Bloomin' Brands, Inc.

Greetings, and welcome to the Blumenbrand's Fiscal Second Quarter 2022 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, Senior 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 2022 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 gap 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 2022, an overview of company highlights, and an update to 2022 guidance. 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. As noted in this morning's earnings and release, adjusted Q2 2022 diluted earnings per share was 68 cents versus 81 cents in Q2 2021. While results were below last year, our Q2 earnings per share was nearly double of what we achieved in 2019. As it relates to 2021, we were lapping exceptional earnings due to stimulus payments and pent-up consumer demand. In addition, Q2 was also the highest inflationary quarter of the year. We made a conscious decision to preserve our value equation and not raise prices to fully offset inflation. We believe the short-term decision will have long-term benefits for the business. The confidence in our strategy, both domestically and internationally, is reflected in our increased revenue guidance. This was driven in large part by the success we saw in our sales initiatives through the first half of the year and the marketing investments we are making in the back half of the year. During the quarter, we saw positive trends through May but experienced softer trends in June consistent with the industry. Fortunately, the comprehensive plan we established to build a stronger, leaner, operation-centric company laid a solid foundation for us to navigate this challenging environment. We leveraged our leading off-premises business, growing digital capabilities, and improved operational efficiencies to deliver on our key commitments. These results would not have been possible without the talented and dedicated employees in our restaurants and the Restaurant Support Center. Your commitment to providing guests the highest level of service and hospitality is what make our restaurants so successful. As we look ahead to the balance of the year, the focus remains on achieving our full year objectives despite a more challenging economic environment. We continue to have confidence in executing our strategy to elevate the customer experience while driving sustainable sales and profits. The plans in place set us up well to achieve our objectives, strengthen the business, and provide momentum for 2023 and beyond. The key elements of our plan include, first, grow in-restaurant sales by improving service levels and food offerings. The investments made over the past few years to elevate the customer experience are showing up in improved social, especially at Outback. As part of this effort, we continue to look for ways to simplify the business to improve execution and consistency. We are rolling out several innovations, such as new cooking technology, including advanced grills and ovens to improve food quality and productivity. We are also installing kitchen display systems for meal pacing and handheld technology for our servers. These innovations should reduce costs and further improve customer service. We are also deploying more targeted marketing to build awareness and drive frequency. These initiatives are aimed at highlighting our great menu and the everyday value that we offer to guests. Importantly, this is accomplished without sacrificing product quality or the guest experience. In addition, these programs offer high returns and are not reliant on deep discounting to drive traffic. Second, expand our leading off-premises business. We continue to capitalize on our strong carryout and delivery capabilities. Retention levels held steady with Q1 and are contributing to sales outperformance. Third-party delivery continues to grow even as people are returned to in-restaurant dining. Importantly, profit margins in this channel are comparable to margins of the in-restaurant business. This is the result of initiatives that were completed the past few quarters. We are also pursuing catering opportunities as people continue to return to offices. We offer significant value through our bundled platforms, which includes group platters for large parties and or individual box options. We expect off-premises to remain a large and growing part of the business going forward. Third, leverage operating margin gains by growing sales and reducing costs. This starts by growing healthy traffic across the in-restaurant and off-premises channels. We also reduce reliance on discounting and promotional LTOs and pivoted advertising spend towards more targeted, high-return digital channels. In addition, we remain disciplined in managing the middle of the P&L and are aggressively pursuing efficiencies in food, labor, and overhead. As Chris will discuss, despite large increases in food and labor inflation, we've been able to achieve our operating margin objectives. We remain committed to our long-term goal of 8% operating margins. And finally, become an even more digitally savvy company. In Q2, approximately 75% of total U.S. off-premises sales were through digital channels. Last year, we implemented a new online ordering system and mobile app to support our digital business. These technology initiatives are aimed at creating a frictionless customer experience while also enhancing customer engagement. Both have outperformed expectations and the new app has over 2 million downloads. You can expect to see more activity as we improve the functionality and features of our app and digital offerings. These priorities will continue to guide us in 2022 and beyond. Because of the momentum we have seen in so many areas and a much stronger balance sheet, we are in a position to begin growing our restaurant base in a meaningful way once again. Last quarter, Mark Graff talked about our new and revitalized development plans. We are making good progress, building a strong pipeline of new units, and we expect to accelerate new unit growth in 2023 and beyond. Our growth priorities are, first, accelerating new unit growth at Outback. We developed a smaller and less expensive prototype that will enable more meaningful growth with healthy returns. This includes pursuing new trade areas and rapidly growing markets, as well as fill-in opportunities in major metro areas. To date, we have opened four new smaller locations with strong sales and positive guest feedback. Consumers are taking notice of the new design and are giving us high marks on the brighter ambiance, decor, redesigned bar, and new service model. In addition, we continue to upgrade and contemporize our asset base. Investments in remiles are offering good returns, and recent relocations at Outback are providing outside sales lift in volumes exceeding $4.6 million, well above the system average. Second, opening new restaurants at Fleming's. The business continues to perform extremely well and is a proven category leader in fine dining. The average unit volumes are the best in the portfolio. We are building first-class facilities on great real estate sites, largely in stronghold markets of Florida, California, and Texas. Third, Brazil is a category leader, and they are seeing a strong recovery in both sales and profits. New restaurants continue to open above expectations. We are on track to open 16 new Outbacks this year and have a robust pipeline for growth. There are currently 135 locations in Brazil, and we believe we can grow this brand to approximately 240 restaurants over time in this under-penetrated market. And finally, we are working through plans to expand the Carabas business in key markets. Kravitz has been among our top performers in the portfolio over the last three years. They have built a terrific off-premises business that has opened up a number of possibilities for the brand. More to follow on this opportunity. In summary, Q2 is another solid quarter. We remain ruthlessly focused on executing against our key initiatives to achieve our 2022 goals while building a great business that will thrive in 2023 and beyond. And with that, I will now turn the call over to Chris We'll provide more detail on Q2 and thoughts for the remainder of 2022.