Q4 2022 Bloomin' Brands Inc Earnings Call

February 16, 2023

Greetings and welcome to the Bloom and brands fiscal fourth 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.

<unk> senior Vice President of Investor Relations. Thank you Mr. Graff you may begin.

Thank you and good morning, everyone with me on today's call are David Deno, Our Chief Executive Officer, and Chris Meyer Executive Vice President and Chief Financial Officer by now you should have access to our fiscal fourth quarter 2022 earnings release.

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

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.

A discussion of recent trends. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from our forward looking statements. Some of these risks are mentioned in our earnings release, others are discussed in our SEC filings, which are available at SEC Gov.

During today's call we will provide a brief recap of our financial performance for the fiscal fourth quarter 2022.

An overview of company highlights and an update to 2023 guidance. Once we've completed these remarks, we'll open up the call for questions and with that I'd now like to turn the call over to David Deno.

Well, thank you Mark and welcome to everyone listening today as noted in this morning's earnings release adjusted Q4 2022 diluted earnings per share was <unk> 68.

Which compares to <unk> 60 in Q4 2021 up 13%. This is also more than double our 2019 results combined U S. Comparable sales were up one 4% with each brand having positive same store sales despite challenges from weather events at both the beginning at the end of the quarter.

Pleased with our Q4 results and it was the culmination of a year, where we successfully navigated significant inflation.

During 2022, we made the decision to preserve our value equation and not raised prices to fully offset inflation. While the consumer has remained resilient to date. We believe the short term decision will have long term benefits for our customers in terms of 2022 performance I would especially like to recognize fleming's in Brazil in 2022 <unk>.

Comparable same store sales were up an impressive 12%. This is the second consecutive year of double digit comp sales growth for Fleming's, Brazil sales were up 38% for the year.

Finally, our 2022 results would not have been possible without the talented and dedicated employees in our restaurants and restaurant support center your commitment to serving guests with the highest levels of hospitality experience is what makes our restaurants so successful.

As we look forward, we will further capitalize on the success of 2022 and.

So youll see from our guidance for the year in the quarter, we are off to a good start in 2023.

To achieve our objectives. These will be our key priorities first and foremost drive healthy sales and traffic we will accomplish this by improving execution and consistency consistency through technology, leveraging proven marketing platform to drive frequency and introducing new products and new sales layers and finally ramping up the remodeling of our <unk>.

Restaurants, let me first talk about the investments we've made to improve execution and consistency. We've completed the rollout of handheld technology for our servers and in addition, we continue to rollout new technology, including advanced grills and ovens, we will complete the rollout of the new technology in the third quarter. These innovations will further improve <unk>.

Guests experience, leading to increasing customer preference in frequency. This benefit is in addition to the productivity dollars embedded in our 2023 plan.

The second part of building sales and traffic is more targeted marketing designed to build brand equity and drive frequency starting in 2023 Outback is bringing back the no rules just right platform and we are deploying additional marketing dollars to support the launch but this is more than just market. It's an attitude is.

How we reenergized, our restaurants with new food offerings, and exceptional service and most importantly, it ties back to our heritage No rules just right is aimed at highlighting our great menu in the everyday value that we offer to our guests.

The third element to our sales building strategy will be the introduction of new sales layers at all of our brands to complement the work being done at Outback. One example is the introduction of social hour, Fleming's, which captures our wonderful food and drink offerings. During the early evening. We also continue to grow our events and catering business within plumbing and look forward to the innovation that's coming.

From this piece of business.

Another example is brunches returning to bonefish. It is a very successful day part and we brought back with even better food offerings, while providing a good financial return for the company.

We will provide more details and additional sales layers at all of our brands as the year progresses.

The final sales driving strategy I want to highlight is the additional emphasis on remodels in 2023, we paused our remodel efforts during the pandemic and have since developed a variety of scope that we can deploy based on varying needs of our restaurants, we intend to remodel over 100 locations. This year at the beginning of a multi year effort to touch a large percentage of our business.

We know keeping our assets looking at their best along with our ongoing relocation program is a key element to growing traffic.

All of this is about bringing in restaurant traffic back to pre pandemic levels. Importantly, these layers of our platform to deliver growth in 2023 and beyond.

Second priority for 2023 is to continue expanding our off premises business, which is performing very well, we will capitalize on our long strong carryout and delivery capabilities.

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

Catering will remain an important and growing lever for our brands. The Kratos team remains an industry leader in this space and has done a fantastic job.

We expect to see more progress out of Outback and Bonefish ruling both can do a great job in catering.

Lastly, we offer significant value through our bundling bundled platform. We expect off premise is to remain a large and growing part of our business.

The third priority is to maintain the major progress we have made in operating margin over the last three years amid a highly inflationary environment.

Just margin improvement start with growing healthy traffic across the in restaurant and off premises channels. We also reduced reliance on discounting or promotional L. T cells and pivoted advertising spend towards more targeted higher return digital channels. In addition, we remained disciplined in managing the middle of the P&L and are aggressively pursuing efficiency.

He is in food labor and overhead costs.

Chris will discuss despite persistent inflation, we've been able to achieve our margins well above 2019.

<unk> committed to growing to 8% operating margins over the long term.

Our fourth priority is to capitalize on our progress to become a more digitally savvy company in Q4, approximately 76% of total U S off premises sales were through digital channels in the past year, we implemented a new online ordering system and mobile app to support our digital business, both have outperformed expectations and the new Hap 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.

The final priority is to build more restaurants, especially at Outback Fleming's in Brazil. Each of these brands have strong sales and profit margins that offer great returns, we see major expansion opportunities at Outback, where our goal is to significantly grow our U S restaurant base, we intend to grow Fleming from 65 to 100 and plan to more than double our footprint in <unk>.

And finally keep an eye on Carrabba's.

Before turning over to Chris I, just wanted to stay at this kind of expansion would not be possible without major progress on our balance sheet, we significantly reduce debt and our credit ratios are much improved and today, we announced a 71% dividend increase and a new $125 million share repurchase authorization highlighting the power of our cash flow.

<unk>.

In summary, 2022 was a good year for our company. We are focused on achieving our 2023 goals while building a great business that will continue to thrive.

And with that I'll now turn the call over to Chris who will provide more detail on Q4 and the full year 2023. Thanks.

Thanks, Dave and good morning, everyone I would like to start by providing a recap of our financial performance for the fiscal fourth quarter of 2022.

Total revenues in Q4 were $1 $1 billion, which was up four 6% from 2021, driven by a $33 million increase in international revenue, primarily in Brazil, as well as a one 4% increase in U S comparable restaurant sales.

In our U S brands traffic was down seven 3% in Q4 relatively consistent with Q3.

Traffic was lowest in November before improving materially in the first three weeks of December Winter Storm Elliott hit in the last week of our fiscal 2022, and it had an approximate 1% impact on our fourth quarter comp sales. Despite the softer sales trends our traffic was consistently better than the industry in December .

Importantly, our traffic trend has improved significantly over the first seven weeks of 2023 <unk>.

Average check was up eight 7% in Q4 versus 2021. This consisted of nine 5% menu price increase and a 0.8% decrease in menu mix our menu pricing was in line with what we discussed on last quarter's call, but the mix change was lower than anticipated this change.

Was a product of our L. T O activity mixing higher than expected changes in our appetizer offerings and strength in our catering business, which carries a lower per person check average.

At 24% of U S sales Q4 off premises was slightly lower than Q3, given the emphasis on special occasions, we tend to see in Q4 and Q1. This change was expected and was primarily a migration from our curbside business to in restaurant dining importantly, the highly incremental <unk>.

Third party delivery business was flat from Q3 at roughly 12% of U S sales.

In terms of brand performance Outback total off premise mix was 27% 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.

And a final note on Q4 sales, Brazil, Q4 comps were up 15, 3% versus 2021, Brazil's fourth quarter reflected the lapping of Covid related operating restrictions from 2021 importantly comp sales were up 26% versus 2019 levels. Brazil's fourth quarter result was a key.

Component of our success in Q4.

As it relates to other aspects of our Q4 financial performance GAAP diluted earnings per share for the quarter was <unk> 61.

Versus 59 of diluted earnings per share in 2021, adjusted diluted earnings per share was <unk> 68.

<unk> 60 of adjusted diluted earnings per share in 2021. It is worth noting that our Q4 result was more than double our 2019 adjusted EPS of <unk> 32.

This represented the most profitable fourth quarter in our company's history.

The primary difference between our GAAP and adjusted results was Q4 2021 restructuring related charges and an adjustment for certain collective wage and hour legal cases in Q4 of 2022.

Adjusted operating income margin was eight 2% in Q4 versus seven 8% in 2021 margins improved year over year as inflation levels mitigated from the historically high levels earlier in 2022.

Commodity inflation was 10% in Q4, driven by some favorability in our beef contracting while labor inflation was 8%, which was 90 basis points better than it was in Q3.

In addition, we had benefits from pricing productivity and incentive compensation these benefits more than offset the unfavorable impacts from inflation overall, our controls on costs remained tight our operating margin was 400 basis points better than it was in Q4 of 2019, our Q4 restaurant margin of.

<unk> 16, 8% was 290 basis points better than 2019, we continue to benefit from simplified menus and operations growth in our international business efficiencies and overhead as well as increased average check.

Depreciation expense and general and administrative expense were both up in Q4 relative to last year. This is consistent with our increased levels of capital spending and our investments in infrastructure to support growth.

Also in Q4, our adjusted tax rate was 15%.

Turning to our capital structure total debt was $833 million at the end of the year and as of today, we are down to total debt of $760 million. This puts our current lease adjusted leverage ratio below three times, we have made tremendous progress on reducing our debt since 2019.

For perspective, our debt balance at the end of 2018 was $1 $1 billion.

In terms of share repurchases, we repurchased five 4 million shares in 2022 for a total of $110 million, we have repurchased another $14 million of stock year to date and our board has approved another $125 million authorization that we expect to make significant progress.

Yes on in 2023.

We have also increased our quarterly dividend from <unk> 14 cents a share to 24 a share this 71% increase in our dividend provides a very attractive yield to our investors and is a strong signal about our confidence in the strength of our free cash flow.

We expect 2023 to Mark the second consecutive year, where we have returned approximately $150 million to shareholders. Returning cash to shareholders is an important part of our story in 2023 and beyond importantly, we were able to increase the dividend buy back stock pay down debt and.

Have ample cash available to either invest in our growth initiatives or invest back into our people.

Before I turn to our guidance I wanted to spend a minute discussing a legislative action in Brazil that has a unique impact on our company in 2022, the Brazilian government enacted legislation that introduced a zero percent rates for both corporate income taxes as well as certain federal gross revenue taxes known as <unk>.

Yes.

This benefit will last for a period of five years. This exemption is intended to provide relief for industries, most severely impacted by the COVID-19 pandemic.

Through a favorable ruling the courts in Brazil determined that our Brazilian business is eligible for this exemption as we've discussed on prior calls our Brazilian business had a two year period of significant negative impacts from COVID-19.

The material benefits from this tax exemption will start to impact our earnings this year and we estimate that this exemption will provide an approximate 25 benefit to our 2023 earnings per share.

As I indicated this benefit benefit will manifest in two distinct ways in our Brazilian financial results.

First we have assessed revenue taxes on certain goods and services known as peace <unk> taxes, we will be exempt from paying piece and <unk> taxes for a period of five years. The benefit to operating income is expected to be approximately $17 million with an approximate $40 million increase in revenue.

Offset by $23 million of expense, primarily loss tax credits split equally between Cogs labor and operating expenses. This operating income benefit is exempt from corporate income tax in Brazil.

Second we will also have a zero percent corporate tax rate on the income generated by our Brazilian business. This five year exemption from corporate income tax in Brazil will be partially offset by minimum taxes required by the U S on multinational companies in total this.

Corporate tax exemption is expected to generate an additional $6 million of benefit in 2023.

Bind benefit of the $17 million of Pes, <unk> exemption and the $6 million of corporate tax benefit will represent an approximate $23 million increase in our net income or <unk> 25 of earnings per share.

This exemption is not a one time benefit these impacts will be embedded in our financial statements. Each of the next five years as such they will be included in both our GAAP and adjusted results showed the Brazilian government or court system also this legislation or our eligibility for it in the future we.

We'll be sure to properly disclose the corresponding impacts.

In our earnings release, we provided a reconciliation of our earnings per share guidance, both before and after the benefits of this exemption.

In addition, keep in mind that for Bloom and brands fiscal 2023 will be a 53 week year. The 50 <unk> week will be December 25th 2023 through December 31, 2023, Although we are closed on Christmas. The remaining six days in this 50 <unk> week are very high volume sales days.

We expect the impact of the 50 <unk> week to be approximately <unk> 14 of EPS.

Now turning to our 2023 guidance first we expect U S comparable restaurant sales to be between 2% and 4% on a 52 week basis. This includes a full year check average benefit of approximately 5% with traffic, reflecting a more uncertain view on the macro environment.

<unk>.

The consumer behave more like what we have seen early this year there could be a better outcome on traffic in 2023.

Next we expect GAAP diluted earnings per share to be between $2 80.

And $2 89.

And we expect adjusted diluted earnings per share to be between $2 91.

And $3 our EPS guidance includes the benefits from the Brazil tax exemption and the 50 <unk> week.

Commodity and labor inflation are expected to be in the mid single digits range. We are currently 60% locked on our overall commodity basket oil dairy produce and grains are expected to be the most inflationary categories.

<unk> is 100% locked and we expect beef inflation to be in line with our mid single digits broader commodity range lobster chicken and pork are expected to be deflationary this year.

We have seen year over year wage inflation slowly come down and we would expect that to continue in 2023 with the second half of the year better than the first half of the year.

Our inflation estimates would make 2023 the second most inflationary year in the history of our company for this reason we have spent significant time identifying productivity opportunities in our restaurants from the technology enhancements at outback to product utilization and sourcing ideas in our supply chain we are targeting.

We're getting $50 million of productivity benefits in 2023, we also expect the benefits from these initiatives to build as the year progresses and provide ongoing incremental benefit into 2024.

Given the benefits of check average and productivity as well as the new benefits from both the Brazil tax legislation and the 50 <unk> week 2023 should be a year of operating margin expansion from 2022. This expectation comes despite persistent levels of inflation.

Our effective income tax rate is expected to be between 13% and 15% cap.

Capital expenditures are expected to be between $240 million and $260 million. This is an increase from our 2022 spend of $220 million due to additional dollars allocated towards new restaurants and remodels.

Finally, we expect to open 30 to 35 system wide restaurants, we began ramping up our domestic new restaurant capabilities in mid 2022, with an emphasis on outback and flemings to complement our already strong growth in Brazil, our new restaurant pipeline continues to fill and we expect 2020.

For to be when we see a material jump in the number of restaurants opened.

As it relates to the first quarter, we expect U S comparable restaurant sales to be up between 3% and 5% through seven weeks of Q1, we have seen traffic favorability greater than what the lapping benefits from omicron and unfavorable weather in 2022 would've suggested we do expect our sales.

To level out some to finished Q1 as we begin to lap sales strength from last year, beginning with Valentine's day. This has been contemplated in our guidance.

We expect Q1 adjusted earnings per share to be between 85 and 90.

This guidance and future guidance will include the benefits from the tax exemption in Brazil.

One final note before I open up the call for questions for the past eight years, Mark Graf has been my partner in communicating our strategy to investors. He has been an excellent ambassador for Bloom and brands as many of you know last year Mark was promoted to senior Vice President of business development and is charged with igniting.

Our development engine as that task gains traction. It is time for mark to step aside from his IR responsibilities I am pleased to announce that Tammy Dean will now lead our day to day Investor Relations efforts as senior director of Investor Relations and corporate Finance Tammy brings over 15 years of <unk>.

Spirits at Bloom and brands to the role she has held finance positions at all of our casual dining brands and is the perfect choice to lead our IR function moving forward Mark we'll be introducing tammy to our coverage analysts over the next several weeks congratulations to both Mark and Tammy.

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

We'll open for questions. If you would like to ask a question. Please press star one on your telephone keypad at this time.

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

We do ask that you. Please limit yourself to one question and one follow up to allow as many parties the opportunity to ask a question as possible because Thats star One to register a question at this time. The first question today is coming from Jeffrey Bernstein of Barclays. Please go ahead.

Great. Thank you very much and congrats to Mark and Tammy.

My initial question is just on comps.

For the fourth quarter, it looks like Outback.

I know you had pricing up close to 10, yet traffic down nine hence the 1% positive comp.

That was below seemingly what the street was looking for and I think what you guys had even implied for the fourth quarter. I know you mentioned weather was a one point headwind, but it would seem like there was a shortfall even beyond that so I'm. Just wondering if you could talk about why the shortfall whether it was a conscious decision on your part.

Kind of weed out value and.

Lower end consumers, who perhaps aren't as profitable or whether there was a further disruption obviously trends did accelerate thus far this year, but that we know has a lot to do with the lapse. So I'm just wondering if you could provide some context around the the.

The comp shortfall in traffic being down like 9% and then I had one follow up.

Yes, yes sure Jeff This is Chris good morning.

So as it relates to Q4 as you know our brands tend to skew special occasion, and we do have a disproportionate impact from weather in that last week of the fourth quarter. So that winter storm Elliott was a 1% negative impact on our Q4 sales and obviously that wasn't contemplated when we prepared our guidance.

In addition, I would say the check average that mix that we the positive menu mix that we've been running positive for most of the year certainly into October that turned negative in November but as I said in the prepared remarks, I think that was probably more a byproduct of our push strong push into catering as well as some of the <unk> activity mix.

Better than expected, but certainly the mix change going from positive to negative was something that we hadn't expected to manifest and then finally I'd say traffic was softer in November .

But importantly, as it relates to our overall trend and the trajectory. We're on it improved pretty significantly in December we put some a number of initiatives in place in November to drive traffic. Those initiatives were taking hold we had positive trends in December and then of course that last week of weather hit but the good news is as even from that momentum we were building.

In December that had further.

Expanded in January and our momentum got even better. So look I think we feel pretty good about the trajectory we're on but hopefully that gives some context on how the Q4 comp came together and Jeff speaking to Q1, the traffic trends are better the improvements are better than what normal kron and weather would suggest so.

I think the things the layers that we've talked about in the prepared remarks are certainly coming together and all of our brands.

And our traffic trends are very good and we feel terrific about it so.

And that's embedded in the guide so the momentum that we start seeing a December certainly has carried through to January and February and the traffic increases are beyond just lapping a softer last year because of <unk> and the weather.

Understood and then my follow up was just on the commodity outlook.

I know last quarter I think you said you thought maybe mid single digit to high single digit for full year 'twenty three now.

Now you've tempered that to mid single digit which understand most commodities are easing, but beef was the surprise at least to US I know you mentioned I think there are 100% locked on beef and thats coming in at mid single digit right in line with your overall basket.

Just wondering if you could provide any context around that I know theres lots of expectation in the industry that beef, while easing short term is likely to accelerate meaningfully into inflation later this year and into next year with supply chain issues and whatnot.

So I'm just wondering how you were able to secure that 100% at mid single digit.

And what your thoughts are as we move towards the end of 'twenty three 'twenty four whether that would be a year, where the airport you would likely see an acceleration of that inflation. Thank you.

Sure, Yes, so I'll give you some context on the commodity guide and where we think we are overall on beef. We are locked as we said 60% on the overall basket typically we would probably be a little more locked at this point in time and look the reality is is we do see that there could be certain upsides in certain areas as the year progresses, and we want to be able to take advantage of that.

But to your point, we are 100% locked on beef.

And as I said in the prepared remarks that beef inflation is in line with sort of the mid single digits broader commodity range look the beef markets moving just like we thought we talked about this last time, hey look there's going to be sort of a supply imbalance youre going to see less product available in the marketplace, that's going to put pressure on pricing you've seen it in this.

Spot markets as prices have started to increase in December and into January so that movement has been exactly like we thought like we tell you guys. In November we started having conversations about locking in on beef, we feel like we have an excellent supply chain team, we feel like locking in medical mid single digits as a great place to land. It gives us price assurance it gives us supply assurance.

And look I think in this marketplace, that's a pretty good place to be.

In terms of the other market basket commodities.

I think Brad grains, certainly those will be challenged this year cooking oils soybean oil.

Well, that's all inflationary, but we're pretty open on things like cooking oil. So hopefully we can have some upside on that as well as the year progresses produce is going to be very weather dependent so that's going to ebb and flow and freight should be better as well. So it isn't just a beef story as it relates to our basket, but but certainly when you look at that mid single digit number we're pretty pleased.

With the work we've done.

Understood Thanks very much.

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

Thanks, Good morning, and congrats I just wanted to dig into something.

The future of productivity opportunity you called out the opportunity for 50 million savings in 'twenty, three which is pretty significant.

<unk>.

Wanted to see if you could kind of talk to a couple of the bigger initiatives there.

And the highlight.

For us.

Yeah, I'll give some of the broader strokes don't throw him, but Chris talk with some of the financials, but we've talked for a while now about our technology initiatives and they have come together on time as expected. So the handhelds and outback are rolled out the ovens and the cooking technology in and the grills.

And outback slated to happen, finishing in the middle of the third quarter. So that has really come together for us and has led to more productivity for us and the supply chain team of course has continued to do a great job on our food supply and productivity there without compromising food quality very importantly, so, but I'll turn over to Chris for any other context on the financials.

Well, the only context I'd add above and beyond that as we have talked about these technology initiatives and they will provide a financial return and so if you think about our productivity this year thats $50 million target.

Pretty much doubled what we did from a productivity perspective in 2022 and the biggest chunk of that increase is coming from this technology initiative.

Initiatives that we've put in place both on the front of the house and in the back of the House and importantly, another thing to keep in mind as it relates to this is that it's not just a 2023 thing we're not going to have all this equipment in place until the middle of the year. So there is going to be a pretty good tail going into 2024 as well in terms of productivity. So we're in pretty good shape and the last thing I would add.

<unk> is in the Outback team certainly knows this is we expect sales gains as a result of this as well over time.

We have as our re cooks diminish in our customer service improves as our table turns improve that will boost sales and it boosts our operating metrics. So it's more than just a financial productivity upside for us in the P&L. It's also a sales building activity, we expect to capture.

Got it thank you.

Thank you. The next question is coming from.

Lauren Silberman of credit Suisse. Please go ahead.

Thank you very much just on the first one for operating margins you talked about 2023 being a year of margin expansion can you just walk through the puts and takes of the day.

I get there.

Yeah sure so let.

Let me let me do this let's let's talk about margins on an apples to apples basis for a minute. So exclude the benefit of this Brazilian tax exemption and exclude the benefit of the 50 <unk> week. So it makes it more clear first the bad news, so even with inflation coming off of last year's record levels as I said, it's still shaping up to be really inflation.

<unk>. This year 2022 had call it $300 million of inflationary headwinds 2023, you will have like $200 million. So it's still pretty good.

Hi, that's close to 500 basis points of margin pressure just from inflation alone, but on the flip side right. You have an estimated 5% increase in average check that we discussed as well as the $50 million of productivity that should be largely able to offset inflation and then from there. The margin story is pretty simple, it's all going to come down to traffic right now we've built in.

Negative traffic assumption into our 2023 plan driven largely by an uncertain macro environment that would lead to a slightly negative outcome.

Margin this year versus 2022 on an apples to apples basis now if that negative traffic doesn't manifest and we've talked about how we've started the year I could have a better margin outcome. This year compared to where we were last year importantly at the restaurant level I feel pretty good about keeping our restaurant margin.

And flat to slightly positive versus last year, and now I'm going to lose a little bit on depreciation and perhaps a small amount on G&A and that's why the op margin might be a little more challenged than my restaurant margin. This year, but again and I think that it's important to not just provide context for 23, youre kind of looking fast forwarding and say, okay, well what about 2020 for a couple of things are going to chase.

Right first of all inflation should be less and second we're going to have a decent amount of rollover from these productivity initiatives. So more as Dave indicated in the prepared remarks marching back closer to that 8% target seems far more and reach now it is important though also to keep in mind that the 50 <unk> week as well as this Brazilian tax exemption are both margin accretive so it is.

Reasonable to expect when we include those.

Okay.

Have operating margin expansion in 2023.

And I just wanted to provide a longer term context to it as we've had sustainable margin gains since 2019, if you look back in our history and we expect to continue that.

Going forward by Chris laid out so eloquently. So it's all there for US we're committed to the 8% margin long term and it's a huge increase which is where we are as a company a few years ago.

Great. Thank you incredibly helpful. And then just a follow up on that traffic piece and the expectation for negative capex given.

Given the macro what opportunities are levers exists.

That are in your control on the traffic side that you are considering.

Or that yes.

Yes, we talked about in the prepared remarks, there's a few things that we have learned during the pandemic and also in 2022 and that is sales sales layers for us are extremely important so whether it's a whole new layer in thinking about no rules just write it out background marketing and it's more than just marketing its operations its.

<unk> associated with it that whole attitude in the restaurants, that's number one number two we've got a reinvigorated a new social hour at Fleming's that we're putting in the restaurants. It's early evening, that's a nice sales layer for us that we're seeing we've got brunch coming back at Bonefish, We've got our wine Big time line opportunity at Carrabba's all of these are les.

Here's and our sales that we can control within our control secondly, we have not priced up to inflation and as much as some of our competitors and we think that for the long term will be very helpful. For us as we look at our traffic trends and then third we've learned a few things about offering consumers some <unk>.

Surety dine and discover at Bonefish for a certain price Outback has some things going on right now that are very attractive at a certain price point. So those are the things that we have control over to help drive traffic and as Chris mentioned, if the macro environment is not quite as bad as some people fear, we think there could be some upside to our traffic.

But we will see well I will just to piggyback off of that importantly, when youre talking about specific price points on offerings that doesn't necessarily have to mean its a deeply discounted offer in fact, we're able to do those offers at a price point that can be at a minimum sort of hold margins steady.

Thank you very much very helpful.

Thank you. The next question is coming from Dan <unk> of Jpmorgan. Please go ahead.

Hi, Thank you very much it's interesting to hear about no rules just right I mean, just kind of like the return of that.

Brand promise, so I mean, a big part of the margin expansion for the entire industry versus 2019 was the reduction of advertising reduction of menu items simplification kind of in the in the kitchen that allowed for a much more efficient operation overall.

Now kind of entering the point, where it makes sense to bring back L. T O bring back some new news in the kitchen bring back advertising I mean is it are we kind of at the start if you will have a slippery slope to where cost need to need to be add back to the business because others are doing that as well.

Yeah couple of things John No rules, just right can be executed with the continued menu simplification that we've had but we don't anticipate a whole bunch of new product offerings and complexity in the kitchen and as you know what the new Grilles and things at Outback that simplifies our kitchen, even more so that's number one and no real just raise more.

Than a marketing slogan, it's about how we run our restaurants. So that's number one number two yes, we are increasing our marketing spend but it's not going to be anywhere near what it was in 2019. So.

We've learned a lot during the pandemic how to access our customers the digital opportunity how to target customers. So that margin opportunity in advertising I think is going to remain as we build sales. So the fundamental benchmarks that we learned during pandemic John are not going away, we're just going back to our heritage and our slogan that was sold.

<unk> worked so well for us at Outback. So that's how we're trying to build this thing.

And let me ask about Remodels I think you said Youre doing 100, which is actually a pretty big percent of the U S Outback system.

It's been said in the past that you don't get credit for an interior remodel unless you do an exterior remodel and of course, an exterior remodel costs, especially in 2023, a lot of money. It takes a lot of time. So you can talk about what the Remodels will look like what kind of game that you're expecting in <unk>.

Yes.

Projects are going to really attract people to come back and dine in the restaurant, which is obviously, where you had the most capacity or potential to add people.

Yeah.

First of all it's 50 at Outback and 15, the other two casual dining brands plus fleming's so if that gets to the $100. Okay. So but.

Really scoped out light touch a medium touch in a heavy touch and our Remodels and we know keeping our interior restaurants fresh is so important and John as we do the interiors, we will do some some exterior work that touched up to make sure people know plus what we have is a digital marketing.

The piece that we can talk about as we go into these markets and do the remodels. So.

Its freshening up the restaurants on an interior basis, we have three separate scopes, we certainly have the capital and cash flow to do this and involves all of our brands with 50 at Outback and any financial measures I will turn it over to Chris to talk about what I would just add that yes look there.

Right Youre not expecting a herculean amount of sales lift when you do an interior remodel, but if you can get a 2% to 3% lift.

That's a pretty good lift for us, but more importantly, as Dave said, it's more about.

I don't see it think of as maintenance per se, but if you don't keep your assets current you could be on a slippery slope from a same store sales perspective, so I think that keeping the assets current is going to be a critical part of what we do not just this year, but moving forward and Jai it's a holistic effort. It's operations, it's marketing it's remodels. It all comes together Holistically and Thats, what we are.

Trying to talk about the sales layers.

Got it thank you.

Thank you. The next question is coming from Jeff Farmer of Gordon Haskett. Please go ahead.

Great. Thanks, Might've missed it but did you guys provide any specifics on G&A, our interest expense dollars for full year 2023.

We didn't but I can give you a little bit of context, and Youre looking G&A and G&A is that what you said G&A.

G&A and interest expense and interest okay. Yes, so G&A is going to be up it'll be up probably 10% to $15 million in 'twenty three in terms of dollars, that's probably flat as a percentage of sales, though a couple of reasons. We made some investments in it and our development team that we will have a full run rate for in 2003, we made some additional investments back into our <unk>.

<unk>, which we thought was very important and we had a number of vacancies.

In the year that are now filled and so and we also had some incentive comp reload. So theres a few things going on in G&A that will make it go up this year I touch on DNA, while we're here DNA will be up this year.

Largely consistent with our increase in capital spending.

And then interest expense should be slightly down actually flat to slightly down I think that we do.

Although the interest rate has gone up we did get to retire some of these hedges last year and so that was kind of that was kind of a benefit heading into 2023, but obviously a lot of that benefit has been eaten up by the rising rate environment, but we would think interest expense will be flat to slightly down that's helpful. And then just one additional one.

You guys did touch on it but as the consumer backdrop has become more challenging just a little bit more strained for some of the discretionary spending are you seeing shifts in relative same store sales performance across multiple channels, meaning the in restaurant to go and delivery channels seen any sort of.

Shifting of behaviors amongst those three channels.

Well this is what I would say, it's a little tough read, but but we because.

Because we skew special occasion, when you're really busy and area in Q4 and Q1, you do see a decline in sort of your off premise mix and we've seen that a little bit here in the first quarter. Overall, we think that's mostly just trade between our curbside business back into the in restaurant piece, but no real <unk>.

Common carry on kind of the consumer our third party business, which is a slightly different consumer from an off premise perspective is hanging in there. It's a little down in Q1 versus where it was in Q4, but it's still pretty steady and that is a different kind of consumers. So overall the shifting between channels isn't really driving a significant amount of what we think is.

Reflective of kind of where the consumer is it feels more just like engineered channel moving.

And Jeff.

The high end.

Use to do really well and Fleming's continues to do really well in that high end and so that's a consumer that we're going to continue to pursue when I talked about some of the sales layers there.

<unk>.

Okay.

Thank you. Our next question is coming from services.

Please go ahead.

Hi.

Sara Senatore.

Sure.

I'm just curious if I could ask two I will follow up and then a quick question a follow up.

If you could just talk about January .

I think widely the industry is seeing.

Group trends are you still maintaining your traffic gap that you've talked about or is it sort of a kind of a rising tide. So any insight onto relative performance given how robust it's been for you, but I think also some trends we're seeing across the board.

And then and then I wanted to ask about kind of your thoughts on pricing it sounds like pricing will be pretty much in line with inflation in 2023.

After having Ron I think behind inflation in 2022, So I guess do you.

You have sort of a philosophy about where those too sick.

Do you use that as an opportunity to reinvest.

<unk>.

The quality or the quantity.

Quantity of food.

How are you thinking about that sort of more normalized relationship between price and inflation.

I'll take the first part I'm not going to comment in detail on weekly trends in February but I can say overall for the quarter. We remain very happy with how do we stand in our traffic trends for our company and versus the industry. So I'll leave it at that for now I will turn the second part over to Chris, Yes look I think that.

Youre right in your commentary, it's a much more balanced equation. This year in terms of our pricing and our inflation that we see.

Look I think that we are very sensitive to the price value equation and how we think about that moving forward is really really important part of the calculus that we go through.

We don't feel like we have the ability to take a tremendous amount more pricing in a year like this moving forward, we want to be very thoughtful and look the good news is is that we didn't take any pricing in 2020, we took very little pricing in 2021.

Given the way we've been buying our commodities have tended to be advantageous so relative to kind of where we were and go back to even to 2019. Our check average is below where the industry is on that same metric. So we feel like we put ourselves in an advantaged position, while still being able to offset the inflationary environment and I just think that equation is something that.

Net of reinvesting those dollars back in I think that we feel like that's going to start to pay dividends from a traffic standpoint, as we move throughout the year and into next year. So we're just going to be a little more guarded as it relates to our pricing now we do have pricing that falls off this year that we took in Q3 and Q4 and I think we're just going to take kind of a wait and see approach as it relates to the weather.

We replicate some of that pricing in the balance of the year or not we'd love to not have to take it to be honest with you.

The last thing I'd add is there is another way to get value to our customer and we talk about this with each of our brands and Thats continued to improve our service levels in our restaurants. So we're seeing very good trends there and so providing.

Providing value to our customers as our service levels improve and the technology that we've invested to make that happen is an important part of our value equation going forward.

Understood. Thank you very much.

Thank you. The next question is coming from Jon Tower of Citigroup. Please go ahead.

Great. Thanks for taking the questions Clare.

Clarification question. So first clarification, the $50 million and productivity gains is that run rate or should we expect to see that all hit in 'twenty three.

No that's all in 2023.

Yes, it will ramp up is that it will ramp up a bit as the year progresses, because we don't have all of the kitchen equipment and yet at Outback that will we will be done into the early into the third quarter, there and so it will ramp up as the year progresses, but it'll all be it will be $50 million this year.

Got it and then I'm just trying to wrap my head around the traffic at Outback in particular, it sounds like this year, you're guiding for a fairly conservative outlook on traffic because of the macro backdrop at the same time, you've got a lot going on with the brand and frankly, the company from productivity gains and ore.

Initiatives at the store level to improve throughput as well as incremental marketing, including a no rules just right. So I guess I'm just trying to understand.

Are you guys trying to layer in a level of conservatism or in your guidance for traffic or is there something you've seen in your business. That's fundamentally altered kind of a traffic cadence for the customer and you feel like it's going to be difficult to get back to pre COVID-19 levels of traffic.

And what we're trying to get done and we've also not priced at some of our competitors have done. So that's why the traffic piece for US is so we're so optimistic about it but we've got pacing and sequencing. We've got the macro environment et cetera, we don't want to get out ahead of our skis, but that's not a sense of us and being any less optimistic we just got to recognize the.

<unk> environment that we're in but we feel very good about the layers and what we've done on the pricing side as we go forward.

And look if you look at our traffic guide our implied traffic guide this year relative to where we were last year. It does suggest that a pretty decent increase from where traffic was in 2022.

Got it and then just lastly on.

David I was hoping maybe you can speak to the board's decision around upping the dividend rather than say.

Increasing the buyback even further the numbers are pretty big today, So I'm curious to learn.

Learn.

What the discussions were.

Well the main thing is to return cash to shareholders.

And invest in our growth opportunities and pay down debt that just shows the power of the cash flow of our company. So as we talked about it we looked at various levers if you look back prior to the pandemic we are basically.

Little bit less than this level.

This dividend increase gets us back to where we were prior to the pandemic and we feel that the surety of dividends and what it looks like for our spark for our shareholders is really an attractive thing.

As we continue to have a shared new share repurchase authorization and we pay down debt and I'll turn it over to Chris for any other thoughts on that since he has been such a big architect of this issue.

Think that we're able to with the dividend, we're able to offer an attractive yield at still what is a relatively low payout ratio and that that gives us a lot of flexibility. So it's not a question of like either or we're able to do not just the dividend, but we're also able to put in place a robust share repurchase program we built.

We can pay down additional debt. This year. So there is especially with the rising interest rate environment paying down debt makes sense as well so theres a lot of things that we can do with the flexibility. It just really again, we always say this but I do think looking at our free cash flow story is really really important for investors.

Got it thank you very much.

Thank you. The next question is coming from Dennis Geiger of UBS. Please go ahead.

Thank you, David and Chris I wanted to come back to the discounting promo activity commentary that you made is there anything more that you can share on latest thoughts on discounting activity or the lack of discounting how youre thinking about discounts in 'twenty three relative to last year and depending on how traffic trends progressed through the year.

Yeah, we don't feel that we need to rely on discounting to drive traffic trends first and foremost.

We play in a category we participate in categories that we haven't seen a lot of that and we continue to make those plans accordingly, because and importantly, because some of our base menu offerings are such a good offer for our customers without offering a lot of discounts and with some pressure. So you won't see a bloom of brands.

Pushed the discounting lever to grow the traffic that we're talking about.

Great appreciate that and then just one more as you talk about continuing to improve service levels can you talk a little bit about where kind of staffing team.

Seem continuity and training are right now and sort of overall, where you are from an operations perspective, and really how much of an opportunity operations and the service enhancements can be as we think about traffic and sales. Thank you.

We are blessed with a very tenured team with turnover trends lessen the industry now part of that was the conscious decision that our company made during the pandemic not to let people go. So we had trained group of people ready to go when the when.

Restaurants reopened and so we intend to capitalize on that tenure and leadership and lack of turnover relatively speaking in.

In the in the industry or excuse me and our company now is.

Are there some staffing challenges in pockets, yes, but not nearly what it was a year ago or two years ago. So.

Goal is to improve service levels through investments in technology and capitalize on the tenure and leadership and training in our restaurants.

Sounds good I appreciate it thank you.

Thank you. Our next question is coming from Andrew <unk> of BMO capital markets. Please go ahead.

Hey, good morning, Thanks for taking the question.

I actually wanted to ask one on Brazil, and I was obviously it was a nice contributor in the quarter I was just hoping you could give us a little bit of an update on the operating environment, there what youre seeing in terms of.

Her behaviors inflation supply, maybe coming online or not and ultimately I'm trying to kind of build to love to hear your perspective on how you think about the margin potential of that business over time, as we build towards kind of a longer term target that you've talked about.

Sure, our Brazil team and a lot of businesses went through a lot during COVID-19 and they've come back in a very good way.

The restaurant sales were good in the quarter.

Operating margins were good in the quarter and we have a really strong management team down there and they've come through it in a very good way, but as we look at the operating environment going forward hopefully the election is behind us and we can move forward in the country and continue to grow our business and as we recover and other <unk>.

<unk> recovered from what we experienced during COVID-19. So we do feel good about our business down there and the growth in the cash flow and the sales it provides.

Thank you our last question today is coming from Brian Vaccaro of Raymond James. Please go ahead.

Hi, Thanks, and good morning, I wanted to go back to the productivity and can you remind us how many units had the full equipment package today across the server handhelds.

And the cooking equipment, and then could you provide some more color and maybe even quantify some of the benefits you expect to yield from that is there any way you could ballpark labor or waste savings or perhaps it's mostly a throughput or sales benefit you expect to see.

Sure.

All the handheld oriented outback.

<unk> is in and we're in about half the restaurants on the on the cooking equipment and they will be done in Q3.

Before I begin the financials and Chris will talk about some of the productivity opportunities. There I just want to underscore once again, it'll go long term with greater service levels and more accurate cooking.

Actually the Grilles provide we expect to build sales and traffic in our restaurants at outback, but I'll turn over to Chris Yeah, and I would say.

Look at the productivity numbers, it's probably look and again, we've said we went from call. It 25 million to $50 million. This year, the $25 million increase a chunk of that supply chain, but most of that is going to be driven by technology improvements in our restaurants and so if you think about where that plays out where it lives on the P&L, it's going to live in the call.

Cost of sales line, it's guidance, but I think a little bit more is going to live in the labor line rate and particularly as it relates to the front of the house technology, we're putting in into the restaurants, there will be though to your point when we have less re cooks those complimentary meals show up as a kind of a reduction of sales. So you will have an increase in sales associated with it is now it's probably not.

Going to be material left material enough to show up in your comp sales assumptions, but it is meaningful it's going to be millions of dollars and so that's going to be something that'll seat and over time as well I think the best part about this technology is that it does provide long term benefits, it's not something that you've put in day, one and immediately are humming on all cylinders. It does ceding over time.

And that's really encouraging and the good news is that the units that have had it for a while now are hitting on all cylinders. So we like where we are.

Alright, that's helpful.

The pricing I heard you say I think average check around 5% is embedded in your guidance could you just level set when was the last pricing last time, you took pricing and.

And if you take no additional pricing what the quarterly cadence would look like over the next few quarters or across the business yes.

We'd like to be in a position now where we don't have to take any more pricing from here until.

We ended the year and then even that is like we want to have optionality on that but if you think about it we should be over 7% or so at least through the first couple of quarters and then we have the big price increases we took in Q3 of last year that we would lap and we have to make a decision then how much do you want a place in those numbers and again right now in our current guidance.

We're assuming call it a 6% annual price increase with negative mix of maybe call. It a point to get you to that 5% overall.

And that does assume that there's going to be some level of pricing taken in the back half of the year, but we could actually have a little bit less pricing, if we don't need it.

We talked about earlier.

Alright, thanks very much.

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

Yes, I want to thank everybody for calling in today, we appreciate it and I want to welcome Tammy to the Investor Relations team she's going to be a good partner.

They're a good partner to all of you and I want to say how important that new unit opportunity for US is in the company and I'm fortunate that we have such a great leader Mark Graf to make that happen. So more to follow in this space and we will be talking to you over the coming weeks. Thanks everybody.

Ladies and gentlemen, thank you for your participation. This concludes today's event you may disconnect. Your lines at this time and enjoy the rest of your day.

Yeah.

[music].

Yes.

[music].

Okay.

Yes.

Okay.

[music].

Yeah.

[music].

Sure.

[music].

Yes.

[music].

Okay.

Yes.

[music].

Yes.

[music].

Yes.

[music].

Okay.

Yes.

[music].

Okay.

Yes.

Okay.

Yes.

Okay.

[music].

Yes.

[music].

Yeah.

Yes.

[music].

Okay.

Yes.

[music].

Yes.

Okay.

[music].

Okay.

[music].

Yes.

Yeah.

Yes.

[music].

Yes.

[music].

Yes.

[music].

Yes.

Okay.

Yes.

Yeah.

Yes.

Yeah.

Yes.

[music].

Okay.

Yes.

Okay.

Yes.

Okay.

Yes.

Okay.

Yes.

Okay.

Yes.

Okay.

Yes.

Okay.

Yes.

Okay.

Sure.

Yes.

Okay.

Yes.

Okay.

[music].

Yes.

Okay.

[music].

Yes.

<unk>.

Yes.

Okay.

Yes.

<unk>.

Yes.

Sure.

Yes.

Sure.

Yes.

Okay.

Sure.

Okay.

Yes.

Okay.

Yes.

Sure.

Yes.

Okay.

Sure.

Yes.

Right.

Okay.

[music].

Yes.

Sure.

Yes.

Alright.

Yes.

Okay.

Yes.

Sure.

Yes.

Okay.

Yes.

Okay.

Yes.

<unk>.

Okay.

Yes.

Sure.

Yes.

Okay.

Sure.

Yes.

Got it.

Yes.

Sure.

Okay.

Yes.

Sure.

Okay.

Yes.

<unk>.

Yes.

Okay.

Right.

Okay.

Sure.

Yes.

Okay.

Yes.

Okay.

Sure.

Okay.

Yes.

Okay.

Thanks.

Yes.

Sure.

Yes.

Okay.

[music].

Yes.

Sure.

Yes.

Greetings and welcome to the <unk> Brands' fiscal fourth 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.

It can also be found on our website at Bloom brand Dot com in the investors section throughout this conference call, we will be presenting results on an adjusted basis, an explanation of our use of non-GAAP financial measures and reconciliations to the most directly comparable GAAP measures appear in our earnings release on our website as previously described.

Before we begin formal remarks, I'd like to remind everyone that part of our discussion today will include forward looking statements.

Including a discussion of recent trends. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from our forward looking statements.

Some of these risks are mentioned in our earnings release, others are discussed in our SEC filings, which are available at SEC Dot Gov.

During today's call we will provide a brief recap of our financial performance for the fiscal fourth quarter 2022.

Well, thank you Mark and welcome to everyone listening today as noted in this morning's earnings release adjusted Q4 2022 diluted earnings per share was <unk> 68.

Which compares to <unk> 60 in Q4 2021 up 13% this is al.

Also more than double our 2019 results combined U S. Comparable sales were up one 4% with each brand having positive same store sales despite challenges from weather events at both the beginning at the end of the quarter.

Pleased with our Q4 results and it was the culmination of a year, where we successfully navigated significant inflation.

Comparable same store sales were up an impressive 12%. This is the second consecutive year of double digit comp sales growth for Fleming's, Brazil sales were up 38% for the year.

Finally, our 2022 results would not have been possible without the talented and dedicated employees in our restaurants and restaurant support center your commitment to serving guests with the highest levels of the hospitality experience is what makes our restaurants so successful.

We look forward, we will further capitalize on the success of 2022 and.

So youll see from our guidance for the year in the quarter, we are off to a good start in 2023.

To achieve our objectives. These will be our key priorities first and foremost drive healthy sales and traffic we will accomplish this by improving execution and consistency consistency through technology, leveraging proven marketing platform to drive frequency, introducing new products and new sales layers and finally ramping up the remodeling of our <unk>.

Guest experience, leading to increasing customer preference in frequency. This benefit is in addition to the productivity dollars embedded in our 2023 plan.

Restaurants, with new food offerings, and exceptional service and most importantly, it ties back to our heritage. The overall is just right is aimed at highlighting our great menu in the everyday value that we offer to our guests.

From this piece of business.

Another example is brunches returning to bonefish. It is a very successful day part and we brought back with even better food offerings, while providing a good financial return for the company.

We will provide more details and additional sales layers at all of our brands as the year progresses.

The final sales driving strategy I want to highlight is the additional emphasis on remodels in 2023, we paused our remodel efforts during the pandemic and have since developed a variety of scopes that we can deploy based on varying needs of our restaurants, we intend to remodel over 100 locations. This year at the beginning of a multiyear effort to touch a large percentage of our business.

We know keeping our assets looking at their best along with our ongoing relocation program is a key element to growing traffic.

All of this is about bringing in restaurant traffic back to pre pandemic levels. Importantly, these layers of our platform to deliver growth in 2023 and beyond.

Second priority for 2023 is to continue expanding our off premise business, which is performing very well, we will capitalize on our long strong carryout and delivery capabilities.

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

Catering will remain an important and growing <unk> brands. The Kratos team remains an industry leader in this space and has done a fantastic job.

We expect to see more progress out of Outback and bonefish going both can do a great job in catering last.

Lastly, we offer significant value through our bundling bundled platform. We expect off premise is to remain a large and growing part of our business.

The third priority is to maintain the major progress we have made in operating margin over the last three years amid a highly inflationary environment as discussed margin improvements start with growing healthy traffic across the in restaurant and off premise channels. We also reduced reliance on discounting or promotional <unk> and pivoted advertising spend towards more target.

Did higher return digital channels. 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 persistent inflation, we've been able to achieve our margins well above 2019, we remain committed to growing to 8% operating margins over the long term.

Our fourth priority is to capitalize on our progress to become a more digitally savvy company in Q4, approximately 76% of total U S off premise sales were through digital channels in the past year, we implemented a new online ordering system and mobile app to support our digital business, both have outperformed expectations and the new <unk>.

<unk> 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.

And the final priority is to build more restaurants, especially at Outback Fleming's in Brazil. Each of these brands have strong sales and profit margins that offer great returns, we see major expansion opportunities at Outback, where our goal is to significantly grow our U S restaurant base, we intend to grow Fleming from 65 to 100 and plan to more than double our footprint.

In Brazil, and finally keep an eye out for us.

In summary, 2022 was a good year for our company. We are focused on achieving our 2023 goals while building a great business that will continue to thrive.

And with that I'll now turn the call over to Chris will provide more detail on Q4 and the full year 2023.

Thanks, Dave and good morning, everyone I would like to start by providing a recap of our financial performance for the fiscal fourth quarter of 2022.

Total revenues in Q4 were $1 1 billion, which was up four 6% from 2021, driven by a $33 million increase in international revenue, primarily in Brazil, as well as a one 4% increase in U S comparable restaurant sales.

In our U S brands traffic was down seven 3% in Q4 relatively consistent with Q3.

Importantly, our traffic trend has improved significantly over the first seven weeks of 2023.

Change was a product of our <unk> activity mixing higher than expected changes in our appetizer offerings and strength in our catering business, which carries a lower per person check average.

Party delivery business was flat from Q3 at roughly 12% of U S sales.

Component of our success in Q4.

As it relates to other aspects of our Q4 financial performance GAAP diluted earnings per share for the quarter was <unk> 61.

Versus 59 of diluted earnings per share in 2021, adjusted diluted earnings per share was <unk> 68.

Versus 60 of adjusted diluted earnings per share in 2021. It is worth noting that our Q4 result was more than double our 2019 adjusted EPS of <unk> 32.

This represented the most profitable fourth quarter in our company's history.

The primary difference between our GAAP and adjusted results was Q4 2021 restructuring related charges and an adjustment for certain collective wage and hour legal cases in Q4 of 2022.

Adjusted operating income margin was eight 2% in Q4 versus seven 8% in 2021 margins improved year over year as inflation levels mitigated from the historically high levels earlier in 2022.

Commodity inflation was 10% in Q4, driven by some favorability in our beef contracting while labor inflation was 8%, which was 90 basis points better than it was in Q3.

Also in Q4, our adjusted tax rate was 15%.

Turning to our capital structure total debt was $833 million at the end of the.

And as of today, we are down to total debt of $760 million.

This puts our current lease adjusted leverage ratio below three times, we have made tremendous progress on reducing our debt since 2019 for perspective, our debt balance at the end of 2018 was $1 $1 billion.

Aggress on in 2023.

We have also increased our quarterly dividend from <unk> 14, a share to 24 a share this 71% increase in our dividend provides a very attractive yield to our investors and is a strong signal about our confidence in the strength of our free cash flow.

We have ample cash available to either invest in our growth initiatives or invest back into our people.

<unk>.

This benefit will last for a period of five years. This exemption is intended to provide relief for industries, most severely impacted by the COVID-19 pandemic.

The material benefits from this tax exemption will start to impact our earnings this year and we estimate that this exemption will provide an approximate 25 benefit to our 2023 earnings per share.

As I indicated this benefit benefit will manifest in two distinct ways in our Brazilian financial results.

First we are assessed revenue taxes on certain goods and services known as <unk> taxes, we will be exempt from paying piece <unk> taxes for a period of five years. The benefit to operating income is expected to be approximately $17 million with an approximate $40 million increase in revenue.

<unk> offset by $23 million of expense, primarily loss tax credits split equally between Cogs labor and operating expenses. This operating income benefit is exempt from corporate income tax in Brazil.

Corporate tax exemption is expected to generate an additional $6 million of benefit in 2023.

Combined benefit of $17 million of decent.

I think <unk> exemption and the $6 million of corporate tax benefit will represent an approximate $23 million increase in our net income or <unk> 25 of earnings per share.

This exemption is not a one time benefit these impacts will be embedded in our financial statements. Each of the next five years as such they will be included in both our GAAP and adjusted results showed the Brazilian government or court system alter this legislation or our eligibility for it in the future.

We will be sure to properly disclose the corresponding impacts.

In our earnings release, we provided a reconciliation of our earnings per share guidance, both before and after the benefits of this exemption.

In addition, keep in mind that for Bloom and brands fiscal 2023 will be a 53 week year. The 50 <unk> week will be December 25, 2023 through December 31, 2023, Although we are closed on Christmas. The remaining six days in this 50 <unk> week are very high volume sales days.

We expect the impact of the 50 <unk> week to be approximately <unk> 14 of EPS.

Now turning to our 2023 guidance.

We expect U S comparable restaurant sales to be between 2% and 4% on a 52 week basis. This includes a full year check average benefit of approximately 5% with traffic, reflecting a more uncertain view on the macro environment should the consumer behave more like what we have seen.

Early this year, there could be a better outcome on traffic in 2023.

Next we expect GAAP diluted earnings per share to be between $2 80.

And $2 89.

And we expect adjusted diluted earnings per share to be between $2 91.

And $3 our EPS guidance includes the benefits from the Brazil tax exemption and the 50 <unk> week.

Single digits broader commodity range lobster chicken and pork are expected to be deflationary this year.

We have seen year over year wage inflation slowly come down and we would expect that to continue in 2023 with the second half of the year better than the first half of the year.

We're targeting $50 million of productivity benefits in 2023, we also.

Expect the benefits from these initiatives to build as the year progresses and provide ongoing incremental benefit into 2024.

Our effective income tax rate is expected to be between 13% and 15% cap.

For to be when we see a material jump in the number of restaurants opened.

To level out some to finished Q1 as we begin to lap sales strength from last year, beginning with Valentine's day. This has been contemplated in our guidance.

We expect Q1 adjusted earnings per share to be between 85 and 90.

This guidance and future guidance will include the benefits from the tax exemption in Brazil.

<unk> at Bloom and brands to the role she has held finance positions at all of our casual dining brands and is the perfect choice to lead our IR function moving forward Mark we'll be introducing tammy to our coverage analysts over the next several weeks congratulations to both Mark and Tammy.

Well open for questions. If you would like to ask a question. Please press star one on your telephone keypad at this time.

We do ask that you. Please limit yourself to one question and one follow up to allow as many parties the opportunity to ask a question as possible again Thats Star One to register a question at this time. The first question today is coming from Jeffrey Bernstein of Barclays. Please go ahead.

Great. Thank you very much and congrats to Mark and Tammy.

My initial question is just on comps.

For the fourth quarter, it looks like Outback.

You had pricing up close to 10, you had traffic down nine hence the 1% positive comp.

That was below seemingly what the street with looking for and I think what you guys had even implied for the fourth quarter. I know you mentioned weather was a one point headwind, but it would seem like there was a shortfall even beyond that so I'm. Just wondering if you could talk about why the shortfall whether it was a conscious decision on your part.

Weed out value and.

Lower end consumers, who perhaps aren't as profitable or whether there was further disruption obviously trends did accelerate thus far this year, but that we know has a lot to do with the lapse. So I'm just wondering if you can provide some context around the.

The comp shortfall in traffic being down like 9% and then I had one follow up.

Yes, yes sure Jeff This is Chris good morning.

So as it relates to Q4 as you know our brands tend to skew special occasion, and we do have a disproportionate impact from weather in that last week in the fourth quarter. So that winter storm Elliott was a 1% negative impact on our Q4 sales and obviously that wasn't contemplated when we prepared our guidance.

Better than expected, but certainly the mix change going from positive to negative was something that we hadn't expected to manifest and then finally I'd say traffic was softer in November .

In December that had further.

I think the things the layers that we've talked about the prepared remarks are certainly coming together and all of our brands.

And our traffic trends are very good and we feel terrific about it so.

Understood and then my follow up was just on the commodity outlook.

I know last quarter I think you said you thought maybe mid single digit to high single digit for full year 'twenty three now.

Now you've tempered that to mid single digit which understand most commodities are easing, but beef was the surprise at least to US I know you mentioned, but I think there are 100% locked on beef and that's coming in at mid single digit right in line with your overall basket.

I'm just wondering how you were able to secure that 100% at mid single digit.

And what your thoughts are as we move towards the end of 'twenty three 'twenty four whether that would be a year, where therefore, you would likely see an acceleration of that inflation. Thank you.

But to your point, we are 100% locked on beef.

And as I said in the prepared remarks that beef inflation is in line with sort of the mid single digits broader commodity range look the beef markets move and just like we thought we talked about this last time, hey look there's going to be sort of a supply imbalance youre going to see less product available in the marketplace, that's going to put pressure on pricing you've seen it in the <unk>.

Spot markets as prices have started to increase in December and into January so that movement has been exactly like we thought like we would tell you guys. In November we started having conversations about locking in on beef, we feel like we have an excellent supply chain team, we feel like locking in medical mid single digits as a great place to land. It gives us price assurance it gives us supply assurance and.

And look I think in this marketplace, that's a pretty good place to be.

In terms of the other market basket commodities.

I think Brad grains, certainly those will be challenged this year cooking oils soybean oil that's all inflationary, but we're pretty open on things like cooking oil. So hopefully we can have some upside on that as well as the year progresses produce is going to be very weather dependent so that's going to ebb and flow and freight should be better as well.

So it isn't just a beef story as it relates to our basket, but but certainly when you look at that mid single digit number we're pretty pleased with the work we've done.

Understood Thanks very much.

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

Hey, Thanks, good morning, and congrats and just wanted to dig into some of the future productivity opportunities you called out the opportunity for $50 million savings in 'twenty, three which is pretty significant.

So if you could talk to a couple of the bigger initiatives there.

And the highlight.

And for Us.

Yeah, I'll give some of the broader strokes thrown but Chris talk with some of the financials, but we've talked for a while now about our technology initiatives and they have come together on time as expected. So the handheld and outback are rolled out the ovens and the cooking technology in and the grills.

And outback slated to happen, finishing in the middle of the third quarter. So that has really come together for us and has led to more productivity for us and the supply chain team of course has continued to do a great job on our food supply and productivity there without compromising food quality very importantly, so, but I'll turn it over to Chris for any other context on the financials.

Well, the only context I'd add above and beyond that as we have talked about these technology initiatives and they would provide a financial return and so if you think about our productivity this year thats $50 million target.

Pretty much doubled what we did from a productivity perspective in 2022 and the biggest chunk of that increase is coming from this technology initiative.

<unk> is in the Outback team certainly knows this is we expect sales gains as a result of this as well over time.

As we have as our re cooks diminish in our customer service improves as our table turns improve that will boost sales and it boosts our operating metrics. So it's more than just a financial productivity.

Upside for us in the P&L. It's also a sales building activity, we expect to capture.

Got it thank you.

Thank you. The next question is coming from.

Lauren Silberman of credit Suisse. Please go ahead.

Thank you very much just on the first one for operating margins you talked about 2023 being a year of margin expansion can you just walk through the puts and takes of the day.

Hi, there.

Yes, sure so well let me let me do this let's let's talk about margins on an apples to apples basis for a minute. So exclude the benefit of this Brazilian tax exemption and exclude the benefit of the 50 <unk> week. So it makes it more clear first the bad news, so even with inflation coming off of last year's record levels as I said, it's still <unk>.

Safe enough to be really inflationary. This year 2022 had call it $300 million of inflationary headwinds 2023, we will have like $200 million. So it's still pretty pretty high that's close to 500 basis points of margin pressure just from inflation alone, but on the flip side right you have an estimated 5% increase in <unk>.

<unk> check that we discussed as well as the $50 million of productivity that should be largely able to offset inflation and then from there. The margin story is pretty simple, it's all going to come down to traffic right. Now we've built a negative traffic assumption into our 2023 plan driven largely by an uncertain macro environment that would lead to a slightly negative outcome.

On op margin this year versus 2022 on an apples to apples basis now if that negative traffic doesn't manifest and we've talked about how we've started the year I could have a better margin outcome. This year compared to where we were last year importantly, though at the restaurant level I feel pretty good about keeping my restaurant margins flat to slightly positive versus.

Last year, and now I'm going to lose a little bit on depreciation and perhaps a small amount on G&A and that's why the op margin might be a little more challenged than my restaurant margin. This year, but again and I think that it's important to not just provide context for 'twenty three if youre kind of looking fast forwarding and say, okay, well what about 2020 for a couple of things are going to change right first inflation should be less.

And second we're going to have a decent amount of rollover from these productivity initiatives. So Martin as Dave indicated in the prepared remarks marching back closer to that 8% target seems far more and reach now it is important though also to keep in mind that the 50 <unk> week as well as this Brazilian tax exemption are both margin accretive. So it is reasonable to expect when you incur.

Those that youre going to have operating margin expansion in 2023.

And I just wanted to provide a longer term context to it as we've had sustainable margin gains since 2019, if you look back in our history and we expect to continue that.

Going forward by Chris laid out so eloquently. So it's all there for US we're committed to the 8% margin long term and it's a huge increase which is where we are as a company a few years ago.

Great. Thank you incredibly helpful. And then just a follow up on that traffic piece and the expectations for negative Capex given.

Given the macro what opportunities are levers exists.

That are in your control on the traffic side that you are considering.

Or that yes.

<unk> associated with it that whole attitude in the restaurants, that's number one number two we've got a reinvigorated a new social hour Fleming's that we're putting in the restaurants as early evening, that's a nice sales layer for us that we're seeing we've got brunch coming back at Bonefish, We've got our wine Big time wind opportunity at Carrabba's all of these are les.

Surety dine and discover at Bonefish for certain price Outback has some things going on right now that are very attractive at a certain price point. So those are the things that we have control over to help drive traffic and as Chris mentioned, if the macro environment is not quite as bad as some people fear, we think there could be some upside to our traffic.

Thank you Dan Thats very helpful.

Thank you. The next question is coming from Dan <unk> of Jpmorgan. Please go ahead.

Hi, Thank you very much it's interesting to hear about no rules just right I mean, just kind of like the return of that.

Brand promise so I mean, it was a big part of the margin expansion for the entire industry versus 2019 was the reduction of the advertising reduction of menu items simplification kind of in the in the kitchen that allowed for a much more efficient operation overall.

Now kind of entering the point, where it makes sense to bring back LTR bring back some new news in the kitchen bring back advertising I mean is it are we kind of at the start if you will have a slippery slope to where cost need to need to be add back to the business because others are doing that as well.

Yes, a couple of things John No rules, just right can be executed with the continued menu simplification that we've had but we don't anticipate a whole bunch of new product offerings and complexity in the kitchen and as you know what the new Grilles and things at Outback that simplifies our kitchen, even more so that's number one and no real just raise more.

More than a marketing slogan, it's about how we run our restaurants. So that's number one number two yes, we are increasing our marketing spend but it's not going to be anywhere near what it was in 2019. So.

We've learned a lot during the pandemic how to access our customers the digital opportunity how to target customers, so that margin opportunity and advertisers and he is going to remain as we build sales. So the fundamental benchmarks that we learned during pandemic John are not going away, we're just going back to our heritage and our slogan that was sold.

<unk> worked so well for us at Outback. So that's how we're trying to build this thing.

And let me ask about Remodels I think you said Youre doing 100, which is actually a pretty big percent of the U S Outback system.

It's been said in the past that you don't get credit for an interior remodel unless you do an exterior remodel and of course, an exterior remodel costs, especially in 2023, a lot of money. It takes a lot of time. So can you talk about what the Remodels will look like what kind of gain that youre expecting in these.

Projects are going to be a really attract people to come back and dine in the restaurant, which is obviously, where you had the most capacity or potential to add people yeah.

First of all it's 50 at Outback and <unk>. The other two casual dining brands plus fleming's. So if that gets to the $100. Okay. So, but we really scoped out light touch a medium touch in a heavy touch and our Remodels and we know keeping that interior restaurants fresh is so important and John .

As we do the interiors, we will do some some exterior work that touched up to make sure people know plus what we have is a digital marketing piece.

Piece that we can talk about as we go into these markets and do the Remodels. So.

Its freshening up the restaurants on an interior basis, we have three separate scopes, we certainly have the capital and cash flow to do this and involves all of our brands with 50 at Outback and any financial metrics I'll turn it over to Chris to talk about what I'd, just add that yes look there youre right youre not expecting a herculean.

Sales lift when you do an interior remodel, but if you can get a 2% to 3% lift.

Pretty good lift for us, but a more important partly as Dave said, it's more about it's I don't see it think of as maintenance per se, but if you don't keep your assets current you could be on a slippery slope from a same store sales perspective, so I think that keeping the assets current is going to be a critical part of what we do not just this year, but moving forward and giant as a holistic effort it's off.

<unk>, it's marketing it's remodels. It all comes together Holistically and that's what we're trying to talk about the sales layers.

Got it thank you.

Thank you. The next question is coming from Jeff Farmer of Gordon Haskett. Please go ahead great.

Great. Thanks, Might've missed it but did you guys provide any specifics on G&A, our interest expense dollars for full year 2023.

We didn't but I can give you a little bit of context, and youre looking at G&A and G&A is that what you said.

G&A and interest expense and interest okay. Yes, so G&A is going to be up it'll be up probably $10 million to $15 million in 'twenty three in terms of dollars, that's probably flat as a percentage of sales, though a couple of reasons. We made some investments in it and our development team that we will have a full run rate for in 'twenty. Three we made some additional investments back into our <unk>.

<unk>, which we thought was very important and we had a number of vacancies.

In the year that are now filled.

And we also had some incentive comp reload so theres a few things going on in G&A that will make it go up this year touch.

Touch on DNA, while we're here DNA will be up this year.

Largely consistent with our increase in capital spending.

And then interest expense should be slightly down actually flat to slightly down I think that we do.

You guys did touch on it but as the consumer backdrop has become more challenging just a little bit more strained for some of the discretionary spending.

Are you seeing shifts in relative same store sales performance across your multiple channels, meaning the in restaurant to go and delivery channels seeing any sort of.

Shifting of behaviors amongst those three channels.

This is what I would say, it's a little tough read, but but we because.

But no real commentary on kind of the consumer our third party business, which is a slightly different consumer from an off premise perspective is hanging in there. It's a little down in Q1 versus where it was in Q4, but it's still pretty steady and that is a different kind of consumers. So overall the shifting between channels isn't really drive in a.

It can amount of what we think is reflective of kind of where the consumer is it feels more just like engineered channel moving.

And Jeff the high.

High end continues to do really well and Fleming's continues to do really well in that high end and.

So that's a consumer that we're going to continue to pursue what I've talked about some of the sales layers. There alright. Thank you.

Thank you. Our next question is coming from Jonathan.

Please go ahead.

Hi.

Sara Senatore I, just want to make sure I am I'm just curious if I could ask a follow up and then a quick question a follow up if you could just talk about January .

Think widely the industry has seen some improved trends are you still maintaining your traffic gap that you've talked about or is it sort of that kind of a rising tide. So any insight onto relative performance given how robust it's been for you, but I think also some trends we're seeing across the board.

And then and then I wanted to ask about kind of your thoughts on pricing.

Sounds like pricing will be pretty much in line with inflation in 2023.

After having Ron I think behind inflation in 2022, So I guess do you.

That's sort of a philosophy about where those two set would you use that as an opportunity to reinvest.

<unk>.

The quality or the quantity of food just how are you.

Are you thinking about that sort of more normalized relationship between price and inflation. Thank you.

Sure I'll take the first part I'm not going to comment in detail on weekly trends in February but I can say overall for the quarter, we remain very happy with how we stand in our traffic trends for our company and versus the industry. So I'll leave it at that for now I will turn the second part over to Chris Yeah look I think.

Youre right in your commentary, it's a much more balanced equation. This year in terms of our pricing and our inflation that we see.

But look I think that we are very sensitive to the price value equation and how we think about that moving forward is really really important part of the calculus that we go through.

The way we've been buying our commodities have tended to be advantageous so relative to kind of where we were and it would go back to even to 2019, our check average is below where the industry is on that same metric. So we feel like we've put ourselves in an advantaged position, while still being able to offset the inflationary environment and I think that equation is something that instead of.

Reinvesting those dollars back in I think that we feel like that is going to start to pay dividends from a traffic standpoint, as we move throughout the year and into next year. So we're just going to be a little more guarded as it relates to our pricing now we do have pricing that falls off this year that we took in Q3 and Q4 and I think we're just going to take kind of a wait and see approach as it relates to whether we.

Replicate some of that pricing in the balance of the year or not wed love to not have to take it to be honest with you and the last thing I'd add is there is another way to get value to our customer and we've talked about this with each of our brands and Thats continued to improve our service levels in our restaurants, and we're seeing very good trends there and so.

Providing value to our customers as our service levels improve and the technology that we've invested to make that happen is an important part of our value equation going forward.

Understood. Thank you very much.

Thank you. The next question is coming from Jon Tower of Citigroup. Please go ahead.

Great. Thanks for taking the questions clarifications.

Clarification question. So first clarification, the $50 million and productivity gains is that run rate or should we expect to see that all hit in 'twenty three.

No that's all in 2023.

Yes, it will ramp up is that it will ramp up a bit as the year progresses, because we don't have all of the kitchen equipment in yet at Outback that will will be done.

The early into the third quarter, there and so it will ramp up as the year progresses, but it'll all be it will be $50 million this year.

Initiatives at the store level to improve throughput as well as incremental marketing, including a no rules just right. So I guess I'm just trying to understand.

Are you guys trying to layer in a level of conservatism or in your guidance for traffic or is there something you've seen in your business that fundamentally altered kind of a traffic cadence for the customer and you feel like it's going to be difficult to get back to pre COVID-19 levels of traffic.

No I don't think that its difficult at all I think we are being prudent in our guidance given the macro environment, we feel very good John but what we can control and we laid that out very clearly today and what we're trying to get done and we are also not priced at some of our competitors have done. So that's why the traffic piece for us is so.

We're so optimistic about it but we've got pacing and sequencing we've got the macro environment et cetera, we don't want to get out ahead of our skis, but that's not a sense of us as being any less optimistic we just got to recognize the macroeconomic environment that we're in but we feel very good about the layers and what we've done on the pricing side as we go forward.

And look if you look at our traffic guide our implied traffic guide this year relative to where we were last year. It does suggest that a pretty decent increase from where traffic was in 2022.

Got it and then just lastly on.

David I was hoping maybe you can speak to the board's decision around upping the dividend rather than say.

Increasing the buyback even further because the numbers are pretty big today, So I'm curious to know.

Learn what the discussions were.

So the main thing is to return cash to shareholders.

Little bit less than this level.

As we continue to have a shared new share repurchase authorization and we pay down debt and I'll turn over to Chris for any other thoughts on that since he has been such a big architect of this issue.

Think that we're able to with the dividend, we're able to offer an attractive yield at still what is a relatively low payout ratio and that that gives us a lot of flexibility. So so it's not a question of like either or we're able to do not just the dividend, but we're also able to put in place a robust share repurchase program we believe.

Got it thank you very much.

Thank you. The next question is coming from Dennis Geiger of UBS. Please go ahead.

Yes, we don't feel that we need to rely on discounting to drive traffic trends first and foremost.

We play in a category we are prepared to participate in a category that we haven't seen a lot of that and we continue to make those plans accordingly, because and importantly, because some of our base menu offerings are such a good offer for our customers without offering a lot of discounts and with some pressure. So you won't see a bloom of brands.

Pushed the discounting lever to grow the traffic that we're talking about.

Great appreciate that and then just one more as you talk about continuing to improve service levels can you talk a little bit about where kind of staffing team.

Team continuity and training are right now and sort of overall, where you are from an operations perspective, and really how much of an opportunity operations and the service enhancements can be as we think about traffic and sales. Thank you.

Yes, we are.

Our blessed with a very tenured team with turnover trends lessen the industry now part of that was the conscious decision that our company made during the pandemic not to let people go. So we had trained group of people ready to go when the.

Restaurants reopened and so we intend to capitalize on that tenure and leadership and lack of turnover relatively speaking in.

In the in the industry or excuse me and our company now is.

Are there some staffing challenges in pockets, yes, but not nearly what it was a year ago or two years ago. So.

Goal is to improve service levels through investments in technology, and capitalize on the 10 year and leadership and training in our restaurants.

Sounds good I appreciate it thank you.

Thank you. Our next question is coming from Andrew <unk> of BMO capital markets. Please go ahead.

Hey, good morning, Thanks for taking the question.

I actually wanted to ask one on Brazil, and I was obviously it was a nice contributor during the quarter I was just hoping you could give us a little bit of an update on the operating environment, there what youre seeing in terms of.

<unk> behaviors inflation supply, maybe coming online or not and ultimately I'm trying to kind of build to love to hear your perspective on how you think about the margin potential of that business over time, as we build towards kind of a longer term target that you've talked about thanks.

Sure, our Brazil team and a lot of businesses went through a lot during COVID-19 and they've come back in a very good way.

The restaurant sales were good in the quarter.

<unk> recovered from what we experienced during COVID-19. So we do feel good about our business down there and the growth in the cash flow and the sales it provides.

Thank you our last question today is coming from Brian Vaccaro of Raymond James. Please go ahead.

Hi, Thanks, and good morning, I want to go back to the productivity and can you remind us how many units had this full equipment package today across the server handhelds kgs and the cooking equipment and then could you provide some more color and maybe even quantify some of the benefits you expect to yield from it is there any way you can.

Paul Park, labor or waste savings or perhaps it's mostly a throughput or sales benefit you expect to see.

Sure.

<unk>.

All the handheld oriented outback.

<unk> is in and we're in about half the restaurants on the on the cooking equipment and they'll be done in Q3.

Before I could begin in the financials and Chris will talk about some of the productivity opportunities. There I just want to underscore once again that'll go long term with greater service levels and more accurate cooking, especially the grilles provide we expect to build sales and traffic in our restaurants at Outback and I'll turn it over to Chris.

Yeah, and I would say.

If you look at the productivity numbers, it's probably look and again, we've said we went from call it $25 million to $50 million. This year, the $25 million increase a chunk of that supply chain, but most of that is going to be driven by technology improvements in our restaurants and so if you think about where that plays out where it lives on the P&L, it's going to live.

The cost of sales line, it's guidance, but I think a little bit more is going to live in the labor line, right and particularly as it relates to the front of the house technology, we're putting in.

The restaurants, there will be though to your point when we have less re cooks those complimentary meals show up as a kind of a reduction of sales. So you will have an increase in sales associated with it is now it's probably not going to be material left material enough to show up in your comp sales assumptions, but it is meaningful it's going to be millions of dollars.

And so that's going to be something that'll seat and over time as well I think the best part about this technology is that it does provide long term benefits, it's not something that you put in day, one and immediately are humming on all cylinders. It does seating over time, and that's really encouraging and the good news is that the units that have had it for a while now are hitting on all cylinders. So we like where we are.

<unk>.

Alright Thats helpful.

The pricing I heard you say I think average check around 5% is embedded in your guidance could you just level set when was the last pricing last time, you took pricing and.

And if we take no additional pricing what the quarterly cadence would look like over the next few quarters or across the business yes.

Yes, we'd like to be in a position now where we don't have to take any more pricing from here until.

The end of the year and then even that is like we want to have optionality on that but if you think about it we should be over 7% or so at least through the first couple of quarters and then we have the big price increases we took in Q3 of last year that we would lap and we have to make a decision then how much do you want a place in those numbers and again right now in our current guidance.

We're assuming call it a 6% annual price increase with negative mix of maybe call. It a point to get you to that 5% overall.

And that does assume that there is going to be some level of pricing taken in the back half of the year, but we could actually have a little bit less pricing, if we don't need it.

I talked about earlier.

Alright, thanks very much.

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

Yes, I want to thank everybody for calling in today, we appreciate it and I want to welcome Tammy to the Investor Relations team she's going to be a good partner.

He will be a good partner to all of you and I want to say how important that new unit opportunity for us is in the company.

It's just that we have such a great leader Mark Graf to make that happen so more to pharma space and we'll be talking to you over the coming weeks. Thanks everybody.

Ladies and gentlemen, thank you for your participation. This concludes today's event you may disconnect. Your lines at this time and enjoy the rest of your day.

Q4 2022 Bloomin' Brands Inc Earnings Call

Request a DemoDemo

BLMN

Bloomin' Brands

Earnings