Bloomin' Brands, Inc.

Welcome to the Bloomin' Brands Fiscal Second Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow management's prepared remarks. It is now my pleasure to introduce your host, Mark Graff, Group Vice President of Investor Relations. Thank you, Mr. Graff. You may begin.

Thank you, and good morning, everyone. With me on today's call are David Dino, our Chief Executive Officer, and Chris Meyer, Executive Vice President and Chief Financial Officer. By now, you should have access to our fiscal second quarter 2020 earnings release. It can also be found on our website at bloomandbrands.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 performance. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from our forward-looking statements. Some of these risks are mentioned in our earnings release. Others are discussed in our SEC filings, which are available at sec.gov. During today's call, we'll provide a brief recap of our financial performance for the fiscal second quarter 2020 and a discussion regarding current trends. Once we've completed these remarks, we'll open up the call for questions. With that, I'd now like to turn the call over to David Dino.

Well, thank you, Mark, and welcome to everyone listening today. Our priorities remain unchanged as we continue to navigate these challenging times. We are focused on taking care of our people and serving food in a safe environment that protects both our team members and customers. The investments made over the past several years to enhance the customer experience and rapidly pursue the emerging delivery opportunity have been critical to our success in navigating this pandemic. At the outset in March, we were able to quickly pivot to an off-premises only business model as dining rooms were forced to close. The rapid growth we experienced in off-premises sales allowed us to keep substantially all of our locations open during this time. Starting in May, states began the process of partially reopening their economies. Our decision not to furlough or lay off any employees during this pandemic has allowed us to quickly prepare our restaurants to reopen dining rooms in a safe and efficient manner. As of July 19, 2020, Almost all of our U.S. company-operated restaurants have reopened with limited in-restaurant dining capacity. During this time, we continue to maintain elevated safety measures, including additional sanitation and disinfecting practices, using gloves and facial protection for our employees, as well as contactless payment options for our customers. In addition, dining room seating configuration has been modified to adhere to social distancing and reduced capacity standards. Customers have responded in taking notice of these additional safety measures. This has translated to improving demand as overall weekly sales have consistently increased since dining rooms reopened. At Outback, for the most recent week ending July 19th, comparable restaurant sales were down 10.7% versus the prior year and locations have reopened with limited in-restaurant dining capacity. Importantly, these locations are also maintaining a high off-premises mix with both delivery and to-go. We will continue to leverage our strong capabilities to retain the off-premises growth we achieved during the pandemic. Off-premises remained a large opportunity and a significant part of the go-forward strategy. The improved sales recovery covered with disciplined cost management enabled us to generate positive cash flow in June. This represents a great step in stabilizing the business and right-sizing our cost structure. The pandemic forced us to operate the business differently, which provides an opportunity to reassess the operating model. One area where we are gaining additional insights is around simplification. This encompasses everything from optimizing the menu and enhancing the labor model to the marketing strategy and how we support our restaurants. These efforts have contributed to reduce complexity, improve consistency, and increase profitability across revenue channels. We are leveraging these learnings to drive more operating efficiency in the restaurant and the current environment and as we emerge in a post-COVID world. None of this progress would be possible without the terrific work done by our team members in the restaurants and the dedicated employees in the Restaurant Support Center. They've remained incredibly nimble and agile in finding ways to support guests as we navigate through this challenging environment. The enthusiasm and commitment they offer every day to bring life to life hospitality, service, and experience is what makes our restaurants so successful. Thank you to everyone for all your hard work. Turning to Brazil, Much like the U.S. and the rest of the world, the Brazilian economy is being impacted from the effects of the pandemic. The country has seen increases in reported COVID cases, which resulted in states and local governments enacting measures to reduce the spread of the virus. This included the closure of restaurant dining rooms and a shift to an off-premises only model. It is more difficult to execute off-premises in Brazil, given that most of our restaurants are located within malls. During this time, we were able to successfully build a carryout business from scratch in just a few short weeks. Recently, as in the U.S., dining rooms are beginning to safely reopen and more than 70% of our locations are offering in-restaurant dining. For the week ended July 19th, comparable restaurant sales at Brazil Outback locations with in-restaurant dining were down 44%. We continue to see an increase in sales volumes and the team is actively addressing cost opportunities to manage cash. Based on current trends, we believe our Brazilian business has adequate liquidity to navigate through this pandemic and we do not anticipate any further cash infusions into the business. Outback remains resilient and continues to be one of the highest regarded brands by consumers in Brazil. In summary, our goal is to emerge as a stronger company and more formidable competitor on the other side of this crisis. We will accomplish this with the following priorities in mind. continue to upgrade our food, menu, and service in all of our brands. We made the significant investments against these areas over the past four years to enhance brand positioning. This cycle of continuous improvement is aimed at enhancing our value proposition to consumers while taking minimal pricing. Second, continue to capture the opportunities in our industry-leading delivery and carry-out business. This pandemic has proven the importance of this channel and the role of convenience for our consumers. We are focused on leveraging our strong off-premises capabilities to further grow this opportunity. Third, make even more progress in our marketing and digital technology efforts. For example, we are making changes to the online ordering platform to enhance stability and performance in this critical channel. We've also implemented new tools that will enable us to pursue targeted digital marketing efforts that provide a high return on investment. Fourth, lead the way in taking care of our people and providing the benefits they need. Attracting and keeping a talented and diverse workforce is the key to success in this business. Fifth, continue to enhance our liquidity position and strengthen the balance sheet. Our improved sales performance combined with the recent bond offering and steps taken to tightly manage cash has enhanced our liquidity position. This also provides ample financial flexibility moving forward and enables us to capitalize on future opportunities. And finally, we will accomplish all this while adhering to strict safety measures. Protecting team members and customers remain the top priority. We want consumers to feel safe in any channel whether that is in our restaurants or in the convenience of their own home. And with that, I'll turn the call over to Chris.