Bloomin' Brands, Inc.

Greetings, and welcome to the Lumen Brands Fiscal Fourth Quarter 2024 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. Today's event is being recorded. It's now my pleasure to introduce your host, Carol Kurian, Vice President, Corporate Finance at Investor Relations. Thank you. Ms. Kurian, you may begin.

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 fourth quarter 2024 earnings release and our investor presentation slides, both of which can be found on our website at www.bloominbrands.com in the Investors 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 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'll provide a brief recap of our financial performance for the fiscal fourth quarter 2024, an overview of company highlights and current thoughts on fiscal 2025 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. Thank you for joining our fourth quarter earnings call. On today's call, I will discuss my observations of the business and steps we are taking to improve business results in 2025. In my first six months, I have become even more excited about the future potential of our business. We have started the holistic strategy work and will be transparent on our findings as part of our earnings calls in the coming quarters. What we know at this stage is consumers love our brands and they want us to succeed. We are actively implementing key actions to improve operations and deliver a better guest experience. Michael will discuss our financial performance, including how to understand our company and our financials now that the Brazil transaction closed on December 30th, 2024. As I've spent time with our teams in the restaurants, it is clear to me that we have empowered and energized team members that want to win. Our principles and beliefs state that the success of a restaurant is measured by its growth in sales and profits and is the result of taking care of our people, our guests, supplier partners, and communities. Our teams want to deliver an outstanding guest experience and want to win. It is our job to work with our team to make it easier for them to deliver outstanding experiences. We have iconic brands that have a strong right to succeed in on-trend, large-scale categories. I have even more confidence in the long-term success of the company as we have ample cash flow and a good balance sheet in order to make any strategic investments. However, the reality is that we are currently not succeeding. As noted in the release this morning, although our fourth quarter results were within our expected guidance range, we underperformed the industry and lost share as defined by black box by 260 basis points on sales and 410 basis points on traffic. We are not pleased with our performance and acknowledge that we need to change the trajectory of the business. Our results are also not in any way indicative of the hard work of our team members or the foundational strength of our brands. In working with my leadership team and listening to our partners in the field, it's clear that there are immediate actions we can take to address our near-term business results. We are focused on building sustainable traffic and profitable, comparable restaurant sales growth the right way by improving quality, value, and the guest experience. As we move forward, we are focusing on three operating priorities. First is simplify the agenda. Second is deliver a great guest experience. Third is a turnaround of Outback. I will discuss each of these areas and actions we are taking now to improve our results. First, simplify the agenda. We have become too complex as an organization. We need to simplify the agenda for both our people in the restaurant support center and in our restaurants. When we simplify the agenda and focus the team on fewer things that are the most important, we serve our people so that they can take care of our guests. We started this effort by re-franchising our Brazil operations. We have a tremendous partner in Vinci and look forward to growing that business together. We have retained a 33% ownership of the business and can sell the remaining portion in 2028. Importantly, having a partner for Brazil that is based in Brazil and entirely focused on Brazil gives our management team in the US the capacity to focus on growing our domestic company-owned business and support our international franchisees. This partnership also de-risks our business model. Going forward, over 30% of our total restaurants will operate as franchisees with a steady royalty stream and less earnings volatility. We continue to believe that our international franchise business is strong and can continue to grow new units and comparable restaurant sales. We've also taken actions to become a more operation-centric and simple organization at our restaurant support center. We have implemented an organizational structure that is more cost-efficient, and more effective in speed of decision-making by flattening layers and empowering our brand presidents with the resources and dedicated teams to drive their business. Previously centralized functions of marketing, training, culinary, off-premises, and domestic franchisee leadership are now housed inside the brand teams for an integrated approach. We have maintained resources within the Restaurant Support Center that deliver more capability and efficiency to support the brands. Our long-term G&A goal will continue to be 5% as a percentage of revenue. I want to acknowledge and thank our team members that exited the organization this past week due to our organizational restructuring. While it was difficult, it is essential we streamline the organization, and I know that our team's excited about the future and our growth potential. We will also simplify the agenda inside the restaurants. I've heard it loud and clear coming from our restaurants. We need to make it simpler for our operators to execute all aspects of the guest and team member experience. We need to make fewer items, but make those much better. We are reducing our menu items in all brands by 10 to 20% in 2025. We are removing low satisfaction and low mix menu items based on guest feedback and prep labor complexity. We are moving away from our LTO strategy that included non-core menu items with discounts presented every 10 to 12 weeks. We will transition to abundant value that is featured as part of our everyday menu offering. We've started with the Office C3 course at Outback and are currently testing simplified menus and everyday value in both Carrabba's and Bonefish. We will measure success based on the guest's intent to return, building frequency of visitation, and gross profit dollars. Our second operating priority is to consistently deliver a great guest experience. We know we win with a quality meal at a great value, attentive and engaging service, and an excellent guest experience. We started by reassessing the menu satisfaction of all items, both on and off premises. We are improving, eliminating, or replacing menu items that our guests consider subpar. We are retraining our standards to recipes and reevaluating cooking procedures to consistently provide the quality and flavor our guests expect from us. We are also working with our supplier partners to enhance our product specifications. We'll roll out these improved specifications throughout the balance of the year and continue to improve our center of the plate quality and abundance. In our off-premises channel, we are removing menu items that have low satisfaction, do not travel well, or create complexity for our operators. It is critical that hot food is hot and cold food is cold in all channels. Eliminating these items will improve operational execution and guest satisfaction. Additionally, we are evaluating our technology capabilities to better support our operators in managing demand both in restaurant and off-premises during peak dinner hours to ensure a great in-restaurant experience. We will now have immediate guest feedback at Outback through our partnership with Ziosk. We can measure guest satisfaction by restaurant and by shift. With features like pay at the table, have to pay with mobile wallet, and entertainment, Outback is offering guests a faster and simpler experience. We will have the rollout completed by the end of April and are already seeing efficiencies with our staff as well as an improved guest experience in those restaurants. In our test restaurants, approximately 80% of our guests are using Ziosk Pay at the Table. Another area of opportunity is our promotional, digital, and consumer messaging. At Outback, we have focused on traffic generation through large-scale campaigns like Stakemas or Stakecation, both from a marketing standpoint and promotional offer standpoint. We were featuring items in short promotional periods that created complexity for our operators. And we failed to drive value in our core high equity menu items with compelling food quality and brand impressions. We are shifting our approach to provide clear messaging that highlights craveable food, abundant everyday value, and a reverent fun. Outback's off C3 course was our strongest performing promotion in 2024. It resonated with our guests, and our operators could easily execute it. Many guests traded up to the premium entrees and dessert options. Our third priority is to focus on the turnaround at Outback Steakhouse. Outback is our largest and most important brand, and I will spend the majority of my time focused on that business. Last year, we had many elements and tests at an incubation restaurant with a focus on quality, value, and the guest experience. We are excited by the results seen in that lab restaurant and have now moved to test phase. As of the end of February, we will have 14 restaurants in test. We are measuring success by traffic lift, guest intent to return, Outbacker employee engagement, and profitability. We have been leveraging ZEOS to provide real-time feedback. I have been personally involved in the test restaurants with our teams, and I am highly encouraged by the improvements. Seeing the impact in these restaurants has been infectious for our people and their belief in the future growth of the brand. The passion that we see from our Outbackers and the enjoyment that we see from our guests is reminiscent of Outback at its best. Our plan is to continue to monitor the test restaurants as we learn in order to be ready for brand-wide expansion. We will be able to share more on the net investments, test results, and specific actions in the upcoming quarters. While we have an urgency to move fast, the most important thing for us is to get it right and ensure that all investments we make have a compelling return. We need to invest in the quality and condition of our existing asset base at Outback. Beginning in 2026, we are slowing down our new unit pipeline. We will continue to open new restaurants, but at a much slower pace. We'll shift our focus to taking care of our existing restaurants and earn the right to open new restaurants again. We have a repair and maintenance survey underway that is evaluating the current state of each restaurant. It will be completed by the end of Q2, which will help inform our analysis on remodel scopes. Additionally, our goal will be to remodel more restaurants using prudently lower spend, higher impact scopes, yielding better returns driven by improved traffic. Remodel activity will begin in earnest in the latter half of this year and will take more of the capital dollars moving forward. Michael will give additional details on the financials with our capital expenditure. We need to reinforce an operational mindset at Outback, and that starts with leadership. I'm very excited that Pat Hafner has been promoted to the president of Outback starting mid-January. He's a 29-year veteran of the Outback brand and a true guest-centric operator. He started as a cook at Outback and has progressed through each role, including managing partner and VP of operations. He most recently served as the president of Carabas. Pat's high energy and bias for action, coupled with strong leadership to develop high-performance teams, will serve him well as he returns to lead our Outbackers. I'm very pleased to announce Kiela Bazile has been promoted to president of Carabas. Back to you, Pat. Keila is another exceptional operator, starting as an hourly employee at Taco Bell. After a successful 28-year career at Yum, including regional operational roles, she joined Carrabba's as a joint venture partner in 2012, served as Carrabba's Vice President of Operations, and most recently as the Vice President of Operations for Bonefish Grill. Her deep operating experience, from the cash register to her current role, her passion for people and serious food, her high standards for execution, and her proven track record of maintaining high operations standards makes her an ideal leader for this role. Lastly, before I turn it over to Michael, I would like to provide an update on our capital allocation. Our priorities are reinvesting back into our restaurants, reducing our debt leverage post the Brazil transaction, and returning capital to our shareholders. We are committed to getting our leverage back to below a 3.0 lease adjusted net leverage. We received the first installment of the Brazil proceeds on December 30th, 2024, and applied the proceeds to our revolver balance. We intend to use the second installment to be received at the end of December this year towards our revolver as well. As it relates to our dividend, this is our first quarter post the Brazil transaction. We are therefore adjusting our dividends such that our dividend payout ratio will be more in line with our historical payout ratio based on the earnings of the business post the Brazil transaction. Our new annual dividend will be $0.60 per share compared to $0.96 per share previously. I want to be clear that we know we need to take actions to improve our results. We are focused on driving everyday value within our casual dining brands while also delivering a great guest experience. Our work will take time, and we will be transparent along the way. We know that we have hard work to do, but the team and I believe in the future. As I committed to you on my first earnings call, my team and I will be strategic and grounded in our operations and decisions we need to make. I will communicate our path and progress in a transparent way, and I hold my team and myself accountable for delivering strong results. With that, I would like to now turn the call over to Michael to review our financial performance.