Q1 2024 Bloomin' Brands Inc Earnings Call

May 7, 2024

Greetings and welcome to the Bloom and brands fiscal first quarter 'twenty 'twenty four 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, if you require operator assistance. Please.

Operator: Greetings and welcome to the Bloomin' Brands Fiscal First Quarter 2024 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. If you require operator assistance, please press star then zero.

Press Star then zero. It is now my pleasure to introduce your host Tara Korean <unk>.

Tara Kurian: It is now my pleasure to introduce your host, Tara Kurian, Vice President, Corporate Finance and Investor Relations. Ms. Kurian, you may begin. Thank you, and good morning everyone. With me on today's call are David Deno, our Chief Executive Officer, and Michael Healey, our Chief Financial Officer and Executive Vice President. By now, you should have access to our fiscal first quarter 2024 earnings release. It can also be found on our website at www.bloominbrands.com in the investor section.

Tara Kurian: Rice, President corporate finance and Investor Relations Ms. Korean you may begin.

Tara Kurian: Thank you and good morning, everyone with me on today's call are David Deno, Our Chief Executive Officer, and Michael Healy, Our Chief Financial Officer, and Executive Vice President by now you should have access to our fiscal first quarter 2024 earnings release. It can also be found on our website at www dot.

Michael Healy: Lehman brands Dot com in the investors section throughout this conference call, we will be presenting results on an adjusted basis, an explanation of our use of non-GAAP financial measures and reconciliations to the most directly comparable GAAP measures appear in our earnings release on our website as previously described.

Tara Kurian: 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.

Speaker Change: 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 in a material way from our forward looking statements some of these.

Tara Kurian: 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 in a material way from our forward-looking statements. Some of these risks are mentioned in our earnings release; others are discussed in our FCC filings, which are available at www.fcc.gov.

Speaker Change: Risks are mentioned in our earnings release, others are discussed in our SEC filings, which are available at www Dot SEC Dot Gov.

Speaker Change: During today's call we will provide a brief recap of our financial performance for the first fiscal quarter 2020 for an overview of company highlights and current thoughts on fiscal 2024 guidance. Once we've completed these remarks, we'll open the call up for questions with that I would like to now turn the call over to David Deno.

Tara Kurian: During today's call, we'll provide a brief recap of our financial performance for the first fiscal quarter of 2024, an overview of company highlights, and current thoughts on fiscal 2024 guidance. Once we've completed these remarks, we'll open the call up for questions. With that, I would now turn the call over to David Deno.

David J. Deno: Well, thank you Sarah and welcome to everyone listening today as noted in this morning's earnings release adjusted Q1 2024 diluted earnings per share was <unk> 70.

David J. Deno: Well, thank you, Tara, and welcome to everyone listening today. As noted in this morning's earnings release, adjusted Q1 2024 diluted earnings per share was $76,000, and U.S. comparable sales were down 160 basis points. These outcomes were within our expectations and represent a solid start to 2024. However, the industry backdrop remained more challenging than expected after the weather-related impact in January.

David J. Deno: And U S comparable sales were down 160 basis points. These outcomes were within our expectations and represent a solid start to 2024 the industry backdrop remained more challenging than expected after the weather related impact in January. Despite this headwind we consistently outperformed the industry on both sales and traffic combined U S comparable sales were.

David J. Deno: Despite this headwind, we consistently outperformed the industry on both sales and traffic. Combined, U.S. comparable sales were 230 basis points better than the industry's sales during the quarter, as measured by BlackBox. Importantly, during Q1, we saw sequential improvement in our performance, and for the quarter, we outperformed the industry. Our top-line performance was driven by Outback and Krabbe. Driving same-store sales growth and improving traffic at Outback remains our number one priority. As we discussed in our last call, we have done a significant amount of work on our customer. We are well underway further improving our marketing and guest experience and leveraging our technology. Having said that, we still have more to do.

David J. Deno: 130 basis points better than the industry sales during the quarter as measured by Black box.

David J. Deno: Accordingly during Q1, we saw a sequential improvement in our performance and for the quarter, we outperformed the industry. Our topline performance was driven by Outback and Carrabba's.

David J. Deno: Driving same store sales growth and improving traffic at Outback remains our number one priority as we discussed on our last call. We have done a significant amount of work on our customer we are well underway and further improving our marketing and guest experience and leveraging our technology, having said that we have more to do.

David J. Deno: The work thus far is contributing to our market share gain. Our goal is to have best-in-class operations. We'll continue to focus on delivering a differentiated guest experience through improved service and consistently great food. All of our technology and equipment investments, such as new grills and server handhelds, have been rolled out, and now our job is to leverage these investments. As we discussed last quarter, all this work has significantly improved our internal customer measures.

David J. Deno: The work thus far is contributing to our market share gains. Our goal is to have best in class operations will continue to focus on delivering a differentiated guest experience through improved service and consistently great food all of our technology and equipment investments such as new Grilles in server handhelds have been rolled out and now our job is to leverage these investments.

David J. Deno: As we discussed last quarter all of this work has significantly improved our internal customer measures a couple of key leading indicators, we track our steak accuracy and consistency of experience over the last year steak accuracy is up 500 basis points and consistency of experience was up 400 basis points. This was further validated by casual.

David J. Deno: A couple of key leading indicators we track are stake accuracy and consistency of experience. Over the last year, stake accuracy has been up 500 basis points, and consistency of experience is up 400 basis points. This is further validated by casual dining industry metrics which have continued to improve. Friendly service and food quality are now 370 and 240 basis points ahead of our casual dining peers, respectively. We are very confident that our strategy at Outback is working.

David J. Deno: <unk> industry metrics, which have continued to improve friendly service and food quality are now 370, and 240 basis points ahead of our casual dining peers respectively.

David J. Deno: We are very confident that our strategy to Opex is working we are seeing improved sales and traffic at outback Opex sales outperformed the industry by 270 basis points in the first quarter and beat the industry in 20 of the last 22 weeks importantly traffic has been the key driver of this sales momentum.

David J. Deno: We are seeing improved sales and traffic at Outback. Outback sales outperformed the industry by 270 basis points in the first quarter and beat the industry in 20 of the last 22 weeks. Importantly, traffic has been the key driver of this sales momentum. Outback traffic beat the industry by 240 basis points on average over the last two months of the quarter.

David J. Deno: Outback traffic beat the industry 240 basis points on average over the last two months of the quarter, Michael will talk to full year and second quarter guidance shortly but most importantly, we expect second quarter sales at outback to be positive and we expect opex to continue to outperform the industry during the quarter.

David J. Deno: Michael will talk about full year and second quarter guidance shortly, but most importantly, we expect second quarter sales at Outback to be positive, and we expect Outback to continue to outperform the industry during the quarter. We feel very good about Outback's performance and the direction of the brand. And we are in a state of continuous improvement. All of our future enhancements will be grounded in the no rules, just right philosophy and will stay true to the irreverent and adventurous spirit of the Outback brand.

David J. Deno: We feel very good about opex performance in the direction of the brand and we are in a state of continuous improvement all of our future enhancements will be grounded in the no rules just right philosophy, and we will stay true to the irreverent and debenture spirit of the Outback brand.

David J. Deno: As mentioned on prior calls we are putting more marketing dollars behind these great ideas to improve our share of voice in the highly competitive market, our multichannel advertising strategy Leverages analytics to ensure strong returns and maximizes our ability to connect with our customers.

David J. Deno: As mentioned on prior calls, we are putting more marketing dollars behind these great ideas to improve our share of voice in a highly competitive market. Our multi-channel advertising strategy leverages analytics to ensure strong returns and maximizes our ability to connect with our customers. Specifically, since the holiday season last year, we've had three strong, limited-time offers at accessible price points that have resonated with our guests. We offer the Steak Mast LTO in Q4, followed by the 3-course offering in the spring, and now, by popular demand, Steak & Lobster. These steak-centered LTOs are differentiated offerings that can only be found at Outback and represent great value for our guests.

David J. Deno: Specifically since the holiday season last year, we've had three strong limited time offers at accessible price points that have resonated with our guests we offered the stake in <unk> in Q4, followed by the three course offerings in the spring and now backed by popular demand steak and lobster. These states centered LTE OS.

David J. Deno: Our differentiated offerings that can only be found at outback and represent a great value to our guests.

David J. Deno: We are equally confident in our marketing calendar in the back half of the year, we are focusing on delivering the right balance between traffic driving lpl's, while still providing a great return for the company.

David J. Deno: Now onto some of our other priorities. During 2024, we will continue to make investments to upgrade our assets through new openings relocating and remodeling restaurants, we expect to remodel 60 to 65 restaurants and opened 40 to 45, new restaurants system wide this year.

David J. Deno: We are equally confident in our marketing calendar for the back half of the year. We are focusing on delivering the right balance between traffic-driving LTOs while still providing a great return for the company. Now on to some of our other priorities. During 2024, we will continue to make investments to upgrade our assets through new openings, relocating, and remodeling restaurants. We expect to remodel 60 to 65 restaurants and open 40 to 45 new restaurants system-wide this year. 15 to 17 of these new restaurants will open in the United States.

David J. Deno: 15% to 17 of these new restaurants will open in the United States, We know that upgrading our assets is a big part of improving our traffic trends, especially at outback.

David J. Deno: We know that upgrading our assets is a big part of improving our traffic trends, especially at Outback. In addition, we are seeing very good returns on our new restaurants and relocations, and we have a robust pipeline. The last priority I'll discuss today is our leading off-premises channel.

David J. Deno: In addition, we are seeing very good returns from our new restaurants, and relocations and we have a robust pipeline.

David J. Deno: The last part I'll be I'll discuss today is our leading off premises channel. This business has more than doubled since 2019, and currently represents 23% of our U S sales.

David J. Deno: This business has more than doubled since 2019 and currently represents 23% of our U.S. sales. We need to continue to pursue our off-premises business and grow in-restaurant sales. We are pioneers in the to-go space, and we continue to see strong demand for this highly incremental occasion. In addition, the success of our catering business and all of our brands, but particularly at Carrabba's, provides a runway for future growth. Importantly, the sales initiatives I have described are supported by a solid foundation of robust cash flow and a strong balance sheet.

David J. Deno: We need to continue to pursue our off premises business and grow in restaurant sales. We were pioneers in this to go space and we continue to see strong demand in this highly incremental occasion.

David J. Deno: In addition, the success of our catering business and all of our brands, but particularly at Carrabba's provides a runway for future growth.

David J. Deno: Importantly, the sales initiatives I have described are supported by a solid foundation of robust cash flow and a strong balance sheet.

David J. Deno: This gives us the ability to invest in our marketing and operations initiatives, our technology plans, and asset investments. These efforts are helping us build a strong business that will thrive for many years. I want to stress that the first quarter results and all the initiatives that I laid out would not have been possible without the great teams in our restaurants and restaurant support. Thank you for delivering outstanding hospitality and service to our guests.

David J. Deno: This gives us the ability to invest in our marketing and operations initiatives, our technology plans and asset improvements. These efforts are helping us build a strong business that will thrive for many years to come.

David J. Deno: I want to stress the first quarter results and all the initiatives that I laid out would not have been possible without the great teams in our restaurants and restaurant support center. Thank you for delivering outstanding hospitality and service to our guests.

David J. Deno: Before I turn the call over to Michael, I want to provide a quick update on our Brazil business. As included in our early release this morning, we are reviewing strategic alternatives for our operations in Brazil. Although we are under no obligation to sell, discussions with interested parties are ongoing.

David J. Deno: Before I turn the call over to Michael I want to provide a quick update on our Brazil business is included in our earnings release. This morning, we are reviewing strategic alternatives for our operations in Brazil, Although we are under no obligation to sell discussions with interested parties are ongoing. This is a great business with an outstanding management team that has significant runway for future growth, which we.

David J. Deno: This is a great business with an outstanding management team and a significant runway for future growth, which we believe warrants a strong evaluation. And finally, as you are aware, Michael Healy was appointed as our company's Chief Financial Officer last month. We are very fortunate that Michael is our CFO.

Michael Healy: We believe warrants a strong valuation.

Michael Healy: And finally as you are aware, Michael Healy was appointed as our company's Chief Financial Officer last month, we are very fortunate that Michael as our CFO. He has had several increasingly important positions in finance supply chain and general management that prepared Michael to be an outstanding CFO. Michael is a terrific executive and I know you will enjoy your interactions with him.

David J. Deno: He has had several increasingly important positions in finance, supply chain, and general management that have prepared Michael to be an outstanding CFO. Michael is a terrific executive, and I know you will enjoy your interactions with him. Before handing over to Michael, I want to take a moment to expand on the announcement of my retirement. When I joined Bloomin' Brands in 2012, my intentions were to stay here for five years. While the opportunity to serve as CEO, followed by the pandemic, extended that plan, the time was now right to begin the search for my success. Discussions with the board directors about the timing of retirement have been underway for some time, and they are leading the search.

Speaker Change: Before handing over to Michael I want to take a moment to expand on the announcement of my retirement, when I joined Bloom and brands in 2012, My intention was to state here for five years, while the opportunity to serve as CEO followed by the pandemic extended that plan. The time is now right to begin the search for my successor discussions with the board of directors about the <unk>.

Michael Healy: We havent, Brian retirement has been underway for some time and they are leading the search.

David J. Deno: I will remain in my role as CEO and Director. I will continue leading the implementation of our strategic priorities that are making us a stronger, leaner, operations-centered company until the new CEO is identified and a successful transition is completed. The best days for Bloomin' Brands are ahead with proven leaders at the helm of these great companies. On a personal note, I have worked with several of you for many years, and I've enjoyed returning to restaurants and the opportunity to work with you again. Thank you for your continued support of Bloomin' Brands. And with that, over to you, Michael, to discuss our Q1 Financial Performance and 2024 Guidelines. Thank you, Dave. And hello everyone.

Michael Healy: I will remain in my role as CEO and director I will continue leading the implementation of our strategic priorities that are making us a stronger leaner operation centric company until the new CEO is identified and a successful transition is completed the best day for Bloom of brands are ahead with proven leaders at the helm of these great brands on a personal note I have worked with several of you.

Michael Healy: For many years and have enjoyed returning to restaurants and the opportunity to work with you again. Thank you for your continued support of <unk> brands and with that over to you Michael to discuss our Q1 financial performance and 2020 for guidance.

Michael Healy: I wanted to share how excited I am to work more closely with our investor community and help share our Bloomin' story. I would like to start by providing a recap of our financial performance for the fiscal first quarter of 2024. As a reminder, Q1 this year does not include the high-volume week of December 26th through December 31st that isn't included in Q1 2023. Additionally, we are lapping the Brazil value-added tax exemption, which affects both our revenue and profitability. Both of these have a negative impact on our results and impact comparability to last year.

Michael Healy: Thank you, David and Hello, everyone I wanted to share how excited I am to work more closely with our investor community and help share our bloom and story.

Michael Healy: Total revenues in Q1 were $1.2 billion, which is down 4% from 2023. This was primarily driven by a decline in comparable restaurant sales, which includes the negative calendar week shift in December, the negative weather impact in January, the net impact of restaurant closures and openings, and the loss of the Brazil value-added tax exemption benefit that ended in 2023. The decline was partially offset by the positive effects of foreign currency translation. U.S. comparable restaurant sales were negative 160 basis points, and traffic was negative 430 basis points.

Michael Healy: I would like to start by providing a recap of our financial performance for the fiscal first quarter of 2024 as a reminder, Q1. This year does not include the high volume week of December 26 through December 31 that isn't included in Q1 2023. Additionally, we are lapping the Brazil value added tax exemption.

Michael Healy: Which affected both our revenue and profitability.

Michael Healy: Both of these have a negative impact on our results and impact comparability to last year.

Total revenues in Q1 were $1 2 billion.

Michael Healy: Which is down 4% from 2023. This was primarily driven by a decline in comparable restaurant sales, which includes the negative calendar week shift in December the negative weather impact in January the net impact of restaurant closures and openings and the loss of the Brazil value added tax exemption benefit.

Michael Healy: That ended in 2023.

Michael Healy: The decline was partially offset by positive effects of foreign currency translation.

Michael Healy: U S comparable restaurant sales was negative 160 basis points and traffic was negative 430 basis points. Importantly, this reflects a 230 basis point beat versus the casual dining industry on sales and a 160 basis point be on traffic.

Michael Healy: Importantly, this reflects a 230-basis point beat for the casual dining industry on sales and a 160-basis point beat on traffic. After a difficult January, we saw sequential improvement in our performance, and for the quarter, we outperformed the industry. Average check was up 2.7% in Q1 versus 2023.

Michael Healy: After a difficult January we saw sequential improvement in our performance and for the quarter, we outperformed the industry.

Michael Healy: Average check was up two 7% in Q1 versus 2023, we are appropriately balancing delivering value to our customers while continuing to support the business in a period of higher inflation, Dave walked you through some exciting <unk> that will bring great value to our guests.

Michael Healy: We are appropriately balancing delivering value to our customers while continuing to support the business in a period of higher inflation. Dave walked you through some exciting LTOs that will bring great value to our guests. From a consumer standpoint, we believe our pricing decisions compare favorably to other competitors in the industry. In Q1, off-premises was approximately 23% of total U.S. sales.

Michael Healy: From a consumer standpoint, we believe our pricing decisions compare favorably to other competitors in the industry.

Michael Healy: Q1 off premises was approximately 23% of total U S. Sales importantly, the highly incremental third party delivery business was 13% of total U S sales, which was up from 12% in Q1 2023, driven by growth in catering.

Michael Healy: Importantly, the highly incremental third-party delivery business was 13% of total U.S. sales, which was up from 12% in Q1 2023, driven by growth in catering. Our Q1 GAAP diluted earnings per share for the quarter was negative 96 cents versus positive 93 cents of diluted earnings per share in 2023. This is driven in large part by the loss on extinguishment of debt related to the significant reduction in our convertible note obligation. Our Q1 Adjusted Diluted Earnings Per Share was $0.70 versus $0.98 of Adjusted Diluted Earnings Per Share in 2023. The primary difference between GAAP and Adjusted Diluted Earnings Per Share is due to the loss on the extinguishment of debt, as well as restaurant closing and impairment costs related to the restaurant closing addition.

Michael Healy: Our Q1 GAAP diluted earnings per share for the quarter was negative at 96.

Michael Healy: <unk> positive 93 of diluted earnings per share in 2023. This is driven in large part by the loss on extinguishment of debt related to the significant reduction in our convertible note obligation.

Michael Healy: Our Q1 adjusted diluted earnings per share was <unk> 70 versus.

Michael Healy: Versus 98 of adjusted diluted earnings per share in 2023, the primary difference between GAAP and adjusted diluted earnings per share is due to the loss on the extinguishment of debt as well as restaurant closing and impairment costs related to the restaurant closing that initiative.

Michael Healy: Q1, adjusted operating margins were seven 5% versus nine 7% last year. There are a number of factors contributing to the margin decline this quarter and I will lay them out.

Michael Healy: Q1 adjusted operating margins were 7.5% versus 9.7% last year. There are a number of factors contributing to the margin decline this quarter, and I will lay them out. First, there are approximately 110 basis points from the following events. The calendar shift in January weather negatively impacted margins by approximately 80 basis points, traded the high volume week between Christmas and New Year's for a week in March, and the weather was a 1.3% headwind on comparable sales for the quarter.

Michael Healy: First there are approximately 110 basis points from the following events the calendar shift in January weather negatively impacted margins by approximately 80 basis points, we traded the high volume week.

Between Christmas and new year's four week in March and the weather was one 3% headwind on comparable sales on the quarter.

As discussed previously we are lapping the Brazil value added tax benefit, which cost us 30 basis points of margin versus last year.

Michael Healy: As discussed previously, we are lapping the Brazil value-added tax benefit, which cost us 30 basis points of margin verse last year. However, there were additional factors that also contributed this quarter. Inflation levels remained somewhat elevated and drove additional year-over-year margin unfavorability. Labor cost was up, driven by wage inflation of 4.5% in Q1.

Michael Healy: There are additional factors that also contributed this quarter inflation levels remain somewhat elevated and drove additional year over year margin unfavorable city labor cost was up driven by wage inflation of four 5% in Q1 other.

Michael Healy: Other restaurant operating expenses were also up year over year, partially due to inflation and partially due to spending $7 million more on advertising this year. The appreciation expense was higher in Q1, consistent with our increased levels of capital spending and our investments in infrastructure to support growth. This is offset by favorability in food and beverage costs from pricing benefits and supply chain productivity. Commodities inflation was 1.3% for Q1. Most importantly, we have a roadmap to maintain the margin gains that we have made over the past few years, even in difficult market conditions.

Michael Healy: Other restaurant operating expenses were also up year over year, partially due to inflation and partially due to spending $7 million more in advertising this year.

Michael Healy: Depreciation expense was higher in Q1, consistent with our increased levels of capital spending and our investments in infrastructure to support growth.

Michael Healy: This was offset by favorability in food and beverage costs from pricing benefits and supply chain productivity initiatives commodities inflation was one 3% for Q1.

Michael Healy: Most importantly, we have a roadmap to maintain the margin gains that we have made over the past few years, even with difficult market conditions.

Michael Healy: Turning to our capital structure total debt was $952 million at the end of Q1, the higher balances driven by the convertible note and accelerated share repurchase activity earlier in the quarter. We retired approximately $84 million of convertible note, leaving $21 million remaining.

Michael Healy: Turning to our capital structure, total debt was $952 million at the end of Q1. The higher balance is driven by the convertible note and accelerated share repurchase activity earlier in the quarter. We retired approximately $84 million of the convertible notes, leaving $21 million remaining.

Michael Healy: This significantly strengthens our financials by removing the variable share dilution underlying the convertible note. Additionally, while our total debt levels are elevated compared to Q4, we are still very pleased with our leverage metrics and levels of liquidity. Importantly, we remain committed to being at or below our least adjusted leverage ratio of three times. In terms of share repurchases, earlier this quarter, we entered into a $220 million accelerated share repurchase program agreement in connection with our previously announced 2024 share repurchase program.

Michael Healy: This significantly strengthens our financials by removing the variable share dilution underlying the convertible note while our total debt levels are elevated compared to Q4, we are still very pleased with our leverage metrics and levels of liquidity importantly, we remain committed to be at or below our lease adjusted leverage ratio of three times and.

Michael Healy: In terms of share repurchases earlier this quarter, we entered into a $220 million accelerated share repurchase program agreement in connection with our previously announced 2024 share repurchase program year to date through the end of April we have repurchased a total of $8 4 million shares of stock for approximately 233 million.

Michael Healy: Year to date, through the end of April, we have repurchased a total of 8.4 million shares of stock for approximately $233 million. This included shares associated with the convertible notes that we repurchased. We have $130 million dollars remaining under our share authorization program. The board also declared a quarterly dividend of 24 cents a share that is payable on May 31.

Michael Healy: This.

Michael Healy: <unk> shares associated with the convertible notes that we repurchase we have $130 million remaining under our share authorization program.

Michael Healy: The board also declared a quarterly dividend of 24, a share that is payable on may 31.

Michael Healy: Okay.

Michael Healy: Now turning to our full year 2024 in Q2 guidance, we are reiterating our our U S comp sales and adjusted earnings per share guidance communicated on our February 20, <unk> earnings call. We have updated our share count expectations to reflect the convertible note and a corresponding share repurchase activity completed during the quarter.

Michael Healy: Now turning to our full year 2024 in Q2 guidance, we are reiterating our U.S. comp sales and adjusted earnings per share guidance communicated on our February 23rd earnings call. Additionally, we have updated our share count expectations to reflect the convertible note and corresponding share repurchase activity completed during the quarter. Our adjusted diluted earnings per share guidance did not change, and we are reiterating the range to be between $2.51 and $2.66. The range provided reflected the uncertainty of the industry trends following the weather-impacted January.

Our adjusted diluted earnings per share guidance did not change and we are reiterating the range to be between $2 51 and $2 66.

Michael Healy: The range provided reflected the uncertainty of the industry trends following the weather impacted January.

Michael Healy: Currently, industry trends remain on the lower end of our expectations, and should they continue, we would expect to finish on the lower end of both our U.S. comp sales and EPS guidance ranges. However, there are several critical factors to delivering on this guidance. First, we are very pleased with Outback Trends' performance to date and their ability to outpace the industry in this challenging environment. They have a stronger promotional calendar versus last year, especially in Q3 and early Q4.

Michael Healy: Currently industry trends remain on the lower end of our expectations and should they continue we would expect to finish on the lower end of both our U S comp sales and EPS guidance ranges.

Michael Healy: There are several critical factors to delivering on this guidance first we are very pleased with outback trends to date in their ability to outpace the industry in this challenging environment. They have a stronger promotional calendar versus last year, especially in Q3 and early Q4 from a marketing dollar standpoint, we will begin to lap them.

Michael Healy: From a marketing dollar standpoint, we will begin to lap the marketing increase we started a year ago, and therefore, the increase will not be as large in the back half. Second, the negative calendar shift experienced in Q1 of $0.06 is largely recaptured in Q4.

Michael Healy: Marketing increase we started a year ago and therefore, the increase will not be as large in the back half.

Michael Healy: Second the negative calendar shift experienced in Q1 of <unk> is largely recaptured in Q4.

Michael Healy: Third we pulled forward pricing decisions to earlier in the year, which we expect to increase the check average benefit by 100 basis points, we have seen improving trends in food and service execution at outback stemming from the investments in technology and operations.

Michael Healy: Third, we pulled forward pricing decisions to earlier in the year, which we expect to increase the check average benefit by 100 basis points. Additionally, we have seen improving trends in food and service execution at Outback stemming from the investments in technology and operations. We have compelling limited-time offers at Outback that reflect our differentiated equity in steak and seafood while offering great value for our customers. Fourth, we are lowering our commodities inflation guidance from 3-4% to 2-3% as we are seeing signs of favorability in our beef program.

Michael Healy: We have compelling limited time offers at Outback that will reflect our differentiated equities and steak and seafood, while offering great value for our customers.

Michael Healy: Fourth we are lowering our commodities inflation guidance from 3% to 4% to 2% to 3% as we are seeing signs of favorability in our beef program.

Michael Healy: We all know the beef market is somewhat volatile, but we are encouraged by the trends we are seeing here today. Collectively, these actions strengthen our ability to manage through this challenging environment and continue to take share in the industry. As it relates to the second quarter of 2024, we expect U.S. comparable restaurant sales to be flat to up 150 basis points on a comparable calendar basis. The industry continues to be a headwind, and while we expect traffic to be negative for the quarter, the good news is Outback continues to outpace the industry.

Michael Healy: We all know the beef market is somewhat volatile, but we are encouraged by the trends we are seeing year to date.

Michael Healy: Collectively these actions strengthen our ability to manage through this challenging environment and continue to take share in the industry.

Michael Healy: As it relates to the second quarter of 2024, we expect U S comparable restaurant sales to be flat to up 150 basis points on a comparable calendar basis.

Michael Healy: The industry continues to be a headwind and while we expect traffic to be negative for the quarter. The good news is outback continues to outpace the industry.

Michael Healy: We expect Q2 adjusted diluted earnings per share to be between $0.55 and $0.60. Importantly, the removal of the Brazilian tax exemption is a headwind of $0.12 in Q2 versus 2020. We did want to share a critical update on tax legislation in Brazil. New tax legislation was recently passed by both the Brazilian House of Representatives and the Senate.

Michael Healy: We expect Q2 adjusted diluted earnings per share to be between 55 and 60.

Michael Healy: Importantly, the removal of the Brazilian tax exemption is a headwind of <unk> <unk> in Q2 versus 2023.

Michael Healy: We did want to share a critical update on tax legislation in Brazil.

Michael Healy: New tax legislation was recently passed by both the Brazilian House of Representatives and the Senate if signed into law by the President this tax legislation could be a positive benefit for our company in 2024 and into the future. We are still working through exactly what this means including the impact to our financials.

Michael Healy: If signed into law by the President, this tax legislation could be a positive benefit for our company in 2024 and into the future. We are still working through exactly what this means, including the impact on our financial performance. Any potential impact has not been included in our current guidance. We will provide updates when we know more. In summary, we are successfully navigating a challenging environment, and importantly, Outback is taking share. We will remain focused on executing against our strategy in 2024.

Michael Healy: Any potential impact has not been included in our current guidance, we will provide updates when we know more.

Michael Healy: In summary, we are successfully navigating a challenging environment and importantly, outback is taking share we remain focused on executing against our strategy. In 2024, we will take the necessary steps to preserve our financial momentum and we will remain disciplined in our capital allocation.

Operator: We will take the necessary steps to preserve our financial momentum, and we will remain disciplined in our capital allocation. And with that, we will open up the call for questions. To ask a question, you may press star then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys.

Speaker Change: And with that we will open up the call for questions.

Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.

If youre using a speakerphone please pick up your handset before pressing the keys.

Speaker Change: Any time your question has been addressed and you would like to withdraw your question. Please press Star then two.

Operator: If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question comes from Jeffrey Bernstein with Barclays. Please go ahead.

Speaker Change: At this time, we will pause momentarily to assemble our roster.

Speaker Change: Our first question comes from Jeffrey Bernstein with Barclays. Please go ahead.

Jeffrey Andrew Bernstein: Great. Thank you very much Dave.

Jeffrey Andrew Bernstein: Great, thank you very much. Dave, congratulations on the well-deserved retirement. You will be missed.

Jeffrey Andrew Bernstein: Dave Congrats on a well deserved retirement.

Jeffrey Andrew Bernstein: Will be missed.

Michael Healy: Michael, congratulations on your new role. Absolutely. Congratulations. Two questions, the first one just on Brazil and the strategic review. I feel like it's been kind of an on again, off again review for a while now.

Speaker Change: Well, thank God rats on your new role absolutely congratulations thank you.

Jeffrey Andrew Bernstein: Two questions. The first one just on Brazil, and the strategic review.

Jeffrey Andrew Bernstein: I feel like it's been kind of on again off again review for a while now I'm just wondering what has changed with this review in terms of whether its expectations or otherwise.

Jeffrey Andrew Bernstein: I'm just wondering what has changed with this review in terms of whether it's expectations or otherwise, and I feel like you were, and in the past, may have been more hesitant to consider an actual sale because you want to retain involvement. So just curious, what has changed this time around relative to last time? Any thoughts that would be great?

Jeffrey Andrew Bernstein: And I feel like you were in the past may be more hesitant to consider an actual sale because you wanted to retain involvement. So just curious what has changed this time around relative to last time.

Jeffrey Andrew Bernstein: Any thoughts there would be great and then I had a follow up.

David J. Deno: And then I had a follow-up. Yeah, sure. On the Brazil piece, it is a we'll still have governance. Okay, so what the royalty rate will be, and those kinds of things are yet to be determined. And we'll take a look at what that looks like for the business. Now, as you know, before COVID, we had looked at possible refranchising here, and we got pretty far along, and then COVID happened. Now COVID is behind us, and the Brazil business is in really great shape. They're growing quickly.

Speaker Change: Yes sure.

Speaker Change: The Brazil piece. It is a we will still have governance, okay. So whats the royalty rate will be in those kind of things are yet to be determined.

Speaker Change: We will take a look at what that what that looks like for the business now as you know before Covid, we had we looked at the.

Speaker Change: Possible Refranchising here and we've got pretty far along and then Covid happened now Covid is behind US the Brazil business is in really great shape. They are growing quickly and it's time to take a look to see if this was the right time to re franchise the business.

David J. Deno: And it's time to take a look to see if this is the right time to refranchise the business. Now, it's a great business, and we don't have to sell it. But we expect the proper valuation for it. But we're taking an active look at it as we speak. And the fact that bonefish in the U.S., it seems like those comps remain under pressure, and last quarter or two you said, you know, they don't necessarily have the right to grow. At this point, I'm just wondering whether that was at all contemplated in terms of considering bonefish within the Brazil strategic review. Now Bonefish is a terrific brand.

Speaker Change: No. It's a great business and we don't have to sell it but we expect the proper valuation for it but we're taking we are taking an active look at it as we speak.

Speaker Change: Understood and the fact that bonefish.

Speaker Change: Bonefish and the U S. It seems like those comps remain under pressure and last quarter or two you said you know they don't necessarily have the right to grow at this point I'm just wondering whether that was at all contemplated in terms of considering bonefish within the Brazil, a strategic review.

Speaker Change: Bonefish has a terrific brand.

David J. Deno: We've got some more customer work to do, much like we did at Outback. We've got some product and service elements to improve. I think you're gonna see that brand come back in same-store sales. It's not a priority for growth for us.

Speaker Change: We've got some more customer work to do much like we did at Outback, We've got some product and service elements to improve.

Speaker Change: You can see that brand comeback and same store sales status priority for growth for us.

David J. Deno: It's something that we will continue to improve upon and invest in, but it's not a growth vehicle for us. But where we have strong locations and strong situations, Bonefish does very well. So we don't have any plans to sell that business, understood. And then just my follow up was on the consumer environment. You mentioned the challenging industry backdrop. Obviously, that's the backdrop, and you're taking shares in that, But I'm just wondering, have you seen any change in consumer behavior in recent months, whether on traffic or mix shift, kind of how you, what evidence do you have to demonstrate that there has been perhaps a slowdown in trend, any color that would be great. Yeah,

Speaker Change: It's something that we will continue to improve upon but and invest in our growth.

Speaker Change: Growth vehicle for us, but where we have strong locations and strong situations bonefish does very well. So we don't have any plans to sell that business.

Speaker Change: Understood and then just my follow up is on the consumer environment, you mentioned, a challenging industry backdrop, obviously, that's the backdrop and you are taking share so that's it.

Speaker Change: Our focus but I'm just wondering have you seen any change in consumer behavior in recent months, whether on traffic or mix shift kind of how you. What evidence do you have to demonstrate that there has been perhaps a slowdown in trend any color there would be great. Thank you.

Speaker Change: Thanks, Jeff and thanks for the congratulations all my retirement I must say.

David J. Deno: Although, in my retirement, I must say, I've got a job to do to lead the company and have a great succession and transition, so that's where my efforts are totally behind as we go forward. So, in the industry itself, we're seeing a couple things. One, as others have discussed, the lower end consumer is, we've seen some check management, we can see it in some of our tax naps and stuff, and we can see it in some of our trends.

Speaker Change: I've got a job to do to lead the company and have a great succession and transition. So that's where my experts are totally behind as we go forward.

Speaker Change: So on the industry itself, what we are seeing a couple of things one is other.

Speaker Change: I said discussed the Lora and consumer we've seen some check management you can see it in some of our Texas snaps and stuff and we can see some more trends.

David J. Deno: The more middle or higher class customer and casual dining is still hanging in there pretty well. Again, we can see that in some of our trends. Fine dining is a little weak right now, but boy, that was really frothy there for a couple years.

Speaker Change: The more middle or higher class.

Speaker Change: Customer in casual dining is still hanging in there pretty well again, we can see that in some of our trends fine dining is a little weak right now, but boy that was really frothy. There for a couple of years. So I don't think thats necessarily anything wrong shall we say on the high end, but I would say on the lower end consumer is facing some pressure.

David J. Deno: So, I don't think there's necessarily anything wrong, shall we say, in the high end. But I'd say for the lower end consumer, it's facing some pressure. Yeah, I'd just jump in to say, as far as Dino mentioned, a little softness and mix, but it's holding up pretty good.

Speaker Change: Yes, I'll just jump in to say as far as.

Speaker Change: Dino mentioned, a little softness in mix, but its holding up pretty good are mixed impact is more revenue channel than it is.

Michael Healy: Our mixed impact is more revenue channeled than it is, you know, the basket in the restaurant. So certainly, there is softness in the traffic that's coming into the restaurant, but once they're in the restaurant, they're having the full experience. Thank you. The next question comes from Alex Slagle with Jeffreys, please go ahead. All right, thanks. Welcome, Michael and David. Congratulations. My echo thoughts are there on all you've accomplished, Ben, remarkable through some uncertain years, as we all know. Thanks, Alec.

Speaker Change: Basket in the restaurants, so certainly softness in the traffic thats coming in the restaurant, but but once they're in the restaurant there having the full experience.

Speaker Change: Thank you.

Speaker Change: The next question comes from Alex Slagle with Jefferies. Please go ahead.

Alexander Russell Slagle: Alright, Thanks, welcome Michael and David Congrats on the Echo.

Alexander Russell Slagle: They're all.

Alexander Russell Slagle: All you've accomplished.

Alexander Russell Slagle: From.

Alexander Russell Slagle: Marketable through some uncertain years as we all know.

Thanks, Alex.

Alexander Russell Slagle: Wanted to.

Alexander Russell Slagle: I just kind of asked around back, and it looks like solid progress is continuing. As you look at sort of the top tier of stores in your system that are driving the best traffic growth, and I mean, what are the commonalities and learnings from that group of stores? And what really stands out? Is it like the manager and staffing tenure?

Alexander Russell Slagle: Can I ask on Outback and it looks like solid progress continuing in.

Alexander Russell Slagle: As you look at sort of the top tier of stores in your system that are driving the best traffic growth.

Alexander Russell Slagle: The commonalities and learnings from that group of stores and what really stands out.

Alexander Russell Slagle: The manager and staffing tenure or trade area differences are.

Alexander Russell Slagle: Okay, I'm curious, what you see in which attribute youre able to move the needle on the underperforming restaurants versus match, where we maybe are not easily replicated.

Alexander Russell Slagle: Yes.

Alexander Russell Slagle: Are you pleased with the trends at Outback I think what we're doing is really paying off.

David J. Deno: And we've talked about that going forward, too. We've talked about the work we've done. But if you look at where we do well, A, we have a great market presence, right? In the Southeast, especially Florida.

Alexander Russell Slagle: We've talked about that going forward too.

Alexander Russell Slagle: We've talked about the work we've done but if you look at where we were we do well.

Alexander Russell Slagle: We have a great market presence right in the southeast, especially Florida.

David J. Deno: So we've got good trade areas, good presence. We've got refreshed assets. We've got tenured partners that are leading the restaurants for a long period of time. And you look at other parts of the country like the Mid-Atlantic, where we've had a really long, tenured, really terrific group of people running those restaurants. We've got good scale up there. You can clearly see the difference.

Alexander Russell Slagle: So we've got good trade areas. Good presence, we've got refreshed assets. We've got tenured partners that are leading our restaurants over a long period of time and you look at other parts of the country like.

Alexander Russell Slagle: The mid Atlantic, where we've had a really long tenured really terrific group of people running those restaurants and we've got good scale up there you can clearly see the difference and our job is to make sure we bring that to all parts of the country and in some location. Some locations that are underperforming right now, but overall when we look at the work we've done on the customer when we look at the marketing.

David J. Deno: And our job is to make sure we bring that to all parts of the country and some locations that are underperforming right now. But overall, when we look at the work we've done on the customer, when we look at the marketing stuff, the marketing programs we've been doing at Outback, when we look at the improvement in operations, when we look at really being irreverent and not following the rules just right, when you look at those things that we're trying to do to drive traffic at Outback, that's paying off, and you're gonna see more of that from Got it. Thank you. The next question comes from Jon Ivankoe with JP Morgan. Please go ahead.

Alexander Russell Slagle: The marketing programs, we have been doing it at Opex. When you look at the improvement in operations. When we look at really being irreverent and no rules just right and you look at those things that we're trying to do to drive traffic at Outback, that's paying off and you're going to see more of that from the company going forward.

Speaker Change: Got it thank you.

Speaker Change: The next question comes from John <unk> with Jpmorgan. Please go ahead.

John William Ivankoe: Hi, thank you very much. Dave, it was great to have you in the industry for so long, but most importantly, I hope the next chapter is a great, fulfilling, and fun one. Thank you. Thank you, Jon.

John: Hi, Thank you very much David.

John: Great to have you in the industry.

John: So long, but most importantly, I hope the next chapter as a great and fulfilling and fun one for you.

Speaker Change: Thank you.

Speaker Change: That's the question.

David J. Deno: You know, so the question, you know, Outback outperformance relative to the casual downing category, but I'd like, you know, to kind of drill in a little bit about your performance relative to your near-in-stake competition. I know, you know, sometimes hard data to kind of get, but, you know, like, listen. I mean, there are public companies that are out there, and, you know, you see their traffic, and, We know why you're choosing brands X or Y over Outback.

Speaker Change: Outback outperformance relative to the casual dining category, but I'd like.

Speaker Change: Drill down a little bit about your performance relative to your nearing state competition I know.

Speaker Change: Sometimes hard data to kind of get right.

Speaker Change: I mean, there are public companies that are out there and you see their traffic in.

Speaker Change: When you survey consumers.

We know why Youre choosing brand X or Y over Outback, what is commonly coming back to you in terms of consumer preference and.

David J. Deno: What is commonly coming back to you in terms of that consumer preference? And, you know, are there any learnings from competition? I know it's not always ideal to talk about, but are there any learnings from competition that you can directly apply to the brand to maybe allow you, you know, your Outback brand to perhaps perform in line with some of your near-end peers? Thanks. Yeah, absolutely, Jon.

Speaker Change: Are there any learnings from competition I know, it's not always ideal to talk about but are there any learnings from competition that you can directly apply to the brand to maybe allow you your outback brand and perhaps perform in line with some of your near end peers. Thanks for that.

David J. Deno: I won't speak to any specific numbers, but I think Outback is closing the gap versus some of the competition. But I'll leave it at that. Everybody sees the numbers. First of all, what do we see that we can make sure that we learn from, right? And also what we have with our Outback heritage and what we control. But it's the best in class operations, right?

Speaker Change: Yes, absolutely John.

Speaker Change: I won't speak to any specific numbers, but I think outback is closing the gap versus some of the competition, but we'll I'll leave it at that everybody sees the numbers first of all what do we what do we see that we can that we can make sure that we that we learned from rate and also what we have with our Outback heritage in what we control but it's.

Speaker Change: It's the best in class operations right. It's the value that we provide our guests and there are things that we can do the things that we can do to on the.

David J. Deno: It's the value that we provide our guests, and there are things that we can do on the menu to provide even more value for our guests at some great price points. Making sure that we have a great experience and consistent execution in our operations day-to-day.

Speaker Change: The menu to provide even more value for aggressive at some great price points, making sure that we have a great experience consistent execution in our operations day to day to day and we've been talking about in my remarks John.

David J. Deno: And we've been talking about in my remarks, Jon, some of the progress that we're making against the industry in our operations. And then, finally, continuing to upgrade our assets. So consistent execution with a great experience, with value coming in great service, but also some products that are really terrific that offer great value and continue to upgrade our assets. That's what we're trying to do.

Speaker Change: The progress that we're making against the industry in our operations and then finally continuing to upgrade our assets so consistent execution with a great experience with value coming in and Great service, but also some products that are really terrific.

Speaker Change: Offer great value and continue to upgrade our assets. That's what we're trying to do and we're and I think we're going to be continuing to close the gap.

John William Ivankoe: And I think we're going to be continuing to close the gap. And could you remind us where we are in terms of editing down the menu, simplifying the menu, and making the menu maybe a little bit more focused? You know, has that begun to go into the system overall on a test basis and, you know, just give us a sense of how much actual opportunity that you may have of, you know, I guess, to use a simple phrase, being better at fewer things? Yeah, before COVID, we, I can't remember the exact number of menu items, Jon, but I think before COVID, we, and after COVID, we were down probably 15% ish in the number of menu items.

Speaker Change: Could you remind us where we are in terms of editing down the menu simplifying the menu to make the menu maybe a little bit more focused.

Speaker Change: Has that begun to go in to the system overall on a test basis, and just give us a sense of how much actual opportunity you may have I guess.

Speaker Change: He is a simple phrase being better at doing fewer things.

David J. Deno: We're looking at that right now to see if we can make things simpler for our guests. I'm not going to get into some specifics, as far as the number of items that we may be looking at and things like that. But I think if we continue to look at what really drives the business and the menu items that we can edit. Now, having said that, you probably will see from us some new menu items that are really terrific and that offer tremendous value and abundance to the customer.

Speaker Change: Before COVID-19.

Speaker Change: I can't remember the exact number of menu items, John but I think before Covid, We had Africa, but we were down probably 15% ish and the number of menu items. We're looking at that right now to see if we can make things simpler for our guests I'm not going to get into for competitive reasons. Some specifics as far as a number of items that we may be looking at in thanks. So I think if we continue to look at.

Speaker Change: What really drives the business and has some menu items that we can edit now having said that you probably will see from us some new menu items that are really terrific that offer tremendous value to bunge. The customer again, I don't want to get into that but you will see potentially some more edits to help with operation.

David J. Deno: Again, I don't want to get into that, but you'll see potentially some more edits to help with operations, but also, potentially some add backs to really address some value and abundance opportunities that we have. Thank you so much.

Speaker Change: But also but potentially some add backs to really address some valued abundance of opportunities that we have.

Speaker Change: Thank you so much.

David J. Deno: You're welcome. Thank you. The next question comes from Sharon Zackfia with William Blair. Please go ahead. Hi, good morning.

Speaker Change: Youre welcome.

Speaker Change: Your next question comes from Sharon Zackfia with William Blair. Please go ahead.

Sharon Zackfia: Going back to kind of what we're hearing throughout the industry about the lower income consumer, are you seeing the consumer that's more mid to high income actually increase traffic year over year, or is it just kind of better than what we're seeing at the lower end? Are you also seeing the more affluent customer kind of hold their check and not kind of mix around on their ticket? I just want to confirm if that's the case because we're also hearing talk of kind of more normalized alcohol consumption across the industry.

Sharon Zackfia: Hi, good morning.

Sharon Zackfia: Going back to kind of what we're hearing throughout the industry on the lower income consumer.

Sharon Zackfia: Are you seeing the consumer that's more mid to high income actually increased traffic year over year or is it just kind of better than what we're seeing at the lower end.

Sharon Zackfia: Yes.

Sharon Zackfia: Are you also seeing it sounds like Youre seeing the.

Sharon Zackfia: More.

Sharon Zackfia: Fluent customer kind of whole Jack.

Sharon Zackfia: Not.

Sharon Zackfia: Mix around on the on there.

Sharon Zackfia: Ticket I just wanted to confirm if that's the case because we're also hearing talks with kind of more normalized alcohol consumption across the industry.

Sharon Zackfia: Yeah, I think, Sharon, I guess the best way to describe our middle and higher end customers and casual dining is the word hanging in there. I think the trends are pretty consistent from what we see, and as I mentioned, it's more the lower end that's experiencing some difficulties. On menu mix and alcohol, I haven't really seen anything really change that much in it. In our mix there, as Michael alluded to, we don't really see much change and decreases in our alcohol mix.

Speaker Change: Yeah, I think Sharon.

Speaker Change: I guess, the best way to describe our middle and higher end customer in casual dining is where it's hanging in there.

I think it's the trends are pretty consistent from what we see.

Speaker Change: Mentioned, it's more of the lower end thats experiencing some difficulties.

Speaker Change: <unk>.

Speaker Change: Menu mix and alcohol I haven't really seen anything really change that much in it and our mix there as Michael alluded to I don't we don't really see much mix and decreases in our alcohol mix.

David J. Deno: Yeah, our mix is relatively stable across all the other basket items, so that piece is encouraging. Great. And then on Brazil, and I apologize if you address this, my cell cut out for about two minutes.

Speaker Change: Yeah, our mix is relatively stable across cross, although the basket items, so that piece is encouraging.

Speaker Change: Great and then on Brazil, and I apologize if you addressed this so I'll cut off for about two minutes.

Speaker Change: If you do sell auto our Refranchising what would you use those proceeds for are there any strategic initiatives.

Sharon Zackfia: If you do sell it or re-franchise it, what would you use those proceeds for? Are there any strategic initiatives that you'd like to accelerate and use that cash for, or would this primarily be something where you would look to return, you know, value to shareholders in terms of, you know, dividends or share purchases or what have you? Yeah, I think that's for another day when we decide and if we have an offer that's interesting to us.

Speaker Change: To accelerate and use that cash for or would this primarily be something where you would look to return.

Speaker Change: Value to shareholders in terms of.

Speaker Change: Dividends or share repurchases or what have you.

Speaker Change: Yes, I think that's for another day when we when we decide on.

Speaker Change: We have an offer that makes it is interesting to us, but needless to say it will provide significant cash allocation opportunities for the company going forward, whether it's some debt paydown, whether it's some share repurchases, whether it's anything we might do to address some of the things that our U S business those are all.

Sharon Zackfia: But needless to say, it will provide significant cash allocation opportunities for the company going forward, whether it's some debt paydown, whether it's some share repurchases, whether it's anything we want to do to address some of the things in our U.S. business. Those are all great options for us, and I think that's going to be addressed when we see what. Fair enough, thank you. The next question comes from Brian Harbour with Morgan Stanley. Please go ahead. Thanks. Good morning.

Speaker Change: Great options for us and I think thats to be addressed when when we see what what comes together.

Speaker Change: Fair enough. Thank you.

Speaker Change: The next question comes from Brian <unk> with Morgan Stanley. Please go ahead.

Brian: Yeah. Thanks, good morning, congratulations to both of you.

Brian James Harbour: Congratulations to both of them. I had a question more on the margin side as you think about 2Q. Is, and I guess as we kind of think about putting the pieces together for the full year, is this more of, you know, would you expect kind of still a significant change in labor and kind of marketing costs? Are those some of the pressures that you would still expect?

Brian: I want to echo those sentiments.

Brian: Just.

Brian: I had a question more on the margin side as you think about <unk>.

Brian: Is and I guess as we kind of think about putting the pieces together for the full year is this more of would you expect kind of still a significant change in labor in kind of marketing cost are those some of the pressures that you would still expect.

Michael Healy: on a year-over-year basis and 2Q or anything else we should keep in mind just as we think about margins. Yeah, from a margin perspective, you know, we certainly still have the Brazilian tax exemption component, which costs us 40 basis points year over year. Other than that, we'll be up a little bit in depreciation as we continue to invest in our restaurants. COGS will be, you know, similar to Q1. It will be favorable. Labor pressure is going to continue because that's been pretty sustained.

Brian: On a year over year basis in <unk> or anything else, we should keep in mind, just as we think about margin progression this year.

Speaker Change: Yes from a margin perspective, we're certainly still have the Brazilian tax exemption component, which cost us 40 basis points year over year other than that we'll be up a little bit in depreciation as we continue to invest in our restaurants Cogs will be similar to Q1 will be favorable labor pressure is going to continue that.

Speaker Change: Been pretty sustained we would expect that to be similar to Q1 for the remainder of the year and as you mentioned with advertising we were up $7 million in Q1 will be similar to that in Q2, maybe a little less and then it should start to flatten out in the back half because we started to increase our advertising in Q3 of last year, but.

Michael Healy: We expect that to be similar to Q1 for the remainder of the year. And as you mentioned with advertising, we were up 7 million in Q1. We'll be similar to that in Q2, maybe a little less.

Michael Healy: And then it should start to flatten out in the back half because we started to increase our advertising in Q3 of last year. But we have the roadmap to continue and maintain our margins, even in a difficult environment. But that should give you some color.

Speaker Change: But we have the roadmap to continue and maintain our margins even in a difficult environment, but that should give you some color.

Brian James Harbour: Okay, yeah, thanks. And I think you mentioned the pull forward of some pricing. What was it, was that mainly at Outback? Is it across the brands? What's the timing of that? It's across the brands, and so it doesn't get pulled forward in one large chunk, so it's sort of kind of just evenly spread out through the back half.

Speaker Change: Okay. Thanks, and I think you mentioned pull forward of some pricing what was was that mainly at outback is it across the brands, what's the timing of that.

Speaker Change: It's across the brands and so and it doesn't get pulled full forward in one large chunk. So it's sort of kind of just evenly spread out through the back half.

Michael Healy: Hey, one thing I've got to mention a little bit is... One thing I'm particularly pleased about achieving these results with modest pricing increases versus others in the industry. And that gives us A, improves our value equation, and B, it gives us dry powder in case we need to do something. But I'm very pleased that we maintained that discipline. Given that the beef basket is such a significant part of who we are, you know, we always take as little pricing as necessary but obviously also have to manage the inflationary environment. The next question comes from Sara Senatore with Bank of America. Please go ahead.

Speaker Change: One thing one thing Ive got I mentioned, a little bit.

Speaker Change: One thing I'm, particularly pleased about is achieving these results with modest pricing increases versus others in the industry and.

Speaker Change: And that gives us a improves our value equation and b. It gives us dry powder in case, we need to do something but I am very pleased that we maintain that discipline.

Speaker Change: Given the beef baskets, such a significant part of our.

Speaker Change: Of who we are we.

Speaker Change: I always take as little pricing as necessary, but obviously you also have to manage that inflationary environment.

Speaker Change: Okay. Thanks.

Speaker Change: The next question comes from Sara Senatore with Bank of America. Please go ahead.

Sara Harkavy Senatore: Oh, thank you. I wanted to, I guess, follow-up on that, your comment about pricing, and then a question. The one about the pricing, I know you said you pulled forward pricing even though you've lowered your commodity guidance. I understand that your view is you've taken a less price than competitors, and your insights on that are probably better than mine. But do you, I guess, as you think about taking more or pulling forward prices when commodities are disinflating, what was the thought behind that and the idea of maintaining your relative value? And then, like I said, another question, please.

Sara Harkavy Senatore: Oh, Thank you I wanted to I guess, a follow up on that.

Sara Harkavy Senatore: About pricing and then and then a question.

Sara Harkavy Senatore: About the pricing.

Sara Harkavy Senatore: You said you pulled forward pricing, even though you lowered your commodity guidance I understand that.

Sara Harkavy Senatore: You mean, as you've taken less price than than competitors.

Sara Harkavy Senatore: Your insights on that is probably better than mine, but do you I guess as you think about taking more pulling forward price when commodities are jason's leading.

Sara Harkavy Senatore: What was the I guess the thought behind that.

Sara Harkavy Senatore: The idea of maintaining relative value and then like I said if another question. Please yes.

David J. Deno: Yeah, we do a deep look at value whenever we look at our pricing and our mix, and we're in, you know, we're in really good shape there versus competition, and we've made a lot of progress on value. We still are a beef-centered basket here at Bloomin' Brands, and so we have to be, you know, always watch that, but we've tried to be extremely careful and extremely modest in any pricing that we're doing. So it's just more of a timing issue.

Speaker Change: Yes, we do a deep look at value whenever we look at our pricing and our mix and we are in really good shape there versus competition and we made lot of progress in value. We still are beef centered.

Speaker Change: Basket here at Bloom and brands, so we have to be.

Speaker Change: Please watch that but we've tried to be extremely careful extremely modest on any pricing that we're doing.

Speaker Change: So it's just more of a timing issue.

Michael Healy: Yeah. Absolutely. Absolutely. Yeah.

Speaker Change: Absolutely absolutely, yes, the pricing was contemplated I think we just pulled it forward a little bit earlier, but but but to Dave's point it's up.

Sara Harkavy Senatore: The pricing was contemplated. I think we just pulled it forward a little bit earlier, but to Dave's point, you know, it's always something that we study very deeply to understand what's the little amount of pricing we can take to continue to support value with our guests, but we have other ways to drive value with our guests, whether it's our compelling LTOs, and obviously, Dave spoke to some of the improvements in the guest experience at Outback, and so that certainly contributes to the overall value for us.

Speaker Change: It's always something that we study.

Speaker Change: Very deeply to understand whats the little amount of pricing that we can we can take to continue to support value with our guests, but we have other ways to drive value with our guests whether it's our compelling <unk>.

Speaker Change: And obviously, Dave spoke to some of the improvements in the guest experience at Outback and so that certainly contributes to the overall value for us.

Sara Harkavy Senatore: Got it, and the decision to pull it forward, was that based on anything specific? No, I just, as we looked at the year and the forecast and everything, we just tried to make sure that, you know, we have commitments out there, and we're just trying to manage them as best we can.

Speaker Change: And the decision to pull it forward was was that based on anything specific.

Speaker Change: Just as we looked at the year the forecast and everything we've just tried to make sure that we have commitments out there. We're just trying to imagine the best we can got it okay and then.

David J. Deno: Okay. And then a quick question on the consumer, and I know we've talked about this, you know, at length. So is a low-end consumer, is that consumer doing worse or spending less? I mean, it feels like that's been something that, that dynamic has been in place for the better part of maybe even the last two years. So as you think about, you know, softness in the industry versus expectations, is there some kind of sort of measurable change? And to that point, I always think of your average consumer as probably seeing higher income than, you know, the country as a whole.

Speaker Change: Question on the consumer and I know we've talked to this.

Speaker Change: So.

Speaker Change: This is allowing consumer.

Speaker Change: Is that consumer doing worse or spending less I mean, it feels like that's been something that that dynamic has been in place for the better part of maybe in the last 10 years.

Speaker Change: As you think about softness in the industry versus expectations is there some kind of like a measurable change.

Speaker Change: To that point I always think of your average consumer is pricing higher income than the country as a whole. So is that low income consumer a meaningful part of your customer base.

David J. Deno: So is that low-income consumer a meaningful part of your customer base? Yeah, it's not as meaningful as some other concepts, but it is, you know, it's a part of our business, so we have to watch it. But yes, there has been somewhat of a pullback on the low end in our company, in our concepts. But we still see really strong demand during special occasions, you know, around the holidays and things like that. So people are still celebrating at all levels of the, you know, income stream, and income status.

Speaker Change: Yes, it's not as meaningful as some other some other concepts, but it is part of our business. So we have to watch it but yes. There has been somewhat of a pullback on the low end.

Speaker Change: In our in our company and our concepts we still see.

Speaker Change: Really strong demand.

Speaker Change: Demand during special occasions, and around the holidays and things like that so people are still celebrating at all levels of the.

Speaker Change: Income stream and it comes up status, but I think we have seen some slowdown on the low end like we talked about earlier today.

David J. Deno: But I think we have seen some slowdown on the low end, like we talked about earlier today, even sequentially versus maybe what you saw late last year or sometime last year. It's been pretty consistent, hasn't really, there hasn't been a dramatic change. Okay, thank you very much.

Speaker Change: Even sequentially versus maybe what you saw late last year or sometime last year.

Speaker Change: It's been pretty consistent Hasnt really there hasnt been a dramatic change got.

Speaker Change: Got it okay. Thank you very much.

Speaker Change: Sure.

Speaker Change: Okay.

Speaker Change: The next question.

Lauren Danielle Silberman: The next question comes from Lauren Silberman with Deutsche Bank. Please go ahead. Thanks for the question, and I also share my congratulations. I wanted to ask about the earnings guide, 2Q came in a bit below street, you're maintaining full year, and it looks like the back half guide implies EPS is more heavily weighted in the back half of the year than what would normally be expected, so can you just expand a bit more on just what's expected in the back half of the year in terms of cadence? Sure. I'll take the first piece, and I'll turn it over to Michael.

Speaker Change: Question comes from Lauren Silberman with Deutsche Bank. Please go ahead.

Lauren Danielle Silberman: Thanks for the question and then I also share my.

Lauren Danielle Silberman: Relations.

Lauren Danielle Silberman: I wanted to ask about the earnings guide came in a bit below street are maintaining full year. It looks like the back half guide implies EPS is more heavily weighted in the back half of the year than what would normally be expected.

Lauren Danielle Silberman: Can you just expand a bit more on just what's expected in the back half of the year in terms of cadence.

Speaker Change: Sure I'll take the first piece and I'll turn it over to Michael but a outperformance of outback versus the industry clearly we expect that to continue.

David J. Deno: But A, the outperformance of Outback versus the industry, and clearly, we expect that to continue. We've got a stronger promotional calendar at Outback, especially in Q3. And therefore, our comparisons, both from a sales and profitability standpoint in Q3 and Q4, are much easier. And as we look at it, four, we've got our guest experience work that we continue to make progress on, and we expect to see help us continue to take shares as we move forward, especially at Outback.

Michael Healy: We've got a stronger promotional calendar at outback, especially in Q3.

Michael Healy: And therefore our compares.

Michael Healy: Our sales and profitability standpoint in Q3, and Q4 are much easier and as we look at it for we've got our guest experience work that we continue to make progress on and we expect to see.

David J. Deno: So those are the things, from a sales standpoint, be it our experience, be it some of the marketing programs we have, be it some of the softness from last year, that give us confidence about our guys on the sales side. Yeah, there's a few things as we just think about, you know, the full-year guide.

Michael Healy: US continue to take share as we move forward, especially at Outback. So those are the things from a sales standpoint be it our experience be it some of the marketing programs, we have be it some of the sources from last year that give us confidence about our guide on the sales side.

Speaker Change: Yes, there's a few things as we just think about.

Michael Healy: The full year guide.

Michael Healy: Our check average, you know, we shared, we updated our guide on the check average to 3 to 4 percent. Commodities, you know, are now more favorable to 2 to 3 percent. We still have $50 million of productivity layered into our plan. The marketing spend, you know, the first half is heavy, and we start to lap that in the back half, and so it starts to get, you know, relatively in line. And then, from a calendar shift perspective, we lost the benefit of the week shift in Q1.

Michael Healy: Our check average we shared we updated our guide on the check average to 3% to 4% commodities now more favorable to 2% to 3%, we still have $50 million of productivity layered into our plan the marketing spend the first half as is heavy.

Michael Healy: And we start to lap that in the back half. So it starts to get relatively in line and then from a calendar shift perspective, we lost the benefit of the week shift in Q1 and.

Michael Healy: That was roughly 6 cents, but we get that back in Q4, or almost all of that back in Q4. So that certainly kind of helps you think about, you know, the first half back half. As Dave mentioned, the continued strength at Outback gives us a lot of confidence, and in fact, all these things give us, you know, collective confidence that we can achieve our full year in guide. Thank you very much. The next question comes from Brian Mullan with Piper Sandler. Please go ahead. Thank you. A question on Carrabba's.

Michael Healy: And that was roughly <unk> <unk>, but we get that back in Q4, almost all of that back in Q4. So thats certainly kind of help us think about the first half back half as well as Dave mentioned the continued strength at Outback gives us a lot of confidence and in fact, all of these items that give us.

Michael Healy: Collective confidence that we can can achieve our year end up full year guidance.

Speaker Change: Thank you very much.

Speaker Change: The next question comes from Brian Mullan with Piper Sandler. Please go ahead.

Brian Hugh Mullan: Okay. Thank you.

Brian Hugh Mullan: You know, you've seen some relative outperformance from that brand in recent years. Maybe you could just talk about the strategy for this year, your degree of confidence that this can continue, and if you could talk about the off-premise business and the dining room business separately, that would be great to get your thoughts on that brand. Carrabba's has done a great job in sales, be it the off-premise business, especially. As we know, that food form is especially conducive to the off-premise business, and the team has done a really terrific job addressing that, be it through catering, delivery, carry-out, etc. The team will tell you that we've got more work to do in in-restaurant dining.

Brian Hugh Mullan: Question on Carrabba's, you've seen some relative outperformance from that brand and in recent years. Maybe you can just talk about the strategy for this year. Your degree of confidence that this can continue and if you could talk about the off premise business in the dining room business separately that would be great to get your thoughts on that brand.

Speaker Change: She has done a great job in sales.

Speaker Change: Be it the off premise business, especially as we know that boot forms, especially.

Speaker Change: Conducive to the off premise business and the team has done a really terrific job of addressing that paid for catering delivery carryout et cetera.

Speaker Change: The team will tell you that we've got more work to do and in restaurant dining.

David J. Deno: We've got more trends in front of us that we need to pursue, also improving the guest experience. They've had some extremely successful wine dinners at Carrabba's, and we've rolled out lunch that is having a lot of success in the brand. So, I'd say that from a Carrabba's standpoint, you've got a strong off-premise business. You've got lunch being rolled out with their sandwich

Speaker Change: We've got more transit, we got more trends in front of us that we need to pursue.

Speaker Change: Improving the guest experience they've had some extremely successful wine dinners.

Speaker Change: At Carrabba's and we've rolled lunch Dennis having a lot of success in the brand. So I would say that from a <unk> standpoint, you've got a strong off premise business, you've got lunch being rolled out.

Speaker Change: They're sandwich line, we've got some successful in restaurant initiatives around their wine dinners now lastly.

David J. Deno: We've got some successful in-restaurant initiatives around their wine dinners. Now, lastly, we talked at length on prior calls about the productivity investment that we've made at Outback Kitchens. We've got the same thing available to us in Carrabba's. In fact, I'd argue Carrabba's is one of the most complicated kitchens in the industry.

Speaker Change: We talked at length on prior calls about the productivity investment we've made at Outback kitchens. We have got the same thing available to us and Carrabba's in fact, I'd argue probably that's one of the most complicated kitchens in the industry and so right now we've got about.

David J. Deno: Right now, about 15% of our fleet has new kitchen equipment, and we're seeing significant savings in utilities and prime costs to help drive that business. That's a big element of productivity for us this year and, importantly, into 2025. So, those are the factors that we're seeing in Carrabba's, and we'll see if all that warrants further expansion of the brand as we go forward. Okay, thank you.

Speaker Change: 50% of our fleet has new kitchen equipment, and we're seeing significant savings in utilities and prime cost to help drive that business and that's a big element of productivity for us this year and importantly into 2025 so.

Speaker Change: The factors that we're seeing in Carrabba's and we'll see if all that warrants further expansion of the brand as we go forward.

Speaker Change: Okay. Thank you and then just a follow up just on the portfolio of stores in the U S broadly with the 2023 closure initiatives now complete.

Brian Hugh Mullan: And then just to follow up, just on the portfolio of stores in the U.S. broadly, with the 2023 closure initiative now complete, my question is, whether or not you think there would be any future closure initiatives you'd consider, or has everything really been addressed now at this point? I think we did a great job over the years managing our portfolio, and I would expect that we won't have more to do, but I think that, you know, we always look at our assets, we always look at where they're located, we always look at things, but we've done a great job being proactive on that over the years. The next question comes from Dennis Geiger of UBS. Please go ahead.

Speaker Change: My question is.

Speaker Change: Whether or not you think would there be any future closure initiatives you'd consider or is everything really been addressed now at this point you think.

Speaker Change: I think we did a great we have done a great job over the years, managing our portfolio and I would expect that we won't have more to do but I think that we always look at our assets. We always look at where they are located we always look at things, but we've done a great job being proactive on that over the years.

Speaker Change: Thank you.

Speaker Change: The next question comes from Dennis Geiger with UBS. Please go ahead.

Dennis Geiger: Thank you, and congratulations, David and Michael. You talked about the three LTOs, which I would consider at compelling price points. I think, David, that you spoke a few times about some value add-backs coming. So I just wanted to ask a little bit more about promotional activity, if anything, more on sort of how you're positioned on value and whether the need maybe to increase promotional offerings, if that reflects the current consumer backdrop, if it's relative to the observation that the broader casual dining industry is leaning in more on value, if it Yeah, sure.

Dennis Geiger: Thank you and congratulations David and Michael.

Dennis Geiger: You talked about the <unk>, which I would consider at compelling price points I think David you spoke a few times to some value add backs coming so I just wanted to ask a little bit more on on promotional activity if anything more on sort of how you are positioned on value and weather.

Dennis Geiger: Need maybe the increased promotional offerings if that reflects the current consumer backdrop, if it's relative to the observation that the broader casual dining industry is leaning in more on value or if it's both.

Dennis Geiger: Or just any additional thoughts there.

David J. Deno: I think what we've done with the last three LTOs at Outback has been really great because it offers tremendous food at a great price point, and you're going to see that from us going forward, you know, in future plans. I'm not going to get into details about what they might be, but that's something that has worked for us. On the menu front, we think that we've got some opportunity, like I mentioned earlier about the question from Jon Ivankoe, you know, is there more opportunity to maybe simplify the menu a little bit more? I don't know for sure.

Speaker Change: Yes, sure I think what we've done is with our last three <unk> Opex has been really great and because it offers tremendous food at a great price point and youre going to see that from us going forward in <unk>.

Speaker Change: Future in future in future plans I am not going into details of what they might be but that's something that has has worked for us on the menu front.

Speaker Change: We think that we've got some opportunity like I mentioned earlier on a question from John <unk> co is there more opportunity to maybe simplify the menu a little bit more don't know for sure and then are there an opportunity to put some really interesting outback high quality products on the menu that are very indulgent that offer great value and we're working through that.

David J. Deno: And then is there an opportunity to put some really interesting Outback high quality products on the menu that are very intelligent and offer great value? And we're working through that right now. That's how we would go about it.

Speaker Change: Right now that's how we would go about it and then lastly, as it speaks to the industry, Yes, we've seen an increase in promotional and marketing activity.

David J. Deno: And then lastly, as it speaks to the industry, yes, we've seen an increase in promotional marketing activity. We need to, you know, respond to that, but we tend to do it in our way, especially at Outback. We don't expect to do any broad-based discounting or special, you know, promotional offers and things, but we will be offering some value-centered LTOs that make a lot of sense for the brand and are consistent with the brand heritage. That's great.

Speaker Change: We we need to respond to that but we don't we tend to do it our way, especially at Outback, We don't expect to do any broad based deep discounting or special promotional promotional offers and things, but we will be offering some value centered LTE OS that make make lot of sense for the brand and consistent with our brand heritage.

Speaker Change: <unk>.

Speaker Change: Okay.

Dennis Geiger: And then just I wanted to ask on Brazil, if there is anything incremental to share sort of on performance in the quarter, the consumer backdrop, anything impacting results for the quarter itself. And then if there's anything incremental on sort of the state of, I guess, maybe the capital markets environment in the country or anything else to add on, you know, thinking through as you think through the strategic review, the conditions in the country right now. Thank you. Yeah, no, Brazil continues to take the share and do extremely well.

Speaker Change: That's great and then just I wanted to ask on Brazil, if anything incremental to share sort of on our performance in the quarter. The consumer backdrop any anything impacting results for the quarter itself and then if there's anything incremental on sort of the state of I guess, maybe the capital markets environment in the country or anything else to add on on <unk>.

Speaker Change: Thinking through as you think through the strategic.

Speaker Change: Review the conditions in the country right now thank you yes.

Speaker Change: Yes, Brazil continues to take take share to extremely well the only thing we had to do in Q1 last year was the World Cup was in December or in their quarter.

David J. Deno: The only thing we had to do in Q1 last year was the World Cup was in December, in their quarter. They had an unbelievably successful promotion, and we've had a little bit of carnival timing this year, but overall, you know, the brand continues to do really well. I think the industry there, like the U.S., is seeing a little softness, but importantly, we are taking share. You know, as Michael mentioned in his prepared remarks, there has been tax legislation that has been approved by the Senate and the House. We don't know what's going to happen with that tax legislation.

Speaker Change: Unbelievably successful promotion.

Speaker Change: And we've had a little bit of carnival timing this year, but overall.

Speaker Change: The brand continues to do really well.

Speaker Change: I think the industry there.

Speaker Change: Are you seeing a little softness, but importantly, we are we are taking share.

Speaker Change: As Michael mentioned in the in his prepared remarks.

Speaker Change: Was tax there has been tax legislation that has been approved by the Senate and the house.

Speaker Change: We don't know what's going to happen with that tax legislation. If it does get signed by the president and once we understand the regulations there could be a financial upsides of the company, but that is not contemplated in our guidance.

David J. Deno: If it does get signed by the President, and once we understand the regulations, there could be a financial upside to the company, but that is not contemplated in our guidance. Thank you very much. The next question comes from Andrew Strelzik with BMO. Please go ahead.

Speaker Change: Thank you very much.

Speaker Change: The next question comes from Andrew <unk> with BMO. Please go ahead.

Andrew: Hey, good morning, Thanks for taking the questions.

Andrew Strelzik: Hey, good morning. Thanks for taking the questions. My first question is about the operational improvements at Outback that are contributing to the share gains there. Are there any metrics that you can share to kind of frame the improvements that you're seeing? And where are the gaps that remain, I guess, on the path to your goal of being a best in class Outback?

Andrew: And where are the gaps that remain I guess on the past.

Speaker Change: So your goal of being a best in class operator.

Speaker Change: Yes, I think we clearly have seen it.

David J. Deno: Yeah, I think we clearly have seen it in... We're going to be talking about steak re-cooks and food quality number one. Steak accuracy has gone up 500 basis points versus past trims, and that has been a direct result of the investment that we've made in the kitchen. I'm very, very pleased about that.

Speaker Change: State <unk> and food quality number one steak accuracy has gone up 500 basis points versus past trend and that has been a direct result of the investments that we've made the kitchen I'm very very pleased about that.

Speaker Change: Insistently consistency of experience is up 400 basis points so serving.

David J. Deno: Consistency of experience is up 400 basis points. So serving a hot meal on time with great service is, for me, the most important thing we can do at Outback Takeout now. Where are some of the gaps?

Speaker Change: A hot meal on time.

Speaker Change: With Great service.

Speaker Change: <unk> the most important thing we can do it opex takeout now.

Speaker Change: There are some of the gas what I'd like to see US do is there more that we can do to maybe enhance our service and enhance the guest experience. We don't think it would take a lot of money to do that but how our servers interact with our customers and things like that there might be some ideas, there, which I won't get into but there might be some things that we can look at.

David J. Deno: What I'd like to see us do is there more that we can do to maybe enhance our service and enhance the guest experience? We don't think it would take a lot of money to do that, but how our servers interact with our customers and things like that. There might be some ideas there, which I won't get into, but there might be some things that we can look at to be more interactive with our guests at Outback while serving the food in a hot, quick manner that our guests have come to enjoy.

Speaker Change: Two.

Speaker Change: It would be more interaction with our guests at outback, while serving the food in a quick manner that our guests have come to come to enjoy it. So those are the things that we're looking at at Outback I am very pleased with steak accuracy being up so much and consistency of experience being up so much.

David J. Deno: So those are the things that we're looking at at Outback. I'm very pleased with steak accuracy being up so much and consistency of experience being up so much. Okay, great.

Speaker Change: Okay, Great that's helpful and just my second one.

Andrew Strelzik: That's helpful. And just my second question, I just wanted to ask about the commodity inflation outlook. With about 1% in the first quarter, I think you said favorable again in the second quarter would apply a little bit of a ramp in the back half. What's your visibility on that? And is it all beef? Or is there anything else, you know, kind of within that driving the acceleration, if I'm right?

Speaker Change: Just wanted to ask about the commodity inflation outlook.

Speaker Change: With about 1% in the first quarter I think you said favorable again in the second quarter would imply a little bit of a ramp in the back half what's your visibility to that and is it all before is there anything else kind of within that driving the acceleration right.

Speaker Change: Right.

Michael Healy: Yeah, you're right as far as kind of where we land in Q1. We'll be maybe a little bit better in Q2. And then we do experience a ramp in the back half. A lot of that is actually driven by seafood. As we burn through some deflationary inventory, we actually come upon inflationary inventory in the back half. Beef itself is relatively stable as far as inflation is concerned. However, as we mentioned when we lowered our commodities guide, we are seeing some favorability in beef that we can take advantage of with our current contract. How we reflect that favorability is a little bit TBD based on the market, but directionally, we will see an uptick in commodities in the back half. Thank you very much.

Speaker Change: Yes, youre right as far as kind of where we land in Q1 will be maybe a little bit better in Q2, and then we do experience a ramp in the back half a lot of that is actually driven by seafood.

Speaker Change: As we as we burn through some deflationary inventory, we actually come upon inflationary inventory in the back half beef itself is relatively stable as far as how we plan for the inflation. However, as we as we mentioned and when we lowered our commodities guide.

Speaker Change: We are seeing some favorability in beef.

Speaker Change: We can take advantage of with our current contract.

Speaker Change: How we how we reflect that favorability.

Speaker Change: Little bit TBD based off of the market, but but directionally, we will see an uptick in commodities in the back half.

Speaker Change: Okay. Thank you very much.

Speaker Change: This concludes our question and answer session I would like to turn the conference back over to Dave Deno for any closing remarks.

David J. Deno: Thank you very much we appreciate the questions today.

David J. Deno: I personally appreciate the kind words it means a lot to me.

David J. Deno: But I wanted to invite everybody back for our Q2 call later in the year take care everyone.

Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Greetings and welcome to the Bloom and brands fiscal first quarter 'twenty 'twenty four 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, if you require operator assistance. Please press Star then zero.

Operator: This concludes our question and answer session. I would like to turn the conference back over to Dave Deno for any closing remarks. Thank you very much.

David J. Deno: We appreciate the questions today, and I personally appreciate the kind words. It means a lot to me, but I want to invite everybody back for our Q2 call later in the year. Take care, everyone.

Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. © BF-WATCH TV 2021, ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Greetings and welcome to the Bloomin' Brands Fiscal First Quarter 2024 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. If you require operator assistance, please press star then zero.

Speaker Change: It is now my pleasure to introduce your host Tara Korean.

Tara Kurian: Vice President corporate Finance and Investor Relations Ms. Korean you may begin.

Tara Kurian: It is now my pleasure to introduce your host, Tara Kurian, Vice President, Corporate Finance and Investor Relations. Ms. Kurian, you may begin. Thank you, and good morning everyone. With me on today's call are David Deno, our Chief Executive Officer, and Michael Healy, our Chief Financial Officer and Executive Vice President. By now, you should have access to our fiscal first quarter 2024 earnings release. It can also be found on our website at www.bloominbrands.com in the investor section.

Tara Kurian: Lehman 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 reconciliation to the most directly comparable GAAP measures appear in our earnings release on our website as previously described.

Tara Kurian: Risks are mentioned in our earnings release, others are discussed in our SEC filings, which are available at www Dot SEC Dot Gov.

Tara Kurian: During today's call we will provide a brief recap of our financial performance for the first fiscal quarter 2020 for an overview of company highlights and current thoughts on fiscal 2024 guidance. Once we've completed these remarks, we'll open the call up for questions with that I would like to now turn the call over to David Deno.

David J. Deno: Well, thank you Tara and welcome to everyone listening today as noted in this morning's earnings release adjusted Q1 2024 diluted earnings per share was <unk> 70 <unk>.

David J. Deno: Well, thank you, Tara, and welcome to everyone listening today. As noted in this morning's earnings release, adjusted Q1 2024 diluted earnings per share were, and U.S. comparable sales were down 160 basis points. These outcomes were within our expectations and represent a solid start to 2024. However, the industry backdrop remained more challenging than expected after the weather-related impact in January.

Speaker Change: And U S comparable sales were down 160 basis points.

David J. Deno: Outcomes were within our expectations and represent a solid start to 2024 the industry backdrop remained more challenging than expected after the weather related impact in January. Despite this headwind we consistently outperformed the industry on both sales and traffic combined U S. Comparable sales were 230 basis points better than the industry sales during the quarter as the.

David J. Deno: Despite this headwind, we consistently outperformed the industry on both sales and traffic. Combined, U.S. comparable sales were 230 basis points better than industry sales during the quarter, as measured by BlackBox. Importantly, during Q1, we saw sequential improvement in our performance, and for the quarter, we outperformed the industry. Our top-line performance was driven by Outback and Karabas. Driving same-store sales growth and improving traffic at Outback remains our number one priority. As we discussed in our last call, we have done a significant amount of work on our customer. We are well underway further improving our marketing and guest experience and leveraging our technology. Having said that, we still have more to do.

David J. Deno: Measured by Black box importantly, during Q1, we saw a sequential improvement in our performance and for the quarter, we outperformed the industry. Our topline performance was driven by Outback and Carrabba's.

David J. Deno: Our goal is to have best in class operations, we will continue to focus on delivering a differentiated guest experience through improved service and consistently great food all of our technology and equipment investments such as new Grilles in server handhelds have been rolled out and now our job is to leverage these investments.

David J. Deno: As we discussed last quarter all of this work has significantly improved our internal customer measures.

David J. Deno: Over the last year, stake accuracy is up 500 basis points, and consistency of experience is up 400 basis points. This is further validated by casual dining industry metrics, which have continued to improve. Friendly service and food quality are now 370 and 240 basis points ahead of our casual dining peers, respectively. We are very confident that our strategy at Outback is working. We are seeing improved sales and traffic at Outback. Outback sales outperformed the industry by 270 basis points in the first quarter and beat the industry in 20 of the last 22 weeks. Importantly, traffic has been the key driver of this sales momentum. Outback traffic beat the industry by 240 basis points on average over the last two months of the quarter.

David J. Deno: Couple of key leading indicators, we track our steak accuracy and consistency of experience over the last year steak accuracy is up 500 basis points and consistency of experience is up 400 basis points. This was further validated by casual dining industry metrics, which have continued to improve friendly service and food quality are now 370.

David J. Deno: At 240 basis points ahead of our casual dining peers, respectively.

David J. Deno: We are very confident that our strategy to Opex is working we are seeing an improved sales and traffic at outback Opex sales outperformed the industry by 270 basis points in the first quarter and beat the industry in 20 of the last 22 weeks importantly traffic has been the key driver of this sales momentum.

David J. Deno: Michael will talk about full year and second quarter guidance shortly, but most importantly, we expect second quarter sales at Outback to be positive, and we expect Outback to continue to outperform the industry during the quarter. We feel very good about Outback's performance and the direction of the brand. And we are in a state of continuous improvement. All of our future enhancements will be grounded in the No Rules, Just Write philosophy and will stay true to the irreverent and adventurous spirit of the Outback brand.

David J. Deno: As mentioned on prior calls, we are putting more marketing dollars behind these great ideas to improve our share of voice in a highly competitive market. Our multi-channel advertising strategy leverages analytics to ensure strong returns and maximizes our ability to connect with our customers. Specifically, since the holiday season last year, we've had three strong, limited-time offers at accessible price points that have resonated with our guests. We offer the Steak Moss LTO in Q4, followed by the three-course offering in the spring, and now, by popular demand, Steak and Lobster. These steak-centered LTOs are differentiated offerings that can only be found at Outback and represent great value for our guests.

David J. Deno: As mentioned on prior calls we are putting more marketing dollars behind these great ideas to improve our share of voice in a highly competitive market. Our multichannel advertising strategy Leverages analytics to ensure strong returns and maximizes our ability to connect with our customers.

David J. Deno: Specifically since the holiday season last year, we've had three strong limited time offers at accessible price points that have resonated with our guests we offered the stake in <unk> in Q4, followed by the three course offering in the spring and now backed by popular demand steak and lobster the states centered LTE does.

David J. Deno: Our differentiated offerings that can only be found at outback and represent a great value to our guests.

David J. Deno: We are equally confident in our marketing calendar for the back half of the year. We are focusing on delivering the right balance between traffic-driving LTOs while still providing a great return for the company. Now on to some of our other priorities. During 2024, we will continue to make investments to upgrade our assets through new openings, relocating, and remodeling. We expect to remodel 60 to 65 restaurants and open 40 to 45 new restaurants system-wide this year. 15 to 17 of these new restaurants will open in the United States.

David J. Deno: 15% to 17 of these new restaurants will open the United States.

David J. Deno: The upgrading of our assets is a big part of improving our traffic trends, especially at Outback.

David J. Deno: Addition, we are seeing very good returns from our new restaurants, and relocations and we have a robust pipeline.

David J. Deno: The last priority I'll discuss today is our leading off premises channel. This business has more than doubled since 2019, and currently represents 23% of our U S sales.

David J. Deno: We need to continue to pursue our off premises business and grow in restaurant sales. We were pioneers in this <unk> space and we continue to see strong demand in this highly incremental occasion and.

David J. Deno: In addition, the success of our catering business at all of our brands, but particularly at Carrabba's, provides a runway for future growth. Importantly, the sales initiatives I have described are supported by a solid foundation of robust cash flow and a strong balance. This gives us the ability to invest in our marketing and operations initiatives, our technology plans, and asset investments. These efforts are helping us build a strong business that will thrive for many years. I want to stress that the first quarter results and all the initiatives that I laid out would not have been possible without the great teams in our restaurants and restaurant support. Thank you for delivering outstanding hospitality and service to our guests.

David J. Deno: In addition, the success of our catering business and all of our brands, but particularly at Carrabba's provides a runway for future growth.

David J. Deno: Importantly, the sales initiatives I have described are supported by a solid foundation of robust cash flow and a strong balance sheet.

Michael Healy: Believe warrants a strong valuation.

Speaker Change: We Havent return, Brian retirement has been underway for some time and they are leading the search.

David J. Deno: I will remain in my role as CEO and Director. I will continue leading the implementation of our strategic priorities that are making us a stronger, leaner, operations-centered company until the new CEO is identified and a successful transition is completed. The best days for Bloomin' Brands are ahead with proven leaders at the helm of these great companies. On a personal note, I have worked with several of you for many years, and I've enjoyed returning to restaurants and the opportunity to work with you again. Thank you for your continued support of Bloomin' Brands. And with that, over to you, Michael, to discuss our Q1 financial performance and 2024 guidance. Thank you, Dave. And hello everyone.

Speaker Change: I will remain in my role as CEO and director I will continue leading the implementation of our strategic priorities that are making us a stronger leaner operations Center company until the new CEO is identified and a successful transition is completed the best day for Bloom of brands are ahead with proven leaders at the helm of these great brands on a personal note I have worked with several of you.

Speaker Change: For many years and have enjoyed returning to restaurants and the opportunity to work with you again. Thank you for your continued support of <unk> brands and with that overview, Michael to discuss our Q1 financial performance and 2020 for guidance.

Michael Healy: Thank you, Dave and Hello, everyone I wanted to share how excited I am to work more closely with our investor community and help share our bloom and story.

Michael Healy: Which affected both our revenue and profitability.

Michael Healy: Both of these have a negative impact on our results and impact comparability to last year.

Michael Healy: Total revenues in Q1 were $1 2 billion.

Michael Healy: Which was down 4% from 2023. This was primarily driven by a decline in comparable restaurant sales, which includes the negative calendar week shift in December the negative weather impact in January the net impact of restaurant closures and openings and the loss of the Brazil value added tax exemption benefit.

Michael Healy: That ended in 2023.

Michael Healy: The decline was partially offset by positive effects of foreign currency translation.

Michael Healy: After a difficult January we saw sequential improvement in our performance and for the quarter, we outperformed the industry.

Michael Healy: Pricing decisions compare favorably to other competitors in the industry.

Michael Healy: Importantly, the highly incremental third-party delivery business was 13% of total U.S. sales, which was up from 12% in Q1 2023, driven by growth in catering. Our Q1 GAAP diluted earnings per share for the quarter was negative 96 cents versus positive 93 cents of diluted earnings per share in 2023. This is driven in large part by the loss on extinguishment of debt related to the significant reduction in our convertible note obligation. Our Q1 Adjusted Diluted Earnings Per Share was $0.70 versus $0.98 of Adjusted Diluted Earnings Per Share in 2023. The primary difference between GAAP and Adjusted Diluted Earnings Per Share is due to the loss on the extinguishment of debt as well as restaurant closing and impairment costs related to the restaurant closing addition.

Michael Healy: Our Q1 GAAP diluted earnings per share for the quarter was negative 96 <unk>.

Michael Healy: Versus positive 93 of diluted earnings per share in 2023. This is driven in large part by the loss on extinguishment of debt related to the significant reduction in our convertible note obligation.

Michael Healy: Our Q1 adjusted diluted earnings per share was <unk> 70 versus.

Michael Healy: Q1, adjusted operating margins were seven 5% versus nine 7% last year. There are a number of factors contributing to the margin decline this quarter and I will lay them out.

Michael Healy: Q1 Adjusted Operating Margins were 7.5% vs. 9.7% last year. There are a number of factors contributing to the margin decline this quarter, and I will lay them out. First, there are approximately 110 basis points from the following events.

Michael Healy: The calendar shift in January weather negatively impacted margins by approximately 80 bases. We traded a high volume week between Christmas and New Year's for a week in March, and the weather was a 1.3% headwind on comparable sales for the quarter. As discussed previously, we are lapping the Brazil value-added tax benefit, which cost us 30 basis points of margin burst last year. However, there were additional factors that also contributed this quarter. Inflation levels remained somewhat elevated and drove additional year-over-year margin unfavorability.

Michael Healy: Between Christmas and new year's four week in March and the weather was one 3% headwind on comparable sales on the quarter.

Michael Healy: As discussed previously we are lapping the Brazil value added tax benefit, which cost us 30 basis points of margin versus last year.

Michael Healy: Labor cost was up, driven by wage inflation of 4.5% in Q1. Other restaurant operating expenses were also up year over year, partially due to inflation and partially due to spending $7 million more in advertising this year. Depreciation expense was higher in Q1, consistent with our increased levels of capital spending and our investments in infrastructure to support growth.

Michael Healy: Other restaurant operating expenses were also up year over year, partially due to inflation and partially due to spending $7 million more in advertising this year.

Michael Healy: Depreciation expense was higher in Q1, consistent with our increased levels of capital spending and our investments in infrastructure to support growth.

Michael Healy: This is offset by favorability in food and beverage costs from pricing benefits and supply chain productivity initiatives. Commodities inflation was 1.3% for Q1. Most importantly, we have a roadmap to maintain the margin gains that we have made over the past few years, even in difficult market conditions. Turning to our capital structure, total debt was $952 million at the end of Q1. The higher balance is driven by the convertible note and accelerated share repurchase activity earlier in the quarter. We retired approximately $84 million of the convertible notes, leaving $21 million remaining.

Michael Healy: This was offset by favorability in food and beverage costs from pricing benefits and supply chain productivity initiatives commodities inflation was one 3% for Q1.

Michael Healy: Most importantly, we have a roadmap to maintain the margin gains that we have made over the past few years, even with difficult market conditions.

Michael Healy: This significantly strengthens our financials by removing the variable share dilution underlying the convertible note while our total debt levels are elevated compared to Q4, we are still very pleased with our leverage metrics and levels of liquidity importantly, we remain committed to being at or below our lease adjusted leverage ratio of three times and.

Michael Healy: In terms of share repurchases earlier this quarter, we entered into a $220 million accelerated share repurchase program agreement in connection with our previously announced 2024 a share repurchase program year to date through the end of April we have repurchased a total of $8 4 million shares of stock for approximately 233 million.

Michael Healy: This included shares associated with the convertible notes that we repurchase we have $130 million remaining under our share authorization program.

Michael Healy: The board also declared a quarterly dividend of 24, a share that is payable on may 31.

Michael Healy: Now turning to our full year 2024 in Q2 guidance. We are reiterating our U.S. comp sales and adjusted earnings per share guidance communicated on our February 23rd earnings call. We have updated our share count expectations to reflect the convertible note and corresponding share repurchase activity completed during the quarter. However, our adjusted diluted earnings per share guidance did not change, and we are reiterating the range to be between $2.51 and $2.66. The range provided reflected the uncertainty of industry trends following the weather impact in January.

Michael Healy: We have updated our share count expectations to reflect the convertible note and a corresponding share repurchase activity completed during the quarter.

Michael Healy: Our adjusted diluted earnings per share guidance did not change and we are reiterating the range to be between $2 51.

Michael Healy: And $2 66 the.

Michael Healy: The range provided reflected the uncertainty of the industry trends following the weather impacted January.

Michael Healy: There are several critical factors to delivering on this guidance first we are very pleased with outback trends to date and their ability to outpace the industry in this challenging environment. They have a stronger promotional calendar versus last year, especially in Q3 and early Q4 from a marketing dollar standpoint, we will begin to lap the mark.

Michael Healy: <unk> increase we started a year ago and therefore, the increase will not be as large in the back half.

Michael Healy: The negative calendar shift experienced in Q1 of <unk> is largely recaptured in Q4.

Michael Healy: We have compelling limited time offers at Outback that will reflect our differentiated equities and steak and seafood, while offering great value for our customers.

Michael Healy: Fourth we are lowering our commodities inflation guidance from 3% to 4% to 2% to 3% as we are seeing signs of favorability in our beef program. We all know the beef market is somewhat volatile, but we are encouraged by the trends we are seeing year to date.

Michael Healy: Collectively these actions strengthen our ability to manage through this challenging environment and continue to take share in the industry.

Michael Healy: As it relates to the second quarter of 2024, we expect U S comparable restaurant sales to be flat to up 150 basis points on a comparable calendar basis the.

Michael Healy: The industry continues to be a headwind and while we expect traffic to be negative for the quarter. The good news is outback continues to outpace the industry.

Michael Healy: We expect Q2 adjusted diluted earnings per share to be between 55 and 60.

Michael Healy: Importantly, the removal of the Brazilian tax exemption is a headwind of <unk> <unk> in Q2 versus 2023.

Michael Healy: We did want to share a critical update on tax legislation in Brazil.

Michael Healy: If signed into law by the President, this tax legislation could be a positive benefit for our company in 2024 and into the future. We are still working through exactly what this means, including the impact on our financial performance. Any potential impact has not been included in our current guidance. We will provide updates when we know more. In summary, we are successfully navigating the challenging environment, and importantly, Outback is taking share. We will remain focused on executing against our strategy in 2024.

Michael Healy: Any potential impact has not been included in our current guidance, we will provide updates when we know more.

Michael Healy: We will take the necessary steps to preserve our financial momentum, and we will remain disciplined in our capital allocation. And with that, we will open up the call for questions. To ask a question, you may press star then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys.

Speaker Change: And with that we will open up the call for questions.

Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.

Speaker Change: If youre using a speakerphone please pick up your handset before pressing the keys.

Speaker Change: At any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.

Speaker Change: At this time, we will pause momentarily to assemble our roster.

Speaker Change: Our first question comes from Jeffrey Bernstein with Barclays. Please go ahead.

Jeffrey Andrew Bernstein: Great. Thank you very much Dave.

Jeffrey Andrew Bernstein: Great, thank you very much. Dave, congratulations on the well-deserved retirement. You will be missed.

Jeffrey Andrew Bernstein: Dave Congrats on the well deserved retirement.

Jeffrey Andrew Bernstein: It will be missed.

Jeffrey Andrew Bernstein: Well, thank God rats on your new role absolutely congratulations thank you.

Jeffrey Andrew Bernstein: Two questions. The first one just on Brazil on the strategic review.

Jeffrey Andrew Bernstein: And I feel like you were in the.

Jeffrey Andrew Bernstein: <unk> may be more hesitant to consider an actual sale because you wanted to retain involvement. So just curious what has changed this time around relative to last time.

Speaker Change: Any thoughts there would be great and then I had a follow up.

David J. Deno: And then I had a follow-up. Yeah, sure. On the Brazil piece, it is a we'll still have governance.

Speaker Change: Yes sure.

Speaker Change: The Brazil piece. It is we will still have governance, okay. So whats the royalty rate will be in those kind of things are yet to be determined.

David J. Deno: Okay, so what the royalty rate will be, and those kinds of things are yet to be determined. And we'll take a look at what that looks like for the business. Now, as you know, before COVID, we looked at possible refranchising here, and we got pretty far along, and then COVID happened. Now, COVID is behind us.

Speaker Change: And we will take a look at what that what that looks like for the business now as you know before Covid, we had we looked at the.

Speaker Change: Possible Refranchising here and we've got pretty far along and then Covid happened now Covid is.

David J. Deno: The Brazil business is in really great shape. They're growing quickly, and it's time to take a look to see if this is the right time to refranchise the business. Now, it's a great business, and we don't have to sell it, but we expect a proper valuation for it. But we're taking an active look at it as we speak. And the fact that bonefish in the U.S., it seems like those comps remain under pressure, and last quarter or two, you said, you know, they don't necessarily have the right to grow at this point. I'm just wondering whether that was at all contemplated in terms of considering Bonefish within the Brazil strategic review. No, Bonefish is a terrific brand.

Speaker Change: Behind us the Brazil business is in really great shape. They are growing quickly and it's time to take a look to see if this was the right time to re franchise the business.

Speaker Change: It's a great business and we don't have to sell it but we expect the proper valuation for it but we're taking we are taking an active look at it as we speak.

Speaker Change: Understood and the fact that.

Speaker Change: Bonefish and the U S. It seems like those comps remain under pressure in <unk>.

Speaker Change: Last quarter or two you said.

Speaker Change: Not necessarily have the right to grow at this point I'm just wondering whether that was at all contemplated in terms of considering bonefish within the Brazil strategic review.

Speaker Change: No Bonefish is a terrific brand.

Speaker Change: We've got some more custom work to do much like we did at Outback, We've got some product and service elements to improve.

Speaker Change: You can see that brand comeback and same store sales, it's not a priority for growth for us.

David J. Deno: It's something that we will continue to improve upon and invest in, but it's not a growth vehicle for us. But where we have strong locations and strong situations, Bonefish does very well. So we don't have any plans to sell that business, understood. And then just my follow up is on the consumer environment. You mentioned a challenging industry backdrop. Obviously, that's the background, and you're taking shares. That's, But I'm just wondering, have you seen any change in consumer behavior in recent months, whether on traffic or mix shift, kind of how you, what evidence do you have to demonstrate that there has been perhaps a slowdown in trend? Any color, that would be great.

Speaker Change: It's something that we will continue to improve upon but and invest in our growth.

Speaker Change: Growth vehicle for us, but where we have strong locations and strong situations bonefish does very well. So we don't have any plans to sell that business.

Speaker Change: Understood and then just my follow up is on the consumer environment, you mentioned, a challenging industry backdrop, obviously thats the backdrop and you are taking share.

Speaker Change: Thanks, Jeff and thanks for the congratulations all my retirement I must say.

David J. Deno: Yeah. Although, in my retirement, I must say, I've got a job to do to lead the company and have a great succession and transition, so that's where my efforts are totally behind as we go forward. So, in the industry itself, we're seeing a couple things. One, as others have discussed, the lower end consumer is, we've seen some check management. We can see it in some of our tax maps and stuff, and we can see it in some of our trends.

Speaker Change: I've got a job to do to lead the company and have a great succession and transition. So that's where my experts are totally behind as we go forward.

Speaker Change: So on the industry itself, what we are seeing a couple of things one is other.

Speaker Change: I said discussed the Lora and consumer we've seen some check management you can see it in some of our Texas snaps and stuff and we can see some more trends.

Speaker Change: More middle or higher class.

Speaker Change: Customer in casual dining is still hanging in there pretty well again, we can see that some of our trends fine dining is a little weak right now, but boy that was really frothy. There for a couple of years. So I don't think thats theres necessarily anything wrong shall we say on the high end, but I would say on the lower end consumer is facing some pressure.

Michael Healy: So, I don't think there's necessarily anything wrong, shall we say, on the high end. But I'd say on the lower end consumer, it's facing some pressure. I'd just jump in to say as far as Dino mentioned a little softness and mix, but it's holding up pretty good.

Speaker Change: Yes, I'll just jump in to say as far as.

Speaker Change: Dino mentioned, a little softness in mix, but its holding up pretty good are mixed impact is more revenue channel than it is.

Alexander Russell Slagle: Our mixed impact is more revenue channeled than it is the basket in the restaurant. So certainly, there is softness in the traffic that's coming into the restaurant, but once they're in the restaurant, they're having the full experience. Thank you. The next question comes from Alex Slagle with Jeffreys, please go ahead. All right, thanks. Welcome, Michael and David. Congratulations. My echo thoughts are there on all you've accomplished, Ben, remarkable through some uncertain years, as we all know. Thanks, Alec.

Speaker Change: <unk> in the restaurants, so certainly softness in the traffic thats coming in the restaurant, but but once they're in the restaurant there having the full experience.

Speaker Change: Thank you.

Speaker Change: The next question comes from Alex Slagle with Jefferies. Please go ahead.

Alexander Russell Slagle: Alright, Thanks, welcome Michael and David Congrats on the Echo.

Alexander Russell Slagle: They're on all you've accomplished.

Alexander Russell Slagle: The remarkable.

Alexander Russell Slagle: A remarkable through some uncertain years as we all know.

Alexander Russell Slagle: Alex.

Alexander Russell Slagle: Wanted to.

David J. Deno: [inaudible] kind of escalant outback, and it looks like solid progress is continuing. As you look at sort of the top tier of stores in your system that are driving the best traffic growth, and I mean, what are the commonalities and learnings from that group of stores? And what really stands out? Is it like the manager and staffing tenure?

Alexander Russell Slagle: Can I ask on Outback and it looks like solid progress continuing in.

Alexander Russell Slagle: As you look at sort of the top tier of stores in your system that are driving the best traffic growth.

Alexander Russell Slagle: What are the commonalities and learnings from that group of stores and what really stands out.

Alexander Russell Slagle: Like the manager and staffing tenure or trade area differences are.

David J. Deno: trade area differences, or I'm just kind of curious what you see and which attributes you're able to move the needle on at the underperforming restaurants versus some attributes that maybe are not easily replicated. Yeah, we're very pleased with the trends at Outback. I think what we're doing is really paying off, and we've talked about that going forward too. We've talked about the work we've done, but if you look at where we do well, A, we have a great market presence, right, in the southeast, especially Florida.

Alexander Russell Slagle: Kind of curious what you see in which attribute youre able to move the needle on the underperforming restaurants versus match or beat that maybe are not easily replicated.

Speaker Change: Yes, we are.

Alexander Russell Slagle: Are you pleased with the trends at Outback I think what we're doing is really paying off and we've talked about that going forward too.

Alexander Russell Slagle: And we've talked about the work we've done but if you look at where we were we do well.

Alexander Russell Slagle: We have a great market presence in the southeast, especially Florida.

David J. Deno: So we've got good trade areas, good presence, we've got refreshed assets, we've got tenured partners that are leading the restaurants for a long period of time. And when you look at other parts of the country, like the mid-Atlantic, where we've had a really long, tenured, really terrific group of people running those restaurants, and we've got good scale up there, you can clearly see the difference. And our job is to make sure we bring that to all parts of the country and some locations that are underperforming right now.

Alexander Russell Slagle: So we've got good trade areas. Good presence, we've got refreshed assets. We've got tenured partners that are leading in restaurants over a long period of time and you look at other parts of the country like the.

David J. Deno: But overall, when we look at the work we've done on the customer, when we look at the marketing stuff, the marketing programs we've been doing at Outback, when we look at the improvement in operations, when we look at, you know, really being irreverent and not following the rules just right, when you look at those things that we're trying to do to drive traffic at Outback, that's paying off, and you're going to see I got it.

Alexander Russell Slagle: The marketing programs, we have been doing it in Opex. When you look at the improvement in operations. When we look at really being a reference and no rules just right and you look at those things that we're trying to do to drive traffic at Outback, that's paying off and youre going to see more of that from the company going forward.

Speaker Change: Got it thank you.

John William Ivankoe: Thank you. The next question comes from Jon Ivankoe with JP Morgan. Please go ahead.

Speaker Change: The next question comes from John <unk> with Jpmorgan. Please go ahead.

John: Hi, Thank you very much David.

John: Great to have you in the industry.

John: So long, but most importantly, I hope the next chapter as a great and fulfilling and final one for you.

Speaker Change: Thank you.

David J. Deno: You know, so the question, you know, Outback outperformance relative to the casual downing category, but I'd like, you know, to kind of drill in a little bit about your performance relative to your near-in-stake competition. I know, you know, it's sometimes hard data to kind of get, but, you know, like, listen. I mean, there are public companies that are out there, and, you know, you see their traffic. We know why you're choosing brands X or Y over Outback.

Speaker Change: That's the question.

Speaker Change: Outback outperformance relative to the casual dining category, but I'd like.

Speaker Change: Drill down a little bit about your performance relative to your nearing state competition I know.

Speaker Change: Sometimes hard data to kind of get right.

John: I mean, there are public companies that are out there and you see their traffic in.

John: When you survey consumers.

John: We know why Youre choosing brand X or Y over Outback, what is commonly coming back to you in terms of that consumer preference and.

John: Are there any learnings from competition I know, it's not always ideal to talk about but are there any learnings from competition that you can directly apply to the brand to maybe allow you your outback brand and perhaps perform in line with some of your near end peers. Thanks for that.

David J. Deno: I won't speak to any specific numbers, but I think Outback is closing the gap versus some of the competition. But I'll leave it at that. Everybody sees the numbers.

Speaker Change: Yes, absolutely John.

Speaker Change: I won't speak to any specific numbers, but I think outback is closing the gap versus some of the competition, but we'll I'll leave it at that everybody sees the numbers first of all what do we what do we see that we can then we can make sure that we that we learned from rate and also what we have with our Outback heritage in what we control but it's.

David J. Deno: First of all, what do we see that we can make sure that we learn from, right? And also what we have with our Outback heritage and what we control. But it's the best-in-class operations, right?

Speaker Change: It's the best in class operations right. It's the value that we provide our guests and there are things that we can do the things that we can do to on the.

David J. Deno: It's the value that we provide our guests, and there are things that we can do on the menu to provide even more value for our guests at some great price points. Making sure that we have this great experience, consistent execution in our operations day-to-day.

Speaker Change: The menu to provide even more value for our breath at some great price points, making sure that we have a great experience consistent execution in our operations day to day to day and we've been talking about in my remarks John.

David J. Deno: And we've been talking about, in my remarks, Jon, some of the progress that we're making against the industry in our operations. And then, finally, continuing to upgrade our assets. So consistent execution with a great experience, with value coming in through great service, but also some products that are really terrific, that offer great value, and continue to upgrade our assets. That's what we're trying to do, and I think we're going to be continuing to close the gap.

Speaker Change: On the progress that we're making against the industry in our operations and then finally continuing to upgrade our assets so consistent execution with a great experience with value coming and great service, but also some products that are really terrific.

Speaker Change: Offer great value and continue to upgrade our assets. That's what we're trying to do and we're and I think we're going to be continuing to close the gap.

David J. Deno: And could you remind us where we are in terms of editing down the menu, simplifying the menu, making the menu maybe a little bit more focused, you know? Has that, you know, begun to go into the system overall on a test basis, and, you know, just give us a sense of how much actual opportunity that you may have of, you know, I guess, you know, use a simple phrase, you know, being better at fewer things Yeah, before COVID, we came up with the exact number of menu items, Jon, but I think before COVID, we had; after COVID, we were down probably 15% ish in the number of menu items.

Speaker Change: And could you remind us where we are in terms of editing down the menu simplifying the menu the menu, maybe a little bit more focused.

Speaker Change: Has that begun to go in to the system overall on a test basis, and just give us a sense of how much actual opportunity you may have I guess.

Speaker Change: He is a simple phrase being better at doing fewer things.

John William Ivankoe: We're looking at that right now to see if we can make things simpler for our guests. I'm not going to get into some specifics, as far as the number of items that we may be looking at and things like that. But I think if we continue to look at what really drives the business and the menu items that we can edit. Now, having said that, you probably will see from us some new menu items that are really terrific and that offer tremendous value and abundance to the customer. Again, I don't want to get into that.

Speaker Change: Yes, before Covid, we cant remember the exact number of menu items, John but I think before Covid, We had Africa, but we were down probably 15% ish and the number of menu items. We're looking at that right now to see if we can make things simpler for our guests I'm not going to get into for competitive reasons. Some specifics as far as a number of items that we may be looking at in <unk>.

Speaker Change: So I think if we continue to look at what really drives the business and have some menu items that we can edit now having said that you probably will see from us some new menu items that are really terrific that offer tremendous value to bunge, the customer again, I don't want to get into that but youll see.

David J. Deno: But you'll see potentially some more edits to help with operations, but also potentially some add-backs to really address some value and abundance opportunities that we have. Thank you so much. You're welcome. Thank you. The next question comes from Sharon Zackfia with William Blair. Please go ahead. Hi, good morning.

Speaker Change: Actually some more edits to help with operations, but also potentially some add backs to really address some value to fund opportunities that we have.

Speaker Change: Thank you so much.

Speaker Change: Youre welcome.

Speaker Change: Your next question comes from Sharon Zackfia with William Blair. Please go ahead.

Sharon Zackfia: Hi, good morning.

Sharon Zackfia: Going back to kind of what we're hearing throughout the industry on the lower income consumer.

Sharon Zackfia: Are you seeing the consumer that's more mid to high income actually increased traffic year over year or is it just kind of better than what we're seeing at the lower end.

Sharon Zackfia: Yes.

Sharon Zackfia: Are you also seeing it sounds like Youre seeing the.

Sharon Zackfia: More.

Sharon Zackfia: Fluent customer kind of whole Jack.

Sharon Zackfia: <unk>.

Sharon Zackfia: Mix around on the on there.

Sharon Zackfia: Ticket I just wanted to confirm if that's the case because we're also hearing talks with kind of more normalized alcohol consumption across the industry.

Sharon Zackfia: Yeah, I think, Sharon. I guess the best way to describe our middle and higher end customers in casual dining is the word hanging in there. I think the trends are pretty consistent from what we see, and as I mentioned, it's more the lower end that's experiencing some difficulties. On menu mix and alcohol, I haven't really seen anything really change that much in it. In our mix there, as Michael alluded to, we don't really see much change and decreases in our alcohol mix.

Speaker Change: Yeah, I think Sharon.

Speaker Change: I guess, the best way to describe our middle and higher end customer in casual dining as to where it's hanging in there.

Speaker Change: I think it's the trends are pretty consistent from what we see.

Speaker Change: It's more of the lower end thats experiencing some difficulties.

Speaker Change: <unk>.

Speaker Change: Our mix is relatively stable across cross, although the basket items, so that piece is encouraging.

Speaker Change: Great and then on Brazil, and I apologize if you addressed this so I'll cut off for about two minutes.

Speaker Change: If you do sell auto our Refranchising what would you use those proceeds for are there any strategic initiatives.

Speaker Change: To accelerate and use that cash for or would this primarily be something where you would look to return.

Speaker Change: Value to shareholders in terms of.

Speaker Change: Dividends or share repurchases or what have you.

Speaker Change: Yes, I think that's for another day when we when we decide on.

Speaker Change: If we have an offer that makes it is interesting to us, but needless to say it will provide significant cash allocation opportunities for the company going forward, whether it's some debt paydown, whether it's some share repurchases, whether it's anything we might do to address some of the things in our U S business those are all good.

Speaker Change: Great options for us and I think thats to be addressed when when we see what what comes together.

Speaker Change #100: Fair enough. Thank you. Thank you.

Brian James Harbour: Thank you. The next question comes from Brian Harbour with Morgan Stanley; please go ahead. Thanks. Good morning.

Speaker Change #100: The next question comes from Brian Harper with Morgan Stanley. Please go ahead.

Brian Harper: Yeah. Thanks, good morning, congratulations to both of you.

Brian Harper: All those those sentiments.

Brian James Harbour: Congratulations to both of them. I had a question more on the margin side as you think about 2Q. Is, and I guess as we kind of think about putting the pieces together for the full year, is this more of, you know, would you expect kind of still a significant change in labor in kind of marketing costs? Are those some of the pressures that you would still expect?

Brian Harper: Yeah.

Brian Harper: I had a question more on the margin side as you think about it.

Brian Harper: <unk>.

Brian Harper: Is and I guess as we kind of think about putting the pieces together for the full year is this more of.

Brian Harper: Would you expect kind of still a significant change in labor in kind of marketing cost are those some of the pressures that you would still expect on.

Michael Healy: On a year-over-year basis in 2Q, or anything else we should keep in mind just as we think about margins. Yeah, from a margin perspective, you know, we certainly still have the Brazilian tax exemption component, which costs us 40 basis points year over year. Other than that, we'll be up a little bit in depreciation as we continue to invest in our restaurants. COGS will be, you know, similar to Q1. It will be favorable. Labor pressure is going to continue because that's been pretty sustained.

Brian Harper: On a year over year basis in <unk> or anything else, we should keep in mind, just as we think about margin progression this year.

Brian Harper: Yes from a margin perspective, we're certainly still have the Brazilian tax exemption component, which cost us 40 basis points year over year other than that we'll be up a little bit in depreciation as we continue to invest in our restaurants Cogs will be similar to Q1 will be favorable labor pressure is going to continue that's been.

Brian Harper: Pretty sustained we would expect that to be similar to Q1 for the remainder of the year and as you mentioned with advertising we were up $7 million in Q1 will be similar to that in Q2, maybe a little less and then it should start to flatten out in the back half because we started to increase our advertising in Q3 of last year, but.

Brian Harper: But we have the roadmap to continue and maintain our margins even in a difficult environment, but that should give you some color.

Brian James Harbour: Okay, yeah, thanks. And I think you mentioned the pull forward of some pricing. What was it, was that mainly at Outback? Is it across the brands? What's the timing of that? It's across the brands, and so it doesn't get pulled forward in one large chunk, so it sort of kind of just evenly spreads out through the back half.

Speaker Change #102: Okay. Thanks, and I think you mentioned pull forward of some pricing what was was that mainly at outback is it across the brands, what's the timing of that.

Speaker Change #105: It's across the brands and so and it doesn't get pulled full forward in one large chunk. So it's sort of kind of just evenly spread out through the back half.

Michael Healy: Hey, one thing I've got to mention a little bit is... One thing I'm particularly pleased about achieving these results with modest pricing increases versus others in the industry. And that gives us A, improves our value equation, and B, it gives us dry powder in case we need to do something. But I'm very pleased that we've maintained that discipline. Given that the beef basket is such a significant part of who we are, you know, we always take as little pricing as necessary but obviously also have to manage the inflationary environment. The next question comes from Sara Senatore with Bank of America. Please go ahead. Oh, thank you.

Speaker Change #101: One thing one thing Ive got I mentioned, a little bit.

Speaker Change #101: One thing I'm, particularly pleased about is achieving these results with modest pricing increases versus others in the industry and.

Speaker Change #101: And that gives us a improves our value equation and b. It gives us dry powder in case, we need to do something but I am very pleased that we maintain that discipline.

Speaker Change #101: Given the beef baskets, such a significant part of our.

Speaker Change #101: Of who we are we.

Speaker Change #101: I always take as little pricing as necessary, but obviously you also have to manage that inflationary environment.

Speaker Change #108: Okay. Thanks.

Speaker Change #108: The next question comes from Sara Senatore with Bank of America. Please go ahead.

Sara Harkavy Senatore: I wanted to, I guess, a follow-up on that, your comment about pricing, and then a question. The one about pricing, I know you said you pulled forward pricing even though you've lowered your commodity guidance. I understand that your view is you've taken a lower price than competitors, and your insights on that are probably better than mine. But do you, I guess, as you think about taking more or pulling forward price when commodities are disinflating, what was the thought behind that and the idea of maintaining your relative value? And then, like I said, another question, please.

Sara Harkavy Senatore: Thank you I wanted to I guess, a follow up on that.

Sara Harkavy Senatore: About pricing and then and then a question.

Sara Harkavy Senatore: About the pricing.

Sara Harkavy Senatore: You said you pulled forward pricing, even though you've lowered your commodity guidance I understand that.

Sara Harkavy Senatore: And your view that you have taken less price than than competitors.

Speaker Change #103: Your insights on that is probably better than mine, but do you I guess as you think about taking more are pulling forward price when commodities are jason's leading.

Sara Harkavy Senatore: What was the I guess the thought behind that.

Sara Harkavy Senatore: The idea of maintaining relative value and like I said, if another question. Please yes.

Speaker Change #109: Yes, we do a deep look at value whenever we look at our pricing and our mix and we are in really good shape, there versus competition and we made lot of progress in value.

Sara Harkavy Senatore: Still our beef centered.

Sara Harkavy Senatore: Basket here at Bloom and brands, so we have to be.

Sara Harkavy Senatore: Always watch that but we've tried to be extremely careful extremely modest on any pricing that we're doing.

Sara Harkavy Senatore: So it's just more of a timing issue.

Michael Healy: Yeah. Absolutely. Absolutely. Yeah.

Sara Harkavy Senatore: Absolutely absolutely, yes, the pricing was contemplated I think we just pulled it forward a little bit earlier, but but but to Dave's point it's up.

David J. Deno: The pricing was contemplated. I think we just pulled it forward a little bit earlier, but to Dave's point, you know, it's always something that we study very deeply to understand what's the little amount of pricing that we can take to continue to support value with our guests, but we have other ways to drive value with our guests, whether it's our compelling LTOs, and obviously, Dave spoke to some of the improvements in the guest experience at Outback, and so that certainly contributes to the overall value for us.

Sara Harkavy Senatore: It's always something that we study it.

Sara Harkavy Senatore: We're very deeply to understand whats the little amount of pricing that we can we can take to continue to support value with our guests, but we have other ways to drive value with our guests whether it's our compelling <unk>.

Speaker Change #112: And obviously, Dave spoke to some of the improvements in the guest experience at Outback and so that certainly contributes to the overall value for us got it.

David J. Deno: Got it, and the decision to pull it forward, was that based on anything specific? No, I just, as we looked at the year and the forecast and everything, we just tried to make sure that, you know, we have commitments out there, and we're just trying to manage them the best we can.

Speaker Change #112: And the decision to pull it forward was was that based on anything specific.

Sara Harkavy Senatore: Just as we looked at the year the forecast and everything we've just tried to make sure that we have commitments out there. We're just trying to imagine the best we can.

Speaker Change #104: Got it Okay and then.

Sara Harkavy Senatore: Okay. And then a quick question on the consumer, and I know we've talked about this, you know, at length. So is a low-end consumer, is that consumer doing worse or spending less?

Speaker Change #104: Question on the consumer and I know we've talked to this.

Speaker Change #104: So.

Sara Harkavy Senatore: This is allowing consumer.

Sara Harkavy Senatore: Is that consumers doing worse or spending glass I mean that it feels like that's been something that that dynamic has been in place for the better part of maybe in the last 10 years.

David J. Deno: I mean, it feels like that's been something that, that dynamic has been in place for the better part of maybe even the last two years. So as you think about, you know, softness in the industry versus expectations, is there some kind of sort of measurable change? And to that point, I always think of your average consumer as perhaps seeing higher income than, you know, the country as a whole.

Sara Harkavy Senatore: As you think about softness in the industry versus expectations is there some kind of like a measurable change and to that point I always think of your average consumer is pricing higher income than that.

Sara Harkavy Senatore: The country as a whole so is that low income consumer a meaningful part of your customer base.

Speaker Change #107: Yes, it does.

Speaker Change #107: Meaningful some other some other concepts, but it is part of our business. So we have to watch it but yes. There has been somewhat of a pullback on the low end.

Speaker Change #107: In our in our company and our concepts we still see.

Speaker Change #107: Really strong.

Speaker Change #107: Demand during special occasions, and around the holidays and things like that so people are still celebrating at all levels of the.

David J. Deno: So people are still celebrating at all levels of the income stream, income status, but I think we have seen some slowdown on the low end, like we talked about earlier today, even sequentially versus maybe what you saw late last year or sometime last year. It's been pretty consistent, hasn't really, there hasn't been a dramatic change. Okay, thank you very much. The next question comes from Lauren Silberman with Deutsche Bank. Please go ahead.

Sara Harkavy Senatore: Income stream and it comes up status, but I think we have seen some slowdown on the low end like we talked about earlier today.

Sara Harkavy Senatore: Even sequentially versus maybe what you saw late last year or sometime last year.

Speaker Change #106: It's been pretty consistent Hasnt really there hasnt been a dramatic change got it okay. Thank you very much.

Speaker Change #106: Okay.

Speaker Change #106: The next question comes from Lauren Silberman with Deutsche Bank. Please go ahead.

Lauren Danielle Silberman: Thanks for the question, and I also share my congratulations. I wanted to ask about the earnings guide, 2Q came in a bit below street, you're maintaining full year, and it looks like the back half guide implies EPS is more heavily weighted in the back half of the year than what would normally be expected, so can you just expand a bit more on just what's expected in the back half of the year in terms of cadence?

Lauren Danielle Silberman: Thanks for the question and then I also share my congratulations.

Speaker Change #111: Sure I'll take the first piece and I'll turn it over to Michael but.

Lauren Danielle Silberman: Sure, I'll take the first piece and I'll turn it over to Michael, but A, the outperformance of Outback versus the industry, clearly we expect that to continue. We've got a stronger promotional calendar at Outback, especially in Q3, and therefore, our comparisons from a sales and profitability standpoint in Q3 and Q4 are much easier as we look at it. Four, we've got our guest experience work that we continue to make progress on, and we expect to see help us continue to take shares as we move forward, especially at Outback.

Lauren Danielle Silberman: Outperformance of Outback versus the industry clearly, we expect that to continue we've got a stronger promotional calendar at outback, especially in Q3.

Michael Healy: And therefore our compares.

Michael Healy: From a sales and profitability standpoint in Q3, and Q4 are much easier and as we look at it for we've got our guests experience work that we continue to make progress on and we expect to see.

Michael Healy: US continue to take share as we move forward, especially at Outback. So those are the things from a sales standpoint.

Lauren Danielle Silberman: So those are the things from a sales standpoint, be it our experience, be it some of the marketing programs we have, be it some of the softness from last year that give us confidence about our guys on the sales side. Yeah, there's a few things as we just think about the full year guide, our check average, you know, we shared, we updated our guide on the check average to 3 to 4 percent.

Michael Healy: Our experience be it some of the marketing programs, we have be it some of the sources from last year that give us confidence about our guide on the sales side.

Speaker Change #110: Yes, there's a few things as we just think about.

Speaker Change #110: The full year guide.

Speaker Change #110: Our check average we shared we updated our guide on the check average to three months to 4% commodities now more favorable to 2% to 3%, we still have $50 million of productivity layered into our plan the marketing spend the first half as is heavy.

Lauren Danielle Silberman: Commodities, you know, are now more favorable to 2 to 3 percent. We still have $50 million of productivity layered into our plan. The marketing spend, you know, the first half is heavy, and we start to lap that in the back half, so it starts to get, you know, relatively in line. And then from a calendar shift perspective, we lost the benefit of the week shift in Q1, and that was roughly six cents, but we get that back in Q4, or almost all of that back in Q4.

Speaker Change #110: And we start to lap that in the back half. So it starts to get relatively in line and then from a calendar shift perspective, we lost the benefit of the week shift in Q1.

Speaker Change #110: And that was roughly <unk> <unk>, but we get that back in Q4, almost all of that back in Q4. So thats certainly kind of help us think about the first half back half as well as Dave.

Michael Healy: So that certainly kind of helps think about, you know, the first half back half, as well as Dave, you know, mentioned the continued strength at Outback gives us a lot of confidence, and in fact, all these things give us, you know, collective confidence that we can achieve our full year in guide. Thank you very much. The next question comes from Brian Mullan with Piper Sandler. Please go ahead. And thank you. A question on Carrabba's.

Speaker Change #110: The continued strength at Outback gives us a lot of confidence and in fact all of these items that give us gave us collective confidence that we can achieve our year end got full year guide.

Speaker Change #113: Thank you very much.

Speaker Change #113: The next question comes from Brian Mullan with Piper Sandler. Please go ahead.

Brian Hugh Mullan: Okay. Thank you.

Brian Hugh Mullan: Question on Carrabba's, you've seen some relative outperformance from that Brandon in recent years, maybe you could just talk about the strategy for this year. Your degree of confidence that this can continue and if you could talk about the off premise business in the dining room business separately that would be great to get your thoughts on that brand.

Speaker Change #113: Which has done a great job in sales.

Speaker Change #113: Be it the off premise business, especially as we know that boot forms, especially.

Speaker Change #113: Conducive to the off premise business and the team has done a really terrific job of addressing that gate catering delivery carryout et cetera.

Speaker Change #113: The team will tell you that we've got more work to do and in restaurant dining.

Brian Hugh Mullan: The team will tell you that we've got more work to do in in-restaurant dining. We've got more trends in front of us that we need to pursue, and also, improve the guest experience. They've had some extremely successful wine dinners at Carrabba's, and we've rolled out lunch that is having a lot of success in the brand.

Speaker Change #113: We've got more transit, we got more trends in front of us that we need to pursue.

Speaker Change #113: Also improving the guest experience they've had some extremely successful wine dinners.

Speaker Change #113: At Carrabba's and we've rolled lunch Dennis having a lot of success in the brand. So I would say that from a <unk> standpoint, you've got a strong off premise business, you've got lunch being rolled out with.

David J. Deno: So, I'd say that from a Carrabba's standpoint, you've got a strong off-premise business, lunch is being rolled out with their sandwich line, and we've got some successful in-restaurant initiatives around their wine dinners. Now, lastly, we talked at length on prior calls about the productivity investment that we've made at Outback Kitchens. We've got the same thing available to us in Carrabba's. In fact, I'd argue Carrabba's is one of the most complicated kitchens in the industry.

Speaker Change #113: Their sandwich line, we've got.

Speaker Change #113: Some successful in restaurant initiatives around their wine dinners now lastly.

Speaker Change #113: We talked at length on prior calls about the productivity investment we've made at Outback kitchens. We have got the same thing available to us and Carrabba's in fact, I'd argue probably that's one of the most complicated kitchens in the industry and so right now we've got about.

David J. Deno: And so, right now, about 15% of our fleet has new kitchen equipment, and we're seeing significant savings in utilities and prime costs to help drive that business. And that's a big element of productivity for us this year and importantly into 2025. So, those are the factors that we're seeing in Carrabba's, and we'll see if all that warrants further expansion of the brand as we go forward. Okay, thank you.

Speaker Change #113: 50% of our fleet has new kitchen equipment, and we're seeing significant savings in utilities and prime cost to help drive that business and that's a big element of productivity for us This year and importantly into 2025. So those are the factors that we're seeing in Carrabba's and we'll see if all of that work.

Speaker Change #113: Further expansion of the brand as we go forward.

Speaker Change #114: Okay. Thank you and then just a follow up just on the portfolio of stores in the U S broadly with the 2023 closure initiatives now complete.

Brian Hugh Mullan: And then just to follow up just on the portfolio of stores in the U.S. broadly, you know, with the 2023 closure initiative now complete, my question is whether or not you think there would be any future closure initiatives you'd consider, or has everything really been addressed now at this point? And I think we did a great job over the years managing our portfolio, and I would expect that we won't have more to do, but I think that, you know, we always look at our assets, we always look at where they're located, we always look at things, but we've done a great job being proactive on that over the years. The next question comes from Dennis Geiger with UBS; please go ahead. Thank you, and congratulations, David and Michael.

Speaker Change #117: My question is.

Speaker Change #115: Whether or not you think would there be any future closure initiatives you'd consider or is everything really been addressed now at this point you think.

Speaker Change #115: We did a great we have done a great job over the years, managing our portfolio and I would expect that we won't have more to do but I think we always look at our assets. We always look at where they're located we always look at things, but we've done a great job being proactive on that over the years.

Speaker Change #116: Thank you.

Speaker Change #116: The next question comes from Dennis Geiger with UBS. Please go ahead.

Dennis Geiger: Thank you and congratulations David and Michael.

Dennis Geiger: You talked about the three LTOs, which I would consider at compelling price points. I think, David, that you spoke a few times about some value add-backs coming. So I just wanted to ask a little bit more on promotional activity, if anything more on sort of how you're positioned on value and whether there is a need maybe to increase promotional offerings, if that reflects the current consumer backdrop, if it's relative to the observation that the broader casual dining industry is leaning in more on value, if it's both, if it's other, just any additional thoughts there. Yeah,

Dennis Geiger: Talked about the <unk>, which I would consider at compelling price points I think David you spoke a few times to some value add backs coming so I just wanted to ask a little bit more on <unk>.

Dennis Geiger: On promotional activity if anything more on sort of how you are positioned on value and whether the need maybe to increase promotional offerings. If that reflects the current consumer backdrop.

Dennis Geiger: Relative to the observation that the broader casual dining industry is leaning in more on value or if it's both if it's other just any additional thoughts there yes.

David J. Deno: I think what we've done with our last three LTOs at Outback has been really great because it offers tremendous food at a great price point, and you're going to see that from us going forward, you know, in future plans. I'm not going to get into details about what they might be, but that's something that has worked for us. On the menu front, we think that we've got some opportunity, like I mentioned earlier about the question from Jon Ivankoe, you know, is there more opportunity to maybe simplify the menu a little bit more? I don't know for sure.

Speaker Change #118: Yes, sure I think what we've done is with our last three <unk> Opex has been really great and because it offers tremendous food at a great price point and youre going to see that from us going forward.

Speaker Change #118: Future in future in future plans, so im not going into details of what they might be but that's something that has worked for us on the menu front.

Speaker Change #118: We think that we've got some opportunity like I mentioned earlier on a question from John <unk> co is there more opportunity to maybe simplify the menu a little bit more don't know for sure and then are there an opportunity to put some really interesting outback high quality products on the menu that are very indulgent that offer great value and we're working through that.

David J. Deno: And then is there an opportunity to put some really interesting Outback high quality products on the menu that are very indulgent and that offer great value? And we're working through that right now. That's how we would go about it.

Speaker Change #118: Right now that's how we would go about it and then lastly is speaks to the industry, yes, we've seen an increase in promotional and marketing activity.

David J. Deno: And then lastly, as it speaks to the industry, yes, we've seen an increase in promotional marketing activity. We need to, you know, respond to that, but we don't. We tend to do it our way, especially at Outback. We don't expect to do any broad-based deep discounting or special, you know, promotional offers and things, but we will be offering some value-centered LTOs that make a lot of sense for the brand and are consistent with the brand heritage. That's great.

Speaker Change #118: We we need to respond to that but we don't we tend to do it our way, especially at Outback, We don't expect to do any broad based deep discounting or special promotional promotional offers to think that we will be offering some value centered LTE OS that make make lot of sense for the brand and consistent with the brand heritage.

Speaker Change #118: <unk>.

Speaker Change #118: Okay.

Speaker Change #121: That's great and then just I wanted to ask on Brazil, if anything incremental to share sort of on our performance in the quarter. The consumer backdrop any anything impacting results for the quarter itself and then if there's anything incremental on sort of the state of I guess, maybe the capital markets environment in the country or anything else to add on on thinking through.

Speaker Change #118: As you think through the strategic.

Speaker Change #120: Review the conditions in the country right now thank you yes.

Dennis Geiger: Yeah, no, Brazil continues to take share, do extremely well. The only thing we had to do in Q1 last year was, the World Cup was in December; in their quarter, they had an unbelievably successful promotion, and we've had a little bit of carnival timing this year, but overall, you know, the brand continues to do really well. I think the industry there, like the U.S., is seeing a little softness, but importantly, we are taking share.

Speaker Change #119: Yes, Brazil continues to take take share to extremely well the only thing we had to do in Q1 last year was the World Cup was in December or in their quarter had unbelievably successful promotion.

Speaker Change #119: And we've had a little bit of carnival timing this year, but overall.

Speaker Change #119: The brand continues to do really well.

Speaker Change #119: I think the industry there.

Speaker Change #119: <unk> seen a little softness, but importantly, we are we are taking share.

Dennis Geiger: You know, as Michael mentioned in his prepared remarks, there has been tax legislation that has been approved by the Senate and the House. We don't know what's going to happen with that tax legislation. If it does get signed by the President, and once we understand the regulations, there could be a financial upside to the company, but that is not contemplated in our guidance.

Speaker Change #119: As Michael mentioned in the in his prepared remarks, there was tax there has been tax legislation that has been approved by the Senate and the house.

Speaker Change #119: Don't know whats going to happen with that tax legislation. If it does get signed by the president and once we understand the regulations there could be a financial upside to the company, but that is not contemplated in our guidance.

Speaker Change #122: Thank you very much.

Speaker Change #122: The next question comes from Andrew <unk> with BMO. Please go ahead.

David J. Deno: Thank you very much. The next question comes from Andrew Strelzik with BMO. Please go ahead. Hey, good morning.

Andrew Strelzik: Thanks for taking the questions. My first question is about the operational improvements at Outback that are contributing to the share gains there. Are there any metrics that you can share to kind of frame the improvements that you're seeing? And where are the gaps that remain, I guess, on the path to your goal of being a best in class company?

Andrew: Hey, good morning, Thanks for taking the questions.

Andrew: My first one I wanted to ask you about the operational improvements at Outback that are contributing to the to the share gains. There are there any metrics you can share to kind of frame the improvement that you're seeing and where are the gaps that remain I guess on the path to your goal of being a best in class operator.

David J. Deno: Yeah, I think we clearly have seen it in steak quality and steak accuracy. Number one, steak accuracy has gone up 500 basis points versus past trends, and that has been a direct result of the investment that we've made in the kitchen. I'm very, very pleased about that. Consistency of experience is up 400 basis points. So serving a hot meal on time with great service is, for me, the most important thing we can do at Outback Steakhouse. Where are some of the gaps?

Speaker Change #126: Yes, I think we clearly have seen it in.

Andrew: State <unk> and food quality.

Andrew: Number one our steak accuracy has gone up 500 basis points versus past trends and that has been a direct result of the investments that we've made the kitchen I'm very very pleased about that.

Andrew: Just any consistency of experience is up 400 basis points so serving.

Andrew: Hot meal on time.

Andrew: With Great service.

Andrew: <unk> the most important thing we can do it opex takeout now.

Speaker Change #123: Where are some of the gas what I'd like to see US do is there more that we can do to maybe enhance our service and enhance the guest experience. We don't think it will take a lot of money to do that but how our servers interact with our customers and things like that there might be some ideas, there, which I won't get into but there might be some things that we can.

Andrew: Look at too.

Andrew: It would be more interaction with our guests at outback, while serving the food in a quick manner that our guests have come to come to enjoy it. So those are the things that we're looking at at Outback I am very pleased with steak accuracy being up so much and consistency of experience being up so much.

Andrew Strelzik: And just my second one, I wanted to ask about the commodity inflation outlook. With about 1% in the first quarter, I think you said favorable again in the second quarter would apply a little bit of a ramp in the back half. What's your visibility on that? And is it all beef? Or is there anything else, you know, kind of within that driving the acceleration?

Speaker Change #127: Okay, Great that's helpful and just my second one.

Speaker Change #124: Wanted to ask about the commodity inflation outlook.

Speaker Change #124: With about 1% in the first quarter I think you said favorable again in the second quarter would imply a little bit of a ramp in the back half whats your visibility to that and is it all before is there anything else kind of within that driving the acceleration.

Speaker Change #124: Right.

Speaker Change #125: Yes, youre right as far as kind of where we land in Q1 will be maybe a little bit better in Q2, and then we do experience a ramp in the back half a lot of that is actually driven by seafood.

Speaker Change #125: As we as we burn through some deflationary inventory, we actually come upon inflationary inventory in the back half beef itself is relatively stable as far as how we plan for the inflation. However, as we as we mentioned and when we lowered our commodities guide.

Speaker Change #124: We are seeing some favorability in beef.

Speaker Change #124: We can take advantage of with our current contract.

Speaker Change #124: How we how we reflect that favorability.

Speaker Change #124: A little bit TBD based off of the market, but but directionally, we will see an uptick in commodities in the back half.

David J. Deno: Thank you very much. This concludes our question and answer session. I would like to turn the conference back over to Dave Deno for any closing remarks. Thank you very much. We appreciate the questions today, and I personally appreciate the kind words. It means a lot to me, but I want to invite everybody back for our Q2 call later in the year. Take care, everyone. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Speaker Change #129: Alright, Thank you very much.

Speaker Change #124: This concludes our question and answer session I would like to turn the conference back over to Dave Deno for any closing remarks.

David J. Deno: Thank you very much we appreciate the questions today.

David J. Deno: I personally appreciate the kind words it means a lot to me.

David J. Deno: But I want it and deliver it back for our Q2 call later in the year take care everyone.

Speaker Change #128: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Q1 2024 Bloomin' Brands Inc Earnings Call

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