Q2 2022 Bloomin' Brands Inc Earnings Call

July 29, 2022

Greetings and welcome to the Bloom in brands fiscal second quarter 2022 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.

It's now my pleasure to introduce your host Mark Graff 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 second quarter 2022 earnings release.

It can also be found on our website at <unk> 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.

Our SEC filings, which are available at SEC Gov during.

During today's call, we'll provide a brief recap of our financial performance for the fiscal second quarter 2020 to an overview of company highlights and an update to 2022 guidance once.

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 Q2 2022 diluted earnings per share was <unk> 68 versus <unk> 81 in Q2 2021.

While results were below last year, our Q2 earnings per share was nearly double of what we achieved in 2019.

As it relates to 2021, you're lapping exceptional earnings due to the stimulus payments and pent up consumer demand.

In addition in Q2 was also the highest inflationary quarter of the year.

We made a conscious decision to preserve our value equation and not raise prices to fully offset inflation.

We believe the short term decision will have long term benefits for the business.

Our confidence in our strategy, both domestically and internationally as reflected in our increased revenue guidance. This was driven in large part by the success. We saw in our sales initiatives through the first half of the year and the marketing investments, we're making in the back half of the year.

During the quarter, we saw positive trends through may but experienced softer trends in June consistent with the industry.

Fortunately the comprehensive plan, we established to build a stronger and leaner operations centric company latest solid foundation for us to navigate this challenging environment.

We leveraged our leading off premises business growing digital capabilities and improved operational efficiencies to deliver on our key commitments. These.

These results would not have been possible without the talented and dedicated employees in our restaurants in the restaurant support center.

Your commitment to providing guests at the highest level of service and hospitality is what make our restaurants so successful.

As we look ahead to the balance of the year. The focus remains on achieving our full year objectives. Despite a more challenging economic environment. We continue to have confidence in executing our strategy to elevate the customer experience, while driving sustainable sales and profits.

The plans in place set us up well to achieve our objectives strengthen the business and provide momentum for 2023 and beyond.

The key elements of our plan include.

First grow in restaurant sales by improving service levels and food offerings the.

The investments made over the past few years to elevate the customer experience are showing up in improved social especially at outback.

As part of this effort, we continue to look for ways to simplify the business to improve execution and consistency.

We are rolling out several innovations such as new cooking technology, including advanced thrills ovens to improve food quality and productivity.

We're also installing kitchen display systems for meal pacing and handheld technology for our servers. These innovation should reduce costs and further improve customer service.

We're also deploying more targeted marketing to build awareness and drive frequency. These initiatives are aimed at highlighting our great menu in the everyday value that we offer to guests importantly, this was accomplished without sacrificing product quality or the guest experience.

In addition, these programs offer high returns and are not reliant on deep discounting to drive traffic.

Second expand our leading off premises business, we continue to capitalize on our strong carryout and delivery capabilities retention levels held steady with Q1 and are contributing to our sales outperformance third party delivery continues to grow even as people are returned to in restaurant dining.

Importantly profit margins in this channel are comparable to margins of their in restaurant business.

This is the result of initiatives that were completed in the past few quarters. We are also pursuing catering opportunities as people continue to return to offices.

We offer significant value through our bundled platforms, which includes group players for large parties and our individual box option.

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

Third leverage operating margin 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 high return digital channels in.

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

As Chris will discuss despite large increases in food and labor inflation, we've been able to achieve our operating margin objectives.

We remain committed to our long term goal of 8% operating margins.

And finally, becoming even more digitally savvy company in Q2, approximately 75% of total U S off premises sales were through digital channels.

This 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.

Both have outperformed expectations in the new App has over 2 million downloads you can expect to see more activity as we improve the functionality and features of our App and digital offerings.

These priorities will continue to guide us in 2022 and beyond because of the momentum we have seen in so many areas in a much stronger balance sheet. We are in a position to begin growing our restaurant base in a meaningful way once again.

Last quarter, Mark Graf talked about our new and revitalized development plans, we are making good progress building a strong pipeline of new units and we expect to accelerate new unit growth in 2023 and beyond.

Our growth priorities are first accelerating new unit growth at Outback, we developed a smaller and less expensive prototypes that will enable more meaningful growth with healthy returns. This includes pursuing new trade areas in rapidly growing markets as well as fill in opportunities in major metro areas.

To date, we have opened four new smaller locations with strong sales and positive guest feedback.

Rooms are taking notice of the new design and are giving us high marks on the brighter ambience decor redesign bar and New service model. In addition, we continue to upgrade and contemporary as our asset base investments in Remodels are offering good returns and recent relocations at Outback are providing outsized sales lift in volumes exceeding $4 6 million.

Well above the system average.

Second opening new restaurants at Fleming's the business continues to perform extremely well and has a proven category leader in fine dining. The average unit volumes are the best in the portfolio. We're building first class facilities on great real estate sites, largely stronghold markets of Florida, California, and Texas.

Third, Brazil, as a category leader and they are seeing a strong recovery in both sales and profits new restaurants continue to open above expectations. We are on track to opened 16, new Outback this year and have a robust pipeline for growth. There are currently 135 locations in Brazil, and we believe we can grow this brand to approximately 240 restaurants over.

Time in this underpenetrated market.

And finally, we are working through plans to expand the Carrabba's business in key markets problems has been among our top performers in the portfolio over the last three years. They have built a terrific off premises business that has opened up a number of possibilities for the brand more to follow on this opportunity.

In summary, Q2 was another solid quarter, we remain ruthlessly focused on executing against our key initiatives to achieve our 2022 goals while building a great business that will thrive in 2023 and beyond.

And with that I will now turn the call over to Chris will provide more detail on Q2 and thoughts for the remainder of 2022.

Thanks, Dave and good morning, everyone I would like to start by providing a recap of our financial performance for the fiscal second quarter of 2022 total revenues in Q2 were $1. One 3 billion, which was up four 4% from 2021, driven by a $58 million increase in international restaurant sales.

Primarily in Brazil.

U S comparable restaurant sales were down 40 basis points versus 2021 during the quarter. We saw positive trends through may but experienced softer trends in June consistent with the industry. Importantly, Q2 sales were up 12% relative to 2019 and maintained an approximate 400 basis points.

GAAP to the industry in both sales and traffic versus 2019.

Given stimulus benefits and our outsized comp sales gains in Q2 of 2021, we believe the comparison versus 2019 provides perspective on the progress we have made in growing our sales. This progress has been bolstered by our significant growth in off premise is tiny.

At 25% of U S sales Q2 off premises was down slightly from 26% of sales in Q1 as expected there continues to be some trade from our curbside business to in restaurant dining occasions.

<unk> the highly incremental third party delivery business continues to grow and was 12% of U S revenues in Q2 versus 11, 5% in Q1.

In terms of concept performance Outback was 28% of sales and Carrabba's was 33% of sales.

Off premises remained sticky and is a large part of our ongoing success. It will be a key part of our growth strategy moving forward.

Average check was up seven 9% in Q2 versus 2021. This was in line with internal expectations Q2 menu pricing was relatively consistent with Q1 at five 8% and the remaining two 1% was menu mix.

And a final note on Q2 sales, Brazil, Q2 comps were up 96% versus 2021, Brazil second quarter reflected the lapping of Covid related operating restrictions from last year importantly comp sales were up an impressive 27, 6% versus 2019 levels.

As it relates to other aspects of our Q2 financial performance.

GAAP diluted loss per share for the quarter was 72.

<unk> 75 of diluted earnings per share in 2021, the GAAP loss was almost entirely driven by the accounting treatment for the repurchase of our convertible notes given the converts were so heavily in the money. The total consideration paid in cash and shares was $246 million.

The difference between the total consideration paid and the $125 million principle created an accounting loss of approximately $122 million for comparability purposes. This loss has been removed from our adjusted results given the potential dilutive effect from future <unk>.

Your price appreciation, we are confident that our repurchase of these notes was a prudent economic decisions.

Adjusted diluted earnings per share was <unk> 68 versus 81 of adjusted diluted earnings per share in 2021. In addition, our Q2 result was nearly double our 2019 adjusted EPS of <unk> 36.

Adjusted operating income margin was seven 8% in Q2 versus 11% in 2021 as Dave mentioned Q2 is expected to be our most inflationary quarter of the year for perspective commodity inflation was in the high teens in Q2, while labor inflation was nearly 10.

Percent.

Despite these headwinds our five 8% menu pricing in Q2 was not enough to offset the inflation. We faced this did have a significant impact on operating margins in the quarter compared to last year. We are comfortable however, with this important decision given that our Q2 margins of seven 8%.

With 320 basis points above 2019 levels, we continue to benefit from simplified menus and operations growth in our international business as well as increased average check.

Finally, a note on Q2 taxes, our adjusted tax rate in the quarter was 14% benefiting from discrete Q2 tax items given the lower rate in Q2, we now expect to be closer to the lower end of our 2022 guidance range of 16, 5% to 17, 5%.

Turning to our capital structure total debt was approximately $800 million and our lease adjusted leverage ratio was two nine times at the end of the second quarter. We are pleased with the progress we have made to improve our balance sheet.

In terms of share repurchases, we have repurchased $62 million of stock through July 28, and have $63 million remaining on our existing authorization. The board also declared a cash dividend of <unk> 14.

We remain committed to a balanced capital allocation strategy.

Turning to 2022 guidance, we are increasing our 2022 guidance for total revenues to be between $4 4 billion and 445 billion.

This is up from our prior guidance of $4 three $5 billion to $4 4 billion. This increase was driven by a few factors first we had higher than expected revenues in the first half of 2022, both domestically and in Brazil.

We have increased our marketing investment in the back half of the year and finally, we will take some incremental pricing primarily impacting Q4.

We are reaffirming our total year guidance for adjusted EPS and EBITDA as a reminder, we expect adjusted EPS to be between $2 45, and $2 55, and EBITDA to be between $505 million and $525 million, we expect the profit.

Fitz from increased revenues to be offset by higher than expected inflation. The higher inflation is being seen primarily in commodities utilities operating supplies and R&M. So.

As it relates to our commodity guidance, we now expect commodity inflation to be between 13% and 14% for the year. This is up from prior guidance of 11% to 13% over the first six months of 2022, we have been trending to the upper end of our original guidance range and have seen more.

Persistent inflation in some of our less locked commodity basket, including seafood dairy and freight we are now 89% locked on our commodity basket for the year.

In addition, the repurchase of the convertible notes has required us to make guidance changes to GAAP EPS and GAAP tax rate for the year GAAP diluted EPS is now expected to be between $1 11, and $1 22.

This is down from prior guidance of $2 23.

To $2 32.

The entire change to the GAAP diluted EPS guidance is driven by the accounting loss on the retirement of our convertible notes.

As it relates to tax rate the accounting loss on the convert is non deductible for tax purposes, and we now expect our GAAP tax rate to be between 28% 29%.

As I indicated earlier, our adjusted tax rate is unchanged in terms of share count weighted average adjusted diluted shares are now expected to be approximately 93 million shares. This is down from prior guidance of approximately 95 million shares the difference in the share count is primarily driven by <unk>.

<unk> and our share price as it relates to the value of the convert.

As it relates to future impacts from the convert our adjusted diluted share count always captures the full potential share dilution from the convert based on where our stock trades over the course of the quarter.

In our 8-K furnished to the SEC. This morning, we have provided a grid outlining how to think about future share dilution at stock prices. Deferring then what is embedded in our guidance for the remaining $105 million principal balance we will continue to evaluate the right time to potentially repurchase additional amounts.

Of the convert.

Finally, capex is expected to be between $200 million to $210 million, we have seen some supply chain and construction delays that may push some of our scheduled projects into 2023, we should still finished the year around 30 new units in total.

Now turning to third quarter guidance, we expect Q3 revenues to be between $1.05 billion and $1.07 billion.

And we expect adjusted EPS to be between $31 36.

This guidance reflects a continuation of strong performance in both the U S and in Brazil for perspective, our adjusted EPS in Q3 of 2019 was 10.

In summary, this was another successful quarter for <unk> 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.

At this time, we will 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 Mchugh.

I ask that you please limit yourself to one question and one follow up.

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

One moment, please while we poll for questions.

Our first question is from Jeffrey Bernstein with Barclays. Please proceed with your question.

Great. Thank you very much two questions. The first one just on your guidance for the rest of the year.

I understand that inflation is pressuring the earnings.

Wondering why raise the revenue guidance into what seems to be a slowing macro.

You mentioned a softening in June just wondering your confidence in sustaining the revenue momentum, despite that slowdown and whether or not you'd comment on July .

That would be great. So specifically just around the revenue guidance raise into a slowing macro and then I had one follow up.

Sure good morning.

We'll answer it briefly and then turn it over to Chris on any specifics but.

On the revenue side with first half was very good for US Brazil has been very good and in July we've seen a sequential improvement in trends so.

So when you bake that in and look at what the balance of the year looks like Jeff. Those are the factors that are causing our revenue guidance to go up which we're very pleased about.

Yeah, and just to give a little additional color Jeff so.

We raised our revenue guidance by $50 million. So if you think about half of that increase is based on the sales over delivery through the first six months of the year. Some of this is in the U S. But as Dave mentioned the sizable portion of that is based on the over delivery in Brazil now moving forward. When you look at the back half of the year. The remainder of the upside is driven by addition.

Marketing investment and the benefits from incremental pricing that we would take in the back half of the year. We haven't built all of the benefits from these initiatives into my guidance. Because there is there is still some macro uncertainty out there but.

But between the marketing and the pricing that makes up the other $25 million, but.

In terms of why raise it think about it this way the full year comp guide that we're implying in the back half both in Q3, and then maybe a little slightly higher in Q4 is basically flat same store sales in Q3, and then maybe a little bit better than flat in Q4.

Okay.

Understood and then the follow up just on inflation.

Some of your peers have actually tempered their inflation guidance.

As far as calling the top on inflation, just looking to get your thoughts whether you would agree or whether you expect further accelerating commodity inflation, maybe you could just share what your first half basket was and what your second half assumption is for your commodity basket, there and any color you could provide in terms of that inflation and maybe what it looks like as we look into 'twenty three.

Thank you.

Yeah, Yeah sure. So look I think the first half was in the high teens in terms of commodity inflation.

The third quarter is probably going to be mid teens or so and then Q4 is going to be probably low double digits, 10% to 12% somewhere in that range and I think that the dynamic of that has more to do with what we're lapping from a year ago, because if youll recall again when it comes to our inflation last year in the first half.

A year and in Q2 for example, we were deflationary in our commodity basket and then that started to tick up as the year progressed. So we're going to get some benefit from the lap now as it relates to just how our commodities are performing this year.

Look there's no question our commodity inflation is higher than what we were thinking when we started the year.

If you look at the back half, although there's pockets, where I think we're seeing some good news in areas like beef fuel prices and then some smaller commodities like chicken wings and things like that we haven't seen a whole lot of upside find its way into our numbers, thus far but there are still labor shortages.

There's record high demand so it's putting some pressure on some categories, where I think you may see some difference between us and maybe some of the other folks is just our the way we buy our beef for example, we're pretty much locked in on beef in fact, we have probably more upside in beef in the back half of the year than we do in some of the other categories were 90% locked now at.

At this point on our overall basket. So there just isn't going to be as much variability when youre not buying spot on a large portion of your overall buy if that makes sense.

It does thank you very much.

Our next question is from Sharon Zackfia with William Blair. Please proceed with your question.

Hi, Good morning, I guess, a question first on the value proposition side, recognizing you've been very diligent about kind of keeping and priced well below inflation can you talk about the planned price increase for the second half and you know the magnitude of that and also combined.

With that the marketing plans for the second half, maybe contrast versus the first half or relative to 2019 and give us some flavor.

What kind of marketing will be expecting and will it be more.

<unk> focused our brand building any context, there would be helpful.

Sure.

Well those are kind of two questions. So we'll start with the first one on pricing I'll kick it off the top of the Chris and we'll come back to the marketing side, but.

As you know you've been following our company for a long time, what we try and do is have productivity plus pricing offset inflation now this year. The inflation was very high so we haven't priced all the way to inflation and although in our productivity efforts remain strong, but we will continue to price below inflation to make sure. We keep that value equation going is there some price in the back half of the year.

Yes, but we will price.

Below inflation, probably to keep our value equation going Chris I'll turn it over to you for any other comments on the inflation side well, yeah, just to give context around the menu pricing so.

Given the inflation as Dave mentioned came in higher than expected. We did we took some additional pricing. This year, we were basically at five 8% pricing in Q Q1, and in Q2. So it didn't change as it looks to what I inferred that we might be taking more pricing in the back half of the year I think if you broke apart our guidance were effectively assuming about it.

2% menu incremental menu price increase either late in Q3 or in early Q4, and that would put us more or less in that six 5% menu pricing range in the back half of the year and so we still feel like relative to what we're seeing out there that provides a pretty good value in todays point it doesn't come close to kind of.

The inflationary pressures that we're seeing so far.

And we have a lot as you know we have a lot of productivity initiatives initiatives also helping us on the margin side. So let me let me turn to your marketing question, we have uptick to our marketing spend and we will up ticket the balance of the year nowhere near 2019 levels.

And also we learned a lot about marketing and how we go to market through digital through cable et cetera, and that mix is really heavily digital and Sharon we're not going to participate in deep discounting in our categories. Our categories generally that we compete in generally don't have deep dose.

<unk> associated with them, we will watch that but our plans are not to do that.

And if you look at our menus themselves because we haven't taken a lot of pricing there is still a lot of value.

On our menu is let me talk about a couple of places, especially at Outback in our combo meals you take a look at what we offer there some really great products at a great price and then secondly in our family bundles offerings at Carrabba's and Bonefish a family can feed a family of four for a great price with great food. So we'll continue to talk about our <unk>.

<unk>, we're not going to plan on any kind of deep discounting we will have an uptick in marketing spend in the balance of the year, but not to the extent that we saw in 2019.

Okay. Thank you.

Our next question is from Alex Slagle with Jefferies. Please proceed with your question.

Thank you and good morning.

Wanted to revisit some of the drivers behind the previous operating margin goals in the bridge is now some of those inputs have moved around a bit with the higher inflation in Brazil.

Continuing to be stronger and then the pricing and not sure what other dynamics to consider I'm just curious what's changed in that how you lay that out now based on how things have evolved.

Yeah sure Hey, good morning, So look as Dave said in the prepared remarks, we are committed to building back to that long term operating margin target of 8% and the reality is based on the guidance. We provided we should have pretty strong operating margin this year despite record inflation.

And the best part is that we don't have to rely on pricing as Dave indicated as the only lever to mitigate the pressures because as you start to move forward and looking past 2022, and you think about the framework that we provided I think the biggest change in that overall operating.

Operating margin framework. We provided is really just some of this technology enabled investment that we're going to start seeding into the P&L and so we remain confident that given some of the things that we've talked about that technology enabled productivity.

Again, it can be deployed over the back half of this year and into next year as well as what hopefully will be certainly we would hope it would be a more moderated commodity environment. In 2023 that you can build back to the long term margin target of 8% that certainly is the goal we're not here to provide guidance for 2023 at this point, but certainly that's in our <unk>.

As we start to think about next year.

In addition, if you think about the levers right. The other levers and these are this is some of the things that I could point out.

Building back in restaurant dining is the best solution to driving higher margins and we still have work to do there, but we're confident that with some of these things that we're putting in place that we're going to get there.

Having a strong off premises business that includes catering which has a very attractive margin is a growth lever digital opportunities with higher rois a growth lever sale.

Sales opportunities in Brazil, another lever that can help improve margins you added things like loyalty programs. So look there's a lot of variables and clearly coming into this year, who would have thought the inflation was going to look like it did so theres a lot of variables that can change, but we are committed to achieving this 8% operating margin target and we think we have the levers move.

Going forward that we can do that and just stepping back a little bit.

That's over 300 basis points higher than we were in 2019 and it was a great achievement by our company and we continue we'll continue to see that and so the big change in operating margin has been a big cash flow has been a big part of what we've been able to achieve the last few years.

Okay. That's helpful.

Just on beef on a follow up I mean, you are locked so perhaps maybe that if you were floating that could have been.

A bit of a temporary tailwind in the quarter, but just interested in your view.

Looking forward, how best to manage that exposure has been could be one protein that stays a bit more elevated in the future.

Yeah sure so you're right the <unk>.

<unk> the spot markets have definitely come down and that does represent.

We're running in the spot market that would represented an opportunity for us, but look I think that we just have a strategy, where we go into every year supply assurance and price assurance means a lot to us right and so that's just a different way to approach. It no way is necessarily better than the other it's just our approach and so what I would tell you is as you think about deep so we have great beef.

Partners and we do have optionality, sometimes with these contracts that we put together, where we can take part in some upsides. If there is some upside so when I talk about potentially be getting a little better there is some opportunity for us to get a little better than our overall beef number. This year in 2022, it's just not going to be beneficial for example, in the second quarter or maybe early <unk>.

The third quarter, if we were in the spot market. If that's if that helps.

That does thanks.

Our next question is from Lauren Silberman with Credit Suisse. Please proceed with your question.

Thank you I wanted to ask about what youre seeing with customer behavior. As you look across the brands. What are you seeing with respect to changes in customer behavior trade down.

Matt are you seeing any differences in trends across channels.

Any color there.

Yeah.

It's been it's been good to see for us and as Chris talked about in the prepared remarks.

Did continue to see a positive menu mix benefit in Q2 and Thats continued into July so we don't see consumers managing their checks at this point in fact in some of our brands. We're seeing continued trade up.

And so that's been really strong for us and so that's one of the reasons why we want to continue to invest behind the marketing and talk about our value in some of the other things we can trade up to in our business that we're seeing so the consumer for us is hanging in there.

Great and as you look at the slowdown in <unk> and across the industry. It sounds like July trends have been crews how much do you think good afternoon sort of broader macro compares relative to normalized seasonality.

I'll start with that and crystals can talk about some of the seasonality but.

We look at the macro trend is a more challenging environment, but the most important thing we stressed in our company is what we do.

Okay, and the things that we do in operations and marketing and food and one thing I also want to mention which I did talk about earlier is our off premises business continues to have some some good legs to it and there is some good consumer trends there as well. So obviously, we're dealing in a more challenging macro environment, but we tried to address the things that we do as we go forward.

Chris I'll turn it over to you for any other color I'll give you a little context on the seasonality thought I think this year, we're much closer to seeing traditional seasonality than you were last year with the stimulus and the Covid fluctuations in fact, if you look at the way we construct our guidance.

We used 2018 2019 as more of a guide for the shape of how our traffic patterns might come in and so what does that mean for.

Quarter like Q3, excluding holidays you go back to June June and July are pretty similar in terms of traffic pattern and flow the way they come into the P&L. So the fact that we did see that acceleration between June and July is pretty encouraging.

And then traditionally volumes would tick up a little bit in August and then then of course they come back down again in September after the kids go back to school and so we've kind of modeled our thinking along that pattern.

Great. Thanks, so much.

Yeah.

Our next question is from John Glass with Morgan Stanley . Please proceed with your question.

Okay. Thanks, good morning.

Can you just talk about what youre seeing in labor inflation would seem like at this point, maybe where staffing is probably easier turnover might be lower I think you're still seeing pressure on that line is driven by some state mandated minimum wages, perhaps coming in key states well, maybe just a quick what's going on in the labor market for you and how you think about turnover improving retention.

Improving et cetera.

Yes, we are seeing the staffing environment improve.

At this time with difficult, although John as you followed our company for a long time and we got off to a very good start because we retained all of our staff. We didn't have some of the staffing challenges of other companies face at that time, but clearly the marketplace has gotten better we're seeing that in our in our metrics and our labor metrics when they get retention be staffing it.

Turnover et cetera, and so the environment is getting better and I'll turn it over to Chris to talk about any of the economics.

Yes.

There are levels of labor inflation, we're pretty consistent between Q1 and Q2 in fact Q2 was us.

Teeny ticked down from what we had seen in Q1, so that does sort of validate what Dave was saying in terms of just the stability. We're seeing and then just in terms of just pure math year over year again similar to what we saw in cost of goods sold the back half of 2021, we started to see labor inflation tick up so just as you start to lap that.

You should start to see some some relief on that number more of the high single digits and then maybe even mid to slightly higher single digits. In Q4, Q3 sort of higher single digits in that Q4, you get to sort of mid to $5 six 7% somewhere in that range.

Thank you and Chris just for the avoidance of doubt maybe I missed this what's the non-GAAP guidance now is it simply.

Is there any other unusuals or maybe just spell out what is the non-GAAP guidance out for earnings for the year.

The non-GAAP to the adjusted it's the $2 45 to $2 55, and then when you look at GAAP guidance the entire difference between the GAAP guidance and the non-GAAP guidance has to do with the convertible.

What we did with the convert by repurchasing and the loss inherent in that.

Okay. Thank you.

Our next question is from John <unk> with Jpmorgan. Please proceed with your question.

Hi, Thank you some questions on capital if I could.

Capex was just I guess tweaked to 200 to 210 on 30 new units in.

That will be opened in 'twenty, two but obviously theres, probably some spillover for units that arent going to open in 'twenty, two but youll spend on 'twenty three.

The question is what is your new unit Capex number.

In 'twenty, two and obviously, what I want to solve for is the non new unit Capex number in 'twenty two.

Yes, we'll pull that up real quick here for you.

New units if you look at 2022.

About $40 million of capital.

On.

Youre, saying $40 million on new units.

<unk>.

Yes, $40 $40 million because a lot of these are Brazil, and they are the smaller box units that we're building. So there are there investments much much lower.

Alright.

And so the remaining number 160 $170 million.

Spent not under units is that the right run rate I mean is that kind of like the necessary repair maintenance investment just keeping the brand current I mean do you think that is that the right base to really think about what you have.

The longer term run rate of capital intensity.

The business, excluding new units.

Yes, John .

I'll turn it over to Christopher ride any more details, but don't forget we've got as you've asked in the past we've got a big rollout right now with handheld and the ovens that's transformational.

I would love to meet you in April some time across the state and I think our new lender out there that now during two hours days no problem. We can do it you can do it tomorrow.

Yes that is high volume has the new kitchen as new handhelds everything in itself that level of capital spending right. Now includes that so it's a bit elevated non new capital, but I'll turn over to Chris to talk about the rest.

So maintenance isn't that I think we've talked about this a little bit before but maintenance is in that $50 million to $60 million a year range, maybe a little higher this year with inflation so call it $60 60 to 65.

But the biggest delta this year that you probably won't see the same degree in future years is that call it $65 million to $70 million of.

Capital that we're deploying in.

Our restaurants for new technology. So that's probably the biggest toggle look as the new but to your point you look into the 2023 and beyond.

At capital comes down we would expect our pipeline to grow so youre going to start to see capital tick up a little bit from where we are here, but again I don't I don't think youre talking about a $300 million number Jon if we're talking about $200 million. This year. It may get as high in the future is $2 50.

Yes, and I did.

We're leading exactly in terms of where I wanted to go.

In terms of kgs in terms of handheld in terms of the grille.

What is it.

How can we kind of circle those numbers in terms of spending for.

For 'twenty, two and 'twenty three and when can we start to really talk about benefits from those programs and Dave to your point. They clamshell grill that I guess at this point I'm, probably most interested in because I assume would be the biggest most substantive change for how the business is run in the future versus how its run in the past.

Yes.

Downplayed the handheld John .

You will see the handheld and our restaurants at Outback by the end of the year and Youll see some of that benefit this year, but most of it next year and then for the ovens will complete at the back half completed the back half of 2023, that's a little bit longer than we than we expected because of some of the supply chain initiatives, but not a lot longer and those.

Benefits are large.

Product quality service times back of the house Labor all of those things are coming together and I mentioned that restaurant in April so it's a very high volume restaurants got everything in it and so it's.

And performing very well so those are the kind of things you can see from us John moving forward and that will be that'll be in our we talked about 2023 and when we get to that point, we will talk about some more of that some of the financial benefits that come with that.

Just so I have the updated timing on Tds.

That will be done.

During 2022 and leasing a bit into 'twenty three.

Okay. Thank you.

Our next question is from Jeff Farmer with Gordon Haskett. Please proceed with your question Hi. Thanks.

Thanks, and good morning, just wanted to follow up on a couple of things. So first would be July same store sales.

I think you guys pointed to a sequential improvement in trends in July . So I was just curious if you were talking or referring to both the U S and Brazil, when you made that comment.

The U S sequentially has gotten stronger in Brazil, I don't have off the top of my head. It's about the same testing, which has been which has been terrific by the way.

Had a great year, so far and then just.

Sort of drilling down a little bit further so July is that versus the <unk> or were you referring to June on the sequential improvement.

Versus versus June July July has improved versus where we were in June . Okay. Helpful. And then just one last one so early in the call.

You made some third party delivery margin comments. So the question is where do off premise.

Meaning both curbside.

And delivery margins stand relative to in restaurant margins are right now.

So the.

Like we've said that the good part about curbside is as those margins are effectively the same as our in restaurant margins. So we feel we feel really good about the curbside and again that is the largest portion of our overall off premise mix right.

In terms of third party margins, they're not as good as in restaurant margins, but they're still really attractive right. So as long as and the best part is what we just talked about is that because they are incremental sales and we feel very comfortable saying that these are incremental sales you get better flow through on that you get those ceding into your P&L, you're not trading between and <unk>.

Restaurant visit.

Don't get all the benefits, so again, a little bit lower but still really good.

Last quick follow up in terms of thinking about those off from a sales it's roughly two five times pre COVID-19 levels just.

Just as we sit here in the third quarter of 'twenty two what's your updated thinking on the incremental nature and sustainability of those off premise sales for you guys. So we think there are sustainable we've got the people the systems the processes in place clearly our customer is wanting our.

Products in their homes and carry out or delivery and we expect to see that continue to grow in the years ahead, and then Jeff One last thing I wanted to mentioned you touched on it but I want to make sure sometimes Brazil doesn't get the attention with investors that it could and if you look at our same store sales growth our margins and our new unit performance is having a terrific.

Terrific year down there and PR and team are doing just a great job. So I wanted to make sure I call that out.

On our call today.

Thank you.

Our next question is from John Power with Citi. Please proceed with your question.

Great. Thanks for taking it actually I guess, just hitting on that Brazil topic, I know in past cycles election cycles that is.

Demand in that market from consumers seems to get a little over attic. So I'm curious with an election coming this fall do you guys have any plans to maybe proactively ensure that demand doesn't.

Chop around a little bit or are you doing any advertising that could hopefully draw some customers than even if they are a bit distracted by what's happening.

Yes, John .

Yes very.

Forward looking question.

Yes, we are we have very strong marketing plans in Brazil to deal with the balance of the year.

I don't want to get into what exactly those are but believe me we spend a lot of time talking about it and the team down there is well ahead of it and.

That team has been through election cycles in the past and has done a great job, but we are well ahead of that planning.

Okay, and then just I don't want to beat a dead horse here, but going back to inflation outlook for later this year 23.

There are indications that the beef supply in the U S will come down pretty significantly year over year likely impacting prices. So I'm kind of curious to get your thoughts on how you think about securing supply but also pricing for next year does this impact the timing on when you would lock.

Or potentially not lock in just curious to get your thinking around that.

Yeah, I don't again, though if you prioritize making sure you have supply assurance then youre variability in your timing is a little less there may be some kind of contract negotiations that take a little longer a little shorter than we normally would but we typically start those conversations in September and we typically don't lock anything down until the very end of the year.

So I don't foresee that changing but your points are all correct. I think there is a very fluid market and it's been it's been good now they've talked about supply for next year I think we just keep an eye on all of that and we'll figure out what the best decision is for the company, but your points are all spot on and they're all top of mind for us.

Goal and then just last from me I'm, just curious from a higher level. Obviously the industry has gone through quite a bit of inflationary pressures have you seen any indications in some of your markets, where smaller chains or independents that have accelerated the pace of closing stores or is it still kind of status quo.

No I don't think we've seen any of that I mean, I think that you are seeing smaller chains and stores get a little more aggressive on the discounting side, but thats about all these things.

Cool thank you.

Our next question is from Brian Vaccaro with Raymond James. Please proceed with your question.

Hi, Thanks, and good morning, I wanted to circle back on the new equipment package. It out back can you just give us a status update on how many have it installed when.

When you expect to complete the rollout or how many kind of just how many by the end of this year and fully rolled and David you started touching on a little bit but can you quantify some of the benefit that youre seeing in terms of order accuracy throughput labor savings can be can we ballpark some of those things.

Yeah.

It's a little too early to ballpark some of those things yet because you.

By the end of the year by the end of the third quarter will have installed.

About 140.

And.

What we're seeing though and I don't want to get into for competitive reasons. Some of the labor savings and other things. So let me talk broadly about it but it takes fewer people to work on the back of the house with this new equipment.

The order accuracy is much improved again. This is this is just to start so we don't want get too far ahead of myself here, Brian , but we're very enthused by the order accuracy the table turns.

Is is faster because the product comes out faster and then we're seeing broadly for outback improvement in our customer scores I've talked about in our prepared remarks. If you look at our food scores our service scores those things are coming together to to look to.

Really provide some good results. So we'll see we'll finish this at the back half of 2023 with our back of the house equipment. The handheld will be done by the end of the year and we'll provide more of an update on that Brian we have more <unk>.

Demonstrated achievement, we're very optimistic about it but it's probably a little too early to provide some real specifics, but we are seeing it in back of the house labor and in our customer measures.

Okay. Thanks for that.

On the marketing.

Chris that sorry, if I missed it but what was the marketing spend as a percent of sales in the second quarter and can you help us ballpark, where that spend you plan to take it in the second half what is embedded in that guide just ballpark.

Yes, I think I think it's probably closer to the 2% of sales range, but I'll have Marc confirm that.

Where we landed in Q2 and what was the other part of your question about the back half Brian Yeah, just what you've embedded you said I think you're you have plans to increase your marketing spend in the back half of the year I'm just trying to gauge the level of that investment versus what we've seen in the P&L.

In the second quarter.

Year over year, probably between each SKU in Q3 and in Q4, you are probably up $10 million or so in Q3, and Q4 would be my guess relative to last year $10 million in each quarter roughly correct, yes, and I was Mister graph is 10.

With me that I was spot on on the 2% of sales in Q2.

Alright, alright, well done on that and then last one just to clarify the July commentary is that a one year comment versus 19, if that's relevant and then.

In the spirit of trying to just level set where we are would you be willing to quantify July versus June that's all I had thank you.

Yes, so it is a one year.

And importantly, before I forget the point is that we.

You cut back and again, we talked about the the value of three year comps that three year same store sales number has been pretty consistent.

Irrespective of kind of the time period, I'm, a little bit of a dip in June but we've been consistently in that kind of double digit same store sales number on a three year basis.

Not going to get too specific in terms of June or July trends definitely though if you and I look let's be clear, they're both they both dipped negative which would make sense given kind of where our comps landed in Q2.

But there is definitely an improvement between June and July which is pretty encouraging because it wasn't just an improvement in the beginning of July just had a sea change we've seen slow steady improvement as July has progressed.

And thats pretty encouraging.

Alright, Thank you I'll pass it along.

Our next question is from Jared Garber with Goldman Sachs. Please proceed with your question.

Great. Thanks for thanks for the question I wanted to actually swing back to the marketing that you just discuss a little bit it looks like if we flow in sort of that $10 million of corner over the next couple of quarters, it looks like you're pushing up.

Maybe two and a half or a little bit higher than that by the end of the year.

I think the pre COVID-19 levels around 3% I know you guys are targeting to be below that how should we be thinking about the level of marketing spend as it relates to sales.

Going into 'twenty three is it fair to assume that that two and a half maybe a little bit higher than that sustains going forward and then just as it relates to the marketing specifically can you help us understand how how you expect to see that manifest maybe with a slowing consumer backdrop, and how you expect to maybe leverage value messaging or broader.

Brand building messaging within that that marketing plan, yes.

Yeah, we as I mentioned earlier with our if you look at just our menu offerings at Outback in particular.

The combos that we have in some of the other values that we have a very compelling, especially when you line them up with other players in the industry and we're going to talk about that.

And the thing that the thing that we have about marketing as we've learned so much on digital we have tremendous flexibility, we can toggle it up or down depending on the returns that we're seeing so the investments there we have a very good understanding what those returns look like we have very good understanding of what we're going to be marketing, we're not going to be doing.

Deep discounting, but we will be looking at some of our menu items at outback that offer a very good value versus.

Versus some of the competition, so that's where we're going to be spending our money and like I said, we have an excellent understanding of the returns and we have an excellent understanding of the ability to flex up or down depending on what we're seeing yes. So marketing in 2019 was three 5% of sales and so when we laid out our long term margin framework, We said Hey, you know what.

We're not going to spend to that it's probably going to be at levels approaching 3% well look I think that as we've learned and we've gotten better at this I think that we feel like this two to two 5% of sales range is a pretty good range. It makes sense was 2% in Q2 to your point it may tick up a little bit as a percentage of sales Q3 Q4, but it.

Feels like that's a pretty decent proxy and looked and we reserve the right to change our mind on this but two to two 5% of sales feels pretty good and as we look at the consumer environment, We get real time information every day and how we're doing and we can move that up or down depending what we're seeing with the consumer and what we're seeing with competition. So I'm very pleased with the flexibility we have on this.

And the returns that we're getting in our marketing space.

Thanks for the color there just just one follow up for me on the Outback traffic line it looks like.

Traffic versus 19 down about four 5% and an average checks up 14, 5% versus the same time period. I know you I know you mentioned, the consumer still sort of trading up in that mix.

Mixed benefit in the quarter, but can you just help maybe contextualize, maybe what youre seeing versus 2019 is there anything that would suggest that the consumer.

Bulking, so to speak for lack of a better term it that some of the increases over time as we see that traffic trend that blower.

No we are not seeing a consumer bulk and I want to remind.

The investors that we changed our marketing profile quite a bit.

At Outback versus 2019 as far as the level of discounting and marketing spend so as you look at that traffic piece. Please keep that in mind, we talked about changing how we work going forward.

At Outback, but no the traffic trends and the trends, we're seeing at Outback like we've seen sequential improvement and we're seeing the benefits of some of our marketing and I'll turn it over to Chris on the rest of that but I'll, just emphasize that point and add a little more context, I mean, choosing not to replicate that that activity does remove a.

<unk> portion of traffic from our base that was incentivized by discounted offers and it also keep in mind Outback traffic relative to 19 was still ahead of black box or whatever measure you want to use by over 200 basis points and that's traffic right. So and now we're making additional marketing investments and outback that will help drive.

Traffic so they carry a higher ROI, we've talked about this so look the environment continues to change and remain dynamic, but we're going to continue to maintain our strategy of keeping those deep discounts that we had back in 19 out of the brand.

Great. Thanks for that reminder.

Our next question is from Brian Mullan with Deutsche Bank. Please proceed with your question.

Thank you just a question on development as it stands today, what do you. What do you think is a reasonable way to think about net unit growth in the U S next year.

Wondering if 3% is something that could be in the cards or if not how much how long might it take to build up to that 3% growth rate on a net basis, and then just related to that outside of equipment delays.

Is there any scenario, where you would put a pause on this due to macro or you're pretty committed to the development regardless of the environment.

And my answer the second question first of all my career some of the best.

Move that we made in companies I've been involved is when the when the economy is a little a little tough you can really make headwind on site.

Maybe save some cost et cetera on a net basis, we aren't going to get into 2023 guidance for 2020 for guidance at this point, but.

2% to 3% growth on a net basis I do know and we will provide more context on that as the year goes along and into next year. So we want to continue to build that in the years ahead, but I can tell you looking at the pipeline that our real estate team is developing especially at Outback, we're seeing some really great.

Sites.

The right trade areas in the right parts of the country with really good returns and that pipeline is growing so I would anticipate that that 2% to 3% I'm talking about on a net basis continues to expand in the years ahead, but it's a little premature to go beyond that but we'll talk about that more in future calls, but youre going to see our pipeline move up and that's why.

The reasons, why we ask Mark Graf to move over to that part of the world and make it happen because you are going to make that happen for us along with the team.

Okay, Thanks, and as a follow up lastly, you mentioned converting to a new dine rewards program point space. Just wondering if you could elaborate on that a little bit you know exactly what will change with the program how is that going so far as to consumer maybe you could just talk about the benefits you expect to see over time as a result of that change.

Yeah, we went to a from a visit.

Based program to a points based program, which offers US a lot more flexibility gets your work to our customers a lot faster, we're seeing an uptick in the sign ups and this is just the start we can look at more marketing programs I think the benefits of the company into the consumer both it's the magic of the <unk> are both coming together.

Not quite costly for us, but the consumer gets rewarded more quickly and there's partnership opportunities here that we're going to take advantage of so I think we're going to see greater sign ups are going to see greater marketing and then once people sign up theyre going to use it more and more and more and then we get all that information to market to our customers, which is still valuable. So this we are very excited about the few.

Each of our Diamond Awards program, what it offers.

Okay that totally complete the transition just for clarification.

And stuff.

Okay. Thank you.

We have reached the end of the question and answer session and I will now turn the call over to Dave Deno for closing remarks.

Well. Thank you everybody and thank you for your interest in our company and we look forward to talking to you. Some more at the conclusion of Q3 in October .

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

Okay.

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Greetings and welcome to the Blue Moon brand fiscal second quarter 2022 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 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 second quarter 2022 earnings release.

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

Our SEC filings, which are available at SEC Gov during.

During today's call, we'll provide a brief recap of our financial performance for the fiscal second quarter 2020 to an overview of company highlights and an update to 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 Q2 2022 diluted earnings per share was <unk> 68 versus <unk> 81 in Q2 2021, while results were below last year. Our Q2 earnings per share was nearly double of what we achieved in 2019.

As it relates to 2021, you are lapping exceptional earnings due to stimulus payments and pent up consumer demand. In addition, Q2 was also the highest inflationary quarter of the year.

We made a conscious decision to preserve our value equation and not raise prices to fully offset inflation.

We believe the short term decision will have long term benefits for the business the.

The confidence in our strategy, both domestically and internationally as reflected in our increased revenue guidance. This was driven in large part by the success. We saw in our sales initiatives through the first half of the year and the marketing investments, we're making in the back half of the year.

During the quarter, we saw positive trends through may but experienced softer trends in June consistent with the industry.

Fortunately the comprehensive plan, we established to build a stronger leaner operation centric company latest solid foundation for us to navigate this challenging environment with.

We leveraged our leading off premises business growing digital capabilities and improved operational efficiencies to deliver on our key commitments.

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

The plans in place set us up well to achieve our objectives strengthen the business and provide momentum for 2023 and beyond.

The key elements of our plan include.

First grow in restaurant sales by improving service levels and food offerings the.

The investments made over the past few years to elevate the customer experience are showing up in improved social especially at outback.

As part of this effort, we continue to look for ways to simplify the business to improve execution and consistency.

We are rolling out several innovations such as new cooking technology, including advanced grills to improve food quality and productivity.

We are also installing kitchen display systems for meal pacing and handheld technology for our servers. These innovation should reduce costs and further improve customer service.

We're also deploying more targeted marketing to build awareness and drive frequency.

These initiatives are aimed at highlighting our great menu in the everyday value that we offer to guests importantly, this was accomplished without sacrificing product quality or the guest experience and.

In addition, these programs offer high returns and are not reliance on deep discounting to drive traffic.

Second expand our leading off premises business, we continue to capitalize on our strong carryout delivery capabilities retention levels held steady with Q1 and are contributing to our sales outperformance third party delivery continues to grow even as people are returned to in restaurant dining.

Importantly profit margins in this channel are comparable the margins of the in restaurant business.

This is the result of initiatives that were completed in the past few quarters. We are also pursuing catering opportunities as people continue to return to offices.

We offer significant value through our bundled platforms, which includes group planners for large parties and our individual box option.

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

Third leverage operating margin 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 lts and pivoted advertising spend towards more targeted higher return digital channels and.

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

As Chris will discuss despite large increases in food and labor inflation, we've been able to achieve our operating margin objectives.

We remain committed to our long term goal of 8% operating margins.

And finally, becoming even more digitally savvy company in Q2, approximately 75% of total U S off premises sales were through digital channels.

After 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.

Both have outperformed expectations in the new App is over 2 million downloads you can expect to see more activity as we improve the functionality and features of our App and digital offerings.

Our growth priorities are first accelerating new unit growth at Outback, we developed a smaller and less expensive prototype that will enable more meaningful growth with healthy returns. This includes pursuing new trade areas in rapidly growing markets as well as fill in opportunities in major metro areas.

To date, we have opened four new smaller locations with strong sales and positive guest feedback.

Rumors are taking notice of the new design and are giving us high marks on the brighter ambiance decor redesign bar and New service model. In addition, we continue to upgrade and contemporary as our asset base investments in Remodels are offering good returns and recent relocations at Outback are providing outsized sales lift in volumes exceeding $4 6 million.

Well above the system average.

Third Brazil as the category leader and they are seeing a strong recovery in both sales and profits new restaurants continue to open above expectations. We are on track to opened 16, new Outback this year and have a robust pipeline for growth. There are currently 135 locations in Brazil, and we believe we can grow this brand to approximately 240 restaurants over.

Time in this underpenetrated market.

And with that I will now turn the call over to Chris will provide more detail on Q2 and thoughts for the remainder of 2022.

Primarily in Brazil.

GAAP to the industry in both sales and traffic versus 2019.

At 25% of U S sales Q2 off premises was down slightly from 26% of sales in Q1 as expected there continues to be some trade from our curbside business to in restaurant dining occasions.

<unk> the highly incremental third party delivery business continues to grow and was 12% of U S revenues in Q2 versus 11, 5% in Q1.

In terms of concept performance Outback was 28% of sales and Carrabba's was 33% of sales.

Off premises remained sticky and is a large part of our ongoing success. It will be a key part of our growth strategy moving forward.

Average check was up seven 9% in Q2 versus 2021. This was in line with internal expectations Q2 menu pricing was relatively consistent with Q1 at five 8% and the remaining two 1% was menu mix.

As it relates to other aspects of our Q2 financial performance.

GAAP diluted loss per share for the quarter was 72.

Versus 75 of diluted earnings per share in 2021, the GAAP loss was almost entirely driven by the accounting treatment for the repurchase of our convertible notes given the converts were so heavily in the money. The total consideration paid in cash and shares was $246 million.

Are price appreciation, we are confident that our repurchase of these notes was a prudent economic decisions.

Adjusted diluted earnings per share was <unk> 68 versus <unk> 81 of adjusted diluted earnings per share in 2021. In addition, our Q2 result was nearly double our 2019 adjusted EPS of <unk> 36.

Percent.

<unk> was 320 basis points above 2019 levels, we continue to benefit from simplified menus and operations growth in our international business as well as increased average check.

And finally, a note on Q2 taxes, our adjusted tax rate in the quarter was 14% benefiting from discrete Q2 tax items given the lower rate in Q2, we now expect to be closer to the lower end of our 2022 guidance range of 16, 5% to 17, 5%.

We remain committed to a balanced capital allocation strategy.

Turning to 2022 guidance, we are increasing our 2022 guidance for total revenues to be between $4 4 billion and 445 billion.

This is up from our prior guidance of $435 billion to $4 4 billion. This increase was driven by a few factors first we had higher than expected revenues in the first half of 2022, both domestically and in Brazil.

We have increased our marketing investment in the back half of the year and finally, we will take some incremental pricing primarily impacting Q4.

Fitz from increased revenues to be offset by higher than expected inflation. The higher inflation is being seen primarily in commodities utilities operating supplies and R&M.

Persistent inflation in some of our less locked commodity basket, including seafood dairy and freight we are now 89% locked on our commodity basket for the year.

This is down from prior guidance of $2 23.

To $2 32.

The entire change to the GAAP diluted EPS guidance is driven by the accounting loss on the retirement of our convertible notes.

As it relates to tax rate the accounting loss on the convert is non deductible for tax purposes, and we now expect our GAAP tax rate to be between 28% and 29%.

<unk> and our share price as it relates to the value of the convert.

As it relates to future impacts from the convert our adjusted diluted share count always captures the full potential share dilution from the converts based on where our stock trades over the course of the quarter.

Of the convert.

Now turning to third quarter guidance, we expect Q3 revenues to be between 1.05 billion and $1.07 billion.

And we expect adjusted EPS to be between $31 36.

This guidance reflects a continuation of strong performance in both the U S and in Brazil for perspective, our adjusted EPS in Q3 of 2019 was 10.

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

A 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 Mchugh.

Ask that you please limit yourself to one question and one follow up.

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

One moment, please while we poll for questions.

Our first question is from Jeffrey Bernstein with Barclays. Please proceed with your question.

Great. Thank you very much two questions. The first one just on your guidance for the rest of the year.

I understand that inflation is pressuring the earnings.

Wondering why raise the revenue guidance into what seems to be a slowing macro.

You mentioned a softening in June just wondering your confidence in sustaining the revenue momentum, despite that slowdown and whether or not you'd comment on July .

That would be great. So specifically just around the revenue guidance raise into a slowing macro and then I had one follow up.

Sure good morning.

We'll answer it briefly and then turn it over to Chris on any specifics but.

On the revenue side with the first half was very good for US Brazil has been very good and in July we've seen a sequential improvement in trends Tony.

So when you bake that in and look at what the balance of the year looks like Jeff. Those are the factors that are causing our revenue guidance to go up which we're very pleased about.

Yeah, and just to give a little additional color Jeff so.

Marketing investment and the benefits from incremental pricing that we would take in the back half of the year.

We haven't built all of the benefits from these initiatives into my guidance because there is there is still some macro uncertainty out there but.

But between the marketing and the pricing that makes up the other $25 million, but.

In terms of why raise that to think about it this way the full year comp guide that we're implying in the back half both in Q3, and then maybe a little slightly higher in Q4 is basically flat same store sales in Q3, and then maybe a little bit better than flat in Q4.

Understood and then the follow up just on inflation.

Some of your peers have actually tempered their inflation guidance.

Coming along as far as calling the top on inflation just looking to get your thoughts whether you would agree or whether you expect further accelerating commodity inflation, maybe you could just share what your first half basket was and what your second half assumption is for your commodity basket, there and any color you can provide in terms of that inflation and maybe what it looks like as we look into 'twenty three.

Yeah.

Yeah, Yeah sure. So look I think the first half was in the high teens in terms of commodity inflation.

Third quarter is probably going to be mid teens, or so and then Q4 is going to be probably low double digits, 10% to 12% somewhere in that range and I think that the dynamic of that has more to do with what we're lapping from a year ago, because if youll recall again when it comes to our inflation last year in the first half.

Of the year and in Q2 for example, we were deflationary in our commodity basket and then that started to tick up as the year progress. So we're going to get some benefit from the lab now as it relates to just how our commodities are performing this year.

Look there's no question our commodity inflation is higher than what we were thinking when we started the year.

There is record high demand so it's putting some pressure on some categories, where I think you may see some difference between us and maybe some of the other folks is just our the way we buy our beef for example, we're pretty much locked in on beef in fact, we have probably more upside in beef in the back half of the year than we do in some of the other categories were 90% locked now at.

This point on our overall basket. So there just isn't going to be as much variability when youre not buying spot on a large portion of your overall buy if that makes sense.

It does thank you very much.

Our next question is from Sharon Zackfia with William Blair. Please proceed with your question.

Hi, Good morning, I guess, a question first on the value proposition side.

Recognizing you've been very diligent about kind of keeping and priced well below inflation can you talk about the planned price increase for the second half.

The magnitude of that and also combined with that the marketing plans for the second half, maybe contrast versus the first half or relative to 2019 and give us some flavor.

What kind of marketing will be expecting and will it be more price focused our brand building any context, there would be helpful.

Sure.

Well those are kind of two questions. So we'll start with the first one on pricing I'll kick it off the top of the Chris and we'll come back to the marketing side, but.

Yes, but we will price.

Below inflation, probably to keep our value equation going and Chris I'll turn it over to you for any other comments on the inflation side well, yeah, just to give context around the menu pricing so.

Given the inflation as Dave mentioned came in higher than expected. We did we took some additional pricing. This year, we were at basically a five 8% pricing in Q Q1, and in Q2, so that didn't change as it looks to what I inferred that we might be taking more pricing in the back half of the year I think if you broke apart our guidance were effectively assuming about it.

Inflationary pressures that we're seeing so far.

And we.

We have a lot as you know we have a lot of productivity initiatives initiatives also helping us on the margin side now let me let me turn to your marketing question, we have uptick to our marketing spend and we will up ticket the balance of the year nowhere near 2019 levels. We.

Learn and also we learned a lot about marketing and how we go to market through digital through cable et cetera, and that mix is really heavily digital and Sharon we're not going to participate in deep discounting in our categories. Our categories generally that we compete in generally don't have deep.

Discounting associated with them, we will watch that but our plans are not to do that.

And if you look at our menus themselves because we haven't taken a lot of pricing. There is still a lot of value on our menu is let me talk about a couple of places, especially at Outback in our combo meals you take a look at what we offer there some really great products at a great price and then secondly in our family bundle offerings at Carrabba's and Bonefish.

<unk>.

Family.

Feed a family of four for a great price with great food. So we'll continue to talk about our value we're not going to plan on any kind of deep discounting we will have an uptick in marketing spend in the balance of the year, but not to the extent that we saw in 2019.

Okay. Thank you.

Our next question is from Alex Slagle with Jefferies. Please proceed with your question.

Thank you and good morning.

Just wanted to revisit some of the drivers behind the previous operating margin goals in the bridge is yes. Some of those inputs have moved around a bit with the higher inflation in Brazil.

To be stronger than that in the pricing and not sure what other dynamics to consider I'm just curious what's changed in that and how you lay that out now based on how things have evolved.

Yeah sure Hey, good morning, So look as Dave said in the prepared remarks, we are committed to building back to that long term operating margin target of 8% and the reality is based on the guidance. We provided we should have a pretty strong operating margin this year despite record inflation.

Again, it can be deployed over the back half of this year and into next year as well as what hopefully will be certainly we would hope it would be a more moderated commodity environment. In 2023 that you can build back to the long term margin target of 8% Thats certainly is the goal we're not here to provide guidance for 2023 at this point, but certainly that's in our thing.

As we start to think about next year.

In addition, if you think about the levers right. The other levers and these are just some of the things that I could point out.

Having a strong off premises business that includes catering which has a very attractive margin is a growth lever digital opportunities with higher rois a growth lever sale.

Going forward that we can do that and just stepping back a little bit.

That's over 300 basis points higher than we were in 2019 and grid.

Greg do you buy a company and we continue we will continue to see that and so the big change in operating margin has been a big cash flow has been a big part of what we've been able to achieve the last few years.

Okay. That's helpful and just on beef on a follow up I mean, you are locked so perhaps maybe that if you were floating that could have been.

A bit of a temporary tailwind in the quarter, but just interested in your view looking forward how best to manage that exposure has been could be one protein that stays a bit more elevated in the future.

Yes, sure so youre right the markets the spot markets have definitely come down and that does represent.

We're running in the spot market that would represent as an opportunity for us, but look I think that we just have a strategy, where we go into every year supply assurance and price assurance means a lot to us right and so that's just a different way to approach. It no way is necessarily better than the other it's just our approach and so what I would tell you is as you think about deep so we have great beef.

Partners and we do have optionality, sometimes with these contracts that we put together, where we could take part in some upsides. If there is some upside so when I talk about potentially be getting a little better there is some opportunity for us to get a little better than our overall beef number. This year in 2022, it's just not going to be beneficial for example, in the second quarter or maybe early <unk>.

In the third quarter, if we were in the spot market.

That helps.

That does thanks.

Our next question is from Lauren Silberman with Credit Suisse. Please proceed with your question.

Thank you I wanted to ask about what youre seeing with customer behavior as you look across the brands.

Are you seeing with respect to changes in customer behavior trade down.

Matt are you seeing any differences in trends across channels.

Any color there.

Yeah.

It's been it's been good to see for us and as Chris talked about in the prepared remarks.

<unk> did continue to see a positive menu mix benefit in Q2 and Thats continued into July so we don't see consumers managing their checks to this point in fact in some of our brands. We're seeing continued trade up.

Great and as you look at yes, slowdown mcghee and across the industry. It sounds like July trends have been crews how much do you think good afternoon sort of broader macro compares relative to normalized seasonality.

I'll start with that and crystals can talk about some of the seasonality but.

We look at the macro trend that is a more challenging environment, but the most important thing we stressed in our company is what we do.

And the things that we do in operations and marketing and food and one thing I also want to mention which I did talk about earlier is our off premises business continues to have some some good legs to it and there is some good consumer trends there as well. So we obviously, we're dealing in a more challenging macro environment, but we try and stress the things that we do as we go forward.

Chris I'll turn over to you for any other color I'll give you a little context on the seasonality thought.

This year, we're much closer to seeing traditional seasonality than you were last year with the stimulus and the Covid fluctuations in fact, if you look at the way we construct our guidance.

We used 2018 2019 as more of a guide for the shape of how our traffic patterns might come in and so what does that mean for <unk>.

A quarter like Q3.

Alluding holidays, you go back to June June and July are pretty similar in terms of traffic pattern and flow the way they come into the P&L. So the fact that we did see that acceleration between June and July is pretty encouraging.

Great. Thanks, so much thank.

Thank you.

Our next question is from John Glass with Morgan Stanley . Please proceed with your question.

Hey, Thanks. Good morning, first can you just talk about what youre seeing in labor inflation would seem like at this point, maybe where staffing is probably easier turnover might be lower I think you're still seeing pressure on that line is driven by some state mandated minimum wages, perhaps coming in key states, maybe just a quick what's going on in the labor market for you.

And how you think about turnover improving retention improving et cetera.

Yes, we are seeing the staffing environment improve.

At this time with difficult, although Jonathan you followed our company for a long time and we got off to a very good start because we retained all of our staff. We didn't have some of the staffing challenges of other companies faced at that time, but clearly the marketplace has gotten better we're.

We're seeing that in our in our metrics and our labor metrics, where they get retention with staffing your turnover et cetera, and so the environment is getting better and I'll turn it over to Chris to talk about any of the economics.

Yes.

Low levels of labor inflation, we're pretty consistent between Q1 and Q2 in fact Q2 was us.

Jeannie ticked down from what we had seen in Q1, so that does sort of validate what Dave was saying in terms of just the stability. We're seeing and then just in terms of just pure math year over year again similar to what we saw in cost of goods sold the back half of 2021, we started to see labor inflation tick up so just as you start to lap that.

You should start to see some some relief on that number more of the high single digits and then maybe even mid sales slightly higher single digits. In Q4, Q3 sort of higher single digits in that Q4, you get to sort of mid to $5 six 7% somewhere in that range.

Thank you Chris just for the avoidance of doubt maybe I missed this what's the non-GAAP guidance now is it simply adding is there any other unusuals or maybe just spell out what is the non-GAAP guidance out for earnings for the year.

The non-GAAP to the adjusted it's the $2 45 to $2 55, and then when you look at GAAP guidance the entire difference between the GAAP guidance and the non-GAAP guidance has to do with the convertible.

So what we did with the convert by repurchasing and the loss inherent in that.

Okay. Thank you.

Our next question is from John <unk> with Jpmorgan. Please proceed with your question Hi.

Hi, Thank you some questions on capital if I could.

Capex was just I guess tweaked to 200 to 210 30, new units in that.

That will be opened in 'twenty, two but obviously theres, probably some spillover for units that arent going to open in 'twenty, two but youll spend on 'twenty three.

So the question is what is your new unit Capex number in 'twenty, two and obviously, what I want to solve for is the non new unit Capex number in 'twenty two.

Yes, we'll pull that up real quick here for you.

So new units if you look at 2022 its up.

$40 million of capital.

On.

You're spending $40 million on new units.

I'm 30.

Yes, $40 $40 million because a lot of these are Brazil, and they are the smaller box units that we're building. So there are investments much much lower.

Okay Alright.

Fine.

The remaining number 160 $170 million you guys.

Spent not on new units is that the right run rate I mean is that new kind of like the necessary repair maintenance investment just keeping the brand current I mean do you think that is that the right base to really think about what the longer term run rate of capital intensity of the business excluding new units.

Yes, John .

I'll turn it over to Christopher ride any more details, but don't forget we've got as you've asked in the past we've got a big rollout right now with handheld and the ovens that's transformational.

In fact, I'd love to meet you enable some time across the state and I see our new lender out there that.

During two hours, Dave No problem, we can do it you can do it tomorrow.

That is high volume has the new kitchen as new handhelds everything in it so that level of capital spending right. Now includes that so it's a bit elevated non new capital Baltimore over to Chris to talk about the rest.

So maintenance isn't that I think we've talked about this little bit before but maintenance is in that $50 million to $60 million a year range, maybe a little higher this year with inflation so call it $60 60 to 65.

The biggest delta this year that you probably won't see to the same degree in future years is that call it $65 million to $70 million of.

Capital that we're deploying in.

Our restaurants for new technology, So thats, probably the biggest toggle look as the new but to your point you look into the 2023 and beyond.

Yes, and I did.

We're leaving exactly in terms of where I wanted to go.

In terms of kgs in terms of handheld in terms of the grille.

What is it.

How can we kind of circle those numbers in terms of spending for.

Yes.

Downplayed the handheld John .

See the handheld and our restaurants at Outback by the end of the year and Youll see some of that benefit this year, but most of it next year and then for the ovens will complete at the back half of completed the back half of 2023, that's a little bit longer than we than we expected because of some of the supply chain initiatives, but not a lot longer.

And those benefits are large.

Quality service times back of the house Labor all of those things are coming together and I mentioned that restaurant in April just a very high volume restaurants got everything in it and so it's up and performing very well. So those are the kind of things you can see from us John moving forward and that'll be that'll be in our we talked about 2023 and when we.

To that point, we will talk about some more of that some of the financial benefits that come with that and just so I haven't the updated timing on kgs.

That will be done.

<unk> 2022, and leasing a bit into 'twenty three.

Okay. Thank you.

Our next question is from Jeff Farmer with Gordon Haskett. Please proceed with your question Hi. Thanks.

Thanks, and good morning, just wanted to follow up on a couple of things. So first would be July same store sales.

I think you guys pointed to a sequential improvement in trends in July . So I was just curious if you are talking or referring to both the U S and Brazil, when you made that comment.

The U S sequentially has gotten stronger in Brazil, I don't have off the top of my head. It's about the same thing, which has been which has been terrific by the way.

Had a great year, so far and then just.

Sort of drilling down a little bit further so July is that versus the <unk> or were you referring to June on the sequential improvement.

Versus versus June July July has improved versus where we were in June . Okay. Helpful. And then just one last one so early in the call.

You made some third party delivery margin comments. So the question is where do off premise.

Meaning both curbside.

And delivery margins stand relative to in restaurant margins right now.

So.

In terms of third party margins, they're not as good as in restaurant margins, but there is still really attractive right. So as long as it and the best part is what we just talked about is that because they are incremental sales and we feel very comfortable saying that these are incremental sales.

Get better flow through on that you would get those ceding into your P&L, you're not trading between an in restaurant visit where you don't get all the benefit so again, a little bit lower but still really good.

And just last quick follow up in terms of thinking about those off from a sales it's roughly two five times pre COVID-19 levels.

As we sit here in the third quarter of 2002, what's your updated thinking on the incremental nature.

And sustainability of those off premise sales for you guys. We think theyre sustainable we've got the people the systems the processes in place clearly our customer is wanting our products in their homes.

Carryout or delivery and we expect to see that continue to grow in the years ahead, and then Jeff One last thing I wanted to mentioned you touched on it but I wanted to make sure sometimes Brazil doesn't get the attention with investors that it could and if you look at our same store sales growth our margins and our new unit performance is having a terrific terrific year down there in <unk>.

Team are doing just a great job. So I wanted to make sure I call that out.

In our call today.

Thank you.

Our next question is from Jon Tower with Citi. Please proceed with your question.

Great. Thanks for taking it actually I guess, just hitting on that Brazil topic, I know in past cycles election cycles that is.

Demand in that market from consumers seems to get a little over attic. So I'm curious with an election coming this fall do you guys have any plans to maybe proactively ensure that demand doesn't.

Chop around a little bit are you doing any advertising that could hopefully draw some customers than even if they are a bit distracted by what's happening.

Yes, John .

Yes very.

Forward looking question, yes.

Yes, we are we have very strong marketing plans in Brazil to deal with the balance of the year.

I want to get into what exactly those are but believe me we spend a lot of time talking about it and the team down there is well ahead of it and we.

That team has been through election cycles in the past and have done a great job, but we are well ahead of that planning.

Okay, and then just I don't want to beat a dead horse here, but going back to inflation outlook for later this year 23.

Or potentially not lock in just curious to get your thinking around that.

Yes.

Again, though if you prioritize making sure you have supply assurance then youre variability in your timing is a little less there may be some kind of contract negotiations that take a little longer a little shorter than we normally would but we typically start those conversations in September and we typically don't lock anything down until the very end of the year. So I.

Don't foresee that changing but your points are all correct. I think there is a very fluid market and it's been it's been good now they've talked about supply for next year I think we just keep an eye on all of that and we'll figure out what the best decision is for the company, but your points are all spot on and Theyre all top of mind for us.

Goal and then just last from me I'm, just curious from a higher level. Obviously the industry has gone through quite a bit of inflationary pressures have you seen any indications in some of your markets, where smaller chains or independents have accelerated the pace of closing stores or is it still kind of status quo.

No I don't think we've seen any of that I mean, I think that you are seeing smaller chains and stores get a little more aggressive on the discounting side, but that's about all we have seen.

Cool thank you.

Our next question is from Brian Vaccaro with Raymond James. Please proceed with your question.

Hi, Thanks, and good morning, I wanted to circle back on the new equipment package. It out back can you just give us a status update on how many have it installed when you expect to complete the rollout or how many kind of just how many by the end of this year and fully rolled and Dave you started touching on a little bit but can you quantify some of the benefit that you saw.

Seeing in terms of order accuracy throughput labor savings can we can we ballpark some of those things.

It's a little too early to ballpark some of those things yet because you.

By the end of the year by the end of the third quarter will have installed.

About 140.

And.

The order accuracy is much improved again. This is this is just to start so we don't want get too far ahead of myself here, Brian , but we're very enthused by the order accuracy the table turns.

Is is faster because the product comes out faster and then we're seeing broadly for outback improvement in our customer scores I talked about in our prepared remarks. If you look at our food scores our service force those things are coming together to us to.

Eminent rated achievement, we're very optimistic about it but it's probably a little too early to provide some real specifics, but we are seeing it in back of the house labor and in our customer metrics.

Okay. Thanks for that.

On the marketing Chris.

Yes, I think I think it's probably closer to the 2% of sales range, but I'll have Marc confirm that.

In the second quarter.

Year over year, it's probably between in each Q in Q3 and in Q4, you are probably up $10 million or so in Q3, and Q4 would be my guess relative to last year $10 million in each quarter, roughly correct, yes, and I was Mr. Graff with til.

To me that I was spot on on the 2% of sales in Q2.

Alright, alright, well done on that and then last one just to clarify the July commentary is that a one year comment versus 19, if that's relevant and then.

In the spirit of trying to just level set where we are would you be willing to quantify July versus June thats. All I had thank you.

Yes, so it is a one year.

And importantly, before I can forget the point is that if you.

You cut back and again, we talked about the value of three year comps that three year same store sales number has been pretty consistent.

Irrespective of kind of the time period, I am a little bit of a dip in June but we've been consistently in that kind of double digit same store sales number on a three year basis.

Not going to get too specific in terms of June or July trends definitely though if you look let's be clear, they're both they both dipped negative which would make sense given kind of where our comps landed in Q2.

And thats pretty encouraging.

Alright, Thank you I'll pass it along.

Our next question is from Jared Garber with Goldman Sachs. Please proceed with your question.

Great. Thanks for thanks for the question I wanted to actually swing back to the marketing that you just discuss a little bit it looks like if we flow in sort of that $10 million a quarter over the next couple of quarters, it looks like youre pushing up.

Maybe two and a half or a little bit higher than that by the end of the year.

I think the pre COVID-19 levels around 3% I know you guys are targeting to be below that how should we be thinking about the level of marketing spend as it relates to sales.

Brand building messaging within that that marketing plan, yes.

Yes, we as I mentioned earlier with our if you look at just our menu offerings at Outback in particular.

The combos that we have in some of the other values that we have a very compelling, especially when you line them up with other players in the industry and we're going to talk about that.

And the thing that the thing that we have about marketing is we've learned so much on digital we have tremendous flexibility, we can toggle it up or down depending on the returns that we're seeing so the investments there we have a very good understanding what those returns look like we have very good understanding of what we're going to be marketing, we're not going to be doing.

Deep discounting, but we will be looking at some of our menu items at outback that offer very good value versus.

We're not going to spend of that it's probably going to be at levels approaching 3% well look I think that as we've learned and we've gotten better at this I think that we feel like this two to two 5% of sales range is a pretty good range. It makes sense was 2% in Q2 to your point it may tick up a little bit as a percentage of sales Q3 Q4, but it.

Feels like that's a pretty decent proxy and look and we reserve the right to change our mind on this but two to two 5% of sales feels pretty good and as we look at the consumer environment, We get real time information every day and how we're doing and we can move that up or down depending on what we're seeing with the consumer and what we're seeing with competition. So I am very pleased with the flexibility we have on this.

And the returns that we're getting in our marketing space.

Thanks for the color there just just one follow up for me on the Outback traffic line it looks like.

Traffic versus 19 down about four 5% and average checks up 14, 5% versus the same time period. I know you I know you mentioned the consumer is still sort of trading up in that mix.

Mixed benefit in the quarter, but can you just help maybe contextualize, maybe what youre seeing versus 2019 is there anything that would suggest that the consumer.

Bulking, so to speak for lack of a better term that some of the increases over time as we see that traffic trend the blower.

No we are not seeing the consumer bulk and I want to remind.

The investors that we changed our marketing profile quite a bit.

At Outback versus 2019 as far as the level of discounting and marketing expense. So if you look at that traffic piece. Please keep that in mind, we talked about changing how we work going forward.

At Outback, but no the traffic trends and the trends, we're seeing at Outback like we've seen sequential improvement and we're seeing the benefits of some of our marketing I will turn it over to Chris on the rest of that but just to emphasize that point and add a little more context, I mean, choosing not to replicate that that activity does remove a significant.

<unk> portion of traffic from our base that was incentivize by discounted offers and also keep in mind Outback traffic relative to 19 was still ahead of black box or whatever measure you want to use by over 200 basis points and that's track right. So and now we're making additional marketing investments and outback that will help drive.

Great. Thanks for that reminder.

Our next question is from Brian Mullan with Deutsche Bank. Please proceed with your question.

Thank you just a question on development as it stands today, what do you think is a reasonable way to think about net unit growth in the U S next year.

Wondering if 3% is something that could be in the cards or if not how much.

How long might it take to build up to that 3% growth rate on a net basis, and then just related to that outside of equipment delays.

Is there any scenario, where you would put a pause on this due to macro or you're pretty committed to the development regardless of the environment.

And my answer to the second question first of all my career some of the best.

Move that we made in companies I've been involved is when the when the economy is a little a little tough you can really make headwind on site.

Maybe save some cost et cetera on a net basis, we arent going to get into 2023 guidance for 2020 for guidance at this point, but.

2% to 3% growth on a net basis I do know.

I'll provide more context on that as the year goes along and into next year. So we want to continue to build that in the years ahead, but I can tell you looking at the pipeline that our real estate team is developing especially at Outback, we're seeing some really great sites.

The right trade areas in the right parts of the country with really good returns and that pipeline is growing so I would anticipate that that 2% to 3% I'm talking about on a net basis continues to expand in the years ahead, but it's a little premature to go beyond that but we will talk about that more in future calls, but youre going to see our pipeline move up and that's one of the.

Reasons, why we ask Mark Graf to move over to that part of the world and make it happen because he's going to make that happen for us along with the team.

Okay, Thanks, and as a follow up lastly, you mentioned converting to a new dine rewards program point space. Just wondering if you could elaborate on that a little bit exactly what will change with the program how is that going so far as to consumer maybe you can just talk about the benefits you expect to see over time as a result of that change.

Yes, we went to a from a business base.

Based program to a points based program, which offers us a lot more flexibility gets rewards to our customers a lot faster.

An uptick in the sign ups and this is just the start we can look at more marketing programs I think the benefit to the company into the consumer both.

The <unk> are both coming together, it's not quite as possibly for us, but the consumer gets rewarded more quickly and there's partnership opportunities here that we're going to take advantage of so I think we're going to see greater sign ups are going to see greater marketing and then once people sign up theyre going to use it more and more and more and then we get all that information to market to our customers, which is still valuable.

This we are very excited about the future of our dine rewards program and what it offers.

Okay is that fully complete the transition just for clarification, Brian just inched up.

Okay. Thank you.

We have reached the end of the question and answer session and I will now turn the call over to Dave Deno for closing remarks.

Well. Thank you everybody and thank you for your interest in our company and we look forward to talking to you. Some more at the conclusion of Q3 in October .

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

Q2 2022 Bloomin' Brands Inc Earnings Call

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