Bloomin' Brands, Inc.

Greetings and welcome to the Bloomin' Brands Fiscal Second Quarter 2021 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. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mark Graff, Senior Vice President of Investor Relations, Thank you, Mr. Graf. 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 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 second quarter 2021, a discussion regarding current trends, and select Q3 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.

Thanks, Mark, and welcome to everyone listening today. We are very pleased with the second quarter sales and profit performance. Our strategies are working and setting the company up for even more sustainable growth. The success is directly tied to the planning and hard work that has taken place in our company over the last few years. In 2019, we presented a comprehensive plan to build a stronger, leaner, operation-centered company, one focused on providing even better service and food to customers. This plan was designed to significantly improve total shareholder return. Before we get into the details of the second quarter, I wanted to take a few minutes to discuss the progress against the key five initiatives that underpin our 2019 plan. First, grow in-restaurant sales by improving service levels and food offerings in the restaurants. Over the last few years, we've made investments in these areas to elevate the customer experience across the portfolio, especially at Outback. As a result, we are taking market share versus the industry. In the second quarter, U.S. same-store sales were up 12.1% on a two-year basis versus 2019. This was 890 basis points ahead of the industry. We also made significant investments in our people. Since the start of the pandemic, we have not furloughed any employees. This decision contributed to retention employee engagement scores that are among the best in the industry. With sales volumes exceeding 2019 levels, these actions provide a competitive advantage in retaining talent in this challenging environment. Maintaining a motivated and well-trained employee base is critical to our long-term success. Second, through our leading off-premises business, we continue to capitalize on our strong off-premises capabilities during the pandemic and the high off-premises retention levels in 2021 are contributing to sales off-performance. During the second quarter, the company generated over $275 million in off-premises sales, representing approximately 28% of total revenue. Importantly, profit margins in the off-premises channel are approaching the margins of the in-restaurant business. This is the result of initiatives that were completed the past few quarters. We expect off-premises to remain a large and growing part of the business going forward. Third, rapidly approve operating margins by growing sales and reducing costs. Our goal was to grow operating margins by nearly 300 basis points to 7.5% of revenue. Margins in the second quarter were well ahead of this long-range goal. Chris will provide additional detail regarding future margin targets. We will leverage learning from the pandemic, including efforts to further optimize how to run and support restaurants. Importantly, a number of technological and equipment innovations are in test that we hope to roll out in restaurants in the coming quarters. These innovations should improve customer service and reduce costs. Fourth, become an even more digitally savvy company. In Q2, digital sales represented approximately 20% of U.S. sales, a 318% increase over 2019 levels. We have made several investments to grow digital volumes and increase our capabilities throughout all aspects of the company. Recently, we rolled out a new and improved Outback app that has significantly improved the off-premises ordering process. Early data and consumer feedback has been very positive. The app will later showcase substantial investments we made to digitize and streamline the carryout experience. These new app features will be rolling out in the coming quarters, and we expect them to accelerate our very attractive carryout channel. And finally, build a much stronger balance sheet. Given our very good year-to-date results, we generate a great deal of free cash flow and are paying down debt. Our credit metrics are improving each quarter, and our goal is to be at three times lease-adjusted leverage by early next year. This will give us the liquidity to withstand unforeseen shocks. A strong balance sheet also provides great flexibility to pursue business opportunities that will enhance shareholder value. All of the initiatives above played a major part in producing an excellent second quarter. Importantly, the sales momentum has carried forward into the third quarter. Through the first four weeks of Q3, two-year U.S. comp sales versus 2019 are up 15.2%. These results would not have been possible without the talented and dedicated employees throughout the company. I would like to thank the hardworking team members in the restaurants and at the Restaurant Support Center. Your commitment to serving guests with the highest levels of service, hospitality, and experience is what makes our restaurants so successful. We intend to build on the progress we've made against these major priorities and are excited about the potential ahead. Before concluding, I would just like to add a couple of other priorities that you'll be hearing more about in the future. First, we believe there's an opportunity to accelerate new unit growth at Outback and Fleming's. Outback is a leading brand with substantial headroom for unit growth. The success of the Outback relocation program is a clear indicator of this demand. In the past five years, we relocated approximately 50 restaurants with sales lifts of 35% and average unit volumes of $4.6 million. We recently developed a new, less expensive prototype that will enable meaningful restaurant growth with healthy returns. We also have the opportunity to open additional Fleming's in California and Florida, our best performing markets. Flemings is a proven category leader by any measure and will be a source of growth for our company. Second, continue to grow Brazil as it manages through the pandemic and resumes expansion. Sales in Brazil are bouncing back quickly. Case counts from the virus are dropping rapidly and there's a strong adoption of the vaccine in the country. We've already had category leading brands in Brazil and the company will be in an even better position as we emerge from the pandemic. As a reminder, Brazil is funding its own growth through internally generated cash. In summary, Q2 was another terrific quarter. We remain very focused on executing against our key initiatives. We are optimistic that it will capture these opportunities and drive total shareholder return. And with that, I'll turn the call over to Chris.