Bloomin' Brands, Inc.

Greetings and welcome to the Bloomin' Brands Fiscal First Quarter 2021 Earnings Conference Call. At this time, all participants are on 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 Grass, Group Vice President of Investor Relations. Thank you, Mr. Grass. You may now 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 first quarter 2021 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 first quarter 21. a discussion regarding current trends, and a select Q2 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. The first quarter was a strong start to the year, and we had very good results across many measures. Results further reinforce our belief that the strategies and tactics are working. and set us up well to achieve our near and long-term commitments. Thank you to the teams in the restaurants and restaurant support center for your unwavering commitment to serving our guests. Your dedication to bringing great hospitality, service and experience every day is what makes our restaurants so successful. Thanks to all of you for your hard work. The first quarter performance was the culmination of a multi-year effort to elevate the guest experience, grow healthy traffic and pursue operational and simplification efforts to improve margins and profitability. This was accomplished by, first and foremost, taking care of our people and customers. We did not furlough any employees during the pandemic and this decision has contributed to low turnover. Maintaining a motivated and well-trained and engaged employee base is critical to our long-term success. As sales volumes are now exceeding pre-pandemic levels, These actions provide a competitive advantage to retaining talent as the industry faces some staffing challenges. Second, we are focused on providing great food and service to customers in the dining room while maintaining our off-premises volumes. We made significant investments pre-pandemic to capitalize on the growing off-premises demand as consumers shifted towards convenience. Our to-go and delivery businesses are performing very well, and the high off-premises retention levels are contributing to the strong sales outperformance. We have been aggressive in pursuing opportunities to further optimize how we run and support our restaurants. We are realizing efficiencies through simplification efforts and across operations, menus, and marketing offers. This has led to lower waste, reduced prep and training hours, and improved execution. These benefits translate into lower costs in the restaurants and in the Restaurant Support Center. We will continue to look for ways to reduce complexity, improve consistency, and increase profitability across revenue channels. As a result of these actions, we had higher than expected volumes and generated significant margin and profit improvement in the first quarter. We believe the strategic and operational framework we outlined last quarter can deliver consistent performance in the quarters ahead. As the country reopens, we remain focused on optimizing revenue channels across both in-restaurant and off-premises. Our goal is to preserve off-premises volumes as dining room capacity grows. The Carrabba's team has done an exceptional job in this area. In the first quarter, Carraba's off-premises sales were a portfolio high of 42% of revenue. We will enhance and strengthen the company's delivery and carry-out business by first, continue to provide great food and service. For example, the Family Blundell platform at Bonefish offers convenience at an attractive price point. The offering provides a fully prepared meal for five starting at $29.99 with six different options to choose from. And second, by expanding our technology and digital efforts. We improved our online ordering system for Outback and Carrabba's in late March. This technology creates a faster and simpler ordering process and resulted in a higher average check. We are seeing strong consumer adoption with approximately 65% of all off-premises sales in Q1 handled through our digital channels, representing 147% growth versus the prior year. In addition, we are in the process of updating the Outback mobile app to improve off-premises execution for customers and our operators. We expect a new app to be available in Q3 of this year. As we increase off-premises revenue, we will also continue to grow our dine-in business. One of the key drivers is the new menu at Outback, which is performing ahead of expectations. 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 and beverages. In addition, the efficient menu design reduces complexity, which improves execution and consistency. This results in an improved customer experience. We'll be doing similar work at our other brands. The positive momentum of our initiative is carrying into the second quarter. Through the first four weeks, second quarter U.S. comparable sales are up 12.6% on a two-year basis versus 2019. It is clear customers want to come back to restaurants, and we are confident in our ability to provide a safe and welcoming dining experience. Now turning to Brazil. Beginning in March, the country experienced a second spike in COVID cases, which caused the government to impose new lockdowns to slow the spread of the virus. This led to significantly reduced or closed in-restaurant dining capacity for a majority of the country. During this period, our restaurants primarily operated in an off-premises only capacity. However, in recent weeks, we've seen in-restaurant dining restrictions beginning to ease. This has resulted in improving weekly sales volumes per store from $21,000 to $35,000 over the last four weeks. In addition, on April 24th, Sao Paulo, which is our largest market, announced they are reopening in-restaurant dining capacity to 25%. This provides further optimism about the future continued pace of the recovery. We expect these reduced sales volumes, while temporary, to disproportionately impact Brazil's second quarter results. As a reminder, last year when Brazil underwent the first wave of COVID, we had to operate with an off-premises only business model. As capacity restrictions eased, sales improved quickly. We would expect a similar recovery once Brazil emerges from this recent wave of the virus. These near-term headwinds do not diminish our long-term enthusiasm for the business. We remain optimistic and expect Brazil to emerge stronger with an even better market position when the pandemic subsides, given the following. First, we have a leading market position and Outback remains a highly regarded brand with strong consumer appeal. The competitive landscape could look very different on the other side of the pandemic. We expect that a large number of restaurants, as high as 30%, will remain permanently closed in Brazil. This reality, combined with a high level of pent-up demand for our brands, could provide meaningful and rapid growth opportunities for this business on the other side of the pandemic. Third, we have an incremental revenue channel in off-premises that did not exist before the pandemic. and believe we can retain a large portion of this business moving forward, even as restaurant dining grows. Lastly, we have a great local team in Brazil. We are confident that they will not only navigate the pandemic, but also capture the major opportunities we will have once the crisis is over. Finally, returning to the U.S., we have the financial power and capability to build our development pipeline in 2021 and beyond. Later, Chris will talk about the very successful refinancing that we just completed. As the environment stabilizes, we are finding opportunities for development. In the U.S., Outback New Restaurants and Relocations, along with New Flemings and our Stronghold Markets, will be the priority. In addition, we'll be building a few Aussie Grill test units. Internationally, we'll continue to expand our great business in Brazil, and they are able to fund their development. In summary, we are off to a terrific start. We are making significant progress against key initiatives to enhance the customer experience simplify operations, and optimize our cost structure. The learnings developed through the pandemic have put us in an even better position to capture these opportunities to drive total shareholder return. I can assure you we will not rest on our success and will be aggressively pushing forward. We are confident we will emerge a better, stronger, operations-focused company. And with that, I'll turn the call over to Chris.