Q1 2025 Bloomin' Brands Inc Earnings Call

May 7, 2025

Operator: Greetings and welcome to the Bloomin' Brands Fiscal Q1 2025 Earnings Conference Call. At this time, all participants are in listen-only mode. A brief question and answer session will follow management's prepared remarks. Please note, this event is being recorded. It is now my pleasure to introduce your host, Tara Kurian, Vice President, Corporate Finance and Investor Relations. Thank you. Mrs. Kurian, you may begin.

Speaker Change: Greetings, and welcome to the Bloomin' Brands Fiskal first quarter, 2025, Ernieg's conference call. At this time, all participants are in lesson only mode. A brief question and answer session will follow management's prepared remarks.

Please note.

This event is being recorded.

Speaker Change: It is now my pleasure to introduce your host, Tara Karing, Vice President Corporate Finance and Investulations.

Thank you

Mrs. Kurian, you may begin.

Tara Kurian: 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 Q1 2025 earnings release and our investor presentation slides, both of which can be found on our website at www.bloominbrands.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. 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.

Mrs. Kurian: 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 first quarter 2025 earnings release and our investor presentation slides, both of which can be found on our website at www.bloominbrands.com in the Investors section.

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

Mrs. Kurian: Before we begin, formal remarks, I'd like to remind everyone that part of our discussion today will include forward-looking statements, including a discussion of recent trends. These statements are subject to numerous risks and uncertainties that could cause actual results to differ in a material way from our forward-looking statement.

Tara Kurian: 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.sec.gov. During today's call, we'll provide a brief recap of our financial performance for the fiscal Q1 2025, an overview of company highlights and current thoughts on fiscal 2025 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.

Mrs. Kurian: During today's call, we'll provide a brief recap of our financial performance for the fiscal first quarter 2025, an overview of company highlights and current thoughts on fiscal 2025 guidance. Once we've completed these remarks, we'll open the call-up for questions.

Mike Spanos: With that, I would now like to turn the call over to Mike Spanos'

Mike Spanos: Thanks, Tara, and good morning, everyone. Thank you for joining our Q1 earnings call. I will discuss our Q1 results and the progress we have made across our operating priorities of simplifying the agenda, delivering consistent execution, and turning around Outback. Michael will then review our financial performance for the quarter. I want to start by thanking our team for their hard work and passion to serve each other and our guests. As I visit our restaurants, it only makes me more excited about our future potential. We are not where we want to be, but I am encouraged by the progress we have made since our last earnings call on our operating priorities. Our focus on an operational mindset to deliver outstanding and consistent guest experiences will build the foundation for our turnaround.

Mike Spanos: and all of you who have joined us today. Thank you for being here. I'm so grateful for your time. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you.

Thanks, Tara, and good morning, everyone.

Mike Spanos: Thank you for joining our first quarter earnings call. I will discuss our Q and results and the progress we have made across our operating priorities of simplifying the agenda.

Mike Spanos: Delivering consistent execution and turning around out back. Michael will then review our financial performance for the quarter.

Mike Spanos: I want to start by thanking our team for their hard work and passion to serve each other and our guests. As I visit our restaurants, it only makes me more excited about our future potential.

Mike Spanos: We are not where we want to be, but I am encouraged by the progress we have made since our last turning is called on our operating priorities. Our focus on an operational mindset to deliver outstanding and consistent guest experiences will build the foundation for our turnaround.

Mike Spanos: Our Q1 results were within our expected guidance ranges, and we did see positive comp sales at Carrabba's and Fleming's. However, we underperformed the industry and lost share as defined by Black Box. We are dissatisfied with our financial and market share results and know we need to do better. Although this will take time to reverse these trends, given the state of the business, we will seek steady improvement. We had a disappointing February, including Valentine's Day week. We continue to operate in a choppy macro environment. In Q2, we have seen some consumer pullback with a softer Easter holiday than anticipated. We will meet the guests where they are with abundant everyday value to drive profitable in-restaurant traffic, which will pressure short-term margins. Our Q2 and balance-of-year guidance assumes a continuation of this choppy macro environment and cautious consumer.

Mike Spanos: Our first quarter results were within our expected guidance ranges, and we did see positive comp sales in Kroppas and Flemmings. However, we underperformed the industry and lost share as defined by Black Box. We are dissatisfied with our financial and market share results and know we need to do better.

Mike Spanos: Although this will take time to reverse these trends given the state and the business, we will seek steady improvement.

Mike Spanos: We had a disappointing February , including Valentine's Day week. We continue to operate in a choppy macro environment.

Mike Spanos: In Q2, we have seen some consumer pullback with a softer Easter holiday than anticipated.

Mike Spanos: We will meet the guests where they are with abundant everyday value to drive profitable in restaurant traffic, which will pressure short-term margins [inaudible]

Mike Spanos: RQ-2 and Bouncy Year Guidance assumes a continuation of this choppy macro environment and costus consumer, and the reality is we are in the early stages of a multi-year turnaround on Outback on Outback.

Mike Spanos: The reality is we are in the early stages of a multi-year turnaround on Outback. We will continue to be transparent on our results and our business as we progress throughout the year. We are focused on three operating priorities to build sustainable and profitable traffic and sales growth. Let me provide an update on our progress across each priority. First, simplify the agenda. We are simplifying the agenda by focusing the team on fewer and bigger bets that are the most important to our guests and enable our team members to execute more consistently. We discussed the organizational design initiative to become more effective and efficient. We have realized more savings in Q1 than originally forecasted as part of the org redesign.

Mike Spanos: We will continue to be transparent on our results and our business as we progress throughout the year.

Mike Spanos: We are focused on three operating priorities to build sustainable and profitable traffic and sales growth. Let me provide an update on our progress across each priority.

Mike Spanos: First, simplify the agenda. We are simplifying the agenda by focusing a team on fewer and bigger bats that are the most important to our guests and enable our team members to execute more consistently.

Mike Spanos: We discussed the organizational design and this shift to become more effective and efficient.

Mike Spanos: We have realized more savings in Q1 than originally forecasted as part of the org redesign. Additionally, we are scrutinizing all expenses and expect to be about $10 million lower in the GNA for the total year for a total of approximately $215 million.

Mike Spanos: Additionally, we are scrutinizing all expenses to be about $10 million lower in G&A for the total year or a total of approximately $215 million. We've made progress on our menu item reduction. We are streamlining menus both on and off premise, removing items with low sales mix, low satisfaction scores, or items that do not travel well. Outback's April menu has approximately 10% fewer items. By the end of 2025, the Outback team will have reduced menu items by about 15%. At Carrabba's, the main menu will have 10% fewer items. At Bonefish, the April menu has 20% fewer items with quality enhancements and an elevated presentation. Fleming's summer menu will reduce items by approximately 10% and is integrating seasonal items into the core menu.

Mike Spanos: We've made progress in our menu item reduction. We are streamlining menus both on and off-premise, removing items with low sales mix, low satisfaction scores, or items that do not travel well.

Mike Spanos: Outback's April menu has approximately 10% few items. By the end of 2025, the Outback team will have reduced menu items by about 15%.

At Krabba's, the main menu will have 10% fewer items

Mike Spanos: At Bonefish, the April menu has 20% fewer items with quality enhancements and an elevated presentation.

Mike Spanos: We've eliminated seasonal LTOs at Outback, which were complex and required incremental training every eight to 10 weeks. We are executing the Aussie Three Course as our everyday value offer. The mix continues to be in line with our expectations and is proving to be a popular, abundant, everyday value platform. This offer leverages core menu items. We expect to see stronger traffic lift attributed to Aussie Three Course in the back half of the year as the brand laps lower performing promotions from 2024. It is important to note that this offer did not have a large impact in Q1 as it was lapping the same promotion from 2024. We will continue to monitor the effectiveness of all value programs and iterate as needed. Our second operating priority is to consistently deliver a great guest experience.

Mike Spanos: We've eliminated seasonal LTOs and Outback which were complex and required incremental training every eight to ten weeks.

Mike Spanos: We are executing the Aussie 3 course as our everyday value offer.

Mike Spanos: The mix continues to be in line with our expectations and is proving to be a popular abundant everyday value platform.

Mike Spanos: This offer leverages core menu items. We expect to see stronger traffic lift attributed to Oc3 course in the back half of the year as the brand laps lower performing promotions from 2024.

Mike Spanos: It is important to note that this offer did not have a large impacting Q1 as it was lapping the same promotion from 2024. We will continue to monitor the effectiveness of all value programs

Mike Spanos: Our second operating priority is to consistently deliver a great guest experience.

Mike Spanos: We are working collaboratively with our supplier partners in how we can improve our food quality specifications. We are testing various menu items and proteins and are excited about the progress. More to come in future quarters on this work as we learn from our test restaurants. Ziosk has been successfully rolled out across our Outback restaurants. We are receiving positive guest and Outbacker feedback on this technology. Over 85% of guests are using the tabletops to pay at the table, increasing table turns on average by about 5 minutes. Customer feedback has been instrumental in providing real-time guidance by store and by shift to the managing partners. We are also getting immediate feedback as we test and learn. Combined with AI tools, we will leverage this information to provide our managing partners with themes and specific areas to address in an efficient manner.

Mike Spanos: ZS has been successfully rolled out across our Outback restaurants. We are receiving positive guests and outback a feedback on this technology. Over 85% of guests are using the table tops to pay at the table, increasing table turns on average by about five minutes.

Mike Spanos: customer feedback has been instrumental in providing real-time guidance by store and by shift to the managing partners We are also getting immediate feedback as we test and learn

Mike Spanos: Combined with AI tools, we will leverage this information to provide our managing partners with themes and specific areas to address in an efficient manner

Mike Spanos: Based on data from Ziosk and input from our operators, we believe that we can also efficiently enhance our service model to deliver a consistent guest experience. We are looking at staffing levels, server-to-table station ratios, and role definition. We want our managing partners coaching Outbackers and interacting with guests during peak hours to improve both the guest experience and throughputs. We will provide more updates as we learn more. The goal is to have a better experience for our guests and for our Outbackers. As it relates to the asset base, the repair and maintenance survey is on track for completion by the end of Q2, and this will help inform our go-forward strategy on refreshes and remodels. Our third priority is to focus on the turnaround at Outback Steakhouse. As I previously stated, Outback is an amazing brand and the steak category is doing well.

Mike Spanos: Based on data from ZASC and input from our operators, we believe that we can also efficiently enhance our service model to deliver a consistent guest experience. We are looking at staffing levels, server-to-table station ratios, and role definition.

Mike Spanos: We want our managing partners coaching out backers and interacting with guest string peak hours to improve both the guest experience and through puts.

Mike Spanos: We will provide more updates as we learn more. The goal is to have a better experience for our guests and for our Outpackers.

Mike Spanos: As it relates to the asset base, the repair and maintenance survey is on track for completion by the end of Q2, and this will help inform our go-forward strategy on refreshes and remodels.

Mike Spanos: Our third priority is to focus on the turnaround at Outback Steakhouse.

Mike Spanos: As I previously stated, Alfak is an amazing brand, and the state category is doing well. However, we are not doing well. But what you get for what you pay for relationship is not working. [inaudible]

Mike Spanos: However, we are not doing well. The what you get for what you pay for relationship is not working. The good news is we know what is important to our guests, food quality, value, and a consistent guest experience. We are starting to get good feedback from our test restaurants. We will continue to iterate and refine our efforts as part of our holistic strategic plan. We are working diligently and urgently on our strategic plan. We know we need to make changes for the long-term health of the business. I cannot speak to these specific changes or investments at this time as we are in the middle of the work. We will transparently communicate our plan and financial impact later in the year. This will take time to fix, but we are committed to getting it right. Our people are resilient, competitive, and want to win.

Mike Spanos: The good news is we know what is important to our guests, food quality, value, and a consistent guest experience. We are starting to get good feedback from our test restaurants. We will continue to iterate and refine our efforts as part of our holistic strategic plan.

Mike Spanos: We are working diligently and urgently on our strategic plan. We know we need to make changes for the long term health and the business.

Mike Spanos: I cannot speak to these specific changes or investments at this time as we are in the middle of the work, we will transparently communicate our plan and financial impact later in year. This will take time to fix, but we are committed to getting it right. Our people are resilient, competitive, and want to win.

Mike Spanos: We will continue to take actions to improve our short-term results while making decisions that accelerate our strategic potential. We have hired a third-party consulting firm to help us with our strategy as well as with specific cost-saving initiatives. We anticipate that we will benefit from cost savings initiatives this year, and they will be key for self-funding future investments. Lastly, our priorities remain reinvesting back into our restaurants, reducing our debt leverage post the Brazil transaction, and returning capital to our shareholders. We are committed to getting our leverage back to below a 3.0x lease adjusted net leverage. We received the first installment of the Brazil proceeds on 30 December and applied the proceeds to our revolver balance. We intend to use the second installment to be received at the end of December this year towards our revolver as well.

Mike Spanos: We will continue to take actions to improve our short-term results while making decisions that accelerate our strategic potential.

Mike Spanos: We have hired a third party consulting firm to help us with our strategy as well as with specific cost-saving initiatives. We anticipate that we will benefit from cost-saving initiatives this year, and there will be key for self-funding future investments.

Mike Spanos: Lastly, our priorities remain reinvesting back into our restaurants, reducing our debt leverage post the Brazil transaction and returning capital to our shareholders. We are committed to getting our leverage back to below a 3.0 times lease-adjusted net leverage.

Mike Spanos: We received the first installment of the Brazil Proceeds on December 30th and applied the proceeds to our revolver balance. We intend to use the second installment to be received at the end of December this year towards our revolver as well. Our liquidity is ample and our cash flow is healthy. [inaudible]

Mike Spanos: Our liquidity is ample, and our cash flow is healthy. With that, I would like to now turn the call over to Michael to review our financial performance.

Michael Healy: With that, I would like to now turn the call over to Michael to review our financial performance.

Michael Healy: Thank you, Mike, and hello, everyone. I would like to start by providing a recap of our continuing operations financial performance for the fiscal Q1 of 2025. Total revenues in Q1 were $1.05 billion, which is down 1.8% from 2024. The decrease in total revenues was primarily due to the net impact of restaurant closures, openings, and a decrease in comparable restaurant sales. US comparable restaurant sales were negative 50 basis points and traffic was negative 390 basis points. While these results were in line with our expectations, they were below the casual dining industry. Average check was 3.4% in Q1 versus 2024 for our US business, in line with our expectations. Q1 off-premises was 23% of total US sales.

Michael Healy: Thank you, Mike, and hello everyone. I would like to start by providing a recap of our continuing operations financial performance for the fiscal first quarter of 2025.

Speaker Change: Total revenues in Q1 were $1.05 billion, which is down 1.8% from 2024. The decrease in total revenues was primarily due to the net impact of restaurant closures and openings and a decrease in comparable restaurant sales.

Speaker Change: US comparable restaurant sales were negative 50 basis points and traffic was negative 390 basis points

Speaker Change: While these results were in line with our expectations, they were below the casual dining industry. Average check was 3.4% in Q1 versus 2024 for our US business, in line with our expectations.

Speaker Change: Q1 off premises was 23% of total US sales, our third party delivery business is 11% of total US sales in line with last year

Michael Healy: Our third-party delivery business is 11% of total US sales, in line with last year. Our Q1 GAAP diluted earnings per share for the quarter was $0.50 versus -$1.00 in 2024. Our Q1 adjusted diluted earnings per share was $0.59 versus $0.64 in 2024. $0.59 was within our guidance range of $0.55 to $0.60. The primary difference between GAAP and adjusted diluted earnings per share is due to approximately $6 million of adjustments related to severance and other costs incurred in Q1 2025 as a result of the transformational and restructuring activities, and approximately $2 million of costs in connection with the foreign currency forward contracts that we entered into to partially offset the risk associated with the purchase price installment payments on the Brazil transaction.

Speaker Change: Our Q1 gap deluded earnings per share for the quarter was 50 cents versus a negative one dollar in 2024. Our Q1 adjusted deluded earnings per share was 59 cents versus 64 cents in 2024.

59 cents was within our guidance range of 55 to 60 cents. [inaudible]

Speaker Change: The primary difference between Gap and adjusted deluded earnings per share is due to approximately six million of adjustments related to severance and other costs incurring Q1 2025 as a result of the transformational and restructuring activities.

Speaker Change: and approximately two million of costs in connection with the foreign currency forward contracts that we entered into to partially offset the risk associated with the purchase price installment payments on the Brazil transaction.

Michael Healy: These adjustments were offset by approximately $2 million in gains from certain lease terminations. Q1 adjusted operating margins were 6.1% versus 7.8% last year. The 170 basis point difference between this year and last year was driven by overall adjusted restaurant level margin declined by 160 basis points. COGS inflation was approximately 1.5%, in line with our expectations. Compared to last year, we had a slightly negative impact on our product cost mix as we used higher-priced inventory. This will continue to be a slight headwind in Q2, but we expect this will normalize in the second half of the year. Labor inflation was 3.7% as we continue to experience inflationary pressure on wages.

Speaker Change: These adjustments were all set by approximately two million in gains from certain least terminations.

Speaker Change: Q1 adjusted operating margins were 6.1% versus 7.8% last year. The 170 basis point difference between this year and last year was driven by. Overall, adjusted restaurant level margin and declined by 160 basis points.

dogs inflation was approximately 1.5% in line with our expectations in line with our expectations.

Speaker Change: Compared to last year, we had a slightly negative impact on our product cost mix as we used higher priced inventory This will continue to be a slight headwind in Q2, but we expect this will normalize in the second half of the year

Speaker Change: Labor inflation was 3.7% as we continue to experience inflationary pressure on wages

Michael Healy: Restaurant operating expense was higher year-over-year, driven by higher operating and supply expenses, mainly due to inflation. As it relates to our 33% retained ownership of Brazil, which is classified using equity method investment accounting, we recognize an impact of negative $1.3 million in Q1. This was driven by the depreciation and amortization on the stepped-up fair value basis of accounting for the assets, as well as interest expense for the acquisition debt on the company. Turning to our capital structure, total debt net of cash was $860 million at the end of Q1. As a reminder, we received $104 million from the first installment of the Brazil refranchising transaction and applied those proceeds to our revolver balance in Q1.

Speaker Change: Restaurant Operating Expense was higher year-rear, driven by higher operating and supply expenses mainly due to inflation.

Speaker Change: As it relates to our 33% retained ownership of Brazil which is classified using equity method investment accounting We recognize an impact of negative $1.3 million in Q1

Speaker Change: This was driven by the depreciation and amortization on the stepped up fair value basis of accounting for the assets, as well as interest expense for the acquisition debt on the company.

Speaker Change: Turning to our capital structure, total debt net of cash with $860 million at the end of Q1. As a reminder, we received $104 million from the first installment of the Brazil Re-Francizing Trees Actions and applied those proceeds to a revolver balance in the first quarter.

Michael Healy: Our leverage metrics are 2.5 times on a net debt to adjusted EBITDA basis and 4.0 times on a lease adjusted net leverage basis. Reducing our debt leverage remains a primary component of our capital allocation, and we're committed to a lease adjusted leverage of less than 3.0 times. We anticipate the next installment of Brazil proceeds to be received at the end of December this year to be approximately $96 million and intend to apply that to our revolver balance. The board declared a quarterly dividend of $0.15 a share that is payable on 4 June 2025. We have $97 million remaining under our share authorization program. We do not plan to execute share repurchases at this time. Now turning to our guidance for the full year and Q2.

Speaker Change: Our leverage metrics are 2.5 times on a net debt to adjusted evative basis and 4.0 times on a lease adjusted net leverage basis.

Speaker Change: Producing our debt leverage remains a primary component of our capital allocation and we're committed to at least adjusted leverage of less than 3.0 times [inaudible]

Speaker Change: We anticipate the next installment of Brazil proceeds to be received at the end of December this year to be approximately $96 million and then tend to apply that to our revolver balance.

Speaker Change: The board declared a quarterly dividend of 15 cents a share that is payable on June 4, 2025.

Speaker Change: We have $97 million remaining under our share authorization program. We do not plan to execute share the repurchases at this time.

Speaker Change: Now, turning to our guidance for the full year and second quarter [inaudible]

Michael Healy: We expect to be at the low end of our full year adjusted diluted earnings per share range of $1.20 to $1.40. This is before any additional investment in quality, value, and execution as part of the turnaround. This is driven by two primary reasons. First, we were notified in March that the Brazil tax benefit had been extinguished and no additional benefit would be recognized. This was an annualized $15 million benefit to the entity. In our prior guidance, we forecasted our 33% ownership would be profit neutral with the assumption that the tax benefit would be in place for all of 2025. We now expect our 33% ownership in Brazil to be an approximate $5 to 7 million negative impact to our earnings this year.

Speaker Change: We expect to be at the low end of our full year adjusted diluted earnings per share range of $1.20 to $1.40.

Speaker Change: This is before any additional investment in quality value and execution as part of the turnaround.

This is driven by two primary reasons [inaudible]

Speaker Change: First, we were notified in March that the Brazil tax benefit had been extinguished, and no additional benefit would be recognized. This was an annualized 15 million USD benefit to the entity. [inaudible]

Speaker Change: In our prior guidance, we forecast that our 33% ownership would be profit neutral with the assumption that the tax benefit would be in place for all of 2025.

Speaker Change: We now expect our 33% ownership in Brazil to be an approximate $5-$7 million negative impact to our earnings this year.

Michael Healy: We will continue to receive a healthy royalty stream as part of the refranchise agreement, and we remain very optimistic on the long-term growth of Outback Brazil with our continued partnership with Vinci Partners. Second reason is related to the overall choppy macro environment and cautious consumer. We anticipate having to be fluid in our abundant everyday value offerings. We would expect our PPA to be slightly lower, driven by mix investments to support value offers. We will assess the health of the consumer and adjust accordingly. We wanted to provide an update on the tariff situation. The environment continues to be volatile and difficult to predict. We are working directly with all of our suppliers to mitigate the impact, build inventory, and shift sourcing locations.

Speaker Change: We will continue to receive a healthy royalty stream as part of the refranchised agreement, and we remain very optimistic on the long-term growth about back Brazil with our continued partnership with Vinci . . . . . . . . . .

Speaker Change: Second reason is related to the overall choppy macro environment and cautious consumer. We anticipate having to be fluid in our abundant everyday value offerings. We would expect our PPA to be slightly lower driven by mixed investments to support value offers.

Speaker Change: We will assess the health of the consumer and adjust accordingly.

Speaker Change: We wanted to provide an update on the terror situation. The environment continues to be volatile and difficult to predict. We are working directly with all of our suppliers to mitigate the impact, build inventory and shift sourcing locations. We are working with all of our suppliers to mitigate the impact, build inventory and shift sourcing locations.

Michael Healy: We estimate the potential impact range to be between 20 and 40 basis points to restaurant level margins in 2025, primarily in the second half of the year if implementation continues. Given the uncertainty, this impact is not included in our guidance range. We'll provide updates as this situation is clarified. With the expectation to be on the low end of the adjusted diluted earnings per share range, we would expect to be in a tax benefit situation, which is driven by the tax benefit of FICA tip credits relative to lower earnings. We are prudently managing our expenses given the choppy macro environment. Additionally, we expect to be on the low end of our capital guidance range of $190 to 210 million.

Speaker Change: We estimate the potential impact range to be between 20 and 40 basis points to restaurant level margins in 2025, primarily in the second half of the year if implementation continues

Speaker Change: Given the uncertainty, this impact is not included in our guidance range. We will provide updates as this situation is clarified.

Speaker Change: With the expectation to be on the low end of the adjusted diluting earnings per share range, we would expect to be in a tax-benefit situation, which is driven by the tax-benefit of FICA tip credits relative to lower earnings. We are prudently managing our expenses given in the choppy macro-environment.

Speaker Change: Additionally, we expect to be on the low end of our capital guidance range of 190 million to 210 million.

Mike Spanos: As it relates to Q2 2025, we expect US comparable restaurant sales to be between negative 250 basis points and negative 150 basis points. We expect Aussie Three Course to be a stronger impact on our sales in the back half of Q2. We expect Q2 adjusted diluted earnings per share to be between $0.22 and $0.27. With softness in Valentine's Day week as well as Easter, our forecast assumes similar holiday trends for both Mother's Day and Father's Day, which will have a material weight on the quarter. This earnings per share range does not include an estimated negative impact from our 33% Brazil ownership to be approximately negative $1.5 to $2 million. With that, we want to open up the call for questions.

Michael Healy: As it relates to Q2 2025, we expect US comparable restaurant sales to be between negative 250 basis points and negative 150 basis points. We expect Aussie Three Course to be a stronger impact on our sales in the back half of Q2. We expect Q2 adjusted diluted earnings per share to be between $0.22 and $0.27. With softness in Valentine's Day week as well as Easter, our forecast assumes similar holiday trends for both Mother's Day and Father's Day, which will have a material weight on the quarter. This earnings per share range does not include an estimated negative impact from our 33% Brazil ownership to be approximately negative $1.5 to $2 million. With that, we want to open up the call for questions.

Speaker Change: As it relates to the second quarter, 2025, we expect U.S. comparable restaurant sales to be between negative 250 basis points and negative 150 basis points. We expect all C-3 course to be a stronger impact on our sales in the back half of Q2.

Speaker Change: We expect you to adjust a diluted earnings per share to be between 22 cents and 27 cents.

Speaker Change: The softness and Valentine's Day week, as well as Easter, are forecast-assumed similar holiday trends for both Mother's Day and Father's Day, which will have a mature await on the quarter.

Speaker Change: This earnings per share range does not include an estimated negative impact from our 33% Brazil ownership to be approximately negative 1.5 to negative 2 million dollars.

Speaker Change: And with that, we want to open up the call for questions. Thank you very much.

Operator: We will now begin the question and answer session. To ask a question, you may press star and then one on your telephone keypad. If you are using a speakerphone, please pick up the handset before pressing the keys. To withdraw your question, please press star and then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Jeffrey Bernstein, Barclays. Please go ahead.

We will now begin the question and answer session.

Speaker Change: What's the question you may press star and then one on your telephone keyboard?

Do it through your question, please trust, star, and then two [inaudible]

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

The first question comes from Jeff Bernstein, Barclays' [inaudible]

Please go ahead.

Pratik Patel: Hi, good morning. This is Pratik on for Jeff. Thanks for the question. Mike, just a bigger picture question on the outlook for the remainder of the year. It seems like the casual dining industry actually held up quite well in April, if we're looking at Black Box data. You've kind of outlined in your prepared remarks just how some of the maybe value perception at Outback are a little bit out of sync right now. Just any kind of learnings that you've you know seen in recent weeks that can kind of give you confidence that the plan is on track and the simplification of the menu, the simplification of the operations, just where are the biggest opportunities still, and where is there still more work to be done?

Speaker Change: Hi, good morning. This is Product Unforgest. Thanks for the question.

Speaker Change: Mike just a bigger picture question on the outlook for the remainder of the year. It seems like the casual dining industry actually held up quite well in April if we're looking at black box data.

Speaker Change: I've seen in recent weeks that can kind of give you confidence that the plan is on track and

Speaker Change: The simplification of the menu, the simplification of the operations, just where are the biggest opportunities still, and where is there still more work to be done? And then where do you kind of see the best?

Pratik Patel: Then where do you kind of see the best opportunity for kind of an inflection to positive comps? Thanks.

opportunity for kind of an inflection to positive comps. Thanks.

Mike Spanos: Yeah. Good morning. I appreciate the question. A few parts. I'd say one, you're right, we're not happy with our performance in terms of our results versus Black Box Intelligence. We are losing share. Second, we do feel good about our progress on the operational priorities. We've been focused on getting simplification right, getting value right, and improving our consistency of execution. I feel very good about our progress there. Third, in terms of the consumer short term, our outlook for the year assumes that we're gonna continue to see a choppy environment. What we saw Valentine's Day and Easter is assumed in our balance of year assumptions, especially as we're looking at Q2, Mother's Day and Father's Day. That's the assumption.

Speaker Change: Yeah, good morning. I appreciate the question. A few parts, I'd say one, you're right, we're not happy with our performance in terms of our results versus black box. We are losing share.

Speaker Change: Second, we do feel good about our progress on the operational priorities. We've been focused on...

Speaker Change: Getting simplification right, getting value right and improving our consistency of execution and I feel very good about our progress there. Third, in terms of the consumer short term, our outlook for the year assumes that we're going to continue to see a choppy environment.

Speaker Change: What we saw Valentine's Day in Easter is assumed in our penalty or assumptions, especially we're looking at Q2 Mother's Day and Father's Day, that's the assumption.

Mike Spanos: Longer term, where you were going is we know that right now the what you get versus what you pay for proposition needs to improve, and that's embedded in our strategic work. We're working urgently on that, deliberately on that, and as we complete that work, we'll communicate that balance to you.

Speaker Change: Longer term, where you were going, is we know that right now the what you get versus what you pay for, proposition needs to improve, and that's embedded in our strategic work. We're working urgently on that, deliberately on that, and as we complete that work, we'll communicate that balance here.

Pratik Patel: Got it. I appreciate that. Just as a follow-up, can you talk about the value mix today at Outback relative to where it was in the past and, you know, with all these menu modifications, where you kind of see it going longer term? Just, you know, how you're thinking about the profitability of the value offers, especially with beef prices kind of remaining pretty high and stubbornly high even.

Speaker Change: I appreciate that, and just as a follow-up, can you talk about the value mix today at Outback relative to where it was in the past and with all these menu modifications, where you see it going longer term and just how you're thinking about the profitability of the value offers?

Speaker Change: Especially with beef prices kind of remaining pretty high and stubbornly high even.

Mike Spanos: Understand. Well, first, we know right now we're priced higher than our competition, and that is one item area in terms of the value proposition we need to fix strategically. We also need to be surgical where we put that value so it's profitable traffic, profitable comp sales, and also is easy to execute for our Outbackers. That's how we're looking at it.

Speaker Change: Understand. Well, first, we know right now we're priced higher than our competition and that is one item area in terms of the valley proposition we need to fix strategically.

Speaker Change: We also need to be surgical where we put that value, so it's profitable traffic, profitable comp sales, and also it's easy to execute for our outbackers, and that's how we're looking at it.

Pratik Patel: Thank you very much. I appreciate it.

Thank you very much, I appreciate it.

Operator: The next question comes from Alexander Slagle with Jefferies. Please go ahead.

Speaker Change: The next question comes from Alex Slagle, with Jeffrey, please go ahead.

Alexander Slagle: Thanks. Good morning. Just wondering if you could expand on the softer holiday special occasion trends you're seeing. I would have thought these would been a place where maybe consumers' frequency would hold up a little bit better and maybe be the last place to fall off, but any thoughts there on why you think you're seeing that?

Alex Slagle: Thanks. Good morning. Just wondering if you could expand on the softer holiday special occasion trends you're seeing. I would have thought these would been a place where maybe consumers' frequency would hold up a little bit better and maybe be the last place to fall off, but any thoughts there on why you think you're seeing that?

Alex Slagel: Thanks. Good morning. I wonder if you could expand on the soft or holiday special occasion trends you're seeing. What I thought these would have been a place where maybe consumers' frequency would hold up a little bit better. [inaudible]

It may be the last place to fall off, but...

Any thoughts there on why you think you're seeing that?

Mike Spanos: Hey, Alex. Good morning. Well, we had decent results, actually good results in some of the brands for the holidays. They just weren't as strong as what we had anticipated. I think that's the biggest thing. If we look at the trends in Q4 moving past Valentine's Day, specifically where we saw the most pressure is the households under $100,000. They seem to be the most pressured. We're seeing apps and desserts hold up well. It's liquor, beer, wine that started to tick down a bit. We're just seeing a consumer that's just being very cautious, watching their spending.

Hey, Alex, good morning. We're... [inaudible]

Alex Slagel: Decent results, actually good results in some of the brands for the holidays. They just weren't as strong as what we had anticipated.

Alex Slagel: I think that's the biggest thing, if we look at the trends in Q4, move in the past Valentine's Day, specifically where we saw the most pressures, the households under $100,000.

Alex Slagel: They seem to be the most pressured. We're seeing apps and desserts hold up well. It's liquor beer wine that started to tick down a bit. And we're just seeing a consumer that's just being very cautious, watching or spending.

Alexander Slagle: Okay. On the same store sales and traffic performance versus the benchmarks, any more way to dial down a little bit more just versus your closest peers for Outback and Carrabba's and how the share-

Alex Slagle: Okay. On the same store sales and traffic performance versus the benchmarks, any more way to dial down a little bit more just versus your closest peers for Outback and Carrabba's and how the share trends look, on a more granular basis?

Thank you.

Alex Slagel: Okay, and then on the scenes for sales and traffic performance versus the benchmarks, any more weighted dial down a little bit more just versus your closest peers for outbacking cravas and how the share trends look one more granular basis

Alexander Slagle: trends look, on a more granular basis?

Mike Spanos: Well, I think in terms of share, that it's a cumulative effect. We know the entire value proposition, we gotta fix it. It's a function of food quality, it's a function of value. Value is a function of price and benefits, and there's a consistency of execution. I don't think it's gonna happen overnight. We didn't get here overnight, and we're very much in the early stages of the turnaround, but it's all that combined. We're gonna just keep making the right short-term decisions that enable our long-term success.

Alex Slagel: Well, I think in terms of share, it's a cumulative effect. We know the entire value proposition.

Alex Slagel: We got to fix it, and it's a function of food quality, it's a function of value values, a function of price and benefits, and there's a consistency of execution. So I don't think it's going to happen overnight. We didn't get here overnight and we're very much in your early stages of the turnaround but it's all that combined. Brian , Brian , Brian , Brian .

Alex Slagel: and we're going to just keep making the right short-term decisions that enable our long-term success.

John Ivankoe: Thanks.

Alex Slagle: Thanks.

Please see the complete disclaimer at https://sites.google.com

Thanks.

Operator: The next question comes from Brian Harbour with Morgan Stanley. Please go ahead.

The next question comes from Brian Harbour [inaudible]

with Morgan Stanley , please go ahead.

Brian Harbour: Yeah, thanks. Good morning. What was the price and mix component of same-store sales in the quarter? I guess, just, it sounds like you may think that there's more mix impact from what you're doing on value going forward, like into Q2. I guess that was sort of an Outback-specific comment, but could you just comment on what you saw and what we should expect there?

Speaker Change: Yeah, thanks, good morning. What was the price and mix component of same first sales in the quarter? And I guess just, it sounds like you may think that there's...

Speaker Change: More mixed impacts from what you're doing on value going forward into the two. I guess that was sort of an outback specific comment, but could you just comment on what you saw and what we should expect there.

Mike Spanos: Yeah. Mix was relatively flat in Q1. We do expect to see a bit of a check down as we get into Q2. Part of this is with the Aussie Three Course promotion. We are lapping that same promotion from last year. It definitely has a lower check than prior other promotions. We expect to get some traffic benefit from that promotion as we get into Q2, but we'll have some mix impact as well. We're looking at other offers besides those value offers. We're gonna have to infuse more value to motivate our guests in this choppy environment. You know, we're actively looking across that, you know, and that'll touch all channels as well.

Michael Healy: Yeah. Mix was relatively flat in Q1. We do expect to see a bit of a check down as we get into Q2. Part of this is with the Aussie Three Course promotion. We are lapping that same promotion from last year. It definitely has a lower check than prior other promotions. We expect to get some traffic benefit from that promotion as we get into Q2, but we'll have some mix impact as well. We're looking at other offers besides those value offers. We're gonna have to infuse more value to motivate our guests in this choppy environment. You know, we're actively looking across that, you know, and that'll touch all channels as well.

Speaker Change: Yeah, so mix was relatively flat in Q1. We do expect to see a bit of a checkdown as we get into Q2. Part of this is with the Aussie 3 course promotion. We are lapping that same promotion from last year.

Speaker Change: It definitely has a lower check than prior other promotions and so we expect to get some traffic benefit from that promotion as we get into Q2 but we'll have to mix impact as well and we're looking at other offers besides those value offers. We're going to have to infuse more value to motivate our guests in this choppy environment and so we're actively looking across that and that'll touch all channels as well. So mix.

Mike Spanos: you know, mix in Q2, we would expect to be, you know, down 1% to 2%, as we think about what we need to do to connect with our guests.

Michael Healy: you know, mix in Q2, we would expect to be, you know, down 1% to 2%, as we think about what we need to do to connect with our guests.

Speaker Change: in Q2, we would expect to be down 1% to 2%, as we think about what we need to do to connect with our guests.

Brian Harbour: Okay, thanks. It sounded like you're contemplating sort of labor investments or maybe it's just staffing model changes. Are you actively doing anything there yet in your guidance? Have you sort of assumed that there's an impact on labor costs from changes there?

Okay, thanks. We're...

Speaker Change: It's kind of like you're contemplating sort of labor investments or maybe it's staffing model changes. Is that, are you actively doing anything there yet in your guidance if you sort of assume that there's an impact on labor costs from changes there? [inaudible]

Mike Spanos: Brian, it's Mike. No. We are testing service models. I mentioned the remarks, and it's based on what our Outbackers are telling us specifically. We believe we can efficiently enhance our service model, deliver a better, consistent guest experience. We are looking at our staffing levels. We're looking at server-to-table station ratios. We're looking at the roles of the bussers and the server assistants, and also where our managing partners are spending their time to drive throughputs and a great guest experience. Any labor investment is not in our guide.

Brian , it's Mike. No, we are testing.

Speaker Change: Service Models, I mentioned the remarks, and it's based on what our Outbackers are telling us specifically.

Speaker Change: We believe we can officially enhance our service model to deliver a better consistent guest experience So we're looking at our staffing levels, we're looking at server table station ratios, we're looking at the roles of the buskers and the service assistants [inaudible]

Speaker Change: and also where our managing partners are spending their time to drive through puts in a great guest experience. So, any labor investment is not in our guide.

Brian Harbour: Okay, thank you.

Okay, thank you [inaudible]

Operator: The next question comes from John Ivankoe with J.P. Morgan. Please go ahead.

The next question comes from

from John Ivankoe, with the GP Morgan, please go.

John Ivankoe: Hi. The question is on, you know, the range of performance that we're seeing in the Outback brand, whether, you know, nationally, regionally, even within a market. I mean, what's, you know, kind of distinguishing, you know, the well-performing stores versus the low-performing stores? You know, you can handle that question either year over year or just in terms of the average unit volume disparity within the brand that might exist nationally.

Speaker Change: The question is on the range of performance that we're seeing in the Outback Grand, whether

Speaker Change: You know, nationally, regionally, even within a market. I mean, what's, you know, kind of distinguishing?

Speaker Change: You know, the role-performing stores versus the low-performing stores, and you know, you can handle that question either year every year, or just in terms of the average unit volume disparity within the brand that made it this nationally.

Mike Spanos: Morning, John. How are you doing? So tactically, we've seen a little more softness in the short term in Texas, Florida, some of the Southeast, Southwest. Broader, it's really about consistency of execution. It's about having good continuity of managing partners. When we dial up what matters in terms of the brand, ’cause we have an amazing brand. When we get the quality right, we get the value right, we get the consistency of experience, and we've proven to ourselves in a number of places when we do it right, we feel great about the AUVs, and we feel great about what we're delivering in terms of restaurant margins, tenure, continuity. That's the fundamental bottom line when it comes to great consistent performance.

Thank you.

Morning, John . How you doing? I'm fine.

Speaker Change: So, tactically, we've seen a little more softness in the short term in Texas, Florida, some of the Southeast Southwest, but broader. It's really about consistency of execution, it's about having good continuity of managing partners. And when you, when we...

Speaker Change: Dial up what matters in terms of the brand, because we have an amazing brand. When we get the quality right, we get the value right, we get the consistency of experience, and we've proven to ourselves in a number of places when we do it right.

Speaker Change: We feel great about the AUVs and we feel great about what we're delivering in terms of restaurant margins, tenure, continuity That's the fundamental bottom line when it comes to great consistent performance [inaudible]

John Ivankoe: Okay. Yeah. That and that obviously makes sense. Let me pivot to another question, if I may. What are the employees, you know, whether it's a managing partner at the store or whether it's the hourly employees? I can certainly imagine what the customers, you know, might be asking for from the brand. What, you know, when you've done your listening tour and you've been able to spend more time in market, in store, which I know, you know, you have a lot of passion for doing, what are the employees specifically asking more of? How are you planning on making the experience better for them?

Thank you.

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Speaker Change: Okay, yeah, that obviously makes sense. Let me give it to another question if I may.

Speaker Change: What are the employees, whether it's a managing partner at the store, whether it's the hourly employee that I can certainly imagine what the customers might be asking for from the brand, but when you've done your listening tour and you've been able to spend more time in market in store, which I know you have a lot of passion for doing,

Speaker Change: What are the employees specifically asking more of? How are you planning on making the experience better for them?

Mike Spanos: John, they're consistently telling me they want a simpler, easier way to execute to the guests. They want less complexity, and they wanna win. That's fundamentally what they're all saying. They're pointing to areas in food quality. They're pointing to areas of value we should be focused on. They're really giving me great advice on consistency of execution, both back of the house and front of the house, what that looks like. That's embedded in the strategic work we're doing. We're taking their feedback, whether it's the service model. We're looking at quality across all of our proteins. That's all and everything we're including in the go forward work.

Speaker Change: John , they're consistently telling me they want a simpler, easier way to execute to the gas. They want less complexity, and they want to win.

Speaker Change: That's fundamentally what they're all saying, and they're pointing to areas in food quality.

Speaker Change: They're pointing areas of value. We should be focused on it. And they're really giving me great advice on consistency of execution, both back of the house in front of the house, what that looks like. And that's embedded in the strategic work we're doing. And we're taking their feedback. We're taking their feedback.

Speaker Change: Whether it's the service model, we're looking at quality across all of our proteins. That's all in everything we're included in the go-work. Go-forward work.

John Ivankoe: Thanks.

Thanks.

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

Speaker Change: The next question comes from Brian Mullan, with five percent love please go ahead

Brian Mullan: Thanks. Kind of following up on the reducing complexity you just talked about. Just at Outback, it sounds like you reduced the menu by 10% in April. It sounds like you're gonna do some more by the end of the year. Can you just talk a bit about any early guest reaction so far, employee feedback, and impact to operations? Just talk about, like, how you chose what you reduced so far versus what you'll be looking for, you know, when you reduce more over the course of the year.

[inaudible]

Speaker Change: Thanks, kind of, falling up on the reducing complexity you just talked about, just at Outback, sounds like he reduced the menu by 10%

Speaker Change: In April , it sounds like you're going to do some more by the end of the year. Can you just talk a bit about any early guest reaction so far and play feedback, impact operations, and then just talk about how you chose what you reduce so far versus what you'll be looking for when you reduce more over the course of the year? [inaudible]

Mike Spanos: The feedback's very consistent between the guests and our Outbackers. We're focusing on if a menu item has low satisfaction, it drives complexity, and it doesn't deliver consistent execution, then we're taking it off the menu. The nice thing is with Ziosk, it gives us even more immediate feedback on those items by menu item between the guests and with our Outbackers. That'll be an iterative process across all the brands. We'll continue to dial in what the guest tells us and what our team members tell us in terms of satisfaction rates, intent to return, and removing complexity.

Speaker Change: The feedback is very consistent between the guests and our outpackers. [inaudible]

Speaker Change: We're focusing on if a menu item has low satisfaction, it drives complexity, and it doesn't deliver consistent execution, then we're taking it off the menu.

Speaker Change: And what we're doing is, and the nice thing is what Zee asks, it gives us even more immediate feedback on those items by menu item between the guests and with our outbackers. And that will be an iterative process across all the brands. We'll continue to dial in what the guest tells us.

Speaker Change: and what our team members tell us in terms of satisfaction rates and intent to return and removing complexity.

Brian Mullan: Okay, thanks. I just wanted to ask about marketing also at Outback. You know, I know it's very early stages of the turnaround, it's gonna take some time. But just when do you envision marketing being able to become a bigger part of this? You know, how do you balance waiting until you know what you wanna talk about, knowing that the guests will have the good experience once you're ready to drive them to the box versus kind of trying to move the needle on the business more near term? Just how you think about that.

Speaker Change: Okay, thanks. I just wanted to ask about marketing also up back. I know it's very early stages of a turnaround. It's going to take some time. But when do you envision marketing being able to become a bigger part of this? How do you balance waiting?

Speaker Change: Until you know what you want to talk about, knowing that the guests will have the good experience, once you're ready to drive them to the box versus trying to move the needle on the business more near term, just how you think about that Let's go.

Mike Spanos: Big part of the strategic plan we're doing is the brand positioning on Outback. That'll include just how we position the brand, but it also goes back to the quality, the value, the consistency, the guest experience. That's gonna be our best marketing tool to recruit and retain guests.

Speaker Change: Big part of the strategic plan we're doing is the brand positioning on Outback and that'll include just how we position the brand but it also goes back to the quality, the value, the consistency, the guest experience. That's going to be our best marketing tool to recruit and retain guests.

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

The next question comes from… [inaudible]

Sara Senatore, with Bank of America, please go ahead

Sara Senatore: Oh, thank you. I guess I wanted to ask about the restaurant level margins. You know, obviously, I think a lot of what you're talking about, you know, reinvesting in value and potentially labor, you know, is the margin, you know, wouldn't pressure margin. Are there offsets? Which is to say, I mean, obviously, if you get traffic growth, that you know cures a lot of ills. You know, as you think about menu simplification, does that translate into, you know, actual labor savings? Or again, is it really about, you know, if the traffic shows up, more productivity? I guess, you know, the bigger question is the structural kind of margin rate that your restaurant should have, you know, how do you think about that and just the broader P&L?

I think that's a good idea.

Speaker Change: Thank you. I guess I wanted to ask about the restaurant level margins, you know, obviously I think a lot of what you're talking about, you know, reinvesting in value and potentially labor.

Speaker Change: You know, is the margin, you know, it's pressure, wouldn't pressure margin. Are there offsets which is to say, I mean, obviously if you get traffic growth, that, you know, that, that hears a lot of ills, but you think about menu simplification, does that translate into, you know, actual labor savings? Or again, is it really about, you know, if the traffic shows up, more productivity? And I guess, you know, the bigger question is,

Speaker Change: The structural kind of margin rate that your restaurant should have, how do you think about that and just the broader P&L? Maybe you should be lower on G&A going forward as you found these savings but also maybe lower on restaurant level margins. Anything on kind of short term but then also earnings power. Thank you. Thank you.

Sara Senatore: Maybe you should be lower on, you know, G&A going forward as you found these savings and, but also maybe lower on restaurant level margins. Anything on kind of short term, but then also earnings power. Thank you.

Mike Spanos: Yeah. As we think through, you know, kind of working through the process and potential investments, we're absolutely looking at funding opportunities. The simplification in the restaurants in and of itself isn't gonna present a ton of funding opportunities. There's certainly some simplification, you know, less training on new LTOs, those types of things, but we'll repurpose those dollars to focus on quality and consistency of execution. I think as we think of funding components, obviously we made a large, you know, move on G&A, you know, in the last quarter. As we shared, we're continuing to look at other costs from a G&A perspective.

Michael Healy: Yeah. As we think through, you know, kind of working through the process and potential investments, we're absolutely looking at funding opportunities. The simplification in the restaurants in and of itself isn't gonna present a ton of funding opportunities. There's certainly some simplification, you know, less training on new LTOs, those types of things, but we'll repurpose those dollars to focus on quality and consistency of execution. I think as we think of funding components, obviously we made a large, you know, move on G&A, you know, in the last quarter. As we shared, we're continuing to look at other costs from a G&A perspective.

Speaker Change: Yeah, as we think through, you know, kind of working through the process and potential investments we're absolutely looking at funding opportunities and the simplification in the restaurants in and of itself isn't going to present a ton of funding opportunities, there's certainly some simplification, you know, less training on new LTOs, those types of things but will repurpose those dollars to focus on quality and consistency of execution. I think as we think of funding components, obviously we made a large, you know, [inaudible]

Speaker Change: on GNA in last quarter, as we shared, we're continuing to look at other costs from a GNA perspective. But we also, as we think about the partnership we have with the third party, certainly part of that is to help us piece together the holistic strategy. But a lot of it is deep dives in some up-channel costs.

Mike Spanos: We also, as we think about, you know, the partnership we have, you know, with a third party, certainly part of that is to help us piece together the holistic strategy, but a lot of it is deep dives in some above-restaurant costs, as we think about the business. You know, we're certainly looking at different ways that we can fund any potential investments.

Michael Healy: We also, as we think about, you know, the partnership we have, you know, with a third party, certainly part of that is to help us piece together the holistic strategy, but a lot of it is deep dives in some above-restaurant costs, as we think about the business. You know, we're certainly looking at different ways that we can fund any potential investments.

Speaker Change: as we think about the business. So we're certainly looking at different ways that we can fund any potential investments.

Sara Senatore: Four-wall margins just over time.

and Four-Wall margins just over time.

Mike Spanos: Yeah. Ultimately, there'll be a bit of pressure, right? As we're in the early stages of the turnaround, and eventually the payoff will be, you know, more consistent same traffic. Our goal will be to try to offset as much as that potential investment in the near term as possible.

Speaker Change: Yeah, ultimately there will be a bit of pressure, right, is we're in the early stages of the turnaround and eventually the pay-off will be more consistent traffic. Our goal will be to try to offset as much as that potential investment in the near term as possible.

Sara Senatore: Okay, thank you.

Okay, thank you

Operator: The next question comes from Brian Vaccaro with Raymond James.

Speaker Change: The next question comes from Brian Vaccaro with Roman and Eamon James.

Brian Vaccaro: Hi. Thanks, and good morning. Mike, I guess, the question's on Outback and just thinking about the traffic declines and the underperformance versus the steakhouse peers the last few years. Do you have any line of sight or data on how the composition of the Outback customer base has changed over the last few years? I'm curious if you've lost traction with a certain consumer cohort, maybe a younger guest, what have you, or maybe an income level. Any insights around those dynamics you'd be willing to highlight?

Hi, thanks again. Good morning.

Speaker Change: I guess the question is on Outback and just think about the traffic decline and the performance versus the take-out appears in the last few years.

Speaker Change: Do you have any line of study or data on how the composition of the Outback customer base has changed?

Speaker Change: over the last few years. I'm curious if you've lost traction with a certain consumer cohort making a younger guest what have you or maybe an income level. Any insights around those dynamics? You'd be willing to highlight?

Mike Spanos: Morning, Brian. We do. We have plenty of data in terms of cohorts, age, ethnicity, geographic, et cetera. We're very clear on it. What I've seen and what's been most concerning is the under $100,000 household has been the biggest pain point for us over the last few years if I go back to 2019. What we are seeing, though, is when we get it right, it's an amazing brand. When we get the quality right, we get the value right, we get the experience right, we get households coming in, whether they're greater than $150,000 or they're less than $100,000. That's what we need to do.

Speaker Change: More than Brian , we have plenty of data in terms of cohorts, age, ethnicity, geographic, etc. We're very clear on it. What I've seen and what's been most concerning is the under $100,000 household has been the biggest pain point for us over the last few years. I go back to 2019.

Speaker Change: What we are seeing now is when we get it right, it's an amazing brand. When we get the quality right, we get the value right, we get the experience right, we get households coming in whether they're greater than 150,000 or they're less than 100,000 and that's what we need to do.

Brian Vaccaro: All right. That's helpful perspective. Thank you. Healy, on the annual guidance, I just wanted to make sure I heard correctly. The annual guidance, it does not include the negative impact of the Brazil equity and earnings, and it also does not include any tariff impact?

Michael Healy: All right, that's all for perspective. Thank you. Healy, on the annual guidance, I just want to make sure I heard correctly. The annual guidance does not include the negative impact of the Brazil equity and earnings, and it also does not include any tariff impact.

Mike Spanos: No, it includes the Brazil, the 33% ownership of Brazil. It includes that. It does not include tariffs. Ultimately

Michael Healy: No, it includes the Brazil, the 33% ownership of Brazil would include that, it does not include

Brian Vaccaro: Okay.

Mike Spanos: Tariff's a bit of a wild card right now. We have a great team. They're working as actively as possible to mitigate any of that risk. Tariff's impact is not included.

Michael Healy: Tara is a bit of a wildcard right now and the team, we have a great team, they're working as active as possible to mitigate any of that risk but Tara's impact is not included.

Brian Vaccaro: Okay. Thanks for that. Last one for me, just quickly on the commodity outlook. Has there been any change to your up 2.5 to 3.5? I guess if we could set aside tariffs, if that's possible, maybe not. On beef specifically too, you know, we've seen some pressure in the spot market on certain steak cut. Just love to get your view on sort of the beef outlook, what you're hearing from your suppliers in terms of supply and demand dynamics, et cetera. Thank you.

Speaker Change: Okay, thanks for that. And then last one for me, just quickly on the commodity outflow, has there been any change to your...

Michael Healy: Up to an half to three and a half, and I get to see if we could set aside tariffs. Is that possible? Maybe not. But on these specifically, you know, you seem to spread some pressure in the spot market on certain state cuts. Just love to get your view on sort of beef outlook, what you're hearing from your suppliers in terms of supply and demand dynamics, etc. Thank you. Thank you very much.

Mike Spanos: Yeah, no changes to commodities, no changes to beef. As you may recall, we structure our beef contracts, so we lock in a price. Certainly allows us to benefit to upside, but will protect us on the downside. You know, obviously, there could be impacts from kind of the larger macro or some of the tariff components, but right now we're pretty well protected on beef, and so no issues.

Michael Healy: Yes, no changes to commodities, no changes to beef. As you may recall, we struck off these contracts, so we locked in a price, certainly allows us to benefit to upside, but we'll protect this on the downside until...

Michael Healy: Obviously there could be impacts from kind of the larger macro or some of the tariff components, but right now we're pretty well protected on beef and some no issues.

Operator: The next question comes from Eric Christel with Goldman Sachs. Please go ahead.

Speaker Change: The next question comes from Christine Koh, with Goldman Sachs, please go ahead.

Christine Cole: Thank you so much for taking the question. Could you share a little bit more color on the test that you had in the 14 stores during the quarter, just in terms of what you're seeing, in traffic, guests' intent to return, employee engagement, and profitability in these test stores? What do you really need to see to gain confidence in a full rollout? In a timing perspective, is this something that you can implement relatively quickly to all your stores once you make that decision? Thank you.

Christine Cho: Thank you so much for taking the question. Could you share a little bit more color on the test that you had in the 14 stores during the quarter, just in terms of what you're seeing, in traffic, guests' intent to return, employee engagement, and profitability in these test stores? What do you really need to see to gain confidence in a full rollout? In a timing perspective, is this something that you can implement relatively quickly to all your stores once you make that decision? Thank you.

Christina Cole: Thank you so much for taking me questions. Could you share a little bit more color on the test that you had in the 14 stores during the quarter? Just in terms of what you're seeing in traffic, guest intent to return, employing engagement and profitability in these test stores? And what do you really need to see taking confidence in a full rollout? And in a timing perspective is something that you can implement relatively quickly into all your stores once you make that decision? Thank you. Thank you.

Mike Spanos: Morning, Christine. We're very encouraged by what we're seeing in the test stores, the 14 stores in terms of what we're seeing in food quality, value, and consistency of guest experience. But we're also very much in a learning stage here. So we are moving urgently to learn, but I wanna be very deliberate to get it right. As we get feedback from our Outbackers, we get feedback from our guests. Again, the beauty of Ziosk is we're able to get that guest feedback very quickly to adjust and learn. That'll enable and really accelerate our longer term strategic plan as we make the right decisions of resources into Outback for long-term sustainable, profitable traffic and comp sales growth.

Speaker Change: Morning, Christine. We're very encouraged by what we're seeing in the test stores, the 14 stores, in terms of what we're seeing in food quality, value, and consistency of guest experience.

Speaker Change: We're also very much in a learning stage here, so we are moving urgently to learn but I want to be very deliberate to get it right, and as we get feedback from our outbackers, we get feedback from our guests, and again the beauty of Ziask is we're able to get that guest feedback very quickly to adjust.

Speaker Change: and Lauren, and that will enable and really accelerate our longer-term strategic plan as we make the right decisions of resources endow back for long-term sustainable profitable traffic and

Christine Cole: Thank you.

Christine Cho: Thank you.

Thank you.

Operator: The next question comes from Jared Garber, with BMO. Please go ahead.

The next question comes from Jared.

Lutvinsky

Jared Garber: Good morning. Thanks for taking the question. Based on what you're seeing in the current macro backdrop, do you believe your current value construct is working as intended across brands, and do you see any reason for change? Last call you discussed negative mix from value embedded in guidance assumptions. Has that assumption changed at all? Thank you.

Jared Hludzinski: Good morning. Thanks for taking the question. Based on what you're seeing in the current macro backdrop, do you believe your current value construct is working as intended across brands, and do you see any reason for change? Last call you discussed negative mix from value embedded in guidance assumptions. Has that assumption changed at all? Thank you.

with B&O, please go ahead.

www.able.co.nz Copyright Able 2020

Speaker Change: Good morning. Thanks for taking the question. Based on what you're seeing in the current macro back job, do you believe your current value construct is working as intended across brands and do you see any reason for change? And then last call, you discussed negative and maximum value embedded in guidance assumptions. Has that assumption changed at all? Thank you.

Mike Spanos: As I said, on the macros, we do expect a choppy environment this year, and that's embedded in our full year outlook and it's embedded in our Q2 outlook for Mother's Day and Father's Day. In terms of the value, as I said, I do think we've got to deal with the value proposition, especially at Outback. We're gonna continue to react and listen to our customers and our guests. It's iterative, which is why we're doing Aussie Three Course. We made the distinct decision, looking at the success of that program last year, that we know it resonates with our guests, it resonates with those guests that need affordable entry into steak and many of the proteins. We're gonna continue to iterate across all the brands.

Speaker Change: We are, so as I said on the Mac Rose, we do expect a choppy environment bounce year and that's embedded in our full year outlook and it's embedded in our Q2 outlook for Mother's Day and Father's Day [inaudible]

Speaker Change: In terms of the values I said, I do think we've got to deal with the value proposition, especially at Outback.

Speaker Change: and we're going to continue to react and listen to our customers and our guests. It's Iterif, which is why we're doing Ocety-3 course. We've made a distinct decision looking at the success of that program last year.

Speaker Change: that we know it resonates with our guests, it resonates with those guests that need affordable entry into stake and many of the proteins, but we're going to continue to rate across all the brands. I don't think the revenue management is a static dynamic, it's very fluid.

Mike Spanos: I don't think the revenue management is a static, dynamic. It's very fluid.

Jared Garber: Great. Thanks. Curious how you're seeing guests interact with Outback's Aussie Three Course pricing tiers. I know last call you discussed leading with the $14.99 tier, but significant number of guests trading up to the $17.99 or $20.99 tier. Wondering if this is still the case, and maybe how you've seen the mix of guests at the $14.99 tier change relative to last quarter. Thank you.

Jared Hludzinski: Great. Thanks. Curious how you're seeing guests interact with Outback's Aussie Three Course pricing tiers. I know last call you discussed leading with the $14.99 tier, but significant number of guests trading up to the $17.99 or $20.99 tier. Wondering if this is still the case, and maybe how you've seen the mix of guests at the $14.99 tier change relative to last quarter. Thank you.

Speaker Change: Great, thanks. And then curious how you're seeing guests interact with LBACs, I'll see three-course pricing tiers. I know last call you discussed, leading with the $14.99 tier, but significant number of guests trading up to the $17.99 or $2.99 tier. Wondering if this is still the case.

Speaker Change: Maybe how you've seen the mix of guests at the 1499 tier change relts to last quarter. Thank you.

Mike Spanos: You bet. Which, first of all, Aussie Three Course had pretty limited impact in Q1 because we're lapping the same promotion from last year. We feel good about the mix. It's very much in line with our expectations, and we've now got it as a core menu item starting in June. I like that because we can execute at a higher level. It's on the base menu. It's easier for our team in the back of the house. We do expect a better momentum out of it in Q2 and actually more second half of the year, and that's embedded in our mix assumptions that Michael talked about. I would also say again, we're gonna continue to iterate and refine all these offers.

Speaker Change: You bet, first of all C3 course have pretty limited impact in Q1 because we're lapping the same promotion from last year.

Speaker Change: But we feel good about the mix, it's very much in line with our expectations of our questions.

Speaker Change: and we've now got it as a core menu item starting in June , and I like that because we can execute at a higher level. It's on the base menu. It's easier for our team in the back of the house. So we do expect a better momentum out of it in the Q2 and the Action Board second half of the year, and that's embedded in our mix assumptions that Michael talked about. I would also say, again, we're going to continue to iterate and refine all these offers. We are seeing a nice trade-up into the 1799

Mike Spanos: We are seeing a nice trade up into the $17.99 and the $20.99 levels. We're seeing a good amount of trade up on the desserts as well. When we get it right, our guests trade up and they feel good about the proposition, and they'll pay more for more.

Speaker Change: and the 29-9 levels. We're seeing a good amount of trade-up on the desserts as well. So when we get it right, our guests trade-up and they feel good about the proposition and they'll pay more for more.

Jared Garber: Great. Thank you very much.

Jared Hludzinski: Great. Thank you very much.

Great, thank you very much.

Operator: This concludes our question and answer session. I would like to turn the conference back over to Mike Spanos for any closing remarks.

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

Mike Spanos: Thank you once again for your investment and support of Bloomin' Brands. I wanna close by thanking our people. I greatly appreciate their passion for our guests and each other, their hard work, and their excellence.

Mike Spanos: Thank you once again for your investment in support of Bloomin' Brands. I want to close by thanking our people. I greatly appreciate their passion for our guests and each other, their hard work and their excellence.

Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect. Goodbye. Greetings, and welcome to the Bloomin' Brands Fiscal Q1 2025 Earnings Conference Call. At this time, all participants are in listen-only mode. A brief question and answer session will follow management's prepared remarks. Please note, this event is being recorded. It is now my pleasure to introduce your host, Tara Kurian, Vice President, Corporate Finance and Investor Relations. Thank you. Mrs. Kurian, you may begin.

Mike Spanos: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Goodbye.

Scrolls of Agreement F spots S

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David Deno, John Ivankoe, Brian Harbour, David Deno, Brian Harbour, David Deno

[inaudible] She's got a lot of work to do She's got a lot of work to do

David Deno, Brian Harbour, Dennis Geiger

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Thank you for watching!

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Speaker Change: Greetings and welcome to the Bloomin' Brands Fiskal first quarter, 2025, Ernieg's conference call. At this time, all participants are in lesson only mode.

Speaker Change: A brief question and answer session will follow management's prepared remarks.

Please note, this event has been recorded.

Thank you [inaudible]

Mrs. Kurian, you may begin.

Tara Kurian: Thank you and good morning, everyone. With me on today's call are Mike Spanos, our Chief Executive Officer, and William Michael Healy, Chief Financial Officer and Executive Vice President. By now, you should have access to our fiscal Q1 2025 earnings release and our investor presentation slides, both of which can be found on our website at www.bloominbrands.com in the Investors section. Throughout this conference call, we will be presenting results on an adjusted basis. An explanation of our use of non-GAAP financial measures and reconciliations to the most directly comparable GAAP measures appear in our earnings release on our website, as previously described. Before we begin formal remarks, I'd like to remind everyone that part of our discussion today will include forward-looking statements, including a discussion of recent trends.

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 first quarter 2025 earnings release and our investor presentation slides, both of which can be found on our website at www.bloominbrands.com in the Investors section.

Speaker Change: Throughout this conference call, we will be presenting results on an adjusted basis, an explanation of our use of non-GAAP financial measures and reconciliation to the most directly comparable GAAP measures appear in our earnings relief 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.

Tara Kurian: 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.sec.gov. During today's call, we'll provide a brief recap of our financial performance for the fiscal Q1 2025, an overview of company highlights, and current thoughts on fiscal 2025 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.

Speaker Change: During today's call, we'll provide a brief recap of our financial performance for the fiscal first quarter 2025, an overview of company highlights and current thoughts on fiscal 2025 guidance. Once we've completed these remarks, we'll open the call up for questions.

Mike Spanos: With that, I would now like to turn the call over to Mike Spanos.

Mike Spanos: Thanks, Tara, and good morning, everyone. Thank you for joining our first quarter earnings call. I will discuss our Q1 results and the progress we have made across our operating priorities of simplifying the agenda, delivering consistent execution, and turning around Outback. Michael will then review our financial performance for the quarter. I want to start by thanking our team for their hard work and passion to serve each other and our guests. As I visit our restaurants, it only makes me more excited about our future potential. We are not where we want to be, but I am encouraged by the progress we have made since our last earnings call on our operating priorities. Our focus on an operational mindset to deliver outstanding and consistent guest experiences will build the foundation for our turnaround.

Speaker Change: Thanks, Tara, and good morning, everyone. Thank you for joining our first quarter earnings call. I will discuss our Q1 results and the progress we have made across our operating priorities of simplifying the agenda, delivering consistent execution, and turning around out back. Michael will then review our financial performance for the quarter. [inaudible]

Speaker Change: I want to start by thanking our team for their hard work and passion to serve each other and our guests [inaudible]

Speaker Change: As I visit our restaurants, it only makes me more excited about our future potential .

Speaker Change: We are not where we want to be, but I am encouraged by the progress we have made since our last turning call on our operating priorities. Our focus on an operational mindset to deliver outstanding and consistent guest experiences will build the foundation for our turnaround.

Mike Spanos: Our Q1 results were within our expected guidance ranges, and we did see positive comp sales at Carrabba's and Fleming's. However, we underperformed the industry and lost share as defined by Black Box. We are dissatisfied with our financial and market share results and know we need to do better. Although this will take time to reverse these trends given the state of the business, we will seek steady improvement. We had a disappointing February, including Valentine's Day week. We continue to operate in a choppy macro environment. In Q2, we have seen some consumer pullback with a softer Easter holiday than anticipated. We will meet the guests where they are with abundant everyday value to drive profitable in-restaurant traffic, which will pressure short-term margins.

Speaker Change: Our first quarter results were within our expected guidance ranges and we did see positive comp sales at Kroppas and Flemmings. However, we underperformed the industry and lost share as defined by Black Box. We are dissatisfied with our financial and market share results and know we need to do better.

Speaker Change: Although this will take time to reverse these trends given the state of the business, we will see steady improvement.

Speaker Change: We had a disappointing February , including Valentine's Day week. We continue to operate in a choppy macro environment.

Speaker Change: In Q2, we have seen some consumer pullback with a softer Easter holiday than anticipated.

Speaker Change: We will meet the guests where they are with abundant everyday value to drive profitable in restaurant traffic which will pressure short-term margins. [inaudible]

Mike Spanos: Our Q2 and balance of year guidance assumes a continuation of this choppy macro environment and cautious consumer, and the reality is we are in the early stages of a multi-year turnaround on Outback. We will continue to be transparent on our results and our business as we progress throughout the year. We are focused on three operating priorities to build sustainable and profitable traffic and sales growth. Let me provide an update on our progress across each priority. First, simplify the agenda. We are simplifying the agenda by focusing the team on fewer and bigger bets that are the most important to our guests and enable our team members to execute more consistently. We discussed the organizational design initiative to become more effective and efficient. We have realized more savings in Q1 than originally forecasted as part of the org redesign.

Speaker Change: Our Q2 and Bouncy Year Guidance assumes a continuation of this choppy macro-environment and costless consumer, and the reality is we are in the early stages of a multi-year turnaround on Outback We are in the early stages of a multiyear turnaround on Outback [inaudible]

Speaker Change: We will continue to be transparent on our results and our business as we progress throughout the year [inaudible]

Speaker Change: We are focused on three operating priorities to build sustainable and profitable traffic and sales growth. Let me provide an update on our progress across each priority.

Speaker Change: First, simplify the agenda. We are simplifying the agenda by focusing in team on fewer and bigger bats that are the most important to our guests and enable our team members to execute more consistently.

Speaker Change: We discuss the organizational design and this shift to become more effective and efficient.

Speaker Change: We have realized more savings in Q1 than originally forecasted as part of the org redesign. Additionally, we are scrutinizing all expenses and expect to be about $10 million lower in GNA for the total year, or a total of approximately $215 million.

Mike Spanos: Additionally, we are scrutinizing all expenses and expect to be about $10 million lower in G&A for the total year, or a total of approximately $215 million. We've made progress on our menu item reduction. We are streamlining menus both on and off premise, removing items with low sales mix, low satisfaction scores, or items that do not travel well. Outback's April menu has approximately 10% fewer items. By the end of 2025, the Outback team will have reduced menu items by about 15%. At Carrabba's, the main menu will have 10% fewer items. At Bonefish, the April menu has 20% fewer items with quality enhancements and an elevated presentation. Fleming's summer menu will reduce items by approximately 10% and is integrating seasonal items into the core menu.

Speaker Change: We've made progress in our menu item reduction. We are streamlining menus both on and off-premise, removing items with low sales mix, low satisfaction scores for items that do not travel well.

Speaker Change: Outback's April menu has approximately 10% fewer items and by the end of 2025 the Outback team will have used menu items by about 15%. At Krabba's the main menu will have 10% fewer items.

Speaker Change: At both fish, the April menu has 20% fewer items with quality enhancements and an elevated presentation.

Speaker Change: Bloomin's summer menu will reduce items by approximately 10% and it's integrating seasonal items into the core menu. Thank you.

Speaker Change: We have eliminated seasonal LTOs at Outback which were complex and required incremental training every eight to ten weeks.

Speaker Change: We are executing the Office of Recourse as our everyday value offered.

Speaker Change: The mix continues to be in line with our expectations and is proving to be a popular up on this everyday value platform.

Speaker Change: It is important to note that this offer did not have a large impact in Q1, as it was lapping the same promotion from 2024. We will continue to monitor the effectiveness of all value programs and iterate as needed.

Speaker Change: Our second operating priority is to consistently deliver a great guest experience.

Mike Spanos: We are working collaboratively with our supplier partners on how we can improve our food quality specifications. We are testing various menu items and proteins, and are excited about the progress. More to come in future quarters on this work as we learn from our test restaurants. Ziosk has been successfully rolled out across our Outback restaurants. We are receiving positive guest and Outbackers feedback on this technology. Over 85% of guests are using the tabletops to pay at the table, increasing table turns on average by about five minutes. Customer feedback has been instrumental in providing real-time guidance by store and by shift to the managing partners. We are also getting immediate feedback as we test and learn. Combined with AI tools, we will leverage this information to provide our managing partners with themes and specific areas to address in an efficient manner.

Speaker Change: We are working collaboratively with our supplier partners and how we can improve our food quality specifications. We are testing various menu items and proteins and are excited about the progress. We're to come in future quarters on this work as we learn from our test restaurants. Thank you very much.

Speaker Change: Z.O.S. has been successfully rolled out across our Outback restaurants. We are receiving positive guests and Outback or feedback on this technology. Over 85% of guests are using the table tops to pay at the table, increasing table turns on average by about 5 minutes.

Speaker Change: Customer feedback has been instrumental in providing real-time guidance by store and by shift to the managing partners.

Speaker Change: Combined with AI tools, we will leverage this information to provide our managing partners with themes and specific areas to address in an efficient manner.

Speaker Change: Based on data from ZASC and input from our operators, we believe that we can also efficiently enhance our service model to deliver a consistent guest experience. We are looking at staffing levels, server-to-table station ratios, and role definition.

Speaker Change: We want our managing partners coaching outbackers and interacting with guest string peak hours to improve both the guest experience and through puts.

Speaker Change: We will provide more updates as we learn more. The goal is to have a better experience for our guests and for our Outpackers.

Speaker Change: As it relates to the asset base, the repair and maintenance survey is on track for completion by the end of Q2, and this will help inform our go-forward strategy on refreshes and remodels.

Speaker Change: Our third priority is to focus on the turnaround at Outback Steakhouse

Speaker Change: As I previously stated, Alfak is an amazing brand, and the state category is doing well. However, we are not doing well. But what you get for what you pay for relationship is not working. [inaudible]

Mike Spanos: However, we are not doing well. The what you get for what you pay for relationship is not working. The good news is we know what is important to our guests, food quality, value, and a consistent guest experience. We are starting to get good feedback from our test restaurants. We will continue to iterate and refine our efforts as part of our holistic strategic plan. We are working diligently and urgently on our strategic plan. We know we need to make changes for the long-term health of the business. I cannot speak to these specific changes or investments at this time, as we are in the middle of the work. We will transparently communicate our plan and financial impact later in the year. This will take time to fix, but we are committed to getting it right. Our people are resilient, competitive, and want to win.

Speaker Change: The good news is we know what is important to our guests, food quality, value, and a consistent guest experience. We are starting to get good feedback from our test restaurants. We will continue to iterate and refine our efforts as part of our holistic strategic plan.

Speaker Change: We are working diligently and urgently on our strategic plan. We know we need to make changes for the long term health and the business [inaudible]

Speaker Change: I cannot speak to these specific changes or investments at this time, as we are in the middle of the work, we will transparently communicate our plan and financial impact later in year. This will take time to fix, but we are committed to getting it right. Our people are resilient, competitive and want to win. [inaudible]

Speaker Change: We will continue to take actions to improve our short-term results while making decisions that accelerate our strategic potential.

Speaker Change: We have hired a third party consulting firm to help us with our strategy as well as with specific cost-saving initiatives. We anticipate that we will benefit from cost savings initiatives this year, and that will be key for self-funding future investments.

Speaker Change: Lastly, our priorities remain reinvesting back into our restaurants, reducing our debt leverage post-the-Brazil transaction and returning capital to our shareholders.

Speaker Change: We are committed to getting our leverage back to below a 3.0 times least adjusted net leverage.

Speaker Change: We received the first installment of the Brazil proceeds on December 30th and applied the proceeds to our revolver balance. We intend to use the second installment to be received at the end of December this year towards our revolver as well. Our liquidity is ample and our cash flow is healthy. [inaudible]

Mike Spanos: Our liquidity is ample, and our cash flow is healthy. With that, I would like to now turn the call over to Michael to review our financial performance.

Speaker Change: With that, I would like to now turn the call over to Michael to review our financial performance.

Michael Healy: Thank you, Mike, and hello everyone. I would like to start by providing a recap of our continuing operations financial performance for the fiscal first quarter of 2025.

Speaker Change: Total revenues in Q1 were $1.05 billion which is down 1.8% from 2024. The decrease in total revenues was primarily due to the net impact of restaurant closures and openings and a decrease in comparable

Speaker Change: US comparable restaurant sales were negative 50 basis points and traffic was negative 390 basis points.

Speaker Change: Q1 off premises was 23% of total US sales, our third party delivery business as 11% of total US sales in line with last year.

Speaker Change: Our Q1 Gap diluted earnings per share for the quarter was 50 cents versus negative $1 in 2024. Our Q1 adjusted diluted earnings per share was 59 cents versus 64 cents in 2024.

59 cents was within our guidance range of 55 to 60 cents

Speaker Change: The primary difference between Gap and adjusted deluded earnings per share is due to approximately 6 million of adjustments related to severance and other costs incurring Q1 2025 as a result of the transformational and restructuring activities.

Speaker Change: And approximately two million of costs in connection with the foreign currency forward contracts that we entered into to partially offset the risk associated with the purchase price installment payments on the Brazil transaction. This is the first time I've ever seen a transaction.

Michael Healy: These adjustments were offset by approximately $2 million in gains from certain lease terminations. Q1 adjusted operating margins were 6.1% versus 7.8% last year. The 170 basis point difference between this year and last year was driven by overall adjusted restaurant-level margin declined by 160 basis points. COGS inflation was approximately 1.5%, in line with our expectations. Compared to last year, we had a slightly negative impact on our product cost mix as we used higher-priced inventory. This will continue to be a slight headwind in Q2, but we expect this will normalize in the second half of the year. Labor inflation was 3.7% as we continue to experience inflationary pressure on wages.

Speaker Change: These adjustments were all set by approximately two million in gains from certain least terminations.

Speaker Change: Q1, adjusted operating margins were 6.1% versus 7.8% last year. The 170 basis point difference between this year and last year was driven by. Overall, adjusted restaurant level margin in decline by 160 basis points.

dogs inflation was approximately 1.5% in line with our expectations

Speaker Change: Compared to last year, we had a slightly negative impact on our product cost mix as we used higher priced inventory This will continue to be a slight headwind in Q2 but we expect this will normalize in the second half of the year [inaudible]

Speaker Change: Labor inflation was 3.7% as we continue to experience inflationary pressure on wages.

Michael Healy: Restaurant operating expense was higher year-over-year, driven by higher operating and supply expenses, mainly due to inflation. As it relates to our 33% retained ownership of Brazil, which is classified using equity method investment accounting, we recognized an impact of -$1.3 million in Q1. This was driven by the depreciation and amortization on the stepped up fair value basis of accounting for the assets, as well as interest expense for the acquisition debt on the company. Turning to our capital structure. Total debt net of cash was $860 million at the end of Q1. As a reminder, we received $104 million from the first installment of the Brazil refranchising transaction and applied those proceeds to our revolver balance in Q1.

Speaker Change: Restaurant Operating Expense was higher year-rear, driven by higher operating and supply expenses mainly due to inflation.

Speaker Change: As it relates to our 33% retained ownership of Brazil, which is classified using equity method investment accounting,

Speaker Change: This was driven by the depreciation and amortization on the stepped up fair value basis of accounting for the assets as well as interest expense for the acquisition debt on the company.

Speaker Change: Turning to our capital structure, total debt net of cash with $860 million at the end of Q1. As a reminder, we received $104 million from the first installment of the Brazil Refranchizing Transaction and applied those proceeds to a revolver balance in the first quarter.

Michael Healy: Our leverage metrics are 2.5 times on a net debt to adjusted EBITDA basis and 4.0 times on a lease adjusted net leverage basis. Reducing our debt leverage remains a primary component of our capital allocation, and we're committed to at least adjusted leverage of less than 3.0 times. We anticipate the next installment of Brazil proceeds to be received at the end of December this year to be approximately $96 million and intend to apply that to our revolver balance. The board declared a quarterly dividend of $0.15 a share that is payable on 4 June 2025. We have $97 million remaining under our share authorization program. We do not plan to execute share repurchases at this time. Now turning to our guidance for the full year and Q2.

Speaker Change: Our leverage metrics are 2.5 times on a net debt to adjusted divative basis and 4.0 times on a lease adjusted net leverage basis.

Speaker Change: Reducing our debt leverage remains a primary component of our capital allocation, and we're committed to at least adjusted leverage of less than 3.0 times [inaudible]

Speaker Change: The board declared a quarterly dividend of $0.15 a share that is payable on June 4, 2025.

Speaker Change: We have $97 million remaining under our share authorization program. We do not plan to execute share the repurchases at this time.

Michael Healy: We expect to be at the low end of our full year adjusted diluted earnings per share range of $1.20 to $1.40. This is before any additional investment in quality, value, and execution as part of the turnaround. This is driven by two primary reasons. First, we were notified in March that the Brazil tax benefit had been extinguished and no additional benefit would be recognized. This was an annualized $15 million benefit to the entity. In our prior guidance, we forecasted our 33% ownership would be profit neutral, with the assumption that the tax benefit would be in place for all of 2025. We now expect our 33% ownership in Brazil to be an approximate $5 to 7 million negative impact to our earnings this year.

Speaker Change: Now, attorney to our guidance for the full year and second quarter [inaudible]

Speaker Change: We expect to be at the low end of our full year adjusted diluted earnings per share range of $1.20 to $1.40.

Speaker Change: This is before any additional investment in quality, value, and execution as part of the turnaround.

This is driven by two primary reasons [inaudible]

Speaker Change: First, we were notified in March that the Brazil Tax Benefit had been extinguished, and no additional benefit would be recognized. This was an annualized 15 million USD benefit to the entity. [inaudible]

Speaker Change: In our prior guidance, we forecast that our 33% ownership would be profit neutral with the assumption that the tax benefit would be in place for all of 2025.

Speaker Change: We now expect our 33% ownership in Brazil to be in approximate $5 to $7 million negative impact to our earnings this year.

Michael Healy: We will continue to receive a healthy royalty stream as part of the refranchise agreement, and we remain very optimistic on the long term growth of Outback Brazil with our continued partnership with Vinci Partners. Second reason is related to the overall choppy macro environment and cautious consumer. We anticipate having to be fluid in our abundant everyday value offerings. We would expect our PPA to be slightly lower, driven by mixed investments to support value offers. We will assess the health of the consumer and adjust accordingly. We wanted to provide an update on the tariff situation. The environment continues to be volatile and difficult to predict. We are working directly with all of our suppliers to mitigate the impact, build inventory, and shift sourcing locations.

Speaker Change: We will continue to receive a healthy royalty stream as part of the Refranchise Agreement, and we remain very optimistic on the long-term growth of Outback Brazil with our continued partnership with Vinci . . . . . . . . . . . .

Speaker Change: Second reason is related to the overall choppy macro-environment and cautious consumer. We anticipate having to be fluid in our abundant everyday value offerings. We would expect our PPA to be slightly leeloar driven by mixed investments to support value offers.

Speaker Change: We will assess the health of the consumer and adjust accordingly.

Speaker Change: We wanted to provide an update on the tariff situation. The environment continues to be volatile and difficult to predict. We are working directly with all of our suppliers to mitigate the impact, build inventory, and shift sourcing locations. [inaudible]

Michael Healy: We estimate the potential impact range to be between 20 and 40 basis points to restaurant level margins in 2025, primarily in the second half of the year if implementation continues. Given the uncertainty, this impact is not included in our guidance range. We will provide updates as this situation is clarified. With the expectation to be on the low end of the adjusted diluted earnings per share range, we would expect to be in a tax benefit situation, which is driven by the tax benefit of FICA tip credits relative to lower earnings. We are prudently managing our expenses given the choppy macro environment. Additionally, we expect to be on the low end of our capital guidance range of $190 million to $210 million.

Speaker Change: We estimate the potential impact range to be between 20 and 40 basis points to restaurant level margins in 2025, primarily in the second half of the year, if implementation continues.

Speaker Change: Given the uncertainty, this impact is not included in our guidance range. We will provide updates as this situation is clarified.

Speaker Change: Additionally, we expect to be on the low end of our capital guidance range of 190 million to 210 million.

Michael Healy: As it relates to Q2 2025, we expect US comparable restaurant sales to be between -250 basis points and -150 basis points. We expect Aussie Three Course to be a stronger impact on our sales in the back half of Q2. We expect Q2 adjusted diluted earnings per share to be between $0.22 and $0.27. With softness in Valentine's Day week as well as Easter, our forecast assumes similar holiday trends for both Mother's Day and Father's Day, which will have a material weight on the quarter. This earnings per share range does not include an estimated negative impact from our 33% Brazil ownership to be approximately -$1.5 to -$2 million. With that, we want to open up the call for questions.

Speaker Change: As it relates to the second quarter, 2025, we expect U.S. comparable restaurant sales to be between negative 250 basis points and negative 150 basis points. We expect all C3 course to be to be a stronger impact on our sales in the back half of Q2.

Speaker Change: We expect you to adjust a diluted earnings per share to be between 22 cents and 27 cents.

Speaker Change: The softness and Valentine's Day week as well as Easter are forecast to assume similar holiday trends for both Mother's Day and Father's Day, which will have a mature await on the quarter.

Speaker Change: This earnings per share range does not include an estimated negative impact from our 33% Brazil ownership to be approximately negative 1.5 to negative 2 million dollars.

Speaker Change: And with that, we are going to open up the call for questions

We'll now begin the question and answer session.

Speaker Change: Well, good question. You may press the star and then one on your telephone keyboard.

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

Please draw your question, please, Trace, Star, and then two [inaudible]

Speaker Change: At this time, we will pose momentarily to assemble our Rooster.

The first question comes from Jeff Brainstine, Barclays.

Pratik Patel: Hi. Good morning. This is Pratik on for Jeff. Thanks for the question. Mike, just a bigger picture question on the outlook for the remainder of the year. It seems like the casual dining industry actually held up quite well in April, if we're looking at Black Box data. You've kind of outlined in your prepared remarks of just how some of the maybe value perception at Outback are a little bit out of sync right now. Just any kind of learnings that you've, you know, seen in recent weeks that can kind of give you confidence that the plan is on track and the simplification of the menu, the simplification of the operations, just where are the biggest opportunities still and where is there still more work to be done?

Please go ahead.

Speaker Change: Hi, good morning. This is product on for Jeff. Thanks for the question.

Speaker Change: Mike, just a bigger picture question on the outlook for the remainder of the year. It seems like the casual dining industry actually held up quite well in April , if we're looking at Black Box data, and you've kind of outlined in your prepared remarks of just how some of the... [inaudible]

Speaker Change: Maybe Value Perception at Alpat Car, or a little bit out of sync right now, but just any kind of learnings that you've

Speaker Change: I've seen in recent weeks that can kind of give you confidence that the plan is on track and

Speaker Change: The simplification of the menu, the simplification of the operations, just...

Speaker Change: Where are the biggest opportunities still and where is there still more work to be done? And then where do you kind of see the best?

Pratik Patel: Where do you kind of see the best opportunity for kind of an inflection to positive comps? Thanks.

opportunity for kind of an inflection to positive comps. Thanks.

Mike Spanos: Yeah, good morning. I appreciate the question. A few parts. I'd say one, you're right, we're not happy with our performance in terms of our results versus Black Box. We are losing share. Second, we do feel good about our progress on the operational priorities. We've been focused on getting simplification right, getting value right, and improving our consistency of execution. I feel very good about our progress there. Third, in terms of the consumer short term, our outlook for the year assumes that we're gonna continue to see a choppy environment. What we saw Valentine's Day and Easter is assumed in our balance of year assumptions, especially as we're looking at Q2 Mother's Day and Father's Day. That's the assumption.

Speaker Change: Yeah, good morning. I appreciate the question. A few parts, I'd say one, you're right. We're not happy with our performance in terms of our results versus black box. We are losing share. Second, we do feel good about our progress on the operational priorities. We've been focused on...

Speaker Change: Getting simplification right, getting value right and improving our consistency of execution and I feel very good about our progress there. Third in terms of the consumer short term our outlook for the year assumes that we're going to continue to see a choppy environment.

Speaker Change: What we saw Valentine's Day in Easter is assumed in our penalty or assumptions, especially as we're looking at Q2 Mother's Day and Father's Day, that's the assumption.

Longer term .

Speaker Change: where you were going is we know that right now the what you get versus what you pay for proposition needs to improve and that's embedded in our strategic work. We're working urgently on that, deliberately on that and as we complete that work we'll communicate that balance here.

Speaker Change: Got it. I appreciate that. And just as a follow-up, can you talk about the value mix today at Alback relative to where it was in the past and with all these menu modifications where you see it going longer term and just how you're thinking about the profitability of the value offers? [inaudible]

Speaker Change: especially with beef prices kind of remaining pretty high and stubbornly high even.

Speaker Change: Understand, well first we know right now we're priced higher than our competition and that is one item area in terms of the valley proposition we need to fix strategically. We also need to be surgical where we put that value so it's profitable traffic, profitable comp sales, and also it's easy to execute for our outbackers and that's how we're looking at it.

Pratik Patel: Thank you very much. I appreciate it.

Operator: The next question comes from Alexander Slagle with Jefferies. Please go ahead.

Speaker Change: The next question comes from Alex Slagle with Jeffrey, please go ahead.

Alexander Slagle: Thanks. Good morning. Just wondering if you could expand on the softer holiday special occasion trends you're seeing at. Would have thought these would have been a place where maybe consumers' frequency would hold up a little bit better, and maybe be the last place to fall off, but any thoughts there on why you think you're seeing that?

Alex Slagel: Thanks. Good morning. I wonder if you could expand on the software holiday, special occasion trends you're seeing. I would have thought these would have been a place where maybe consumers, frequency would hold up a little bit better in the last place to fall off.

Mike Spanos: Hey, Alex. Good morning. Well, we had decent results, actually good results in some of the brands for the holidays. They just weren't as strong as what we had anticipated. I think that's the biggest thing. If we look at the trends in Q4 moving past Valentine's Day, it's specifically where we saw the most pressure is the households under $100,000. They seem to be the most pressured. We're seeing apps and desserts hold up well. It's liquor, beer, wine that started to tick down a bit. We're just seeing a consumer that's just being very cautious, watching their spending.

Any thoughts there on why you think you're seeing that?

Hey, Alex, good morning. We are-

Speaker Change: Decent results, actually good results in some of the brands for the holidays. They just weren't as strong as what we had anticipated.

Speaker Change: I think that's the biggest thing. If we look at the trends in Q4, move in past Valentine's Day, specifically where we saw the most pressures, the households under $100,000.

They seem to be the most pressured [inaudible]

Speaker Change: We're seeing apps and desserts hold up well. It's liquor beer wine that started to tick down a bit.

Speaker Change: And we're just seeing a consumer that's just being very cautious, watching their spending [inaudible]

Alexander Slagle: Okay. On the same store sales and traffic performance versus the benchmarks, is there any more way to dial down a little bit more just versus your closest peers for Outback and Carrabba's and how the share trends look, on a more granular basis?

Speaker Change: Okay, and then on the things for sales and traffic performance versus the benchmarks, any more weighted dial down a little bit more just versus your closest peers for outback in carabas and how the share trends look on a more granular basis.

Mike Spanos: Well, I think in terms of share, that it's a cumulative effect. We know the entire value proposition, we gotta fix it. It's a function of food quality, it's a function of value is a function of price and benefits, and there's a consistency of execution. So I don't think it's gonna happen overnight. We didn't get here overnight, and we're very much in the early stages of the turnaround, but it's all of that combined. We're gonna just keep making the right short-term decisions that enable our long-term success.

Speaker Change: Well, I think in terms of share, it's a cumulative effect. We know the entire valley proposition.

Speaker Change: We gotta fix it. And it's a function of food quality, it's a function of value values, a function of price and benefits, and there's a consistency of execution. So I don't think it's gonna happen overnight. We didn't get here overnight and we're very much in your early stages of the turnaround but it's all that combined. We're going to do it overnight.

Speaker Change: and we're going to just keep making the right short-term decisions that enable our long-term success.

Alexander Slagle: Thanks.

Operator: The next question comes from Brian Harbour with Morgan Stanley. Please go ahead.

Thanks

The next question comes from Brian Harbour.

Pratik Patel: Yeah, thanks. Good morning. What was the price and mix component of same store sales in the quarter? I guess just it sounds like you may think that there's more mix impact from what you're doing on value going forward, like, into the Q2. I guess that was sort of an Outback specific comment, but could you just comment on what you saw and what we should expect there?

With Morgan Stanley , please go ahead. Let's go ahead.

Thank you. Thank you.

Speaker Change: Yeah, thanks. Good morning. What was the price and mix component of same first sales in the quarter? And I guess just, it sounds like you may think that there's...

Speaker Change: More mixed impacts from what you're doing on value going forward into the 2Q. I guess that was sort of an outback specific comment, but could you just comment on what you saw and what we should expect there?

Mike Spanos: Yeah. Mix was relatively flat in Q1. We do expect to see a bit of a check down as we get into Q2. Part of this is with the Aussie Three Course promotion. We are lapping that same promotion from last year. It definitely has a lower check than prior other promotions. We expect to get some traffic benefit from that promotion as we get into Q2, but we'll have some mix impact as well. We're looking at other offers besides those value offers. We're gonna have to infuse more value to motivate, you know, our guests in this choppy environment. You know, we're actively looking across that, you know, and that'll touch all channels as well.

Speaker Change: It definitely has a lower check than prior other promotions, and so we expect to get some traffic benefit from that promotion as we get into Q2, but we'll have to make impact as well. And we're looking at other offers besides those value offers, we're going to have to infuse more value to motivate our guests in this choppy environment. And so,

Mike Spanos: you know, mix in Q2, we would expect to be, you know, down 1% to 2%, as we think about what we need to do to connect with our guests.

Speaker Change: You know, we're actively looking across that, you know, and that'll touch all channels as well. So, you know, mix in Q2, we would expect to be, you know, down 1% to 2%, as we think about what we need to do to connect with our guests [inaudible]

Brian Mullan: Okay, thanks. It sounded like you're contemplating sort of labor investments or maybe it's just staffing model changes. Are you actively doing anything there yet in your guidance? Have you sort of assumed that there's an impact on labor costs from changes there?

Okay, thanks. We're-

Speaker Change: It's kind of like you're contemplating sort of labor investments or maybe it's staffing model changes is that are you actively doing anything there yet in your guidance if you sort of assume that there's an impact on labor costs from changes there?

Mike Spanos: Brian, it's Mike. No. We are testing service models. I mentioned the remarks, and it's based on what our Outbackers are telling us specifically. We believe we can efficiently enhance our service model, deliver a better, consistent guest experience. We are looking at our staffing levels, we're looking at server to table station ratios, we're looking at the roles of the bussers and the server assistants, and also where our managing partners are spending their time to drive throughputs and a great guest experience. Any labor investment is not in our guide.

Speaker Change: Brian , it's Mike. No, we are testing service models, I mentioned the remarks and it's based on what our outbackers are telling us specifically.

Speaker Change: We believe we can officially enhance our service model to deliver a better consistent guest experience. So we're looking at our staffing levels, we're looking at server table station ratios, we're looking at the roles of the buskers and the server assistants. We're looking at the server assistants, we're looking at the server assistants, we're looking at the server assistants,

Speaker Change: and also where our managing partners are spending their time to drive through puts in a great guest experience. So, any labor investment is not in our guide.

Brian Mullan: Okay, thank you.

Okay, thank you.

Operator: The next question comes from John Ivankoe with JPMorgan. Please go ahead.

The next question comes

John Ivankoe: Hi. The question is on, you know, the range of performance that we're seeing in the Outback brand, whether, you know, nationally, regionally, even within a market. I mean, what's, you know, kind of distinguishing, you know, the well-performing stores versus the low-performing stores? You know, you can handle that question either year-over-year or just in terms of the average unit volume disparity within the brand that might exist nationally.

from Don Ivankoe. [inaudible]

with GP Morgan, please.

Thank you for your time. Thank you.

Speaker Change: The question is on the range of performance that we're seeing in the Outback Grand, whether

Speaker Change: You know, nationally, regionally, even within a market. I mean, what's, you know, kind of distinguishing?

Speaker Change: You know, the role-performing stores versus the low-performing stores, and you know, you can handle that question either year-over-year or just in terms of the average unit volume disparity within the brand that might exist nationally.

Mike Spanos: Morning, John. How are you doing? Tactically, we've seen a little more softness in the short term in Texas, Florida, some of the Southeast, Southwest, but broader, it's really about consistency of execution. It's about having good continuity of managing partners. When we dial up what matters in terms of the brand, because we have an amazing brand. When we get the quality right, we get the value right, we get the consistency of experience, and we've proven to ourselves in a number of places when we do it right, we feel great about the AUVs, and we feel great about what we're delivering in terms of restaurant margins, tenure, continuity. That's the fundamental bottom line when it comes to great, consistent performance.

Thank you.

Morning, John . How are you doing? Well, I'm fine.

Speaker Change: So, tactically, we've seen a little more softness in the short term in Texas, Florida, some of the southeast, southwest, but broader. It's really about consistency of execution, it's about having good continuity of managing partners. [inaudible]

Speaker Change: And when we dial up what matters in terms of the brand, because we have an amazing brand, when we get the quality right, we get the value right, we get the consistency of experience and we've proven to ourselves in a number of places when we do it right

Speaker Change: We feel great about the AUVs and we feel great about what we're delivering in terms of restaurant margins, tenure, continuity. That's the fundamental bottom line when it comes to great consistent performance.

John Ivankoe: Okay. Yeah. That and that obviously makes sense. Let me pivot to another question, if I may. What are the employees, you know, whether it's a managing partner at the store or whether it's the hourly employees. I can certainly imagine what the customers, you know, might be asking for from the brand. You know, when you've done your listening tour and you've been able to spend more time in market, in store, which I know, you know, you have a lot of passion for doing, what are the employees specifically asking more of? How are you planning on making the experience better for them?

Thank you.

Speaker Change: Okay, yeah, that obviously makes sense. Let me give it to another question if I may.

Speaker Change: What are the employees, whether it's a managing partner at the store or whether it's the hourly employee? I can certainly imagine what the customers might be asking for from the brand, but when you've done your listening tour and you've been able to spend more time in market in store, which I know you have a lot of passion for doing.

Speaker Change: What are the employees specifically asking more of? How are you planning on making the experience better for them?

Mike Spanos: John, they're consistently telling me they want a simpler, easier way to execute to the guest. They want less complexity, and they wanna win. That's fundamentally what they're all saying. They're pointing to areas in food quality. They're pointing to areas of value we should be focused on. They're really giving me great advice on consistency of execution, both back of the house and front of the house, what that looks like. That's embedded in the strategic work we're doing. We're taking their feedback, whether it's the service model. We're looking at quality across all of our proteins. That's all in everything we're including in the go forward work.

Speaker Change: Jon, they're consistently telling me they want a simpler, easier way to execute to the gas. They want less complexity and they want to win.

Speaker Change: That's fundamentally what they're all saying, and they're pointing to areas in food quality.

Speaker Change: They're pointing areas of value. We should be focused on it, and they're really giving me great advice on consistency of execution, both back in the house and in front of the house, what that looks like. And that's embedded in the strategic work we're doing. We're taking their feedback.

Speaker Change: Whether it's the service model, we're looking at quality across all of our proteins that's all in everything we're included in the go-work, go-forward work.

John Ivankoe: Thanks.

Thanks.

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

Speaker Change: The next question comes from Brian Mullan, with 5% left, please go ahead.

Brian Mullan: Thanks. Kind of following up on the reducing complexity you just talked about. Just at Outback, it sounds like you reduced the menu by 10% in April. It sounds like you're gonna do some more by the end of the year. Can you just talk a bit about any early guest reaction so far, employee feedback, impact to operations? Just talk about, like, how you chose what you reduced so far versus what you'll be looking for, you know, when you reduce more over the course of the year.

Speaker Change: Thanks, kind of, falling up on the reducing complexity you just talked about just at Outback, sounds like he reduced the menu by 10%

Speaker Change: In April , it sounds like you're going to do some more by the end of the year. Can you just talk a bit about any early guest reaction so far and play feedback, impact operations and then just talk about how you chose what you reduced so far versus what you'll be looking for when you reduce more over the course of the year?

Speaker Change: The feedback is very consistent between the guests and our outpackers [inaudible]

Speaker Change: We're focusing on if a menu item has low satisfaction, it drives complexity, and it doesn't deliver consistent execution, then we're taking it off the menu.

Speaker Change: And what we're doing is, and the nice thing is with Zee Asks, it gives us even more immediate feedback on those items by menu item between the guests and with our outbackers. And that'll be an iterative process across all the brands. We'll continue to dial in what the guest tells us and what our team members tell us in terms of satisfaction rates and intent to return and removing complexity. Thank you very much.

Brian Mullan: Okay, thanks. Just wanted to ask about marketing also at Outback. You know, I know it's very early stages of a turnaround. It's gonna take some time. When do you envision marketing being able to become a bigger part of this? You know, how do you balance waiting until you know what you want to talk about, knowing that the guests will have the good experience once you're ready to drive them to the box versus kind of trying to move the needle on the business more near term? Just how you think about that.

Thank you.

Speaker Change: Okay, thanks. And I just wanted to ask about marketing also up back. I know it's very early stages of a turnaround. It's going to take some time. But when do you envision marketing being able to become a bigger part of this? How do you balance waiting until you know what you want to talk about knowing that the guests will have the good experience once you're ready to drive them to the box versus trying to move the needle on the business more near-term? Just how do you think about that? Yeah.

Thank you.

Speaker Change: Big part of the strategic plan we're doing is the brand positioning on Outback and that will include just how we position the brand but it also goes back to the quality, the value, the consistency, the guest experience. That's going to be our best marketing tool to recruit and retain guests.

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

The next question comes from… [inaudible]

Sara Senatore: Oh, thank you. I guess I wanted to ask about the restaurant level margins. You know, obviously, I think a lot of what you're talking about, you know, reinvesting in value and potentially labor is pressuring the margin. Wouldn't that pressure the margin? Are there offsets? Which is to say, I mean, obviously, if you get traffic growth that cures a lot of ills. You know, as you think about menu simplification, does that translate into actual labor savings? Or again, is it really about, you know, if the traffic shows up, more productivity? I guess, you know, the bigger question is the structural kind of margin rate that your restaurant should have, you know, how do you think about that and just the broader P&L?

Sara Senatore, with Bank of America, please go ahead. [inaudible]

Thank you.

Speaker Change: Are there offsets which is to say, obviously if you get traffic growth, that cures a lot of ills, but do you think about many simplification? Does that translate into actual labor savings? Or again, is it really about if the traffic shows up? [inaudible]

Speaker Change: and more productivity. And I guess the bigger question is...

Speaker Change: The structural kind of margin rate that your restaurant should have, how do you think about that and just a broader P&L? Maybe you should be lower on G&A going forward as you family savings but also maybe lower on restaurant level margin. [inaudible]

Sara Senatore: Maybe you should be lower on, you know, G&A going forward as you found these savings, but also maybe lower on restaurant level margin. Anything on kind of short term, but then also earnings power. Thank you.

Speaker Change: Anything on kind of short term, but then also earnings power. Thank you

Speaker Change: Yeah, as we think through, you know, kind of working through the process and potential investments, we're absolutely looking at funding opportunities and the simplification in the restaurants in and of itself isn't going to present a kind of funding opportunities.

Speaker Change: There's certainly some simplification, you know, less training on new LTOs, those types of things, but will repurpose those dollars to focus on quality and consistency of execution. I think as we think of funding components obviously we...

Speaker Change: We made a large move on GNA in last quarter as we shared, we're continuing to look at other costs from a GNA perspective. But we also, as we think about the partnership we have with the third party, certainly part of that is to help us piece together the holistic strategy but a lot of it is deep dives in some up-channel costs. [inaudible]

Speaker Change: as we think about the business, so we're certainly looking at different ways that we can fund any potential investments.

Sara Senatore: Four-wall margins just over time.

Thank you for watching!

Mike Spanos: Yeah. Ultimately, there'll be a bit of pressure, right? As we're in the early stages of the turnaround, and eventually the payoff will be, you know, more consistent same traffic. Our goal will be to try to offset as much as the potential investment in the near term as possible.

and Four-Wall Margins just over time.

Speaker Change: Ultimately, there will be a bit of pressure, where in the early stages of the turnaround and eventually the pay-off will be more consistent traffic. Our goal will be to try to offset as much as that potential investment in the near term as possible.

Sara Senatore: Okay, thank you.

Operator: The next question comes from Brian Vaccaro with Raymond James.

Okay, thank you

The next question comes from Brian Vaccaro with Raymond James [inaudible]

Brian Vaccaro: Hi. Thanks, and good morning. Mike, I guess are the questions on Outback and just thinking about the traffic declines and the underperformance versus the steakhouse peers the last few years. Do you have any line of sight or data on how the composition of the Outback customer base has changed over the last few years? I'm curious if you've lost traction with a certain consumer cohort, maybe a younger guest, what have you, or maybe an income level. Any insights around those dynamics you'd be willing to highlight?

Hi, thanks. Good morning.

Speaker Change: I guess our question is on Outback and just think about the traffic decline and the performance versus the take-house period in the last few years.

Speaker Change: James over the last few years. I'm curious if you've lost traction with a certain consumer cohort, maybe a younger guest would have you, or maybe an income level. Any insights around those dynamics? You'd be willing to highlight? [inaudible]

Mike Spanos: Morning, Brian. We do. We have plenty of data in terms of cohorts, age, ethnicity, geographic, et cetera. We're very clear on it. What I've seen and what's been most concerning is the under $100,000 household has been the biggest pain point for us over the last few years. If I go back to 2019. What we are seeing, though, is when we get it right, it's an amazing brand. When we get the quality right, we get the value right, we get the experience right, we get households coming in, whether they're greater than $150,000 or they're less than $100,000. That's what we need to do.

Speaker Change: All right, that's up for perspective. Thank you. Healy, on the annual guidance, I just want to make sure I heard correctly. The annual guidance does not include the negative impacts of the Brazil equity and earnings, and it also does not include any tariff impacts.

Mike Spanos: No, it includes the Brazil, the 33% ownership of Brazil. It includes that. It does not include tariffs. Ultimately.

Michael Healy: No, it includes the Brazil, the 33% ownership of Brazil would include that. It does not include tariffs.

Brian Vaccaro: Okay.

Mike Spanos: Tariff's a bit of a wild card right now. We have a great team. They're working as actively as possible to mitigate any of that risk. Tariffs impact is not included.

Michael Healy: Ultimately, Tara's a bit of a wildcard right now and the team, we have a great team, they're working as active as possible to mitigate any of that risk, but Tara's impact is not included.

Brian Vaccaro: Okay. Thanks for that. Last one for me, just quickly on the commodity outlook. Has there been any change to your up 2.5 to 3.5? I guess if we could set aside tariffs if that's possible, maybe not. On beef specifically too, you know, we've seen some pressure in the spot market on certain steak cut. Love to get your view on sort of the beef outlook, what you're hearing from your suppliers in terms of supply and demand dynamics, et cetera. Thank you.

Speaker Change: Okay, thanks for that. And then the last one for me just quickly on the commodity outflows has there been any change to your up to an half to three and a half? And I guess if we could set aside tariffs, is that possible? Maybe not. But on these specifically, you know, you seem to spread some pressure in the spot market on certain state cuts. Just love to get your view on sort of beef outflow of what you're hearing. Thank you.

Mike Spanos: Yes, no changes to commodities, no changes to beef. As you may recall, we structure our beef contracts, so we lock in a price. Certainly allows us the benefit to upside, but protect us on the downside. You know, obviously, there could be impacts from kind of the larger macro or some of the tariff components, but right now we're pretty well protected on beef. No issues.

Thank you.

Speaker Change: Yes, no changes to commodities, no changes to beef. As you may recall, we struck our beef contract, so we locked in a price, certainly allows us to benefit to upside, but we'll protect this on the downside until...

Speaker Change: Obviously, there could be impacts from the larger macro or some of the tariff components, but right now we're pretty well protected on beef and some no issues.

Operator: The next question comes from Eric Christel with Goldman Sachs. Please go ahead.

Christina Cole: The next question comes from Christine Cho, with Goldman Sachs, please go ahead.

Sara Senatore: Thank you so much for taking the question. Could you share a little bit more color on the test that you had in the 14 stores during the quarter, just in terms of what you're seeing in traffic, guest intent to return, employee engagement, and profitability in these test stores? What do you really need to see to gain confidence in a full rollout? In a timing perspective, is this something that you can implement relatively quickly to all your stores once you make that decision? Thank you.

Christina Cole: Thank you so much for taking me questions. Could you share a little bit more color on the test that you had in the 14 stores during the quarter, just in terms of what you're seeing in traffic, guest intent to return, employing engagement and profitability in these test stores, and what do you really need to see taking confidence in a full rollout? And in a timing perspective is something that you can implement relatively quickly to all your stores once you make that decision. Thank you. Thank you.

Mike Spanos: Morning, Christine. We're very encouraged by what we're seeing in the test stores, the 14 stores in terms of what we're seeing in food quality, value, and consistency of guest experience. We're also very much in a learning stage here. We are moving urgently to learn, but I wanna be very deliberate to get it right. As we get feedback from our Outbackers, we get feedback from our guests. Again, the beauty of Ziosk is we're able to get that guest feedback very quickly to adjust and learn. That'll enable and really accelerate our longer term strategic plan as we make the right decisions of resources into Outback for long-term sustainable, profitable traffic and comp sales growth.

Speaker Change: Morning Christine. We're very encouraged by what we're seeing in the test stores, the 14 stores, in terms of what we're seeing in food quality, value, and consistency of guest experience.

Speaker Change: But we're also very much in a learning stage here. So we are moving urgently to learn, but I want to be very deliberate to get it right. And as we get feedback from our backers, we get feedback from our guests, and again the beauty of Ziaskis, we're able to get that guest feedback very quickly to adjust.

Speaker Change: and Lauren, and that will enable and really accelerate our longer-term strategic plan as we make the right decisions of resources end out back for long-term sustainable profitable traffic and cop sales growth.

Jared Garber: Thank you.

Operator: The next question comes from Jared Garber, with BMO. Please go ahead.

Thank you [inaudible]

The next question comes from Jared [inaudible]

Jared Garber: Good morning. Thanks for taking the question. Based on what you're seeing in the current macro backdrop, do you believe your current value construct is working as intended across brands? And do you see any reason for change? Last call, you discussed negative mix from value embedded in guidance assumptions. Has that assumption changed at all? Thank you.

Ludwinski,

with B&O, please go ahead. [inaudible]

Good morning, thanks for taking the question.

Speaker Change: Based on what you're seeing in the current macro backdrop, do you believe your current value construct is working as intended across brands and do you see any reason for change? And then last call, you discussed negative mixed-room value and bedded-in guidance assumptions. Has that assumption changed at all? Thank you.

Mike Spanos: As I said on the macros, we do expect a choppy environment this year. That's embedded in our full year outlook, and it's embedded in our Q2 outlook for Mother's Day and Father's Day. In terms of the value, as I said, I do think we've got to deal with the value proposition, especially at Outback. We're gonna continue to react and listen to our customers and our guests. It's iterative, which is why we're doing Aussie Three Course. We made the conscious decision, looking at the success of that program last year, that we know it resonates with our guests. It resonates with those guests that need affordable entry into steak and many of the proteins. We're gonna continue to iterate across all the brands.

Speaker Change: So, as I said, on the macros, we do expect a choppy environment balance year, and that's embedded in our full year outlook, and it's embedded in our Q2 outlook for Mother's Day and Father's Day.

Speaker Change: In terms of the values, I said, I do think we've got to deal with the value proposition, especially at Outback, and we're going to continue to react and listen to our customers and our guests. It's iterative, which is why we're doing Aussie 3 course. We've made a distinct decision looking at the success of that program last year.

Speaker Change: that we know it resonates with our guests. It resonates with those guests that need affordable entry into stake and many of the proteins. But we're going to continue to rate across all the brands. I don't think the revenue management is a static dynamic. It's very fluid.

Mike Spanos: I don't think the revenue management is a static, dynamic. It's very fluid.

Speaker Change: Great, thanks. And then curious how you're seeing guests interact with LFACS Office 3 course, pricing tiers. I know last call you discussed, leading with the $14.99 tier, but significant number of guests trading up to the $17.99 or $2.99 tier. Wondering if this is still the case.

Speaker Change: Maybe how you've seen the mix of guests at the 1499 tier change relts to last quarter. Thank you.

Mike Spanos: You bet. Which first of all, Aussie Three Course had pretty limited impact in Q1 because we're lapping the same promotion from last year. We feel good about the mix. It's very much in line with our expectations, and we've now got it as a core menu item starting in June. I like that because we can execute at a higher level. It's on the base menu. It's easier for our team in the back of the house. We do expect a better momentum out of it in Q2 and or actually more second half of the year. That's embedded in our mix assumptions that Michael talked about. I would also say, again, we're gonna continue to iterate and refine all these offers.

Speaker Change: You bet, first of all C3 course have pretty limited impact in Q1 because we're laughing the same promotion from last year.

Speaker Change: But we feel good about the mix. It's very much in line with our expectations of our expectations.

Speaker Change: and we've now got it as a core menu item starting in June . And I like that because we can execute at a higher level. It's on the base menu. It's easier for our team in the back of the house. So we do expect a better momentum out of it in the Q2 and action boards second half of the year. And that's embedded in our mix assumptions that Michael talked about. I would also say, again, we're going to continue to iterate and refine all these offers. We are seeing a nice trade-up into the 1799

Speaker Change: and the 29-9 levels. We're seeing a good amount of trade-up on the desserts as well. So when we get it right, our guests trade up and they feel good about the proposition and they'll pay more for more. We're seeing a good amount of trade. We're seeing a good amount of trade. We're seeing a good amount of trade.

Jared Garber: Great. Thank you very much.

Operator: This concludes our question and answer session. I would like to turn the conference back over to Mike Spanos for any closing remarks.

Great. Thank you very much.

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

Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect. Goodbye.

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

Goodbye!

Q1 2025 Bloomin' Brands Inc Earnings Call

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