open up the call for questions and with that I'd now like to turn the call over to David Deno.

Well, thank you Mark and welcome to everyone listening today as noted in this morning's earnings release adjusted Q4 2021 diluted earnings per share was <unk> 60 versus <unk> 32 in Q4 2019 up 88%.

Back in 2019, we presented a comprehensive plan to build a stronger leaner operation centric company.

One focused on providing even better food and service to customers I will talk about those plans in a minute it's.

It is clear our strategies are working and this gives us confidence in our ability to deliver on key commitments and drive even more sales growth.

Stepping back we are a far different and better company today than we were in 2019.

I want to highlight this in a few key measures to Dimensionalize the progress we have made.

In 2021, we earned $2 70, a share versus $1 54, a share in 2019, which is a two year growth of 75% on an adjusted basis.

U S comp sales finished up four 5% versus 2019 and are up 35% versus 2020.

Adjusted operating margins finished at nine 1% versus four 8% in 2019, our operating margins now compare favorably to many in the industry.

And finally, we have a much stronger balance sheet, we generate significant free cash flow and paid down approximately $300 million in debt in 2021 as.

These results would not have been possible without the talented and dedicated employees in our restaurants and restaurant support center your commitment to serving guests with the highest level service hospitality and experience is what makes our restaurants so successful.

As we look forward, we will further capitalize on the success of 2021 <unk>.

Specifically, our focus will be on executing against the following key priorities to deliver sustainable growth.

We also look for ways to simplify the business to improve execution and consistency.

As concerted efforts have translate into market share gains, where we outperformed the industry by 590 basis points on a two year basis versus 2019.

In addition, we continue to upgrade our asset base investments in Remodels are offering good returns and relocations at Outback are providing outsized sales lifts and volumes exceeding $4 5 million.

Off premises sales were over $1 billion in 2021 up 147% versus 2019, we.

We enjoyed sales gains in bulk carryout and delivery importantly profit margins in this channel are approaching the margins of the in restaurant business. This was the result of initiatives that were completed the last few quarters and.

In addition, we are aggressively pursuing catering opportunities as return to work growth Carrabba's saw 46% growth in catering sales in 2021 versus 2019.

We offer significant value through our bundled platforms and our expanding relationships to increase market awareness and drive penetration.

We expect off premises to remain a large and growing part of the business going forward.

In addition, we remained disciplined in managing the mill P&L and are aggressively pursuing efficiencies in food labor and overhead.

Accordingly, we will rollout several initiatives in the coming quarters. These include new cooking technology, including advanced grills, and ovens to improve food quality and productivity and.

In addition, we will be deploying kitchen display systems for meal pacing and handheld technology for our servers. These innovations to further improve customer service and reduce cost.

And finally become an even more digitally savvy company and 2021, approximately 70% of total U S off premises sales were through digital channels did.

Digital sales were $750 million in 2021 up 268% versus 2019.

Over the past year, we implemented a new online ordering system and mobile app to support our digital business. These technology initiatives are aimed at creating a frictionless customer experience, while also enhancing customer engagement.

We have outperformed expectations and the new App has over one 4 million downloads.

Can expect to see more activity on these fronts in the coming quarters.

The priority is above will be our guide for 2022 and beyond.

The momentum we have in so many areas and our stronger balance sheet. We are in a position to begin growing our restaurant base in a meaningful way once again.

We will provide more details on our new unit development plans for 2022 and beyond during our first quarter call in April .

In the meantime, just let me say, our new unit priorities will be Outback Fleming's in Brazil, and Chris is incorporate the impact of our development plans in the 2022 guidance that he will discuss in a few minutes.

In summary, Q4 was another terrific quarter this momentum sets us up well for 2022.

We remain ruthlessly focused on executing against our key initiatives. We are optimistic about our ability to continue capitalizing these opportunities and drive total shareholder returns.

And with that I'll now turn the call over to Chris who will provide more detail on Q4 and provide some thoughts on 2022.

Thanks, Dave and good morning, everyone I would like to start by providing a recap of our financial performance for the fiscal fourth quarter of 2021, given the significant impact of Covid on Q4 2020 results most of our discussion today will compare against the fourth quarter of 2019, which we believe provides better context to our underlying <unk>.

Performance.

This increase was driven by two factors first in mid November Outback traffic and check average improved significantly after we lapped heavy promotional activity from 2019.

We took additional pricing actions in November and December to offset higher inflation I will provide more detail on the ongoing impact of these price increases when I discuss 2022 guidance.

As it relates to other aspects of our Q4 financial performance GAAP diluted earnings per share for the quarter was 59 versus 32 in 2019.

Adjusted diluted earnings per share was <unk> 60.

Versus 32 of adjusted diluted earnings per share in 2019. This significant improvement represented a fourth quarter record for the company.

Our five 3% increase in two year same store sales drove significant leverage in the quarter.

Second we continue to benefit from our efforts to drive efficiency into our business. For example, food waste continues to be at record low levels at our menu simplification work has reduced hours in the restaurants.

In addition, the cost savings efforts that we have previously discussed helped drive G&A expense down $4 $3 million from 2019, and finally marketing expenses were down $23 million from 2019.

$5 million share repurchase program.

We expect commodity inflation of between 11 and 13%. This is higher than our previously communicated range of 10% due to increased pressure on several categories, including chicken seafood dairy and oil. We have however completed most of our 2022 contracts for beef and we expect beef.

Inflation for 2022 will be in the mid to high teens. As a reminder, we benefited from a relatively benign commodity inflation number in 2021 up one 7% given our contracting strategy. This will lead to an outsized year over year comparison in 2022 in terms of.

2022 commodity needs. We have currently contracted roughly 70% of our food basket for the year.

Impact on the shape of 2022.

Labor inflation is expected to be in the high single digit range. This is running higher than the levels. We were seeing in our last earnings call. This is the collective impact of wage legislation in a tight labor market in.

Forward strategy.

It became clear that the 3% pricing. We previously discussed would not be enough to offset the increased inflationary pressures our industry is facing give.

Given that we had not taken a material menu price increase since 2019, we are confident that 5% is appropriate as it relates to other aspects of our guidance, we expect EBITDA to be between $495 million $515 million, we expect our effective income tax rate to be between 16% and.

17%.

We expect GAAP EPS to be between $2 13, <unk> and $2 22, with adjusted EPS of between $2 35, and $2 45.

This adjusted EPS guidance represents 15% to 17% compound annual growth from 2019 the.

The difference between our GAAP and adjusted EPS relates to accounting treatment of share count from our convertible bonds.

We expect capital expenditures of between $225 and $240 million this was driven.

By approximately 30 gross restaurant openings half of which are international as well as a $70 million investment in the restaurant technology that Dave discussed.

We also expect adjusted EPS to be between 70% and 75.

As a reminder, the cadence of our inflationary pressures will be more pronounced in the first half of the year. This is reflected in our Q1 guidance in.

Thank you at this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.

In the interest of time, we ask that you each keep to one question and one follow up thank you.

First question comes from the line of Jeffrey Bernstein with Barclays. Please proceed with your question.

Great. Thank you good morning.

My question relates to operating margins as we look to 'twenty two.

Clearly you saw significant improvement in 'twenty, one and definitely a popular question is whether or not you'd be at a sustained that so I'm wondering if you can just.

Talk to what you expect the full year operating margin to be in 'twenty two.

And maybe the confidence you have to sustain that considering that inflation is now more heavily anticipated than prior and then I had one follow up.

Sure.

Good morning, Good morning, Jeff This is Chris.

As we talked about last time hitting that 8% operating margin goal is a key part of our long term earnings framework and if you look at the 2022 guidance to your point. Despite what I would say is record inflation on it but if you look at the top end of our guidance. The EBITDA guidance range allows you to get to that 8% margin for the year.

And if you think about that dynamic last quarter I laid out sort of the puts and takes in terms of the inflation environment and how the pricing will be used to offset that really the only change versus that outlook from last quarter is the fact that I have more inflation in my business and commodities and in particular labor versus what we were expecting last quarter and I've taken.

Additional pricing to help offset that and I think the only variable left in that calculus. After you factor that in is really just traffic and mix shift.

We feel good like you can be in that seven 5% to 8% range over the full year. It really just depends on how traffic plays out over the back half.

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

The 5% surprisingly is on the lower end of some of what your peers are taking so thats encouraging.

Your confidence that that might not need to be further increases.

Or your willingness if necessary to take some especially would stake.

<unk> I would expect you to say that you were going to be floating stake in anticipation that prices ease.

Led you to ultimately decide to lock in steak prices I think you said mid to high teens inflation, which obviously seems extraordinary but any color on stake and the related pricing will be great. Thank you sure on the pricing piece, yes, we are.

This year because of some of the extraordinary inflation.

<unk> are pretty pretty muted obviously, we've got to survey the marketplace, but we hope we don't have to take much more than that but we'll have to watch and see what happens I'll turn it over to Chris now to talk about the supply chain cost and what that mean, well I think specific is there specifically as it relates to beef for us and we've talked to you guys about this before having some.

Beef prices fall towards the back half of the year I think that's just a byproduct of having great supply chain partners and I think we're being prudent in our approach.

And Jeff I, just want as you consider the year on year gain an increase in supply supply chain costs.

Any significance in our company so were serving our menu each and every day.

Understood. Thank you so much.

Thank you. Our next question comes from the line of Brett Levy with <unk> Partners. Please proceed with your question.

Great. Thanks so.

You talked about your expansion on your extension targets with the Outback Fleming's in Brazil.

You've obviously seen some great successes on Carrabba's.

What are your thoughts on.

Just what youre seeing from Carrabba's, how you're looking at it its growth prospects.

Both the in store in the off premise and.

What did you see in the near term what did you see really across the general landscape regional.

Different customer cohorts.

As the back half of that question on Carrabba's or is it against across the broader company.

That was that was across all segments.

Okay.

First of all on Carrabba's I mean, the team did a magnificent job in 2021, I mean hats off to the Carrabba's team. It was great and to have the level of sales that they've achieved and profitability that they've achieved is really an unlocked for our company.

What I challenge them in a friendly way as we've had a great year now you're going to lap it.

Can it grow it.

And when you do that there'll be there'll be opportunities to expand the business.

Our team there is working with Mark Graf our head of business development.

And what that could look like.

Obviously.

This mix 37%.

So, yes, I mean, the mix Ed Provost for off premises and carry out and delivered 37% catering is way up we've got a whole new business here that we've never had before and they're doing a great job in restaurant dining. So so Brett that is a piece of our portfolio that is now an opportunity that you talked to us two years.

We want to it's a great business, but it may not be the place that we are today, but as a friendly challenge they've got to lap it and grow it. We certainly believe they will and then Mark has got to work with them on the asset prototyping things to go forward, that's what we're going to be doing on the broader customer cohort.

R R on channels piece.

On delivery third party delivery to younger crowd.

We see different times a day on the in restaurant dining people are coming back into the restaurants. There is a mix between carryout and delivery carryout and in restaurant dining dose, which back and forth a little bit, but you saw the growth in the business in delivery and Carryout and Youll see what the opportunities are going forward, while we build.

Back to the.

Thank you very much.

Thank you. Our next question comes from the line of Alex.

Slagle with Jefferies. Please proceed with your question.

Thanks, Good morning.

Question on your people strategy I mean people are pretty much the most important ingredient for success right now in the industry. It seems like.

Yes.

Bold people first stance at the onset holding on to all your staff.

Yes, it seems to be paying dividends now as we've shifted for the new phase on the staffing front Im curious what youre doing that differentiates lululemon and elevates its brands and the ICD employees I mean, we hear I guess a lot of the same tactics across the industry and just curious what youre doing differently.

Given <unk> taken.

<unk> taken a bit of a bolder stance in the past.

Yes sure.

First of all culture, and how you treat people is job one okay. I mean, obviously economics and how people are pages is important but culture in an environment you create in the restaurants is really what we got to do.

And we and we will continue to build on that culture and frankly the decisions we've made the pandemic help.

That culture and that belief and how do you know our retention levels and turnover levels are among the very best in the industry. So that's job one and then turning to the economics I think we do a very good job with the person that we call our managing partner.

They get their leadership their compensation systems, we do a good job with people at our associates that are hourly level at the front of the house or back of the house. The area. We need to work on is that kind of a second level of management and we're going to be continuing to do that to make their lives.

As enjoyable as possible because they were the heroes and heroines. During this pandemic that worked so hard. So we are looking at their quality of life. The shifts that they are working we are looking at expanding our manager bonus program. All those things are are something that we're looking at to improve our culture, even more and retain our people.

Great and just a follow up on Brazil, just if you have any.

First quarter commentary expectations things, we should.

Look out for.

Yes.

They're doing great the only thing to say.

We've got the best market position in the industry down there.

We've got a lot of well positioned restaurants.

Comps in Q4 were up eight 5% a two year basis were up 26, 5% and one year basis strong trends continue down there, we're adding restaurants right and left Pierre and his team are doing a fabulous job there.

They are doing their version of <unk> called the <unk> and <unk>.

Taken the Aki Grill business down there, which is our fast casual business and done that so.

I just think that.

It's been a fabulous business for us and right now on a two year basis are up 10%. So in the first quarter, so where to date. So they're just doing a great job and it's a real it's a real jewel for us in the company.

Great. Thanks.

Thanks.

Thank you. Our next question comes from the line of John Glass with Morgan Stanley . Please proceed with your question.

Thanks, and good morning all.

First question is Chris. Thank you for all the detail on 'twenty two in terms of guidance, how do you think about.

The shape of the sales.

Growth in 'twenty two there are some big labs, particularly in the second and third quarter across your brands.

Yeah, Hey, John stage first of all one of the things I've learned during this pandemic has to pay attention to your revenue trends.

Because of the lapse what year over year going a little crazy so.

My comments next have nothing we feel very good about our revenue trends this year.

But clearly when you look at.

Continue to look at it and then so the lap in 2020, the comp lap in Q2 and into Q3 will be more difficult not because revenue trends are expected to change, but because we're going to be lapping. Some some extraordinary stimulus on the marketing side, yes, we do have some of the marketing coming back.

<unk>.

The balance of the year.

John is far different than we were in 2019, we developed a digital capability. That's really terrific. We have a really good understanding of our customers.

Gone to that channel hard we're now multichannel.

Environment, where we've got delivery carry out that's very digital heavy along with our in restaurant dining. So we're going to turn that back on we're going to look at our return on investment that we see on marketing and the ideas that we have and we're going to be we're going to be investing behind that we don't anticipate doing broad scale discounting or anything like that its around ideas.

Fact ideas and marketing ideas, so we're going to take that quarter by quarter. We've got a very good sense of what the returns look like in the channels that we can use to make it work.

The only thing I would add to that is when you think about marketing expense overall the position. We're in now with some of these marketing ideas is that you can get a return on investment that not only yields a positive results of the company, but it also doesn't necessarily have to be margin dilutive right and I think that's a real sweet spot that we would aspire to maintain as the year progresses, which is why we can flush.

Marketing up or down depending on the environment, depending on what we see and we can yield a good result for the company that they can maintain margin as well.

And my second question is how.

How do you think about the tailwind potentially for the dine in business to come back.

I believe it's a more profitable does it you've got higher beverage attach you may have a higher check overall, so just looking at comps that tell the whole story, how do you think about the benefits you might see or the differential in margin you might see as the dining room business comes back more than it did in 2021.

Yes for us.

Okay.

John revenue trends are really tough to predict and we've tried to give investors our best sense of what's going on we would love to see tailwind as people.

As the virus calms down and people come back into restaurants, and yes, it's a higher margin, but I want to underscore we've worked our tail off to have the off premises business.

It can be as close to margin as possible as an in restaurant business, but yes, we do get the drink we do get the the check build and everything else, but John I am very hopeful that we have <unk> in beyond our guidance that'd be great, but I think we put our best thinking forward on in restaurant dining I think the biggest thing for US as you look at our channels will continue to see.

That delivery business move up, especially third party. It's been very good for US there is a bit of a trade off between carryout and in restaurant, So they'll go back and forth a little bit but.

That will be that will be something we have to watch, but we're very hopeful that the in restaurant piece comes back and then lastly, I'd be remiss, if I didn't talk about catering.

It's a big channel for us crop is nailing it in Outback is moving aggressively so that'll be something that we're going to be doing as well.

Can you just remind us what was kidding percentage sales pre pandemic, just sort of an understanding of how big that business was.

Tiny tiny.

Not even a tiny tiny tiny.

I don't know the number off top my head, but it was virtually negligent.

Built during the pandemic.

Thank you.

Thank you. Our next question comes from the line of John <unk> with Jpmorgan. Please proceed with your question.

Hi, Thank you very much.

In your prepared remarks, David Skus that just run back to my desk in your prepared remarks.

Specifically pointed out.

The emission of Bonefish and Carrabba's from a portfolio management perspective are you, perhaps thinking about some alternatives that you may have.

With those mid scale.

Our mid scale, meaning to say.

Domestic brands.

Yeah, John you know.

Brazil, well you know our market position down there <unk> been down there you've seen it we've got great understanding of it.

It's coming back strong.

And.

We've always said when it comes back we're going to ride it we're going to look at it we're going to grow like we are going to develop it and then we're going to just watch and see what happens we've got great Optionality down there. The team has built a great business. So we don't have any we're not marketing the business right now we're not doing any of that but the business is growing so well so rapidly from both the same store sales standpoint.

And our unit expansion standpoint, both.

By the way Outback and what we call a bronchial, which is carrabba's is just really really doing well.

We have a as I mentioned on the call in Q1, we're going to talk to more of our development plans, but let me at least spend a minute talking about it.

Outback we've developed.

A smaller business a smaller box that is carryout and delivery friendly that really encompasses the new kitchen equipment and operating systems that we have we've been opening them. It works and it works at high volumes and we're very optimistic about it so that expansion plan is going to move forward.

<unk>.

Talks about relocations over the years that continues to do really well.

Thats 0.1 on Outback Fleming's.

I hope our investors step back and take a look at Fleming's performance versus others in a very good fine dining industry. The results are second to none and the team has done a fantastic job the new openings do really well and we're going to be building Fleming's in some core markets in California, Texas and Florida.

In Nevada.

The two smaller brands.

<unk>.

But as I mentioned earlier, they are going to lap that theyre going to grow it and we got to make it work that doesn't mean that mark Graf is going to sit behind weight behind them and wait to see what happens, but we want to see this but these businesses continue to grow and John they are in a completely different spots than they were three years ago as far as sales of economics those two brands.

That was very helpful. Let me pivot if I can you mentioned several initiatives, which you've talked about before and I wanted to see if we could get a timing.

Three items and would that Capex number drop from 'twenty two to 'twenty three.

Yes, that's specifically related to those three items.

Our goal is to take each of them individually KBS will rolling first.

The handhelds depending on availability.

It's a great deal of progress there and him in the restaurants that will be rolling out over the next four to six quarters.

Depending on the availability and.

Supply chain for our new grills and ovens that will be rolled out over the next couple of years.

We're meeting with the manufacturer of those.

Items next week, and obviously I'm going to be encouraging encouraging them strongly to move very fast.

So that's the timing so again kgs next within this year Handhelds next 456 quarters and.

The grilles in kitchen equipment in the next couple of years, hopefully faster as we roll it through that Capex will drop a bit but.

But as the <unk>.

Portfolio growth.

Find more restaurants, we probably will have a more new unit capital next year, assuming the returns are there.

As far as the basis point improvement John .

I, probably don't want to get in that kind of detail because of some of competitive stuff, but we're expecting at least a 20% return on investment on those on those type of those type of equipment measures. Chris you want to add anything else well I would just say a big part of we talked about the profit bridge last quarter about what it would take to get back to those mark.

<unk> levels, and we talked about needing productivity and we talk about menu pricing in the level of menu pricing one of the things that we've always focused on that has allowed us to not have to take outsized levels of pricing as our productivity initiatives and the productivity initiatives that we have on deck for 2022, and then into 2023 are highly enabled by these technology investments.

Lastly, John what we'll do.

This is outback the stuff that works in the other brands will take the other brands.

Thank you very much.

Thank you. Our next question comes from the line of Lauren Silberman with Credit Suisse. Please proceed with your question.

Thank you I just wanted to follow up on the first quarter of noting just omicron largely behind you. At this point can you just talk about where recent trends are running relative to pre OMA crown level, and if you've seen any outsize differences in certain brands or regions.

The last.

It's an interesting tale here for US January we saw the impact of <unk>, Chris talked about the 2000 $930 million impact on between omicron in a bit on weather.

The last few weeks for us has been very good.

Hopefully those trends will continue were very bullish on those trends.

And the only thing that we have in front of us is.

As you know as we talked with John glass sales do pick up a bit in in Q2 into March and into Q2 from the 2021, but our revenue trends are very good.

So look.

Last few weeks have been very good we expect those revenue trends to continue we talked about where.

Where it's happening.

In the country, we talked about the southeast being stronger we talked about the Midwest and the northeast picking back up a bit.

And fine dining has been the best of the of the yes.

Yes in the lap the lap from last year really starts kind of in that mid mid March time period.

Yes.

It's a tale of the quarter is kind of a tale of two cities during the quarter.

It was rugged in January .

Not that people were getting really really sick, but we follow the guidelines and we had some staffing challenges because people are out they didn't leave the company, but they were out and so we had to.

Still a very frothy market and a market that it's a war for talent and you'll see the impact on inflation, but things are getting I think they are getting a bit better from a labor standpoint.

Thank you guys.

Thank you. Our next question comes from the line of Brian Mullan with Deutsche Bank. Please proceed with your question.

Hey, thanks.

Could you just let us know your thinking on G&A spend in 2022 that is embedded in that guide.

If not is there something unique blooming.

That would prohibit that.

So first question 2022 got $2 35 to $2 40 feels like the right number for G&A for this year and then I would say in terms of the overall goal. The goal is 5% of sales on G&A now. The good news is as you don't you don't have to get there by continuing to reduce G&A, although we do feel like theres still a little bit of opportunity there.

I think really for us it's about growing top line that can get you there, but yes, a little bit above.

Okay. Thanks, and then great great improvement on the balance sheets very notable congrats and kudos I see the reinstatement of the dividend.

Uses of cash in.

We generate a significant amount of cash I mean, our guidance for 2022 has us tracking to that $500 million or so of EBITDA in the first priority as we think about when we have that kind of cash flow is deploying things via capex for new restaurants, and the technology investments we talked about so in 2022, that's going to be $225 million then you have tax.

There is an interest and call that the.

Last year was 80%, 85% so between 75 and $100 million that interest and tax number is going to be so that leaves about $175 million to $200 million of cash in hand to deploy to the business to shareholders via dividends share repurchases or other uses and I think that we talk about the dividend of 2014.

That as the year progresses relative to other alternatives such as share repurchase activity.

Want to say, Chris that was you guys have done.

Great job getting if we look where we were two years ago.

We now have.

We paid down debt, we got that leverage ratio below our long term guide of three.

We have reinstituted reinstituting a dividend.

Now announced a share buyback plan and we've got the muscle to pursue the capital opportunities we talked about earlier in the call. So.

That's why you hear us.

Bullish on where we are and what we can do going forward.

Thank you.

Thank you. Our next question comes from the line of Brian Vaccaro with Raymond James. Please proceed with your question.

Thanks, and good morning, Good morning, just circle back on the 22 EBITDA guidance.

Could you walk us through sort of the dollar bridge versus 'twenty, one like we did in the third quarter just as it relates to pricing, we expect our dollar inflation Cogs labor productivity gave us G&A, obviously, but could you just walk through some of those puts and takes getting you to around that 500 505 mid point.

I'll go through them again pricing, we said was we're going to get about $100 million at a pricing that number is now going to be about $155 million benefit with that 5% price increase Brazil, we talked about a recovery in Brazil between $30 million to $40 million would be the guests that we would get back from Brazil, assuming that that business continue.

It's like it's been continuing.

Favorable move because we paid higher incentive comp in 2021, we would normalize those targets for 2022 that would be a $10 million benefit for us. So that gets you back pretty close to neutral and then the question is well, Okay. Why does EBITDA come down and that really is just all about sales traffic within the business. There's two there's two things traffic and mix Theres two things to think about it.

As the year progresses, one is there going to be management of check right as the year progresses, just given we took a 5% price increase and then the other big piece is traffic related to OMA crime, we already talked about a pretty massive $30 million revenue impact that flows through at a pretty high level, that's going to be a headwind and then I think the rest of it is.

Alright. Thank you that's very helpful. I wanted to circle back on the Q1 trends to some unique AWS seasonality versus other companies.

Non Brazil, we haven't seen any any particular slowdown in business trends continue to be very strong.

Over to Chris to talk about any any volume.

Yes, I mean, it's interesting Brian the first so.

The first week of our year ended on January the second you've got to strip that out because that's just a massive week for us because of the coming out of that that's always the busiest one of the busiest weeks of the year for us. So if you take that out and then you take out. This most recent week because theres Valentine's noise on weekend in 2013, I think I can confidently say that outback as well.

As sort of the total company AWS has been improving on a pretty regular basis. If you look at kind of where we are now outback has been in that mid 70000, a week range, which is a really good result, and again thats sort of pre we typically see a volume pop the week a few weeks after you get through the Valentine's day.

Day.

Shift and again like I said the important thing to consider in this is that that gap, both at outback and across our total portfolio that gap relative to what you would look at in a black box. For example has maintained and grown which is really encouraging.

Alright, Thats, great and I guess, the last one going back to the kitchen equipment.

Those efficiencies at UBS here Brian .

Right.

Just don't want to get into that because of that that kind of detail is pretty competitive, but we do have targeted a 20% return on investment on that kind of.

Capital investments. So I think you can kind of begin to noodle around what that might look like in the back of the restaurant.

And importantly, like I mentioned earlier not only just tested this is in and this is in high volume restaurants. So we're seeing the what.

What we need this type of equipment.

Alright, Thank you I'll pass it along.

Thank you. Our next question comes from the line of Jeff Farmer with Gordon Haskett. Please proceed with your question. Thank you a handful of follow up questions. The first one was on that I believe you said 150, <unk> hundred $55 million of menu pricing benefit all in in 2022 with the menu price increases but.

What does that assume in terms of price increase levels at Outback and Carrabba's can you provide us concept across those or can you provide us any context across those two concepts.

Yes, it's a little higher than I mean, outback is so big that the average price increase is going to pretty be reflective of a pretty much about back but it is a little bit higher at outback, maybe a little lighter at the at the other casual dining brands.

And then just to be clear so have you already pursued or are you.

Sort of currently rolling out the newest price increase at Outback is that happened already or is it happening now.

March.

March Okay, and then just.

Other topic that was touched on but staffing levels at the concepts.

So all your peers are asked about this in a lot of people will point to staffing levels versus pre COVID-19 levels, but given that sales volumes were up pretty materially versus pre COVID-19 levels.

How do you think about what the most efficient staffing levels are.

As you move forward.

And where our staffing levels right now sort of easily those those efficient staffing levels that you would you would think about or what you would need moving forward in 2022.

Yes, Jeff first of all we're a completely different business in 2019, if you look at the menu changes we made the simplification equipment investments some of the equipment. We have done so I'll go back to 2019 looking at staffing levels.

Isn't really make a good comparison, so basically what we do is we.

Look at our our labor engineering in the back of the restaurant in the front of the restaurant and compare versus where we are staffed and we're in really good shape and our staffing levels. It doesn't mean, we don't have work to do et cetera, I'm, not saying that but we're very close to where we need to be and the team has done a great job on that but to go back and compared to 2019 would not be something that would be.

Wise for Us what we do is we build the staffing models.

And just last one related so as we've moved past homegrown here.

Hiring just whats sort of the high level takeaway there in terms of number of applicants.

Qualified applicants.

How much easier has it gotten too actually.

Bringing new staff members onboard as we move costs.

If it has.

Yes, Jeff it's gotten better.

It was tough for a while there obviously, our retention levels and turnover levels really helped us, but as we look for talent.

It's been it's been a war for talent, but if things have gotten better the last few weeks and months.

And we think we're very well positioned to to do that.

It doesn't mean that all of our all of our issues are solved no not at all but on a relative basis, the labor environment from a talent recruitment standpoint is getting better alright.

Alright, thank you.

Thank you. Our next question comes from the line of Jared Garber with Goldman Sachs. Please proceed with your question.

Alright, Thanks for the question and congrats on another strong quarter I wanted to just get a quick modeling question on pricing I know youre, taking another incremental price in March which you've talked about can you just help frame what the effective pricing should look like for the first quarter I think there'll be 5% once you pass through that.

That incremental price, but just wanted to make sure. We're understanding the first quarter implications properly and then I had to sort of one follow up.

Yes, it will be approaching that 5% I'd say and then going in Q2, it will be the full 5% so four 5% to five somewhere in there.

Okay Cool that's helpful and then if we go back.

Maybe a year or 18 months, you took menu prices down at outback and or sort of improve the value proposition there to kind of shrink the gap between some of the best Steakhouse gears can you just.

Update us on maybe what youre seeing in your own data or your industry data.

As it relates to sort of how consumers are viewing the value proposition at outback versus some of your primary steakhouse competitors.

Yes no.

Made significant progress with that menu change.

The team did a very good job on it at mix was up appetizer mixes up drink attachments are up people are trading up to higher cuts of steak or larger stakes.

No longer.

Managing things in pursuing value initiatives, because some of our pricing was out of line.

They just did a very thoughtful job and we're seeing that benefit in the company both from a sales and profitability standpoint and mix.

And also the other thing that they did that was really smart was the combos that they add to the menu have really been great.

And I'd say the tactically speaking the way that you deploy some of that is you can just move we have menu pricing tiers across the country. You can just sort of play with those tiers or not.

Away any of the key tenants of the price increases that you are the price decreases that we put in place.

Great that makes sense and then just one sort of follow up as we think about heading further into into the year with some potential.

Pressure on the lower income consumer.

David you guys don't have maybe some pricing power obviously I appreciate the commentary that you took critical price last year, so sort of a two year basis, it's quite low.

But just how are you thinking about sort of those laps.

As we head into the heart of the.

Thank you.

One reason why we were so delivered on our price increase changes.

And also offering value in other ways to the combos, we talked about or some of the menu stuff that we did it at outback.

We don't intend on getting into a discounting situation or anything else.

It's all about great food served at a terrific price with some really great marketing ideas.

Great. Thanks.

Okay.

Thank you. Our next question comes from the line of Sharon Zackfia with William Blair. Please proceed with your question.

Hi, I think we are going in alphabetical order again.

So most of my questions were asked but I did want to inquire about kind of the the menu simplification that you've been so good at doing over the past few years and how that might enable more robust product innovation and menu innovation.

Now does that can you give us your thoughts on on how that might have cleared the decks for that and if we should expect any kind of.

More frequent cadence of new product news now in 2022.

Yes.

Clearing the deck is exactly a great way of saying it Sharon and yes, we do want new product news around what we do so well in our concepts.

So we'll continue to do some steak innovation and things like that Outback, we've got some combo meal ideas the blooming idea.

How we spice things everything is always kind of fun.

Those kind of ideas are an important part of outback going forward. When we can't have and to your point is we can't have renewed menu proliferation that takes us away from the core great.

Opportunity for people to serve our customers.

On the other thing that is coming up Sharon is on the Carryout and delivery standpoint, all kinds of opportunities on family bundles packaging all of those things are just that's a whole new channel for US and then when you add on the digital experience that.

That will be important so.

That those are some of the things that we're thinking about and you can play the same thing to our other brands.

Lastly, I want to say that we will make sure that we don't go in alphabetical order next time, when we have our call and we will address that sharing our apologies.

I appreciate that thanks.

Thank you. Our final question. This morning comes from the line of Andrew <unk> with BMO capital markets. Please proceed with your question.

Hey, good morning, and thanks for squeezing me in here I just have two follow up questions on Brazil, but first one.

You mentioned easing restrictions there being a help how much your restrictions continuing to impact sales trends and do you have a central how much capacity that has come out I guess some of the industry in Brazil, I guess I'm, just trying to figure out where those volumes could be headed thats number one and number two obviously a lot of cost conversation in the U S. But what does that look like in Brazil.

I think I noticed that the relative to 19. The average check is down so I'm just curious what the environment's like there is there any need to take price and margin implications look thanks.

Yes.

On the business itself.

Crystal.

We will identify how much of the capacity has come out of the business, but the trends have been very very good there as they have progressed through the the virus that has been strong.

We do the team is probably best in class in our company frankly on identifying pricing opportunities studying where they lie et cetera, we can learn a lot from them and so they do work that through as much as possible without losing the value equation. So I will turn it over to Chris.

Talk about what the impact on the capacity it looks like for the overall category.

Well, so I think just a couple of stats, Brazil right now is effectively 95% plus capacity I think that it's Rio and Sao Paulo or are at a 100%, but it's really just a question of.

The other outlying areas and thats the only a residual we have left I think from a total industry capacity standpoint.

It's really difficult to get good data on this but what we have seen and heard as a they.

From our perspective provides a great opportunity for us, but it remains to be seen how much of that comes to fruition as well and I think the third thing in terms of the overall environment from an inflation pricing tpa standpoint, they have inflation down there as well I think it's that high I'd say again high single digit inflation overall seems right. They are taking inappropriate level pricing.

The way, we would think about the environment, Brazil, very similar to the U S. But obviously the opportunity from a capacity perspective moving forward.

It's pretty good.

Great. Thank you very much.

Thank you, ladies and gentlemen that concludes our question and answer session I will turn the floor back to Mr. Gugino for any final comments.

Thank you everybody for the questions and interest today, we really appreciate it hopefully we gave you a good sense of what's going on in our company and we look forward to talking to you. After our first quarter call in April have a good day.

Thank you. This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.

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