Q3 2024 Bloomin' Brands Inc Earnings Call

Executive Officer, and Michael Healy, Chief Financial Officer, and Executive Vice President by now you should have access to our fiscal third quarter 2024 earnings release. It can also be found on our website at www Dot women brands Dot com in the investors section.

This conference call, we will be presenting results on an adjusted basis, an explanation of our use of non-GAAP financial measures and reconciliations to the most directly comparable GAAP measures appear in our earnings release on our website as previously described.

Before we begin formal remarks, I'd like to remind everyone that part of our discussion today will include forward looking statements, 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 SEC filings, which are available at www Dot SEC Dot Gov.

During today's call we will provide a brief recap of our financial performance for the fiscal third 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 now like to turn the call over to Mike Spanish.

Mike Spanish: Thanks, Tara and good morning, everyone.

Mike Spanish: It's a privilege to be leading the bloom and brands team, we have iconic brands passionate and resilient team members and a culture grounded in taking care of our people our employees customers suppliers and communities.

I'm excited and wanted to be part of this tremendous team for two reasons.

Mike Spanish: First my family and I are long time loyal is of all of the Bloom and brands, including my late father, who always felt so special going to Outback with my mom every Friday night to have a high quality steak and a beer at a great value and a fun casual environment.

Mike Spanish: Whether it has been a great steak with my wife and kids at Outback.

Mike Spanish: With my in-laws for Italian at Carrabba's.

Mike Spanish: Birthday dinner for my mom at Bonefish for fresh seafood or an elevated steak dinner at Fleming's.

Mike Spanish: Our brands have provided my family with fun and memorable experiences.

Speaker Change: Excitement to be part of the team has only increased after spending time working in our restaurants with our great team members from cutting Falaise shaking hand crafted cocktails nothing beats the hands on approach to learning the operations of a business.

Second I believe in the strategic growth potential of the business.

Speaker Change: <unk> brands is a great business with great brands and a great team when we consistently execute with excellence and the guest experiences right our brands generate profitable traffic growth are.

Speaker Change: Our brands have a high rate to succeed and stake in Italian casual dining are on trend and our big categories.

Speaker Change: Within state, we compete with strong players and good competition enhances category growth and pushes us to deliver a better guest experience.

I have a lot of confidence in the long term value of the company with the financial resources, including a good balance sheet with ample cash flows with an operating mindset, we will deliberately and quickly make the necessary strategic steps to unlock that value.

Speaker Change: Now that you hopefully understand my motivation to be part of the Bloom and brands team I want to recognize and thank our dedicated our Packers Nikos associates and anglers.

Speaker Change: In addition to being outstanding operators I have been impressed with their resiliency and capability after dealing with both hurricane Helene and hurricane Milton in the span of two weeks, our teams demonstrated leadership and dedication to each other our guests and our communities. The examples of serving leading and doing what is right in the face.

Speaker Change: Such adversity has been inspiring to see.

Speaker Change: <unk> flooded and damaged homes and cars power outages and gas shortages. Our teams took care of each other and safely reopened our restaurants to serve our communities. This kindness and support have been so impressive and I think I appreciate each and every one of you.

Speaker Change: We also donated $500000 to the American Red Cross to support Hurricane recovery. In addition to feeding thousands of our first responders and those in need to support community recovery.

Speaker Change: I also want to thank and acknowledge the legacy contribution of Dave Deno. He has a superb leader in person and has been invaluable during my on boarding we've executed a smooth transition and have spent detailed time together to ensure the strategic work that the team has been working on remains on track and accelerates our special.

Speaker Change: <unk> and Outback Steakhouse.

As you get the Nuomi directly leading frontline team members in both the Marine Corps and in the Pepsi system was foundational for me.

Speaker Change: The majority of my Pepsico career on the bottling side and asset and people intensive workplaces, starting on delivery trucks and servicing both retailers and restaurants.

Speaker Change: I also led broad and complex portfolio of businesses at Pepsico, six flags and Delta.

Speaker Change: In addition to my operational experience I've, let marketing consumer insights revenue management and foodservice teams.

Speaker Change: We will manage the business with an operational focus and a guest centric lens my time in these roles reinforced three guiding principles.

Speaker Change: First leadership as a privilege focus on the team member experience, we have a unique culture at Bloom and brands one that originates from our founders our principles and belief states success as measured by growth in sales and profit and is the result of taking care of our people.

Speaker Change: Our success is based on a belief that people want to be part of something they can be proud of is fun and that includes and values them.

Speaker Change: Throughout my career I focused on building performance based cultures balancing employee wellbeing and driving accountability for best in class performance listening to and learning from our restaurant operators is important in order to support them working more effectively and efficiently we will stay close to our managing partners and joint venture.

<unk> as well as our franchise leaders as they have the greatest insight into what we can do to better improve the guest experience.

Speaker Change: I'll spend the majority of my time on our operations and how we can improve our team member experience, which in turn inspires our high quality welcoming elevated and carrying experience for our guests.

Speaker Change: The second guiding principle is to focus on the guest experience our ability to consistently execute a memorable experience for our guests with a high quality meal at a great value and a relaxing environment is what drives repeat visits and loyalty to our iconic brands consumers want memorable experiences and <unk>.

Speaker Change: From home occasions every moment matters when guests choose to spend their hard earned money and their precious time with us.

Speaker Change: The third principle is to have a growth mindset by focusing on the core.

Speaker Change: I found every market, whether domestic or international and every category has growth potential in terms of traffic revenue and profitability.

Speaker Change: It is important to control what we can control have a clear definition of success and execute on targeted initiatives that drive growth.

Speaker Change: This leads to disciplined capital investments simplification of the agenda and being great on what is important to our guests.

Speaker Change: <unk> brands as a portfolio of iconic brands that have strong growth potential by.

Speaker Change: By focusing on the core of our brands and operational excellence. There is a long runway ahead.

As I initially evaluate our portfolio I see two primary scalable areas for growth.

And our biggest brand as Outback Steakhouse. This is a global brand and an on trend stay category. However, we have not sustainably grown traffic. We're closely evaluating all elements of the guest experience I am personally committed to material improvement at Outback Steakhouse that will sustainably grow.

Speaker Change: Traffic comparable sales and profitability. This brand has a high rate to succeed within the steak category I am excited about the strategic work that we have underway and I will take an active role and operationalize the work.

Speaker Change: Our second scaled growth opportunity is carrabba's I've been impressed with this team's capability to grow both traffic and comparable sales and to meet our guests' needs across the various day parts and occasions.

Speaker Change: The team is focused on the in restaurant experience and is assessing the white space opportunity to strategically scale, the brand with margins and returns that deliver shareholder value.

Speaker Change: We plan to sharing meaningful update on the Outback in Bloom and brand strategy on our next earnings call.

Before I turn it over to Mike will discuss our financials. There are two last items I want to address.

Speaker Change: First is our Q3 results and balance of year and full year guidance. It is reflective of the broader challenging industry trends recent impact from the hurricanes and our current execution. Our team is working hard but we are not pleased with our performance and we know we can do better we have work to do and are committed.

Speaker Change: To providing accurate and transparent forecast of our performance.

Speaker Change: Second I am pleased to announce our strategic partnership with Vinci partners for our Brazil operations, we are a scaled and leadership position in Brazil and are excited to have vinci as our partner to grow the business in the future and she is a significant asset management firm with a successful track record of partnerships in the restaurant space.

Speaker Change: We are retaining 33% ownership of the business. It has been my experience living and working internationally with franchise partners that combining powerful classic brands with local capability and expertise is the optimal business model to maximize future growth.

Speaker Change: We have also created aligned economic interests for both parties with a material equity stake to grow the business and to grow it in a profitable way. This transaction will allow us to simplify and focus on our domestic operations.

Speaker Change: We anticipate closing the transaction this year, and Michael will walk through more of the financial implications of the transaction. Next year, Blumen Brands will be a more focused and simpler company.

As I leave the company, you have my following commitments.

Speaker Change: First, I will be strategic and grounded in our operations and decisions we need to make. Second, I will communicate our path and progress in a transparent way.

Speaker Change: And third, I will hold my team and myself accountable for delivering strong results. With that, over to you, Michael, to discuss our Q3 financial performance and updated 2024 guidance.

Thank you, Mike, and hello, everyone.

Michael: I would like to start by providing a recap of our financial performance for the fiscal third quarter of 2024. Total revenues in Q3 were $1 billion, which is down 4% from 2023. This was primarily driven by a decline in comparable restaurant sales, the FX translation of the Brazilian dollar relative to the U.S. dollar, and the net impact of restaurant openings and closures.

Michael: U.S. comparable restaurant sales were negative 150 basis points and traffic was negative 440 basis points, which was in line with the casual dining industry.

Michael: At Outback, we introduced greater value in our LTOs beginning in Q3. While this allowed Outback to outperform BlackBox on traffic in a very promotional environment, our focus is on building sustainable traffic growth, particularly at Outback.

Michael: Average check was up 2.9% in Q3 versus 2023, in line with expectations. Value is critical right now, and we are committed to take the least amount of pricing as necessary.

Michael: Q3 off-premises with approximately 23% of total U.S. sales. Our third-party delivery business is 13% of total U.S. sales, which is an increase from 12% in Q3 2023, driven by our growth in catering.

Michael: Our Q3 GAAP Diluted Earnings Per Share for the quarter was $0.08 versus $0.45 in 2023. Our Q3 Adjusted Diluted Earnings Per Share was $0.21 versus $0.41 in 2023.

Michael: The primary difference between GAP and adjusted diluted earnings per share is due to the asset impairment and closure related charges associated with the decision we made in Q2 to close nine restaurants in Hong Kong.

Michael: Executive Transition Costs, and Professional Fees Related to our Revenue Growth Management Strategic Efforts.

Michael: Q3 adjusted operating margins were 3% versus 5.3% last year. There were a number of factors contributing to the margin decline this quarter.

Overall, restaurant-level margins declined by 150 basis points.

Michael: 110 basis points were driven by labor, primarily due to hourly and field management wage rate inflation.

Labor wage inflation for the quarter was 3.8%.

Michael: Other restaurant operating margin declined 90 basis points, driven by higher operating and supply expenses, primarily due to inflation, as well as higher pre-open expenses as we open more restaurants this year.

Michael: Cost of goods was 50 basis points favorable from pricing benefits and supply chain productivity initiatives.

Michael: Commodities were better than expected in Q3 at approximately 2%, driven by more modest inflationary expectations across seafood, oil, and dairy. We continue to see positive signs within our beef program, but this category remains inflationary.

Michael: Depreciation expense was higher in Q3, consistent with our increased levels of capital spending in recent years and our investments in infrastructure to support growth.

Michael: We are operating in a challenging market environment and we are focused on managing the costs that are in our control.

Michael: Turning to our capital structure, total debt net of cash was 1 billion dollars at the end of Q3.

Michael: During the quarter, we upsized our revolver to $1.2 billion, which provides additional liquidity for our business and provides broader financial flexibility. Importantly, we remain committed to being at or below our long-term lease-adjusted leverage ratio target of three times.

Michael: Year-to-date we have repurchased a total of 10.1 million shares of stock for approximately two hundred and sixty six million dollars.

Michael: This included shares issued in connection with the repurchase in March of a portion of our convertible notes.

Michael: We have $97 million dollars remaining under our Share Authorization Program.

Michael: The board also declared a quarterly dividend of 24 cents a share that is payable on December 11th.

Michael: Now turning to our full year 2024 guidance. We are updating our full year guidance to reflect the continued industry softness and our trends.

Michael: As a result, we are updating our comp guidance range to be down 100 basis points to down 50 basis points.

Michael: We are being very mindful of pricing and have not contemplated pricing actions above prior guidance.

Michael: Given the volatility the industry is seeing in traffic trends, we are updating our adjusted diluted earnings per share guidance to be between $1.72 and $1.82.

Michael: Prior guidance assumed industry trends would strengthen, but our updated view assumes no improvement.

Michael: Additionally, the hurricanes have had a negative impact on our business and were a distraction for our teams.

Michael: U.S. domestic comparable sales were negatively affected by approximately 30 basis points in the fourth quarter and a total impact of profitability of approximately 3 cents on an earnings per share basis.

Michael: Both of these are included and are updated for your guidance.

Michael: We are updating our commodity inflation guidance to be approximately 1%.

Michael: We are updating our adjusted tax rate to be between 6% and 7%.

Michael: As we mentioned on the last call, the negative calendar shift experienced in Q1 of 5 cents is recaptured in Q4.

Michael: The Brazil tax benefit is expected to be approximately $0.15 for the year.

Michael: As it relates to the fourth quarter of 2024, we expect U.S. comparable restaurant sales to be down 200 basis points to down 100 basis points on a comparable calendar basis.

Michael: This reflects the current environment and what we are seeing in the restaurant industry, as well as the approximate 30 basis points impact from the hurricane experienced at the start of the fourth quarter.

Michael: We expect Q4 adjusted diluted earnings per share to be between $0.32 and $0.42. Importantly, this guidance includes the revised Brazil value-added tax exemption benefit of approximately $0.07.

Michael: and an approximate $0.05 benefit from the calendar shift, offset by an FX headwind of $0.02 and a $0.03 impact from the hurricane.

Michael: This morning we announced a strategic partnership with Vinci Partners for our Brazil operations.

Michael: Total enterprise value for the business is 2.06 billion Brazilian dollars or 6.5 times trailing 12 months EBITDA net of royalties through Q3 2024.

Speaker Change: Vinci will purchase a 67% ownership interest based on this valuation and as Mike mentioned we will retain a 33% ownership in the business.

Speaker Change: We believe our economic interests are aligned and expect the business to continue to grow.

Speaker Change: We have an option to monetize our remaining equity stake in 2028.

We anticipate the transaction to close in 2024.

Speaker Change: We will receive 52% of the proceeds upon closing and the remaining 48% one year later. We will provide more details on the use of those proceeds on our February earnings call after we complete our strategic planning efforts later this year.

Speaker Change: Additionally, the ongoing royalty stream will allow us to continue to benefit from a high-growth, market-leading business.

Speaker Change: In summary, we are not satisfied with our results in 2024, and we are committed to the actions necessary to deliver consistent, long-term sales and profit growth. While Outback is our primary focus, all of our brands play a role in the success of Blooming Brands.

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

Speaker Change: Thank you. We will now begin the question-and-answer session. 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. If at any time your question has been addressed and you would like to withdraw it, please press star then 2. At this time, we will pause momentarily to assemble our roster.

Speaker Change: And today's first question comes from Jeffrey Bernstein with Barclays. Please proceed.

Jeffrey Bernstein: My first question is just in terms of the operations and the opportunity you talked about.

Jeffrey Bernstein: I know in the press release you talked about consistent and elevated guest experience which was key. I'm just wondering in your early days, what do you think Outback has been falling short on that, which presumably has pressured repeat traffic?

Jeffrey Bernstein: I know you mentioned deliberately and quickly taking action. I'm just wondering whether you think there's any low-hanging fruit that we could see being implemented over the next quarter or two to stem the tide. And then I had one follow-up question.

and David Deno.

Speaker Change: Thanks, Jeffrey. Yeah, it might be better just to say Spanos for CEO and Healy for CFO to keep it simple for everybody, but good morning.

Speaker Change: I'll start with your point or your question on the operations and what I'm seeing with Outback. I'd start with, first of all, we are seeing, if I start with the problem, we are seeing declining same-store sales and we're seeing declining traffic and we have been losing share in the state category. That is our reality right now.

Speaker Change: If I look at what I think are the positives on the balance sheet, so to speak, we've got a great, iconic brand.

Speaker Change: We've got a great team, the team is very passionate about the guest experience.

Speaker Change: and they're very rooted in what I think is that Aussie spirit.

Speaker Change: that irreverence, that no rule is just right, the core ethos of the brand.

Speaker Change: that's out there and we're very much on trend in the state category so that I feel very good about and as I said we've got ample liquidity we've got you know cash flows are also ample and we've got a really good balance sheet so I feel very good about that.

Speaker Change: If I look at where I'd like us to lean further in and accelerate, it starts with the guest experience.

Speaker Change: We've got to create just a great meal at a great value in a fun casual environment, which is also the core of the brand.

Speaker Change: And to me, I look at operational excellence as consistency. The team has told me that. To me, that means we've got to be thoughtful about controlling what we can control.

Speaker Change: Simplifying the agenda and the menu. In addition to that, we've been really looking at our brand positioning. We don't want to be a bar and grill in terms of how we go to market. And the work is, you know, we're going to get better every day.

Speaker Change: and we're going to create a differentiating experience back to our roots.

but

Speaker Change: We'll give you more in February, but I will tell you this, I am personally very hands-on with Outback. I'm working very closely with the team, and the strategic work the team did...

Speaker Change: We're accelerating that, and we're going to get that moving. Again, it's an everyday process getting better, and that starts with coaching and leading accountability.

Got it. And Spanos, you mentioned Outback and you mentioned...

Speaker Change: Karabas in terms of near-term priorities. I'm wondering if you could just talk about thoughts on the portfolio more broadly the pros and cons

Speaker Change: whether it's of keeping carabas or, you know, just the thought process around bonefish. Any thoughts there?

Speaker Change: We're aware that there's an activist in the name so I'm just wondering if there's any thoughts you could share in terms of your relationship or Your priorities or whatnot relative to that of an activist investor. Thank you

Speaker Change: You've got a few questions there. Let me let me start in reverse order. I think you were asking about Starboard in terms of that relationship. What I'd say there is...

Speaker Change: We have a very collaborative relationship with Starboard. They're incredibly insightful, and what I've really liked about the board members...

Speaker Change: They're passionate about the guest experience and how the team member experience unlocks that guest experience. And they want us to do what's right for the business and they're especially focused on sustainability of the business through a fantastic guest experience.

Speaker Change: So, I'll start there. Second on the portfolio, maybe what's inferred a bit in your question is Brazil, and then I'll come to the domestic piece.

Speaker Change: I would not link or connect our decision on Brazil to the domestic portfolio. I've lived and worked internationally many years, both in company-owned businesses, franchise businesses, and what I've found is

Speaker Change: You unlock the maximum future value when you have an iconic brand

Speaker Change: with a great set of capability combined with the local capability, community, local savviness. That combination is your best synergy for growth.

Speaker Change: If I go to the domestic portfolio, we're committed to our domestic portfolio, and I do think there's two scaled.

Speaker Change: growth opportunities. Outback, which I already spoke about, and that is primarily our biggest opportunity. That is all about the guest experience and able-through-the-team-member experience, and we just got to be

really tight on our operational excellence to get there.

Speaker Change: Karaba is, to me, is really an exciting business. What we've seen on a sustained basis...

Speaker Change: Good, steady traffic and good, steady same-store sales with that business. I do want the team, and I know Pat Hafner, who leads that business, the team has done a great job since about 2019.

elevating that brand.

Speaker Change: The brand does a nice job across day parts and converting occasions, which I think is very positive. And to me, what's exciting is exploring, in a very deliberate manner, the whitespace growth opportunity of that brand. And we'll do that smartly, because you've got to have the right margin profile and the right return profile on that.

Speaker Change: The last part of your question I think was specific to bonefish.

Speaker Change: Bonefish to me is all about, again, at its core, the brand. It's a polished dine, fresh seafood, around an energetic bar experience. And that's what the team's focused on, Jeffrey. They're focused on simplifying that menu in a good way that pivots back to fresh seafood.

Speaker Change: Really going off that energy of the bar that we saw in the very first Bone Pistols that were out there. And that's where we're at.

Thank you. Thank you.

and the

Thank you. Thank you. Thank you.

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

Speaker Change: Thanks, good morning, and welcome aboard, Mike. I thought it was interesting you talked about your history with the brand as a consumer, you know, as you dug in and worked with the operators. I mean, what are you hearing that stands out, differs from what you initially expected kind of coming in?

Alex, good morning.

Very, the operators, our managing partners, our JVPs, our franchisees.

Speaker Change: They're incredibly consistent in their feedback. The first is, they want simplification.

Speaker Change: They want to get back to that guest experience. They're giving me feedback around center-of-the-plate improvements. They're giving me feedback around how we remove barriers by simplifying the agenda and what we can do to improve that guest experience.

Speaker Change: Very consistent feedback there. The second is on what I would call the brand positioning. As one Outbacker said to me, they want to be great.

Speaker Change: in a few things and not average in a lot of things. That's very clear. So they want to have a really strong value every day that the guest knows from a brand trust.

Speaker Change: that they can get out there in a big way. The other thing they've talked to me about in terms of the brand positioning is.

and I agree with them on this, is about frequency.

Speaker Change: Our average Outback guest comes about twice a year, and their point is, let's get that number to three. So, increase the frequency of our loyal guests.

and retain them.

and what they're also telling me is to recruit.

Speaker Change: new guests. We should recruit the right new guests that want to lean into the steak category, steak and seafood. And the last thing is they believe in the brand. They believe passionately in the brand. They believe passionately in the potential of the brand.

and they love serving our guests and serving each other.

Speaker Change: helpful I mean I guess it's early but I mean do you expect any investments back into the brand around food quality marketing labor other areas that

Speaker Change: that could have an impact on margins or just that sort of reinvestment as we look ahead to 2025.

Speaker Change: Yeah Alex, I won't get into 25. We'll be real clear with you on what we're doing as we finish our long-range planning into February, but maybe I give you a framework on how I think about this in terms of how you lead the P&L and lead the team. I start with one.

Speaker Change: I'm a believer you can reward yourself with a free dividend. What I mean by that is step one is coaching, leading, controlling what you can control, focusing on the guest.

Second

Speaker Change: You've got to look at redeploying resources, that can be financial, it can be time.

Speaker Change: but redeploying your resources on the point of main effort priorities is important as well.

Speaker Change: We also should be looking at reducing, wherever we have costs or any type of cost we don't think is driving revenue or top line growth, we've got to take a hard look at that.

Speaker Change: And then after that, I think it's fair to say we can look at reinvestments, but those reinvestments have got to be sharp, they've got to be targeted, they've got to have clear returns on them, so we have revenue outgrowing our cost growth sustainably.

Great, thanks.

Speaker Change: Today's next question comes from John Ivanko with JP Morgan. Please proceed.

Speaker Change: Hi, thank you. I want to grab that last word, reinvestment, and apply it to your existing asset base.

Speaker Change: you know obviously the majority of your sales are presumably always will be on premise you know a modern experience at least relative to expectations really matters

Speaker Change: and at least in previous conversations with the company, we've heard anywhere between 30 and 50% of the asset base is considered to be modern. In other words, the majority are considered not to be modern.

Speaker Change: And are you willing to make that investment, even if it doesn't necessarily pencil out from a financial return perspective, just because it's the right thing for the brand, your employees, your customers, longer term? Thanks.

Speaker Change: Yeah, you bet. Morning, John. So, I think that's a really fair question, and that is very much part of the work we're doing is asset condition and asset quality.

Speaker Change: across all the brands and how we think about that. But I would also start with the one thing I've learned over the years calling on food service customers and servicing them and what I've learned here so far is

Speaker Change: The best results inside the four walls of a restaurant start with the leadership of our managing partners.

Speaker Change: What I've seen is results that tell me when we get the right leadership with the right accountability and we simplify the agenda, we can unlock growth everywhere.

What I think you're also getting to is capital allocation.

Speaker Change: Again, we'll be clear on that, but what you're getting at is what I would call is investment-based business. To me, that's always where you start in terms of capital allocation.

Speaker Change: And part of that is repair and maintenance. Part of that can be a remodel. Part of it can be a relocation, etc. But we're going to make those right moves because it does pencil out if you're doing the right things.

Speaker Change: with sustainability and if you have the right process, which we do, and Michael's team is leading that process.

Speaker Change: And we'll do those things. Beyond that, on capital allocation, which I think is a bit of the inference of your question, we're going to continue to be thoughtful on that. We're going to obviously stay focused on paying down debt to lease-net-leverage ratio, a long-term of 3.0, as Michael pointed out.

Speaker Change: will be disciplined in new store openings, and then after that, we'll look at how we properly return cash to shareholders. But it pencils out what I found. I've been leading asset-heavy and people-intensive companies.

Speaker Change: for a lot of years. You have to reinvest in the base of the business for sustainable growth and we're committed to that.

And John, just to piggyback on that, I think...

Speaker Change: The focus on better operations and better execution works when we reinvest in the restaurants as well. And so it has to be an and as we think about the investments or what we need to do to support Alpac.

Speaker Change: That's how we're prioritizing them as we go through this strategic planning.

Speaker Change: Certainly, an asset component is part of that conversation. Thank you. And I think a follow-up on the reinvestment side. I mean, you've mentioned a couple of interesting – a lot of interesting things.

Speaker Change: You know, really trying to constrain the amount of pricing you take going forward, but not wanting to be a bar and grill, I get both of those comments, but how do we feel about

Speaker Change: You know the overall average ticket. Is the opportunity to go lower to bring that frequency from two times to three times when you kind of take a clean slate look at the business and look at prices?

Speaker Change: on an absolute basis relative to consumers' expectations, you know, how are we feeling about the current price levels and overall average ticket that the customer pays?

Speaker Change: Yeah, John, so I'll add her up to what I've always found to be your levers on revenue management. There is a volume lever, which is traffic.

Speaker Change: There's obviously an inflationary price lever and there's a mixed lever And what I found is you got to be balanced on all three levers

Speaker Change: In terms of what you've got to do internally on the P&L as well as being thoughtful externally on what's going on competitively and what the guest or consumer gives you credit for between a price and benefits equation.

Speaker Change: So, we're going to be balanced moving forward and we're going to have a very sharp lens on all those levers.

Okay, thank you.

Speaker Change: The next question comes from Brian Harbour with Morgan Stanley. Please proceed.

Speaker Change: Yeah, thank you. Good morning. Maybe just wanted to start with the 4Q. Obviously, you did change your annual EPS guide quite a bit.

Speaker Change: You know part of that is sales. It sounds like the hurricane impact wasn't too significant from an earnings perspective But could you help us on some of the pieces that are kind of driving that change to you know your 4Q outlook?

Speaker Change: Hi, good morning. It's Spanos. So I'll start with what we're not happy with our results.

and we assumed our performance.

Speaker Change: would improve in terms of grabbing share or growing faster than some of the folks out there, and that did not happen.

Speaker Change: So our quarter four forecast is reflective and consistent with our year-to-date Q3 trends.

If you're looking at same-store sales...

Speaker Change: traffic pricing and what we internally look at in terms of EBIT, that's where we're at.

Speaker Change: So, again, we're not happy with it. What I would tell you moving forward, you're going to find with me, and I know Michael feels exactly the same way, we're going to be very transparent and candid on the forecast.

Speaker Change: I tend to take a balance, center, cut approach. We'll give you what we think are some of the moving parts and the pluses and minuses of that.

Speaker Change: And to me, what's going to really drive the business in terms of forecasting is just getting back to that outstanding guest experience enabled by a great team member experience, and that's where we're going to go.

Speaker Change: Yeah, the only thing I'd say, I mean, for the most part, it's a pretty clean bridge for us as far as the traffic is a more...

Speaker Change: A lower perspective on where we think Q4 traffic would be. We do have a few unique things. We spoke about the hurricane, the Brazilian tax component that will, you know, one hurts, one helps, as well as the calendar shift. There's a couple new, you know, unique things in there.

Speaker Change: But other than that, for the most part, it's just traffic we anticipate to run, you know, pretty much what it's been running and that's how we think about the finish of the year.

Speaker Change: This was a consuming three weeks during the hurricanes. If you look at whether it was Helene or Milton,

Speaker Change: We still have team members that are in the land of remediation and recovery and all the fun that goes with putting your lives back together, and they're still getting through it. So, it was a big drain of energy.

Speaker Change: capacity and bandwidth and energy of the team and work where everybody's been positive but I that has been one of the distractions and it's good to be past that.

Yeah, understood. I appreciate that.

Speaker Change: You know, maybe this is something you want to comment on later, but just on kind of like menu, thinking about Outback specifically.

Speaker Change: Do you think there needs to be, there have been you know changes there I know, do you think there needs to be more of a change from from a menu perspective? You kind of mentioned you know some simplification, but what's what's kind of your view on just the the food offering at Outback today?

Speaker Change: I like your question, Brian. Again, I think it starts with simplification and getting back to the core.

Speaker Change: of that Aussie spirit, that steak, seafood core, and being all things to some people on the menu, not necessarily being all things to all people on the menu. Our operators want that simplification in the back of the house.

Speaker Change: And we are looking at that, and I've found over the years, just fewer items executed more consistently drives a way better guest experience.

Thank you.

Speaker Change: The next question comes from Jeffrey Farmer with Gordon Haskett. Please proceed. Great, thank you. Mike, in answering some of the earlier questions, you pointed out the importance of value. Can you just elaborate on where you see the core Outback concepts currently positioned on the value front?

Good morning, Jeffrey.

Speaker Change: We um, so if I think about where we're at first I start with value to me value has always been a function again of What's the price and what's the benefit and that value is? accentuated with the fantastic outstanding guest experience

Speaker Change: And I start there and it's that great meal, great value, great experience, a fun casual environment. That enhances that value because part of that value is that benefit, that feel, that memory you get when you walk out of an Outback.

Speaker Change: As I said, what I am drilling into, and what the team is giving me feedback on, is

Speaker Change: how we execute LTOs relative to other innovation versus everyday value.

Speaker Change: And that's part of the work we're doing right now, is can we simplify the value or promotional equation?

Speaker Change: and also Simplify the Menu, which was where Brian was going as well before in his question, to make it a simpler offering for not only the guests but our team members.

Speaker Change: 1699 so in terms of something as simplistic as that is lowering the price is that sort of within your strategy vision or is that not how you see this happening moving forward?

Speaker Change: You're talking about Great Barrier Reefs in terms of Q3 and affordability. We are looking at that. We've also, in the past, run the three-course offerings. We're just broadly looking at affordability and our entry price points and how we think about it. What I would say with this is these types of LTOs.

We want to be

Speaker Change: We want to execute them core to our menu. What I don't want to be doing, and the team has given me this feedback, is more and more, we don't want to be bringing in a lot of new items to execute in these programs. We want to pivot off the core of the menu with the right value to attract sustainable traffic.

Speaker Change: Yeah, and the team is fully focused. We know we had to...

Speaker Change: They had to have more value, right? So we made the intentional shift to lower our opening price points.

on LTOs beginning in Q3 down to $14.99.

Speaker Change: The team is able to engineer those offers. Those offers drive a lot of mix, but the entry price point, lower end mix, some of our more featured, more iconic items tend to drive the mix. And so we're able to engineer them, so the overall economics are in a good place, but we know that we had to lower those opening price points. We know that affordability matters.

Speaker Change: We know that, you know, how we, how our prices compare to other state competitors matter and so all of those are things that we're looking at and especially as we think about some of the longer term strategic work of just, you know, what's the appropriate pricing for us as we think about our business.

Speaker Change: Jeffrey, the last piece on that is Michael is exactly right in terms of

Speaker Change: making it work financially, engineering it. My bigger focus, based on feedback from the team members, is whatever we offer, we want to make sure it's

Speaker Change: generating traffic that retains our loyals or recruits the right kind of guests we want long-term. That's the focus for me as we look at pricing and promotions. All right. Helpful. Thank you.

Speaker Change: The next question is from Sarah Senatore with Bank of America. Please proceed.

Thanks, Alex.

Speaker Change: Two questions please. The first is, you know, you mentioned sort of having anticipated that the demand environment would improve.

as well as perhaps your relative performance, I guess.

Speaker Change: I want to dig into that because my understanding is that the demand environment has improved. If I look at some of the industry trends, for example, it looks like start of July was the softest and then we've seen pretty consistent improvement into and through October.

Speaker Change: One of the mics, I think it's Spanos made on managing partners

Speaker Change: So, I think everybody assumed that we would have some rebound off of that, and we did have some rebound off of that. If we look at sequentially how we performed versus BlackBox, we performed better in Q3 versus BlackBox than we did in Q2, so we saw some improvement, especially as we moved to some of the lower price point LTOs.

Speaker Change: In our prior guidance, we assumed that trajectory would continue through Q4 and our gap to the industry would continue.

Speaker Change: You know, that optimism is now not contemplated in our guidance, and we're sort of assuming the industry is what the industry is. And so, you know, we continue to fight for share with that. We still think we have some very compelling offers that can take share, but we've pretty much flattened that expectation as we think about finishing the year. That's just mechanically how the forecast was rebuilt.

Speaker Change: Okay, thank you. And then on the sort of getting the right managing partners, and I think

Speaker Change: That makes perfect sense. The general manager role is the most important in the system.

Speaker Change: I'm wondering how you do that, in the sense that I think they participate in the economics of the box, so it seems like your approach to aligning incentives is about as good or as sort of optimal, and I'm curious what you see as an opportunity

Speaker Change: to make sure that you do have the best, you know, partners there, if it's not an incentive, if it's not a change in how you incentivize them, is there something else? Because that model has worked very well for others.

Speaker Change: Yes, Sarah, good morning. So it has worked well and I like aligned economic interests and I like the model.

Speaker Change: And that's the feedback I've been given by our managing partners. What many of them have also said to me is their aligned economic interests and ours in the model also need to incent

sales growth.

and ProfitGrowth.

Speaker Change: in addition to a percent or a mix off the discounted cash flow. But the bottom line we're seeing with our managing partners when we get great results is we have retention of our good MPs, we have their engagement, and with that, most importantly, we get a great guest experience.

Speaker Change: and that's it. So we will stay consistent with that and I do, to your point, we feel good about that model where they have aligned economic interests and they get contribution from our profitability and our growth.

Thanks.

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

Dennis Geiger: Great, thank you. I wanted to ask a bit more on marketing. I know it's early and we'll hear more from you on the next call, but curious if anything high-level to share today. You know, we've seen really good traction from a couple of others in the industry who have leaned in and made some enhancements to marketing. They've tied it into social media, etc.

Dennis Geiger: So I'm curious how you guys think about the current marketing, where the brand is positioned in that marketing, in the ad spots, and relative maybe to how you should be positioned, and relative to your thoughts earlier on what the brand stands for?

Speaker Change: Good morning Dennis. I'll start maybe with the bigger picture and I think you've got

Speaker Change: questions in our position for Q3 and Q4 as well, and I'll give you that insight as well. To me, with a brand, when you're building brand trust or brand loyalty, you're usually going down a curve of awareness to trial, to repeat, and to loyalty.

Speaker Change: So, for me, I start with the loyals, and retaining the loyals, and getting the loyal guest frequency up.

Speaker Change: So if the average is two, as I said, I want to get them to three. And you do that with a great guest experience. That's the foundation of a brand trust, and that's the foundation of an intent to return.

recruiting.

Speaker Change: We want to recruit the right guests that also want that great experience, if it's Outback again, it's going to be a focused steak and seafood experience with that Aussie spirit, that irreverence, where they get that great meal at that great value, that great experience.

Speaker Change: And then, you know, we want to get them past the trial, we want to get them into repeat.

Speaker Change: On both of those, regardless of what we're saying, whether it's social or traditional TV, we've got to be consistent in our operational excellence.

to deliver a great guest experience.

Speaker Change: And to me, that's really important. More tactically, if you look at Q3 or Q4, our spends year-over-year are basically flat, our weeks year-over-year are basically flat, and our TRPs year-over-year are basically flat, specific for those quarters.

Speaker Change: Yeah, and just to jump in, I think, you know, we...

Speaker Change: We have pretty good analytical capability to evaluate, you know, our marketing spend, what the ROIs are, what channel, what message is most relevant, and we look at those every quarter. There's no doubt there are some other players, share of voices.

Speaker Change: is very competitive right now, as others have leaned into broader marketing spend. And that's certainly a consideration for us, as we think about our larger strategic plan, operationalizing and accelerating the work that we're doing at Outback. When we get to the other side of that, we are going to have to be able to communicate who Outback is, what Outback is, and really drive trial when we have a much better experience. And so that's certainly a consideration.

as we think about that longer strategic plan.

marketing starts with service and that's guest experience and that

Speaker Change: To me, it's what we've got to focus on and first get right as we think about spends in terms of our voice to the consumer base.

Speaker Change: Good color. Thanks, guys. Just one more, just on Brazil, maybe.

Speaker Change: and the Refranchising Transaction and that partnership. Anything more to share right now on thinking about modeling that, whether it's royalty looking ahead, more near in, when roughly in the fourth quarter we should think about that closing and impact to the fourth quarter. Any more details on that today? Thanks, guys.

Speaker Change: Yeah, I think we shared most of the details already as far as the the enterprise value again selling two-thirds of the business We would expect to close or you know, hope to close by the end of this year the end of this calendar year And you know, we're not going to disclose the royalty rate But we will we will get a royalty as the business continues to grow but just just mechanically We sold two-thirds of the business at two point zero six Brazilian dollars

Speaker Change: We get 52% of the proceeds at close, we get 48% of the proceeds a year later. We have an option to sell the remaining third of the business in 2028. We certainly expect that business to continue to grow. We've chosen the right partner, right, to really lead and grow that business and augment it with talent and capability. And so, you know, we're really excited about, you know, obviously we love that business. We're really excited about it, but it allows us to focus on our core domestic and we have a great partner down there that can focus 100% of their time on growing that business. So, you know, economics were good for us, we're able to benefit in the growth and so it was a great...

Great opportunity for us.

Speaker Change: The next question comes from Brian Mullen with Piper Sandler. Please proceed.

Thank you. Thank you. Thank you.

Speaker Change: Hey, thank you. I just want to come back to capital allocation. I wanted to ask specifically on the dividend. That's about an $85 million annual cash outflow.

Speaker Change: You might make the case the market maybe isn't giving you credit for it given where it looks like the yield is, you know Mike Spano's just wondering how you feel about the dividend if that is an under any kind of review if there might be a better Use of cash whether that be remodels or debt pay down or share repurchases any early thoughts on that

Speaker Change: Hey Brian, good morning. Well, you mentioned a point about are we getting credit for it. Arguably, I would say we're undervalued and that's part of the challenge with the yield if that's where you're going.

Speaker Change: David Deno, William Healy, Christopher Meyer, William Healy, Christopher Meyer, David Deno,

Speaker Change: I'm confident we've done the right things on the base business, we've been doing the right things on debt, and we're through the strategic plan.

Speaker Change: We'll be clear on what cash goes back to shareholders and how, but as you know, we just approved a dividend as part of this quarter. We're committed to it, and again, I think the key here is, as I said,

Speaker Change: We've got to be really sharp on our investments, our use of cash, with the right returns operationally and also the right to shareholders when we don't think we have those kind of returns to give that cash back to our shareholders.

Speaker Change: Okay, thank you. And then just a question on the domestic store base. In the first quarter, there were some strategic closures. You know, Mike Spanos, that was before you got here. Just my question is, given the tough industry trends since then and, you know, the fresh set of eyes,

Speaker Change: Do you think there could be some more closures here in the next year or two as you as you do this asset review? Just any early thoughts?

Speaker Change: Ryan, as we've always done every year, as I've learned here and other places, we're obviously always looking at our assets, as I said, the condition, the quality, but again, I'm going to start with...

Speaker Change: are what our managing partner is telling us, what's working or not working inside the four walls.

Speaker Change: before we make any decisions about shutting down a restaurant. I start there.

and if it is...

If that's the issue, we'll get that right.

Speaker Change: If we do have an asset that we don't feel is right from a guest experience standpoint

Speaker Change: Then we're going to get to the next question, which is are we remodeling or relocating, which is part of our normal process, and we're working that very much in a process manner as part of the long-range planning we're doing right now. And of course, obviously, Brian, that also goes for new store openings, if we consider that. We go through the same discipline process in how we think about that cash.

Thank you.

Speaker Change: The next question comes from John Tower with Citigroup. Please proceed.

Speaker Change: Sorry about that. I've got to figure out how to use my mute button. Apologies. So just quickly go back to the Brazil business. Can you just, I know you're not wanting to provide too much more details by way of royalties, but can you at least tell us what the capex over the past 12 months was allocated to that business?

About 40 million.

all right thank you and then

You know one one part

Mike Spanos: Spanos, so I'll be referred to as Tower from this point forward. One thing you had spoke about was the idea of speaking with managers and so far meeting with them.

Mike Spanos: at the Outback brand, and what they liked about the business, what they wanted to have improved, and what was absent in your comments was any commentary regarding...

Speaker Change: the off-premise business or delivery. And at Outback, it's a much larger chunk of the business than it is for some of your direct competitors. So I'm just curious, you know, what feedback you heard from them and frankly, your own thoughts on that channel going forward.

Speaker Change: Absolutely, and thanks for the correct enunciation on the Greek-American name. I appreciate that. So, you know, John, what I would say on your question...

Speaker Change: First I'd start with, we've been absolute pioneers in this space. I go back to my days as a consumer.

Speaker Change: many times, calling in the order at Outback and then picking it up. We were first on that forefront, and that has worked well. And to your point, we have a good mix of that business.

Speaker Change: But again, I go back to the guest experience here. We will, what the operators and managers are telling me is...

Speaker Change: They want the guests to have a great experience on or off premise. What that implies is we've got to be really thoughtful around the menu we offer in terms of off premise.

and which food travels the best off-premise.

Speaker Change: and making sure we also feel good about the delivery and how that guest interaction happens as well. And that's part of the work we're doing. So we're going to continue to be committed to off-premise but we're also going to be very balanced and thoughtful where whatever we do there

Speaker Change: It's got to be a great guest experience. It's got to be a great meal, great tasting food, still at a great value, and you've got to have that guest experience.

Got it. Thank you for taking the questions.

Speaker Change: And the next question comes from Brian Vaccaro with Raymond James. Please proceed.

Speaker Change: Hi, thanks, just a couple quick follow-ups if I could. Back to the Brazil transaction, can you share what the expected tax bill or after-tax proceeds will be and also can you remind us how much of the annual G&A budget is in Brazil?

Thank you.

Thank you. Thank you. Thank you.

Speaker Change: Yeah, we're not going to get into the after tax because we still have to close and go through all of those components at this time and I don't have their G&A on me, but we can get back to you with that.

Speaker Change: Okay, and then I guess back to capital allocation, I think more than half of your CapEx budget is going towards new unit growth in recent years and

Speaker Change: You mentioned, you know, you highlighted the 40 mil towards Brazil, but also some domestic, obviously. So can you speak to kind of the returns you're seeing on your domestic unit growth? Are they hitting your targets?

Speaker Change: and just any thoughts on the potential to optimize your CapEx budget, maybe just maintenance and remodels to help bolster free cash flow.

Yeah, I mean

Speaker Change: The restaurants that we've opened over the past couple of years are certainly hitting our expectations, so we're excited to see the success of those new restaurants.

Speaker Change: Obviously, it's a combination of new restaurants and relocations as well. You know, I think, and we've shared, you know, I think in the past couple quarters we've seen costs increase on bill costs, and if those costs, you know, push to the point where we aren't going to get our returns, we're going to walk away from those deals. So, I mean, our priority is to return.

Speaker Change: are delivering the expected return to our shareholders and not just to open stores to open stores. And so that's our focus. But we do think that opening stores is appropriate for us. We think whether it's relocations or additional restaurants for Outback are out there. We've talked about Carrabba's being a larger growth engine. The team has done great work to date to grow sales and revenue. The team is doing some good work now around how do I really refine and improve the return on that investment because we certainly have a lot more geography for Carrabba's that we can open restaurants. You know, Fleming's is a great business, great returns.

Speaker Change: Obviously, you know, higher volume, you know, so we'll definitely open, you know, a couple of flemings each year. But, you know, there's a, you know, capacity there given kind of the magnitude of the bills and whatnot. But we're satisfied with the returns, but we're always scrutinizing them, and we'll make sure that we continue to deliver those returns.

as far as

Speaker Change: What was your question around, you know, capital allocation for remodels? Yeah, potential to just optimize CapEx to bolster free cash flow. Obviously, you want to stay focused on maintenance and and remodels, but there's just any opportunities there as you think about the CapEx. But I understand you don't turn these things off like a light switch, but over the next year or two perhaps, you know, just to optimize free cash flow.

Speaker Change: Yeah, I mean that and that'll be a key component of the strategic work we're doing You know ultimately how our our entire capital allocation will be important But certainly as we think about CapEx, that'll be a key consideration So, you know, we we want to open restaurants, but we want to open restaurants with great returns

Speaker Change: You know, if we can't open as many restaurants because we can't achieve those returns, then that certainly could impact the allocation, but right now we think we're confident we can continue to open restaurants. The magnitude of that is still to be determined as we go through this process, but, you know, to your point, obviously you have to maintain the restaurants, so that's a non-negotiable, and then there is a remodel component to our restaurant base that's going to be necessary, and so that's how we're thinking about it, at least as far as prioritization.

Speaker Change: Okay, thank you. And last one, just on pricing, if I could, can you remind us, what was pricing in the third quarter and maybe you could level set how you see pricing trending if you don't take any additional pricing the next couple quarters? Thanks again. Yeah, we are pretty much 4% in Q3. We would expect to be, you know, kind of in that range in Q4. You know, I think, obviously, our pricing has kind of rolled off, especially compared to 23, and we're going to do everything we can. We're trying to price as little as possible. You know, certainly, you know, we think we're in line with the industry on pricing, and we still have a beef headwind, although beef is better than we expected. It's still the most inflationary part of our basket. And so, but we're going to be...

David Deno, William Healy, Christopher Meyer

as we get into next year for sure.

Speaker Change: Again, if you do have a question, please press star then 1.

Speaker Change: And the next question comes from Andrew Strelzick with BMO. Please proceed.

Andrew Strelzick: Hey, good morning. Thanks for taking my questions. Just two quick ones from me.

Andrew Strelzick: You talked about growing revenue faster than costs. The company's always spoken to like a 50 plus million dollar productivity run rate. Is that still the right way to think about productivity in your opinion and kind of high level where those buckets remain outside of menu simplification, which you've certainly spoken to?

Yeah, certainly productivity is always a key component.

Speaker Change: I think, you know, as we go through our strategic planning and our annual planning, we'll align. I would say, you know, $50 million is probably too high for where we are going forward. But a lot of it is technology-enabled. As we think about, you know, the evolution of productivity over time, you know, some of it was just, you know, kind of base efficiencies, then it was deploying technology, whether it's front-of-house or back-of-house technology in the restaurants to not only improve operations, but deliver efficiencies. And that's how we'll continue to look at it. We still think there's plenty of opportunity in supply chain, plenty of opportunity in simplification. So, there's definitely, there's definitely, you know, there's plenty of opportunities

Speaker Change: opportunities there, but you know magnitude probably less than you know sort of that historical 50 million run rate, but still material and we'll get back to you as we get into next year.

Speaker Change: Okay, that's helpful. And then, actually, a question on Fleming's. That was the only segment that saw a comp acceleration in the quarter.

Speaker Change: So, I was curious, you know, kind of what you thought was driving that, and more broadly, what you're seeing from a consumer perspective, and if you think you're seeing a shift maybe in how consumers are interacting with fine dining. Thanks.

Speaker Change: Good morning, Andrew. I would agree with you on Fleming's. Shalena, Henry, and the team have done a really, really nice job. And to me that what they've told me, and I agree, is Fleming's is a reputational brand.

Speaker Change: And as we're in the fine dining space there on that reputational brand, that is all about elevating the experience.

Speaker Change: and that is the team has been so so dialed in on everything from the attentiveness to the pace

experience.

Speaker Change: and it's just really a phenomenal experience and I really do want to compliment them on our flagship opening here in Tampa. It's just a tremendous success.

New Flemings, and it's very high energy

Speaker Change: and the guest experience is tremendous. And that's how we think about Flemings. And as Michael said, to get that fine dine experience right, we're going to be thoughtful. We've got 63 Flemings, and the bandwidth of the team would suggest it's two or three a year if we get them right on the new store because we don't want to sacrifice

The fine dining, elevated experience there.

Great.

Thank you. Thank you.

Speaker Change: We appreciate everyone for joining us today. We look forward to updating you on our progress at our next ARRENES call. Thank you.

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

Speaker Change: and the American Pronunciation Guide Presents David Deno, William Healy, Christopher Meyer, William Healy, Christopher Meyer, and the American Pronunciation Guide. American Pronunciation Guide Presents David Deno, William Healy, Christopher Meyer, and the American Pronunciation Guide.

Speaker Change: A film by William Healy Directed by William Healy Cinematography by William Healy Music by William Healy Edited by William Healy Music by William Healy Edited by William Healy Music by William Healy Edited by William Healy

and and of in

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The Doctrine and Covenants of the시다

Thank you for watching!

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Speaker Change: Leignat 9, J Minster Exodus D, Wilmuni June 7, 2011 November 1, 2012 December 9, 2011 Sept 29, 2012

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Speaker Change: Thank you and good morning, everyone. With me on today's call are Mike Spanos, our Chief Executive Officer, and Michael Healy, Chief Financial Officer and Executive Vice President. By now, you should have access to our fiscal third quarter 2024 earnings release. It can also be found on our website at www.bloomenbrands.com in the Investor 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.

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.

Speaker Change: Some of these risks are mentioned in our earnings release, others are discussed in our SEC filings which are available at www.sec.gov.

Speaker Change: During today's call, we will provide a brief recap of our financial performance for the fiscal third quarter 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 like to turn the call over to Mike Spanos.

Mike Spanos: Thanks Tara and good morning everyone. It is a privilege to be leading the Blumen Brands team. We have iconic brands, passionate and resilient team members, and a culture grounded in taking care of our people, our employees, customers, suppliers, and communities.

Mike Spanos: I am excited and wanted to be part of this tremendous team for two reasons.

Mike Spanos: First, my family and I are longtime loyals of all of the Blumen brands, including my late father, who always felt so special going to Outback with my mom every Friday night to have a high-quality steak and a beer at a great value in a fun, casual environment.

Mike Spanos: Whether it has been a great steak with my wife and kids at Outback, a dinner with my in-laws for Italian Acrabas, a birthday dinner for my mom at Bonefish for Fresh Seafood, or an elevated steak dinner at Fleming's.

Mike Spanos: Our brands have provided my family with fun and memorable experiences.

Mike Spanos: The excitement to be part of the team has only increased after spending time working in our restaurants with our great team members.

Mike Spanos: From cutting fillets to shaking handcrafted cocktails, nothing beats the hands-on approach to learning the operations of a business.

Mike Spanos: Second, I believe in the strategic growth potential of the business.

Mike Spanos: Blumen Brands is a great business with great brands and a great team. When we consistently execute with excellence and the guest experience is right, our brands generate profitable traffic growth.

Mike Spanos: Our brands have a high right to succeed, and steak and Italian casual dining are on trend and are big categories.

Mike Spanos: Within State, we compete with strong players and good competition enhances category growth and pushes us to deliver a better guest experience.

Mike Spanos: I have a lot of confidence in the long term value of the company with the financial resources including a good balance sheet with ample cash flows. With an operating mindset, we will deliberately and quickly make the necessary strategic steps to unlock that value.

Speaker Change: Now that you hopefully understand my motivation to be part of the Blooming Branch team, I want to recognize and thank our dedicated Outbackers, MECOs, Associates, and Anglers.

Speaker Change: In addition to being outstanding operators, I've been impressed with their resiliency and capability after dealing with both Hurricane Helene and Hurricane Milton in the span of two weeks.

Speaker Change: Our teams demonstrated leadership and dedication to each other, our guests, and our communities. The examples of serving, leading, and doing what is right in the face of such adversity has been inspiring.

Speaker Change: Despite flooded and damaged homes and cars, power outages and gas shortages, our teams took care of each other and safely reopened our restaurants to serve our communities. This kindness and support have been so impressive, and I thank and appreciate each and every one of you.

Speaker Change: We also donated $500,000 to the American Red Cross to support hurricane recovery, in addition to feeding thousands of our first responders and those in need to support community recovery.

Speaker Change: I also want to thank and acknowledge the legacy and contribution of Dave Deno.

Speaker Change: He is a superb leader in person and has been invaluable during my onboarding. We've executed a smooth transition and have spent detailed time together to ensure the strategic work that the team has been working on remains on track and accelerates, especially in Outback Steakhouse.

Mike Spanos: As you get to know me, directly leading frontline team members in both the Marine Corps and in the PEPSI system was foundational for me.

Mike Spanos: I spent the majority of my PepsiCo career on the bottling side, in asset and people intensive workplaces, starting on delivery trucks and servicing both retailers and restaurants.

Mike Spanos: I also led broad and complex portfolio businesses at PepsiCo, Six Flags, and Delta.

Mike Spanos: In addition to my operational experience, I've led marketing, consumer insights, revenue management, and food service teams.

Mike Spanos: We will manage the business with an operational focus and a guest-centric lens. My time in these roles reinforced three guiding principles.

Mike Spanos: First, leadership is a privilege focused on the team member experience. We have a unique culture at Blumen Brands, one that originates from our founders. Our principles and beliefs states, success is measured by growth in sales and profit and is the result of taking care of our people.

Mike Spanos: Our success is based on our belief that people want to be part of something they can be proud of, is fun, and that includes and values them.

Speaker Change: Throughout my career, I focused on building performance-based cultures, balancing employee well-being, and driving accountability for best-in-class performance.

Speaker Change: Listening to and learning from our restaurant operators is important in order to support them working more effectively and efficiently.

Speaker Change: We will stay close to our managing partners and joint venture partners as well as our franchise leaders as they have the greatest insight into what we can do to better improve the guest experience.

Speaker Change: I will spend the majority of my time on our operations and how we can improve our team member experience, which in turn inspires a high quality, welcoming, elevated, and caring experience for our guests.

Speaker Change: The second guiding principle is to focus on the guest experience.

Speaker Change: Our ability to consistently execute a memorable experience for our guests with a high quality meal at a great value in a relaxing environment is what drives repeat visits and loyalty to our iconic brands.

Speaker Change: Consumers want memorable experiences and away-from-home occasions. Every moment matters when guests choose to spend their hard-earned money and their precious time with us.

Speaker Change: The third principle is to have a growth mindset by focusing on the core. I found every market, whether domestic or international, in every category has growth potential in terms of traffic, revenue, and profitability.

Speaker Change: It is important to control what we can control, have a clear definition of success, and execute on targeted initiatives that drive growth.

Speaker Change: This leads to disciplined capital investments, simplification of the agenda, and being great on what is important to our guests.

Speaker Change: Blumen Brands is a portfolio of iconic brands that have strong growth potential.

Speaker Change: By focusing on the core of our brands and operational excellence, there is a long runway ahead.

Speaker Change: As I initially evaluate our portfolio, I see two primary scalable areas for growth.

Speaker Change: The first and our biggest brand is Outback Steakhouse. This is a global brand in an on-trend steak category.

However, we have not sustainably grown traffic.

Speaker Change: We are closely evaluating all elements of the guest experience. I am personally committed to material improvement at Outback Steakhouse that will sustainably grow traffic, comparable sales, and profitability. This brand has a high right to succeed within the steak category.

Speaker Change: I'm excited about the strategic work that we have underway, and I will take an active role in operationalizing the work.

Speaker Change: Our second scaled growth opportunity is Carrabba's. I've been impressed with this team's capability to grow both traffic and comparable sales and to meet our guests' needs across various day parts and occasions.

Speaker Change: The team is focused on the in-restaurant experience and is assessing the whitespace opportunity to strategically scale the brand with margins and returns that deliver shareholder value.

Speaker Change: We plan to share a meaningful update on the Outback and Blooming Branch strategy on our next earnings call.

Speaker Change: Before I turn it over to Michael to discuss our financials, there are two last items that I want to address.

Speaker Change: First is our Q3 results and balance of year and full year guidance.

It is reflective of the broader challenging industry trends.

Speaker Change: recent impact from the hurricanes and our current execution. Our team is working hard, but we are not pleased with our performance and we know we can do better. We have work to do and are committed to providing accurate and transparent forecasts of our performance.

Speaker Change: Second, I am pleased to announce our strategic partnership with Vinci Partners for our Brazil operations.

We are retaining 33% ownership of the business.

Speaker Change: It has been my experience living and working internationally with franchise partners that combining powerful, classic brands with local capability and expertise is the optimal business model to maximize future growth.

Speaker Change: We have also created aligned economic interests for both parties with a material equity stake to grow the business and to grow it in a profitable way.

Speaker Change: This transaction will allow us to simplify and focus on our domestic operations.

Speaker Change: We anticipate closing the transaction this year and Michael will walk through more of the financial implications of the transaction.

Speaker Change: Next year, Blumen Brands will be a more focused and simpler company.

As I leave the company, you have my following commitments.

Speaker Change: First, I will be strategic and grounded in our operations and decisions we need to make. Second, I will communicate our path and progress in a transparent way.

Speaker Change: And third, I will hold my team and myself accountable for delivering strong results.

Speaker Change: And with that, over to you, Michael, to discuss our Q3 financial performance and updated 2024 guidance.

Thank you, Mike, and hello, everyone.

Michael Healy: I would like to start by providing a recap of our financial performance for the fiscal third quarter of 2024. Total revenues in Q3 were $1 billion, which is down 4% from 2023. This was primarily driven by a decline in comparable restaurant sales, the FX translation of the Brazilian dollar relative to the US dollar, and the net impact of restaurant openings and closures. This is the end of the year. This is the end of the year. This is the end of the year.

Michael Healy: U.S. comparable restaurant sales were negative 150 basis points and traffic was negative 440 basis points, which was in line with the casual dining industry.

Michael Healy: At Outback, we introduced greater value in our LTOs beginning in Q3. While this allowed Outback to outperform BlackBox on traffic in a very promotional environment, our focus is on building sustainable traffic growth, particularly at Outback.

Michael Healy: Average check was up 2.9% in Q3 versus 2023, in line with expectations.

Michael Healy: Value is critical right now, and we are committed to take the least amount of pricing as necessary.

Michael Healy: Q3 off-premises was approximately 23% of total U.S. sales. Our third-party delivery business is 13% of total U.S. sales, which is an increase from 12% in Q3 2023, driven by our growth in catering.

Michael Healy: Our Q3 GAAP diluted earnings per share for the quarter was $0.08 versus $0.45 in 2023. Our Q3 adjusted diluted earnings per share was $0.21 versus $0.41 in 2023.

Michael Healy: The primary difference between GAP and adjusted diluted earnings per share is due to the asset impairment and closure related charges associated with the decision we made in Q2 to close nine restaurants in Hong Kong.

Michael Healy: executive transition costs, and professional fees related to our revenue growth management strategic efforts.

Q3 adjusted operating margins were 3% versus 5.3% last year.

Michael Healy: There are a number of factors contributing to the margin decline this quarter.

Overall, restaurant-level margins declined by 150 basis points.

Michael Healy: 110 basis points were driven by labor, primarily due to hourly and field management wage rate inflation.

Labor wage inflation for the quarter was 3.8%.

Michael Healy: Other restaurant operating margin declined 90 basis points, driven by higher operating and supply expenses, primarily due to inflation, as well as higher pre-open expenses as we open more restaurants this year.

Michael Healy: Cost of goods was 50 basis points favorable from pricing benefits and supply chain productivity initiatives.

Michael Healy: Commodities were better than expected in Q3 at approximately 2%, driven by more modest inflationary expectations across seafood, oil, and dairy. We continue to see positive signs within our beef program, but this category remains inflationary.

Michael Healy: Depreciation expense was higher in Q3, consistent with our increased levels of capital spending in recent years and our investments in infrastructure to support growth.

Michael Healy: We are operating in a challenging market environment and we are focused on managing the costs that are in our control.

Michael Healy: Turning to our capital structure, total debt net of cash was $1 billion at the end of Q3.

Michael Healy: During the quarter, we upsized our revolver to $1.2 billion, which provides additional liquidity for our business and provides broader financial flexibility. Importantly, we remain committed to being at or below our long-term lease-adjusted leverage ratio target of three times.

Michael Healy: Year to date, we have repurchased a total of 10.1 million shares of stock for approximately $266 million.

Michael Healy: This included shares issued in connection with the repurchase in March of a portion of our convertible notes.

Michael Healy: We have $97 million dollars remaining under our Share Authorization Program.

Michael Healy: The board also declared a quarterly dividend of 24 cents a share that is payable on December 11th.

Now turning to our full year 2024 guidance.

Michael Healy: We are updating our full year guidance to reflect the continued industry softness and our trends.

Michael Healy: As a result, we are updating our comp guidance range to be down 100 basis points to down 50 basis points.

Michael Healy: We are being very mindful of pricing and have not contemplated pricing actions above prior guidance.

Michael Healy: Given the volatility the industry is seeing in traffic trends, we are updating our adjusted diluted earnings per share guidance to be between $1.72 and $1.82.

Michael Healy: Prior guidance assumed industry trends would strengthen, but our updated view assumes no improvement.

Michael Healy: Additionally, the hurricanes have had a negative impact on our business and were a distraction for our teams.

Michael Healy: U.S. domestic comparable sales were negatively affected by approximately 30 basis points in the fourth quarter and a total impact of profitability of approximately 3 cents on an earnings per share basis.

Michael Healy: Both of these are included and are updated for your guidance.

Michael Healy: We are updating our commodity inflation guidance to be approximately 1%.

Michael Healy: We are updating our adjusted tax rate to be between 6% and 7%.

Michael Healy: As we mentioned on the last call, the negative calendar shift experienced in Q1 of $0.05 is recaptured in Q4.

Michael Healy: The Brazil tax benefit is expected to be approximately $0.15 for the year.

Michael Healy: As it relates to the fourth quarter of 2024, we expect U.S. comparable restaurant sales to be down 200 basis points to down 100 basis points on a comparable calendar basis.

Michael Healy: This reflects the current environment and what we are seeing in the restaurant industry, as well as the approximate 30 basis points impact from the hurricane experienced at the start of the fourth quarter.

Michael Healy: We expect Q4 adjusted diluted earnings per share to be between $0.32 and $0.42. Importantly, this guidance includes the revised Brazil value-added tax exemption benefit of approximately $0.07.

Michael Healy: and an approximate $0.05 benefit from the calendar shift, offset by an FX headwind of $0.02 and a $0.03 impact from the hurricane.

Michael Healy: This morning we announced a strategic partnership with Vinci Partners for our Brazil operations.

Michael Healy: Total enterprise value for the business is 2.06 billion Brazilian dollars or 6.5 times trailing 12 months EBITDA net of royalties through Q3 2024.

Michael Healy: Vinci will purchase a 67% ownership interest based on this valuation and as Mike mentioned we will retain a 33% ownership in the business.

Michael Healy: We believe our economic interests are aligned and expect the business to continue to grow. We have an option to monetize our remaining equity stake in 2028.

We anticipate the transaction to close in 2024.

Michael Healy: We will receive 52% of the proceeds upon closing and the remaining 48% one year later. We will provide more details on the use of those proceeds on our February earnings call after we complete our strategic planning efforts later this year.

Michael Healy: Additionally, the ongoing royalty stream will allow us to continue to benefit from a high-growth, market-leading business.

Michael Healy: In summary, we are not satisfied with our results in 2024, and we are committed to the actions necessary to deliver consistent, long-term sales and profit growth. While Outback is our primary focus, all of our brands play a role in the success of Blooming Brands.

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

Speaker Change: Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw it, please press star then 2. At this time, we will pause momentarily to assemble our rosters.

[inaudible]

Speaker Change: Do you think outback has been falling short on that which presumably has pressured repeat traffic.

Speaker Change: I know you mentioned deliberately and quickly taking action I'm just wondering whether you think there's any low hanging fruit that we could see being implemented over the next quarter or two too to stem the tide.

And then I had one follow up questions.

Yeah. Thanks, Jeffrey yes, it might be better just to say Spanish for Seo and Haley for CFO keep you all keep it simple for everybody good morning.

Speaker Change: Yes, I'll start with your point or your question on the operations and what I'm seeing with Outback.

Speaker Change: I'd start with first of all we are seeing if I start with the problem.

Speaker Change: We are seeing declining same store sales and we're seeing declining traffic and we have been losing share in the steak category that is our reality right now.

Speaker Change: If I look at what I think are the positives on the balance sheet. So to speak we have got a great iconic brand.

Speaker Change: We've got a great team. The team is very passionate about the guest experience and theyre very rooted in what I think is that Aussie spirit data referenced at no rules just right at the core ethos of the brand.

That's out there and we're very much on trend in the steak category. So that I feel very good about and as I said, we've got ample liquidity we've got.

Speaker Change: Cash flows are also ample and we've got a really good balance sheet. So I feel very good about that.

If I look at where I'd like us to lean further in and accelerate it is starts with the guest experience.

Craig: Got it Craig just a great meal at a great value and a fun casual environment, which is also the core of the brand.

To me I look at operational excellence and consistency.

Craig: The team has told me that to me that means we've got to be thoughtful about controlling what we can control simplify the agenda and the menu.

Craig: In addition to that we've been really looking at our brand positioning we don't want to be a bar and grill in terms of how we go to market and the work is we're going to get better every day.

Craig: In order to create a differentiated experience back to our roots.

Craig: But we will give you more in February but I will tell you. This I am personally very hands on with Outback and working very closely with the team and the strategic work. The team did we're accelerating that and we're going to we're going to get that moving again, it's an everyday process getting better and that starts with coaching leading accountability.

Speaker Change: Got it and Spinose, you mentioned Outback and you mentioned.

Speaker Change: Carrabba's in terms of near term priorities and I'm wondering if you could just talk about thoughts on the portfolio.

More broadly the pros and cons, whether it's if keeping carrabba's or just the thought process around bonefish.

Speaker Change: Any thoughts there, especially.

Speaker Change: We're aware that there is an activist in the names and I'm just wondering if there's any thoughts you could share in terms of your relationship or.

Speaker Change: Priorities or whatnot relative to that.

Speaker Change: Activist Investor Thank you.

Speaker Change: You got a few questions. There let me let me start in reverse order.

Speaker Change: I think you were asking about star board in terms of that relationship.

Speaker Change: What I would say there is we have a very collaborative relationship with starboard, they're incredibly insightful and what I've really liked about the board members.

Speaker Change: They are passionate about the guest experience and how the team member experience unlocks that guest experience and they want us to do what's right for the business in there, especially focused on sustainability of the business through a fantastic guest experience.

So I'll start there.

Speaker Change: Second on the portfolio, maybe what's inferred in your question is Brazil now come to the domestic piece I would not link or connect our decision on Brazil to the domestic portfolio I've lived and worked internationally. Many years both in company owned businesses franchise businesses and what I found is <unk>.

Speaker Change: Unlock the maximum future value when you have an iconic brand.

Speaker Change: With a great set of capability combined with our local capability community local savviest that combination is your best synergy synergy for growth.

Speaker Change: If I go to the.

Speaker Change: Domestic portfolio, we're committed to our domestic portfolio and I do think theres, two scaled growth opportunities Outback, which I already spoke about and that is primarily our biggest opportunity and that is all about the guest experience enabled through the team member experience and we just got to be really tight on our operational excellence to get there.

Speaker Change: Carrabba's is to me is really exciting business, what we've seen on a sustained basis, good steady traffic and good steady same store sales with that business I do want the team I know Pat after who leads that business. The team has done a great job since about 2019.

Speaker Change: Elevating that brand.

Speaker Change: Better way.

Speaker Change: They're very focused on in restaurant traffic the brand does a nice job across day parts and converting occasions, which I think is very positive and to me whats exciting is exploring in a very deliberate manner. The white space growth opportunity that brand and we will do that smartly because you've got to have the right margin profile and the right Rick.

Speaker Change: Term profile on that.

Speaker Change: The last part of your question I think it was specific to bonefish.

Bonefish to me is all about again at its core the Brad It's a Palestine fresh sea food around an energetic bar experience and that's what the team's focused on Jeffrey Theyre focused on simplifying that menu in a good way that pivots back to fresh seafood.

Speaker Change: Really going off that energy of the bar that we saw in the very first bone pieces that were out there and that's where we're at.

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

Alex Slagle: Hey, Thanks, good morning.

Speaker Change: Welcome aboard Mike.

Speaker Change: I thought it's interesting you talked about your history with the brand as a consumer.

Speaker Change: As you dug in and worked with the operators I mean, what what are you hearing that stands.

Speaker Change: Stands out from what you initially expected coming in.

Alex Slagle: Alex Good morning.

Alex Slagle: Very the operators, we saw our managing partners are GBP as our franchisees.

Alex Slagle: They're incredibly consistent in their feedback.

Alex Slagle: The first is they want simplification.

Alex Slagle: In the simplest terms. The second is they wanted to get back to that guest experience, they're giving me feedback around center of the plate improvements, they're giving me feedback around how we remove barriers by simplifying the agenda and what we can do to improve that guest experience very consistent feedback there.

Alex Slagle: Second is on what I would call the brand positioning as one Outback are said to me they want to be great at a few things and not average at a lot of things.

That's very clear so they want to have a really strong value everyday that the gas knows from our brand Trust.

Alex Slagle: They can get out there in a big way the other thing they have to.

Alex Slagle: Talk to me about in terms of the brand positioning is.

Speaker Change #100: And I agree with him on this is about frequency.

Speaker Change #100: Our average Outback gas comes about twice a year and their point is let's get that number to three.

Speaker Change #100: Increase the frequency of our oil gas.

Speaker Change #100: And retain them and what they're also telling me is to recruit new gas, we should recruit the right new guests that want to lean into the steak category steak and seafood.

Speaker Change #100: And the last thing is they believe in the brand.

Speaker Change #100: Believe passionately in the brand they believe passionately in the potential of the brand and they loved serving our guests and serving each other.

Speaker Change #100: Helpful.

Speaker Change #101: I mean, I guess, it's early but I mean do you expect any investments back into the brand around food quality marketing labor or other areas that.

Speaker Change #101: It could have an impact on margins or just that sort of reinvestment as we look ahead to 2005.

Speaker Change #102: Yes, Alex so I won't get into 25 will be real clear with you on what we're doing as we finish our long range planning in February, but maybe I'll give you a framework on how I think about this.

In terms of how you lead the P&L and lead the team I start with one.

I'm a believer you can reward yourself for free dividend, what I mean by that is step one is coaching leading controlling what you can control focusing on the gas.

Speaker Change #102: That accountability factor can unleash a lot of potential when the team is focused I start there second you got to look at redeploying resources that can be financial it can be time, but redeploying your resources on the point of main effort priorities is important as well we also should.

Speaker Change #102: Looking at reducing wherever we have cost or any any type of cost. We don't think is driving revenue. Our top line growth. We've got to take a hard look at that and then after that.

Speaker Change #102: It's fair to say, we can look at reinvestments, but those reinvestments that got to be sharp they've got to be targeted they got to have clear returns on them.

Speaker Change #102: So we have revenue outgrowing our cost growth sustainably.

Alright. Thanks.

Today's next question comes from John <unk> with Jpmorgan. Please proceed.

Speaker Change #103: Hi, Thank you I wanted to.

Speaker Change #103: Grabbed that last word reinvestment and apply it to your existing asset base.

Speaker Change #103: Obviously the majority of your sales are presumably always will be on premise a modern experience at least relative to expectations really matters.

Speaker Change #103: At least in previous conversations with the company, we've heard anywhere between 30% and 50% of the asset base is considered to be modern in other words. The majority are considered not to be modern so.

Speaker Change #104: I wanted you to just kind of a direct the asset base, how much of a front burner need flash opportunity is there and are you willing to make that investment even if it doesn't necessarily pencil out from a financial return perspective, just because it's the right thing for the brand your employees your customer longer term.

Speaker Change #103: Thanks.

Speaker Change #104: Yes, you bet morning, Jon.

Speaker Change #104: So I think that's a really fair question.

Speaker Change #104: That is very much part of the work we're doing is asset condition in asset quality across all the brands and how we think about that but I would also start with the one thing I've learned over the years, calling on foodservice customers and servicing them and what I've learned here so far as.

Speaker Change #104: Bob.

Bob: The best results inside the four walls of our restaurants start with the leadership of our managing partners.

Bob: What I've seen is the results that tell me when we get the right leadership, what the right accountability and we simplify the agenda, we can unlock growth everywhere.

What I think Youre also getting to is capital allocation.

Speaker Change #107: And again, we'll be clear on that but what youre getting at is what I would call is investment in the base business to me, that's always where you start in terms of capital allocation and part of that is repair and maintenance part of that can be.

Speaker Change #107: Remodel part of it can be a relocation et cetera, but we're going to make those rate moves because it does pencil out if youre doing the right things with sustainability and if you have the right process, which we do in Michael's team is leading that process.

Speaker Change #107: And we will do those things beyond that our capital allocation, which I think is a bit of the inference of your question, we're going to continue to be thoughtful and now we're going to obviously stay focused on paying down debt to lease net leverage ratio of long term a 3.0 as Michael pointed out we'll be disciplined and new store openings and then after that we will look at how we.

We properly return cash to shareholders.

Speaker Change #107: It pencils out when I found I've been leading asset heavy people intensive companies for lot of years, you have to reinvest in the base of the business for sustainable growth and we're committed to that and John just to piggyback on that I think to focus on better operations and better execution works works when we when we reinvest in the restaurants is.

Speaker Change #107: Well and so it has to be in and as we think about.

Speaker Change #107: The investments are what we would need to do to support Outback and that's that's how our prior to prioritizing them as we go through this strategic planning certainly an asset component as part of that conversation.

Speaker Change #107: And I think a follow up on the reinvestment side I mean.

Speaker Change #107: Mentioned, a couple of interesting a lot of interesting things, but.

Really trying to constrain the amount of pricing you take going forward, but not wanting to be a bar and grill I get both of those comments, but how do we feel about.

Speaker Change #107: The overall average ticket it is the opportunity to go lower to bring that frequency from two times to three times when you kind of take a clean slate look at the business and look at prices on an absolute basis relative to consumers' expectations. How are we feeling about the current price levels and overall average ticket that the customer base.

Yes, John So I'll, let her up to what I've always found to be your levers on revenue management, there's a volume lever which is traffic.

Speaker Change #108: There's obviously an inflationary price lever in there is a mix lever.

Speaker Change #108: And what I found is you got to be balanced on all three levers in terms of what you got to do internally on the P&L as well as being thoughtful externally on what's going on competitively and what the guests are consumer gives you credit for between a pricing benefits equation.

Speaker Change #108: So we're going to be balanced moving forward and we're going to have a very sharp lens on all of those levers.

Speaker Change #109: Okay. Thank you.

Speaker Change #110: The next question comes from Brian <unk> with Morgan Stanley. Please proceed.

Yes. Thank you and good morning, maybe just wanted to start with with the <unk>. Obviously, you did change your annual EPS guide quite a bit.

Speaker Change #110: Part of that is sales it sounds like the hurricane impact wasn't.

Speaker Change #110: Two significant from an earnings perspective, but could you help us on some of the pieces that are kind of driving that change to your <unk> outlook.

Speaker Change #111: Alright, good morning, it's <unk>, so I'll start with we're not happy with our results.

Speaker Change #111: And if you look at the forecast for the initial forecast for Q4.

Speaker Change #111: We were arguably optimistic we assumed casual dine would improve.

Speaker Change #111: And we assumed our performance would improve in terms of wrapping share or growing faster than some of the folks out there and that did not happen. So our quarter four forecast is reflective and consistent with our year to date Q3 trends if youre looking at same store sale.

Speaker Change #111: <unk> traffic pricing and what we internally look at in terms of EBIT.

Speaker Change #111: That's where we're at.

Speaker Change #111: So again, we're not we're not happy with what I would tell you moving forward.

Speaker Change #112: Fine with me.

Speaker Change #112: And I know Mike feels exactly the same way, we are going to be very transparent candid on the forecast.

Speaker Change #112: Tend to take a balanced center cut approach will give you. What we think are some of the moving parts on the pluses and minuses of that.

And to me, what's going to really drive the business in terms of forecasting is just getting back to that outstanding guest experience enabled by a great team member experience and that's where we're going to we're going to go.

Speaker Change #113: Yes, the only thing I would say.

For the most part it's a it's a pretty clean bridge for us as far as the traffic is a mark.

Speaker Change #113: Lowered perspective on where we think Q4 traffic would be we do have a few unique things we spoke about the hurricane the Brazilian tax component.

Speaker Change #113: That will one hurts when helps as well as the calendar shifts there's a couple of unique things in there, but but other than that for the most part. It's just traffic we anticipate to run pretty much what it's been running and that's that's how we think about the finish of the year.

Brian: Yes, Brian the last piece.

Speaker Change #115: One last point on the hurricane.

<unk> seen this as well.

Acknowledge our teams again.

Speaker Change #115: This was a consuming three weeks during the hurricanes.

Speaker Change #115: You look at whether it was helene or Milton.

Speaker Change #115: We still have team members that are in the land of remediation and recovery in all of the fund that goes with putting their lives back together and there is still get through it so.

Speaker Change #115: It was a big drain of capacity and bandwidth and energy of the team and where everybody has been positive but.

Speaker Change #115: That has been one of the distractions and it's good to be past that.

Speaker Change #116: Yeah understood I appreciate I appreciate that.

Speaker Change #117: Maybe this is something you want to comment on later, but just some kind of like menu thinking about opex specifically.

Speaker Change #118: Do you think there needs to be there have been changes there I know do you think there needs to be more of a change from a menu perspective.

Speaker Change #118: You kind of mentioned some simplification, but what's what's kind of your view on just the food offering at Outback today.

Speaker Change #119: I like your question Brian.

Speaker Change #119: Again, I think it starts with simplification and getting back to the core of that Aussie spirit that stake seafood core and being all things to some people on the menu and not necessarily being all things to all people on the menu our operators want that.

Speaker Change #119: Simplification in the back of the house and.

Speaker Change #119: And we are we are looking at that and I found over the years, just fewer items executed more consistently drives a way better guest experience.

Speaker Change #120: Thank you.

Speaker Change #121: The next question comes from Jeffrey Farmer with Gordon Haskett. Please proceed great. Thank you.

Mike Spanish: Mike in answering some of the earlier questions.

You pointed out the importance of value can you just elaborate on where you see the core Outback concept currently positioned on the value front.

Speaker Change #122: Hey, good morning Jeffrey.

Speaker Change #122: So if I think about where we're at firstly start with value to me value has always been a function again of.

What's the price and what's the benefit and that value is accentuated with the fantastic outstanding guest experience.

Speaker Change #122: Start there and it's great.

Speaker Change #122: Great meal, great value, great experienced soft fun casual environment that enhances that value because part of that values that benefit that feel that memory you get when you walk out of an outback.

Speaker Change #122: As I said, what I am drilling into and what the team is giving me feedback on is.

Speaker Change #122: How we execute <unk> realm.

Speaker Change #122: Relative to other innovation versus everyday value.

Speaker Change #122: And that's part of the work we're doing right now is can we simplify the value of promotional equation and also simplify the menu, which was where Brian was going as well before in his question to make it a simpler offering for not only the guests, but our team members.

Okay.

Speaker Change #123: Just to follow up on that and I'll leave you with this in terms of thinking about I think in the <unk> you basically outback move to a $14 99 promo price point from I think it was like $6, 99% in terms of something that simplistic as that is lowering the price is that sort of.

Speaker Change #123: Within your strategy vision or is that not how you see this happening moving forward.

Speaker Change #124: Yes, youre talking about great barrier eats.

Q3 and affordability so.

Speaker Change #124: We are looking at that we are also in the past from the three course offerings, but we are just broadly looking at affordability.

Speaker Change #124: Our entry price points, and how we think about it what I would say with this is these types of <unk>, we want to be core to we want to execute 10 core to our menu with what I don't want to be doing and the team is giving me this feedback as more and more.

Speaker Change #124: We don't want to be bringing in a lot of new items to executing these programs want to pivot off the core of the menu with the right value to attract sustainable traffic yes.

Speaker Change #124: Yes.

Speaker Change #124: The team is fully focused we know we had to to have to have more value right. So we've made the intentional shift to lower opening price points.

Speaker Change #124: On <unk> beginning in Q3 down to 499, the team is able to engineer those offers.

Speaker Change #124: Those offers drive a lot of mix, but the entry price point lower end mix. Some of our more featured more iconic items tend to drive the mix and so we're able to engineer them. So the overall economics are in a good place, but but we know that that we had to lower those opening price points, we know that affordability.

Speaker Change #124: <unk>, we know that how we how our prices compared to other state competitors matter and so all of those are are things that we're looking at and especially as we think about some of the longer term strategic work of just whats the appropriate pricing for us as we think about our business, yes, Geoffrey last last piece on that is Michael <unk>.

Speaker Change #124: Right in terms of.

Speaker Change #124: <unk>.

Speaker Change #124: Making it work financially engineering.

Speaker Change #124: Bigger focus based on feedback from the team members is whatever we offer we want to make sure it's generating traffic.

That retains article whales or recruits the right kind of guests we want long term.

Speaker Change #124: That's the focus.

Speaker Change #124: For me as we as we look at pricing and promotions.

Helpful. Thank you.

The next question is from Sara Senatore with Bank of America. Please proceed.

Speaker Change #124: Thanks.

Speaker Change #125: Two questions. Please the first is you mentioned sort of having anticipated that.

Demand environment would improve as long as your perhaps your relative performance I guess I'm a little.

Speaker Change #125: I wanted to dig into that because you might.

Speaker Change #125: Is that the demand environment has improved and look at some of the industry trends for example.

It looks like July was the softest and then we've seen pretty consistent improvement in Q3.

Speaker Change #125: <unk> timber.

Speaker Change #125: By cross across segments, So I wanted to clarify that comment.

Speaker Change #125: More improvement.

Speaker Change #126: Or is it really isn't a relative performance question and then and then I did want to ask about your yes.

Speaker Change #126: Comment.

Speaker Change #126: Glenn.

Speaker Change #126: The mic sorry.

Speaker Change #126: On managing partners.

Speaker Change #127: Yes, I can kind of jump in on how we thought about the forecast. So certainly July was the low point from an industry standpoint. So I think I think I think everybody assumed that we would we would have some rebound off about off of that and we did have some rebound off of that if we look at sequentially, how we perform versus black box, we we performed better in Q3.

Speaker Change #127: <unk> Black box than we did in Q2. So we saw so we saw some improvement, especially as we move to some of the lower price point <unk>.

Speaker Change #127: Our prior guidance, we assumed that trajectory would continue through Q4 and our gap to the industry would continue I think some of that.

Speaker Change #127: That optimism is now not contemplated in our guidance and we're sort of assuming the industry is what the industry is and so we continue to fight for share with that we still think we have some very compelling offers that.

Speaker Change #127: And take share but.

Speaker Change #127: But we sit pretty much flattened that expectation as we think about finishing the year. That's just mechanically how the forecast was rebuilt.

Speaker Change #128: Okay. Thank you and then on.

Speaker Change #128: Sort of given the managing partners and I think yes. It makes perfect sense general manager role is.

Speaker Change #128: Is the most important in the system.

Speaker Change #128: But I guess.

Speaker Change #129: Im wondering how you do that in a sense that I think they participate in the economics box. So it seems like your approach to <unk>.

Speaker Change #129: And incentives is about as good or sort of optimal.

Speaker Change #129: Im curious.

Speaker Change #129: What you see as an opportunity.

To make sure that you do have the best.

Speaker Change #130: Yes partners there.

Speaker Change #130: And incentives is a sign of change in Shanghai incentivize them is there something else.

Speaker Change #131: Does that.

Speaker Change #131: That model has worked very well for others.

Speaker Change #132: Yes, Sir.

Speaker Change #132: So it has worked well in.

I like aligned economic interests.

Speaker Change #132: Like the model.

Speaker Change #133: That's the feedback I've been given by our managing partners. What many of them are also said to me is there aligned economic interest and ours in the model also need to Incent sales growth and profit growth. In addition.

Speaker Change #133: 2% of our mix off the discounted cash flow, but the bottom line, what we're seeing with our managing partners and we get great results as we have retention of our good MPS we have their engagement.

Speaker Change #133: Most importantly, we get a great guest experience.

Speaker Change #133: So we will stay consistent with that and I do to your point, we feel good about that model, where they have aligned economic interests in.

Contribution from our profitability and our growth.

Speaker Change #133: Thanks.

The next question comes from Dennis Geiger with UBS. Please proceed.

Dennis Geiger: Great. Thank you I wanted to ask a bit more on marketing and I know, it's early and we'll hear more from you on the next call, but curious if anything high level to share today, we've seen really good traction from a couple of others in the industry, who have leaned in and made some enhancements to marketing they've tightened into social media et cetera. So I'm curious how you guys think about the.

Dennis Geiger: Current marketing, where the brand is positioned in that marketing in the AD spots and relative maybe to how you should be positioned and Mike relative to your thoughts earlier on on what the brand stands for.

Hey, good morning, Dennis I'll start maybe with the bigger picture I think you've got questions.

We're positioned for Q3, Q4, as well and I'll give you that insight as well.

Dennis Geiger: To me with a brand when you're building brand Trust brand loyalty you usually go down.

Dennis Geiger: Curve of awareness to trial to repeat and loyalty.

Speaker Change #134: For me I start with the whales and retaining the loyalty and getting the loyal guest frequency up. So if the average is to as I said I want to get them to three.

Speaker Change #134: And when you do that with a great guest experience. That's the foundation of our brand Trust and that is the foundation of an intent to return.

Speaker Change #134: I also then look at in that same.

Speaker Change #134: Sort of curves.

Speaker Change #134: Recruiting we want to recruit the right guests set also want that great experience of south back again, it's going to be a focus steak and seafood experience with that Aussie spirit at a reference where they get that great meal at a great value that great experience.

Speaker Change #134: We want to get it past the trial, we want to get them into repeat.

Speaker Change #134: On both of those regardless of what we're seeing whether it's social or traditional TV, we got to be consistent in our operational excellence to deliver a great guest experience.

Speaker Change #134: To me Thats really important more tactically if you look at Q3 or Q4, our spends year over year are basically flat or weeks year over year are basically flat in our <unk> year over year are basically flat specific for those quarters.

Speaker Change #135: Yeah, and just to just to jump in I think we.

We have pretty good analytical capability to evaluate our marketing spend what the rois are what ciena what message is most relevant and we look at those every quarter. There is no doubt there is some other players share of voices is it's very competitive right now as others have leaned into broader marketing spend and that's certainly a consideration.

Speaker Change #135: For US is as we think about our larger strategic plan right operationalized any accelerating the work that we're doing at outback when we get to the other side of that we are going to have to be able to communicate who outback is what outback is and really drive trial. When we have a much better experience and so that's certainly a consideration.

Speaker Change #135: As we think about that longer strategic plan.

Yes, Dennis to me.

Speaker Change #136: Last thing I'll say on this I think the foundation of any brand in any push or pool marketing starts with service and guest experience.

Speaker Change #136: To me is what we've got to focus on first get right.

Speaker Change #136: As we think about spend in terms of our voice to the to the consumer base.

Speaker Change #137: Good color. Thanks, guys, just one more just on Brazil, maybe on.

Speaker Change #137: And the Refranchising transaction in that partnership anything more to share right now on thinking about modeling that whether its royalty looking ahead more near in.

Speaker Change #137: Roughly in the fourth quarter, we should think about.

That closing and impact to the fourth quarter.

Speaker Change #138: Any more details on that today, thanks, guys.

Speaker Change #139: Yes, I think we shared most of the details already as far as the enterprise value again, selling two thirds of the business, we would expect to close or hope to close by the end of this year. The end of this calendar year.

Speaker Change #139: We're not going to disclose the royalty rate, but we will we will get a royalty is.

Speaker Change #139: That business continues to grow but just but just mechanically we sold two thirds of their business at 2.06 Brazilian.

Speaker Change #139: We get 52% of the proceeds of close we get 48% of the proceeds a year later, we have an option to sell the remaining third of the business in 2028, we certainly expect that business to continue to grow.

Speaker Change #139: We've chosen the right partner right to really lead and grow that business and augment it with talent and capability and so we.

Speaker Change #139: We're really excited about obviously, we love that business.

Speaker Change #139: We're really excited about it but it allows us to focus on our core domestic and we have a great partner down there. They can focus 100% of their time on growing that business. So economics were good for us, we're able to benefit and the growth and so it was a great great opportunity for us.

Speaker Change #140: The next question comes from Brian Mullan with Piper Sandler. Please proceed.

Brian Mullan: Okay. Thank you just wanted to come back to capital allocation wanted to ask specifically on the dividend.

Brian Mullan: And $85 million annual cash outflow you might make the case that the market, maybe it's giving you credit for it given where it looks like the yield is.

Speaker Change #142: Mike span I was just wondering how do you feel about the dividend if that isn't under any kind of review if there might be a better use of cash whether that'd be remodels or debt paydown or share repurchases any early thoughts on that.

Speaker Change #143: Hey, Brian Good morning.

Speaker Change #144: Well you mentioned a point about are we getting credit for it arguably I would say we are undervalued and thats part of the challenge with the yield if that's where you're going so.

Speaker Change #144: Im confident and optimistic over time, we're going to we're going to get back to the right levels there.

Speaker Change #144: We're not going to I'm not going get into the details of the capital allocation on the RP, but as I said once we're.

Confident we've done the right things on the base business, we've been doing the right things on that and we're through the strategic plan.

I'll be clear on what cash goes back to shareholders and how but as you know, we just approved a dividend and as part of this quarter, we're committed to it and again I think the key here is as I said, we got to be really sharp on our investments our use of cash with the right returns.

Operationally and also be right to shareholders. When we don't think we have those kind of returns that give that cash back to our shareholders.

Speaker Change #145: Okay. Thank you and then just a question on the domestic store base in the first quarter. There were some strategic closures, Mike Spanos that was before you got here.

Speaker Change #146: My question is given the tough industry trend since then.

Speaker Change #147: Fresh set of eyes.

Speaker Change #147: Do you think there could be some more closures here in the next year or two as you do this asset review just any early thoughts.

Speaker Change #148: Yes, Ryan.

Speaker Change #148: <unk> always done every year is.

Speaker Change #148: Learned adhere and other places, we're obviously always looking at our assets as I said the condition the quality, but again I'm going to start with.

Speaker Change #148: Our what our managing partners, telling us, what's working or not working inside the four walls.

Speaker Change #148: We make any decisions about shutting down a restaurant I start there.

Speaker Change #148: And if if it is that's the issue.

Speaker Change #148: We'll get we'll get that right.

Speaker Change #148: If we do have an asset that we don't feel is right from a guest experience standpoint, then we're going to get to the next question, which is are we remodel or relocating which is part of our normal process.

We're working that very much in a process manner as part of long range planning, we're doing right now and of course, obviously, Brian that also goes for new store openings. If we consider that we go through the same disciplined process and how we think about that cash.

Speaker Change #149: Thank you.

Speaker Change #150: The next question comes from Jon Tower with Citigroup. Please proceed.

Jon Tower: Sorry about that I got to figure out how to use my mute button apologies so.

Jon Tower: Just quickly going back to the Brazil business can you just I know youre not wanting to provide too much more details by way of royalties, but can you at least tell us what the capex over the past 12 months was allocated to that business.

Speaker Change #152: About $40 million.

Speaker Change #153: Alright, thank you.

Speaker Change #153: And then.

Speaker Change #153: One one part.

Mike Spanos: Span house, so I'll be referred to as power from this point forward.

Speaker Change #154: One thing you had spoke about was the idea of speaking with managers and so far meeting with them at the Outback brand and what they liked about the business what they wanted to have improved and what was absent in your comments was any commentary regarding the off premise business or delivery.

And outback, it's a much larger chunk of the business than it is for some of your direct competitors. So I'm just curious what feedback you've heard from them and frankly your own thoughts on that channel going forward.

Speaker Change #155: Absolutely and thanks for the correct enunciation.

Speaker Change #156: Greek American name I appreciate that so John what I would say on.

Speaker Change #157: Your question on off premise first I'd start with we've been absolute pioneers in this space I go back to my days as a consumer many times cone and the order at Outback and then picking it up we were first on that forefront and that has worked well and to your point, we have we have a good mix.

Speaker Change #157: That business, but again I go back to the guest experience here.

Speaker Change #157: Well with the operators and managers are telling me is they want guests to have a great experience on our off premise with that implies as we got to be really thoughtful around the menu. We offer in terms of off premise and which food travels the best off premise.

Speaker Change #157: And making sure. We also feel good about the delivery and how that guest interaction happens as well and Thats part of the work we're doing.

Speaker Change #157: So we're going to continue to be committed to top presence off premise, but we're also going to be very balanced and thoughtful where whatever we do there. It's got to be a great guest experience. It's got to be a great meal, great tasting food still a great value and you've got to have that guest experience.

Speaker Change #158: Got it thank you for taking the questions.

And the next question comes from Brian Vaccaro with Raymond James. Please proceed.

Brian Vaccaro: Hi, Thanks, just a couple of quick follow ups, if I could back to the Brazil transaction can you share with your expected tax bill or after tax proceeds will be and also can you remind us how much of the annual G&A bucket is in Brazil.

Speaker Change #160: Yes, we're not going to get into the after tax because we still have to close and go through all of those components at this time.

Speaker Change #161: I don't I don't have their G&A on me, but we can get back to you with that.

Speaker Change #162: Okay and then.

Speaker Change #162: I guess back to capital allocation.

Speaker Change #164: I think more than half of your Capex budget is towards new unit growth in recent years and you mentioned you highlighted the 40 mill towards Brazil, but also some some domestic obviously so can you speak to kind of the returns youre seeing on your domestic unit growth are they hitting your targets and just any thoughts on the potential.

Speaker Change #164: To optimize your Capex budget, maybe maintenance and remodels to help bolster bolster free cash flow.

Speaker Change #164: Yes.

Speaker Change #164: The restaurants that we've opened over the past couple of years are certainly hitting our expectations. So we're excited to see the success of those new restaurants, obviously, its a combination of new restaurants and relocations as well.

And we shared I think in the past couple of quarters, we've seen cost increase on build cost and and if those costs.

Push to the point, where we arent going to get our returns we're going to walk away from those deals. So our priority is to return our deliver they expect to return to our shareholders and not just open stores to open stores and so that's our focus but we do think that opening stores is appropriate for us we think whether it's relocations are our additional restaurants four hour.

Speaker Change #164: <unk> are out there we've talked about carrabba's being a larger growth engine. The team has done great work to date.

Speaker Change #164: Gross sales in revenue the team is doing some good work now around how do I really refine and improve the return on that investment because we certainly have a lot lot more geography for carrabba's that we can open restaurants.

Speaker Change #164: <unk>.

Speaker Change #164: Is a great business great returns, obviously higher volume so we'll definitely open.

Speaker Change #164: A couple of Fleming's each year, but there is capacity there given kind of the magnitude of the builds and whatnot, but but we're satisfied with the returns, but we're always scrutinizing them and we'll make sure that we continue to deliver those returns as far as what was your question around capital allocation for a remodel.

Speaker Change #164: So to just optimize capex to bolster free cash flow, obviously, you want to stay focused on maintenance and <unk>.

Speaker Change #164: And Remodels.

Speaker Change #165: Any opportunities there as you think about the Capex, but I understand you don't turn these things like a light switch, but over the next year or two perhaps just to optimize free cash flow yes.

Speaker Change #166: And that'll be a key component of the strategic work we're doing.

Speaker Change #166: Ultimately, how our entire capital allocation will be important, but certainly as we think about capex that will be a key consideration. So we.

Speaker Change #166: We want to open restaurants, but we want to open restaurants with great returns, we can open as many restaurants, because we can achieve those returns and that certainly could impact the allocation but.

Speaker Change #166: But right now we think we're confident we can continue to open restaurants.

Speaker Change #166: <unk> to that is still to be determined as we go through this process, but to your point, obviously you have to maintain the restaurants. So that's a non negotiable and then and then there is a remodel component to our restaurant base, that's going to be necessary and so.

Speaker Change #167: That's how we're thinking about it at least as far as prioritization. Okay. Thank you and last one just on pricing if I could can you remind us what was pricing in the third quarter and maybe you could level set how you see pricing trending if you don't take any additional pricing in the next couple of quarters. Thanks again, yes.

Speaker Change #168: We are pretty much four 4% in Q3, we would expect to be kind of in that range in Q4.

I think obviously, our pricing is kind of rolled off, especially compared to 23, and we're going to do everything Ken we're trying to price as little as possible certainly.

Speaker Change #168: We think were in line with the industry on pricing and we still have a beef beef headwind, although better than we expected. It's still the most inflationary part of our basket and so but we're going to be intentional on our pricing and make sure that we can continue to provide value to our guests.

Speaker Change #168: And so we don't we don't think we have extra pricing opportunities, we'll see where we're are commodities and other inflationary components come in next year, but but our goal would be to take as little pricing as possible.

As we get into next year for sure.

Speaker Change #169: Again, if you do have a question. Please press Star then one.

Speaker Change #170: And the next question comes from Andrew <unk> with BMO. Please proceed.

Hey, good morning, Thanks for taking my questions just two quick ones for me.

Speaker Change #170: Talked about growing revenue faster than costs. The company is always spoken to like a 50 plus million dollars of productivity run rate is that still the right way to think about productivity in your opinion and kind of high level, where those buckets remain outside of menu simplification, which you've certainly spoken to.

Speaker Change #171: Yes, certainly productivity is always a key component.

Speaker Change #172: For Us I think.

Speaker Change #172: As we go through our strategic planning in our in our annual planning will line I would say $50 million is probably too high for where we are.

Speaker Change #172: Going forward, but a lot of it is technology enabled as we think about the evolution of productivity over time.

Speaker Change #172: It was just kind of base efficiencies than it was deploying technology, whether it's front of house or back of house technology in the restaurants to two to not only improve operations, but deliver efficiencies in and Thats how were continuing to look at it. We still think there is there is plenty of opportunity in supply chain and plenty of opportunity in <unk>.

Speaker Change #172: Vacation. So there is definitely there is definitely opportunities there, but magnitude probably less than sort of that historical $50 million run rate, but but still material and we will get back to you as we get into next year.

Speaker Change #173: Okay. That's helpful and then.

Speaker Change #174: Quick question on Fleming's that was the only segment that saw comp acceleration in the quarter. So I was curious kind of we thought was driving that and more broadly what you're seeing from a consumer perspective, and if you think youre seeing a shift maybe in how consumers interacting with fine dining.

Speaker Change #175: Yes, good morning, Andrew.

Speaker Change #176: I would agree with you on Fleming's showing Henry the team have done a really really nice job.

Speaker Change #177: And to me, that's what they've told me and I agree as Fleming's has a reputation brand.

Speaker Change #177: And as you're as we're in the fine dining space, there and that reputation brand that is all about elevating the experience.

Speaker Change #177: And that is the team has been so so dialed in on everything from the attentiveness to the pace.

Speaker Change #177: The experience.

Speaker Change #177: It's just really a phenomenal experience I really do want to complement them on our flagship opening here in Tampa is just a tremendous new fly means and it's very high energy and the guest experience is tremendous and that's how we think about Fleming's as Michael said to get.

That fine dining experience right.

Speaker Change #177: Are going to be thoughtful we got 63 flat means in the bandwidth of the team would suggest it's two or three a year.

Speaker Change #177: If we get them right on the new store, because we don't want to sacrifice.

Speaker Change #177: The fine dining elevated experience there.

Speaker Change #177: Great.

Speaker Change #178: Thank you. This concludes today's question and answer session I would now like to turn the conference back over to Mr. Mike Spanos for any closing remarks.

Speaker Change #178: We appreciate everyone for joining us today, we look forward to updating you on our progress at our next earnings call. Thank you.

Speaker Change #179: The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.