Bloomin' Brands, Inc.

Greetings and welcome to Blumenbrand's Fiscal Fourth 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, Mr. Mark Graff, Group Vice President of Investor Relations. Thank you, Mr. Graff. You may begin. The floor is yours.

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 fourth quarter 2020 earnings release. It can also be found on our website at blumenbrands.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. 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 fourth quarter 2020, a discussion regarding current trends, and select 2021 guidance metrics. Once we've completed these remarks, we'll open up the call for questions. And with that, I'd now like to turn the call over to David Dino.

Well, thank you, Mark, and welcome to everyone listening today. Since the beginning of the pandemic, our priorities have remained unchanged. We are focused on taking care of our people and serving great food in an environment to protect both team members and customers. Maintaining a motivated, well-trained, and engaged employee base that is committed to providing a safe dining experience is critical to our long-term success. The fourth quarter once again showed our resilience in navigating through an ever-changing landscape. Our teams had to adapt to rapidly evolving rules, regulations, and in-restaurant dining restrictions at the state and local level. I would like to thank everyone in the restaurants and the Restaurant Support Center for doing such a great job managing through this crisis. Your dedication to providing hospitality, service, and experience every day is what makes our restaurants so successful. The strategic and financial plans we laid out in our February 2020 fourth quarter earnings call remain. In fact, the learnings developed through the pandemic have put us in an even better position to capture these opportunities to drive total shareholder return. Over the past year, we have seen robust performance in our off-premises business. Convenience continues to play an important role with consumers, and we are leveraging the strength of our to-go and delivery capabilities to meet this growing demand. During the fourth quarter, off-premises represent 37% of U.S. sales. Importantly, this momentum continues into the first quarter. We are maintaining high off-premises volumes even as dining rooms reopen. Karabas in particular has capitalized on this sales channel with its family bundles platform that provides convenience at an attractive price point. This offering provides a fully prepared meal for five people starting at $34.99 with eight different options to choose from. We believe off-premises will be an important growth catalyst for Karabas and all of our brands moving forward. 2021 has started off stronger than expected. We experienced an acceleration in sales trends due to an easing of in restaurant dining restrictions, pent-up consumer demand, and continued strength in our off-premises sales. As a result, U.S. comparable sales were down 12.9% through the first seven weeks of the fiscal year. We continue to outperform the industry and take share. It is clear customers want to come back to restaurants and are confident in our ability to provide a safe and welcoming dining experience. The new menu at Outback launched in September 2020 is performing even better than the test markets. This includes an increase in guest satisfaction and improvement in positive sentiment across all key factors, such as price value, service and portion size, as well as food and beverage. We designed the menu to reinforce our steak leadership through more accessible premium cuts and larger portions while also lowering menu prices. We are seeing strong customer preference as guests are trading up to larger cuts of steak enjoying larger portions and increasing their attachment rate on appetizers. In addition, the efficient menu design reduces complexity, which improves execution and consistency. This results in an improved customer experience. Chris will speak to more of this in a bit, but our focus on margin improvement continues. Last year, we outlined actions to simplify our overhead structure. This is resulting in $40 million in an estimated savings over a two-year period. We are making great progress against these initiatives and are ahead of schedule in realizing these benefits. In addition, the pandemic provided an opportunity to look at this business differently and reassess the operating model. This review has identified efficiencies to further optimize how to run and support restaurants. For example, simplified menus have resulted in record low levels of waste over the back half of the year. We will continue to look for ways to reduce complexity, improve consistency and increase profitability across revenue channels. Our performance improvement resulting opportunities are not limited to the United States. The Brazil business experienced significant improvement in sales and profit trends in the fourth quarter. During Q4, we saw an easing of in-restaurant dining restrictions that helped drive effective capacity to approximately 50% in most cities. This contributed to a steady sequential increase in comp sales performance, where they ended the quarter down 14.8%. Delivery remains a strong contributor to sales, and we are retaining a large portion of this business. The team has also been actively managing costs while leveraging learning from the pandemic to drive additional efficiencies. Outback remains a highly regarded brand with strong consumer appeal. We are well positioned in this important market. Turning back to the U.S., sales growth will also help drive profitability and margins. We are confident in our ability to continue to take market share over the long term. We will accomplish this by leveraging existing opportunities to grow healthy organic traffic, including the new menu at Outback that enhances price value, as previously mentioned. Sustaining the off-premises volume we achieved amid the pandemic while building in-restaurant traffic. Expanding the pipeline of the successful relocation program at Outback, where we believe we still have lots of opportunity. Accelerating digital capabilities to attract and retain guests in a more targeted and personalized manner with improved ROIs. Leveraging our Diner Rewards loyalty platform, which is driving strong engagement across the portfolio, we are using the rich data we have collected over the years to attract, convert, and retain customers. Pursuing the virtual brand opportunity with a concept like TenderShack. Tender Shack provides incremental sales with attractive margins and requires zero capital investment. And finally, investing in new store development in the U.S. with Outback, Fleming's, and Aussie Grill, and internationally in Brazil, given our brand regard with high consumer demand and attractive margin profile. As we move into 2021, we are prepared to adapt to the changing landscape to deliver an exceptional experience for our guests, whether in restaurant or the convenience of their own home. To fully capture the off-premises opportunity, today we are announcing the national rollout of our virtual chicken brand, Tender Shack. This is yet another lever in our very successful off-premises business. As I mentioned earlier, 37% of our revenue is currently off-premises. Our goal is to maintain and improve service levels so we can continue to grow this channel. We recently introduced Tender Shack across the country in 725 locations primarily in Alpac and Carrabba's restaurants. We have terrific geographic coverage given our national footprint. As a reminder, this virtual brand leverages the kitchens of our existing restaurants for cooking and delivery. It offers a high-quality, very limited menu featuring chicken tenders, fries, cookies, and drinks. As we rolled out Tender Shack in test markets, it was clear we had a winner. The brand exceeded all of our sales, profit, guests, and operating metrics. Our goal is to achieve $75 million in incremental sales on an annualized basis. The chicken segment is a large and rapidly growing category, and we look forward to expanding this opportunity for years to come. We expect our off-premises business to continue to be strong as in-restaurant dining trends improve. We are making significant progress against key initiatives to enhance the customer experience, simplify operations, and optimize our cost structure, all in a safe environment. We are confident we will emerge a better, stronger, operations-focused company. Blumenbrands has the right people, assets, and capability to meet the needs of today's consumer and capture the opportunities in front of us and beyond. And with that, I'll turn the call over to Chris.