Bloomin' Brands, Inc.

Thank you and good morning, everyone. With me on today's call are Mike Spanos, our Chief Executive Officer, and Michael Healy, Chief Financial Officer and Executive Vice President. By now, you should have access to our fiscal third quarter 2024 earnings release. It can also be found on our website at www.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 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 in a material way 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 www.sec.gov. During today's call, we will provide a brief recap of our financial performance for the fiscal third quarter 2024, an overview of company highlights, and current thoughts on fiscal 2024 guidance. Once we've completed these remarks, we'll open the call up for questions. With that, I would now like to turn the call over to Mike Spanos.

Thanks, Tara, and good morning, everyone. It is a privilege to be leading the Blumen Brands team. We have iconic brands, passionate and resilient team members, and a culture grounded in taking care of our people, our employees, customers, suppliers, and communities. I am excited and wanted to be part of this tremendous team for two reasons. First, my family and I are longtime loyals of all of the Blumen Brands. including my late father, who always felt so special, going to Outback with my mom every Friday night to have a high-quality steak and a beer at a great value in a fun, casual environment. Whether it has been a great steak with my wife and kids at Outback, a dinner with my in-laws for Italian acrabas, a birthday dinner for my mom at Bonefish for fresh seafood, or an elevated steak dinner at Fleming's, Our brands have provided my family with fun and memorable experiences. The excitement to be part of the team has only increased after spending time working in our restaurants with our great team members. From cutting filets to shaking handcrafted cocktails, nothing beats the hands-on approach to learning the operations of a business. Second, I believe in the strategic growth potential of the business. Blumen Brands is a great business with great brands and a great team. When we consistently execute with excellence and the guest experience is right, our brands generate profitable traffic growth. Our brands have a high right to succeed and steak and Italian casual dining are on trend and are big categories. Within steak, we compete with strong players and good competition enhances category growth and pushes us to deliver a better guest experience. I have a lot of confidence in the long-term value of the company with the financial resources, including a good balance sheet with ample cash flows. With an operating mindset, we will deliberately and quickly make the necessary strategic steps to unlock that value. Now that you hopefully understand my motivation to be part of the Bloomin' Brands team, I want to recognize and thank our dedicated outbackers, MECOs, associates, and anglers. In addition to being outstanding operators, I've been impressed with their resiliency and capability after dealing with both Hurricane Helene and Hurricane Milton in the span of two weeks. Our teams demonstrated leadership and dedication to each other, our guests, and our communities. The examples of serving, leading, and doing what is right in the face of such adversity has been inspiring. Despite flooded and damaged homes and cars, power outages and gas shortages, our teams took care of each other and safely reopened our restaurants to serve our communities. This kindness and support have been so impressive, and I thank and appreciate each and every one of you. We also donated $500,000 to the American Red Cross to support hurricane recovery in addition to feeding thousands of our first responders and those in need to support community recovery. I also want to thank and acknowledge the legacy and contribution of Dave Dino. He is a superb leader in person and has been invaluable during my onboarding. We've executed a smooth transition and have spent detailed time together to ensure the strategic work that the team has been working on remains on track and accelerates, especially in Outback Steakhouse. As you get to know me, directly leading frontline team members in both the Marine Corps and in the Pepsi system was foundational for me. I spent the majority of my PepsiCo career on the bottling side in asset and people-intensive workplaces, starting on delivery trucks and servicing both retailers and restaurants. I also led broad and complex portfolio businesses at PepsiCo, Six Flags, and Delta. In addition to my operational experience, I've led marketing, consumer insights, revenue management, and food service teams. We will manage the business with an operational focus and a guest-centric lens. My time in these roles reinforced three guiding principles. First, leadership is a privilege. Focus on the team member experience. We have a unique culture at Bloomin' Brands, one that originates from our founders. Our principles and beliefs states success is measured by growth in sales and profit and is the result of taking care of our people. Our success is based on our belief that people want to be part of something they can be proud of, is fun, and that includes and values them. Throughout my career, I focused on building performance-based cultures, balancing employee well-being, and driving accountability for best-in-class performance. Listening to and learning from our restaurant operators is important in order to support them working more effectively and efficiently. We will stay close to our managing partners and joint venture partners as well as our franchise leaders as they have the greatest insight into what we can do to better improve the guest experience. I will spend the majority of my time on our operations and how we can improve our team member experience, which in turn inspires a high-quality, welcoming, elevated, and caring experience for our guests. The second guiding principle is to focus on the guest experience. Our ability to consistently execute a memorable experience for our guests with a high quality meal at a great value in a relaxing environment is what drives repeat visits and loyalty to our iconic brands. Consumers want memorable experiences and away from home occasions. Every moment matters when guests choose to spend their hard earned money and their precious time with us. The third principle is to have a growth mindset by focusing on the core. I found every market, whether domestic or international, in every category has growth potential in terms of traffic, revenue, and profitability. It is important to control what we can control, have a clear definition of success, and execute on targeted initiatives that drive growth. This leads to disciplined capital investments, simplification of the agenda, and being great on what is important to our guests. Blumen Brands is a portfolio of iconic brands that have strong growth potential. By focusing on the core of our brands and operational excellence, there is a long runway ahead. As I initially evaluate our portfolio, I see two primary scalable areas for growth. The first and our biggest brand is Outback Steakhouse. This is a global brand in an on-trend steak category. However, we have not sustainably grown traffic. We are closely evaluating all elements of the guest experience. I am personally committed to material improvement at Outback Steakhouse that will sustainably grow traffic, comparable sales, and profitability. This brand has a high right to succeed within the steak category. I'm excited about the strategic work that we have underway and I will take an active role in operationalizing the work. Our second scaled growth opportunity is Carrabba's. I've been impressed with this team's capability to grow both traffic and comparable sales and to meet our guest needs across various day parts and occasions. The team is focused on the in-restaurant experience and is assessing the white space opportunity to strategically scale the brand with margins and returns that deliver shareholder value. We plan to share a meaningful update on the Outback and Bloomin' Brands strategy on our next earnings call. Before I turn it over to Michael to discuss our financials, there are two last items that I want to address. First is our Q3 results and balance of year and full year guidance. It is reflective of the broader challenging industry trends, recent impact from the hurricanes and our current execution. Our team is working hard, but we are not pleased with our performance and we know we can do better. We have work to do and are committed to providing accurate and transparent forecasts of our performance. Second, I am pleased to announce our strategic partnership with Vinci Partners for our Brazil operations. We have a scaled and leadership position in Brazil and are excited to have Vinci as our partner to grow the business in the future. Vinci is a significant asset management firm with a successful track record of partnerships in the restaurant space. We are retaining 33% ownership of the business. It has been my experience living and working internationally with franchise partners that combining powerful classic brands with local capability and expertise is the optimal business model to maximize future growth. We have also created aligned economic interests for both parties with a material equity stake to grow the business and to grow it in a profitable way. This transaction will allow us to simplify and focus on our domestic operations. We anticipate closing the transaction this year, and Michael will walk through more of the financial implications of the transaction. Next year, Blumen Brands will be a more focused and simpler company. As I leave the company, you have my following commitments. First, I will be strategic and grounded in our operations and decisions we need to make. Second, I will communicate our path and progress in a transparent way. And third, I will hold my team and myself accountable for delivering strong results. And with that, over to you, Michael, to discuss our Q3 financial performance and updated 2024 guidance.

Thank you, Mike, and hello, everyone. I would like to start by providing a recap of our financial performance for the fiscal third quarter of 2024. Total revenues in Q3 were $1 billion, which is down 4% from 2023. This was primarily driven by a decline in comparable restaurant sales, the FX translation of the Brazilian dollar relative to the U.S. dollar, and the net impact of restaurant openings and closures. U.S. comparable restaurant sales were negative 150 basis points and traffic was negative 440 basis points, which was in line with the casual dining industry. At Outback, we introduced greater value in our LTOs beginning in Q3. While this allowed Outback to outperform Black Box on traffic in a very promotional environment, our focus is on building sustainable traffic growth, particularly at Outback. Average check was up 2.9% in Q3 versus 2023, in line with expectations. Value is critical right now, and we are committed to take the least amount of pricing as necessary. Q3 off-premises was approximately 23% of total U.S. sales. Our third-party delivery business is 13% of total U.S. sales, which is an increase from 12% in Q3 2023, driven by our growth in catering. Our Q3 GAAP diluted earnings per share for the quarter was $0.08, versus $0.45 in 2023. Our Q3 adjusted diluted earnings per share was $0.21 versus $0.41 in 2023. The primary difference between GAAP and adjusted diluted earnings per share is due to the asset impairment and closure related charges associated with the decision we made in Q2 to close nine restaurants in Hong Kong. Executive transition costs and professional fees related to our revenue growth management strategic efforts. Q3 adjusted operating margins were 3% versus 5.3% last year. There were a number of factors contributing to the margin decline this quarter. Overall, restaurant-level margins declined by 150 basis points. 110 basis points were driven by labor, primarily due to hourly and field management wage rate inflation. Labor wage inflation for the quarter was 3.8%. Other restaurant operating margin declined 90 basis points driven by higher operating and supply expenses, primarily due to inflation, as well as higher pre-open expenses as we open more restaurants this year. Cost of goods was 50 basis points favorable from pricing benefits and supply chain productivity initiatives. Commodities were better than expected in Q3 at approximately 2%. driven by more modest inflationary expectations across seafood, oil, and dairy. We continue to see positive signs within our beef program, but this category remains inflationary. Depreciation expense was higher in Q3, consistent with our increased levels of capital spending in recent years and our investments in infrastructure to support growth. We are operating in a challenging market environment, and we are focused on managing the costs that are in our control. Turning to our capital structure, total debt net of cash was $1 billion at the end of Q3. During the quarter, we upsized our revolver to $1.2 billion, which provides additional liquidity for our business and provides broader financial flexibility. Importantly, we remain committed to being at or below our long-term least adjusted leverage ratio target of three times. Year-to-date, we have repurchased a total of 10.1 million shares of stock for approximately $266 million. This included shares issued in connection with the repurchase in March of a portion of our convertible notes. We have $97 million remaining under our share authorization program. The board also declared a quarterly dividend of 24 cents a share that is payable on December 11th. Now turning to our full year 2024 guidance. we are updating our full year guidance to reflect the continued industry softness and our trends. As a result, we are updating our comp guidance range to be down 100 basis points to down 50 basis points. We are being very mindful of pricing and have not contemplated pricing actions above prior guidance. Given the volatility the industry is seeing in traffic trends, we are updating our adjusted diluted earnings per share guidance to be between $1.72 and $1.82. Prior guidance assumed industry trends would strengthen, but our updated view assumes no improvement. Additionally, the hurricanes have had a negative impact on our business and were a distraction for our teams. U.S. domestic comparable sales were negatively affected by approximately 30 basis points in the fourth quarter and a total impact of profitability of approximately three cents on an earnings per share basis. Both of these are included in our updated four-year guidance. We are updating our commodity inflation guidance to be approximately 1%. We are updating our adjusted tax rate to be between 6% and 7%. As we mentioned on the last call, the negative calendar shift experienced in Q1 of 5 cents is recaptured in Q4. The Brazil tax benefit is expected to be approximately 15 cents for the year. As it relates to the fourth quarter of 2024, We expect U.S. comparable restaurant sales to be down 200 basis points to down 100 basis points on a comparable calendar basis. This reflects the current environment and what we are seeing in the restaurant industry, as well as the approximate 30 basis points impact from the hurricane experience at the start of the fourth quarter. We expect Q4 adjusted diluted earnings per share to be between 32 cents and 42 cents. Importantly, This guidance includes the revised Brazil value-added tax exemption benefit of approximately 7 cents and an approximate 5-cent benefit from the calendar shift, offset by an FX headwind of 2 cents and a 3-cent impact from the hurricane. This morning, we announced a strategic partnership with Vinci Partners for our Brazil operations. Total enterprise value for the business is $2.06 billion Brazilian dollars, our 6.5 times trailing 12 months EBITDA net of royalties through Q3 2024. Vinci will purchase a 67% ownership interest based on this valuation, and as Mike mentioned, we will retain a 33% ownership in the business. We believe our economic interests are aligned and expect the business to continue to grow. We have an option to monetize our remaining equity stake in 2028. We anticipate the transaction to close in 2024. We will receive 52% of the proceeds upon closing and the remaining 48% one year later. We will provide more details on the use of those proceeds on our February earnings call after we complete our strategic planning efforts later this year. Additionally, the ongoing royalty stream will allow us to continue to benefit from a high growth market leading business. In summary, we are not satisfied with our results in 2024 and we are committed to the actions necessary to deliver consistent, long-term sales and profit growth. While Outback is our primary focus, all of our brands play a role in the success of Blooming Brands.