Brinker International, Inc.

Good morning, ladies and gentlemen, and welcome to the Brinker International Q1F21 earnings call. At this time, all participants have been placed on a listen-only mode, and the floor will be open for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Micah Ware. Ma'am, the floor is yours.

Thank you, Kate, and good morning, everyone. With me on today's call are Wyman Roberts, Chief Executive Officer and President of and Joe Taylor, Chief Financial Officer. Results for the quarter were released earlier this morning and are available on our website at brinker.com. As usual, Wyman and Joe will first make prepared comments related to our operating performance and strategic initiatives. We will then open the call for your questions. Before beginning our comments, it is my job to remind everyone of our safe harbor regarding forward-looking statements. During our call, management may discuss certain items which are not based entirely on historical facts. Any such items should be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All such statements are subject to risk and uncertainties, which could cause actual results to differ from those anticipated. Such risk and uncertainties include factors more completely described in this morning's press release and the company's filings with the SEC. And, of course, on the call, we may refer to certain non-GAAP financial measures that management uses in its review of the business and believes will provide insight into the company's ongoing operations. And with that said, I will turn the call over to Wyman.

Thanks, Micah. And thanks, everyone, for joining us this morning to review our first quarter performance and share highlights of what we see for the future of our business. Looking broadly at the quarter, we're encouraged by the continued improvement in the environment the consumers increasing engagement with the category, and we hope to see those trends continue. We know there are still challenges out there, especially with independents, yet Brinker continues its strong recovery, posting a better-than-expected first quarter and delivering earnings of $0.28 a share. Both brands increased their progression from last quarter, with Chili's reporting comp sales of negative 7.2% and Maggiano's negative 38.6%. and both brands delivered solid sequential improvement throughout the quarter, with Chili's ending September down just 1.4% and Maggiano's down 32.5%. Polish Casual is obviously a more challenged segment that's facing greater headwinds, but the Maggiano's team is doing a great job managing their cost structure and flow through. We feel good about where Maggiano's is from a relative perspective, and we're excited about the bold strategies Steve Provo and the team are putting in place to build the business. The Chili's brand continues to exceed expectations from both a relative and an absolute perspective. The month of September marked our return to positive traffic, and that's pretty impressive given there are still major states like California and New Jersey not yet near full dining room capacity. This brand continues its nearly three-year streak of outperforming other casual dining chains in NAPTRAC, driving a 16-point gap in sales and 23 points in traffic this quarter. When we broaden our view of the category to include independence, our gap widens significantly. Current credit card data shows the whole category down 30%, which reflects the ongoing impact of this pandemic and the reality of what is likely to be a meaningful shift in the competitive landscape. In this tough environment, I couldn't be prouder of the resilience and agility of our operations team. For the quarter, they improved restaurant operating margins 60 basis points year over year. When the pandemic hit back in March, the market drove us all to dramatically cut costs. Since then, we've judiciously evaluated every cost within our P&L, and we've been diligent about reestablishing our spending levels. In many cases, we're comfortable maintaining a level of spend below pre-pandemic levels. One of the biggest changes we made was to rethink our marketing spend. We significantly reduced traditional television advertising so we could invest more aggressively in digital and direct channels that work harder for us, like MyChillies Rewards. And with the increased desire for convenience, we're shifting to support all our brands more aggressively with delivery, resulting in higher third-party delivery fees and promotional expenses. Based on where we're tracking with sales and the efficiency of our P&L, we feel really good about these decisions. Our top priority has been and remains the safety of our team members and guests. We're committed to supporting our team that's working so hard to take care of our guests. We've now brought back most of our hourly team members, and we've been able to help them maintain their hourly wage levels. We've also kept our management structure intact. We know how critical their leadership is to our guests and our business, and we're proud that we've been able to bonus our managers close to target. Nobody could have predicted this pandemic back in the spring, and we're thankful we didn't have to change strategies when it hit. Instead, we leaned into the same strategies that have been helping us take share for the last three years, and they've been even more effective since the pandemic. But even before that, our challenge was to prove to ourselves and to you that we could create a growth model out of a legacy business in a category that's seen meaningful declines in traffic over the years. We have always believed growth is available in this category, if you do the right things. By delivering a better guest experience, a strong value proposition, and more effective marketing, we unlock sustainable organic growth within our base business. And our results demonstrate we're doing the right thing. Our improvements to the base enabled us to introduce our first virtual brand, It's Just Wings, an incremental growth vehicle that offers convenience and value in a way no one else is positioned to do. Now, there's been a lot of discussion about what a virtual brand is. Itch Just Wings is not a disposable vehicle. We're committed to this brand for the long haul. There are barriers to entry in doing virtual brands well, and Brinker is uniquely positioned to do it right. We have the scale, the asset ownership, available capacity in our well-equipped kitchens, the right technology, and unbelievably strong operators who can focus and deliver consistently. When we rolled out Itch Just Wings overnight to more than 1,000 restaurants, Now that's easy to say, but tremendously hard to do. So I know everyone's curious about how it's going so far. We're excited with how the brand is already performing and we're well on track to meet our first year target of more than 150 million in sales. We're encouraged by what DoorDash sees with regard to consumer data. The brand is already generating high satisfaction scores and strong repeat usage. It's really resonating with consumers, which we know is critical to the health and long-term success of any brand. Going forward, our focus is to ensure we're executing at the highest level possible and we're maximizing the brand's growth potential. It's Just Wings started as a virtual brand, but as we wire an execution and accelerate growth, it may take different trajectories. We're evaluating internal and external opportunities to increase awareness levels and expand access to consumers. This is just phase one for It's Just Wings. We also believe we have capacity to expand our virtual brand portfolio. we're testing a few ideas to better understand consumer demand and ensure that we can execute at a high level. We'll have more to say on that in the not too distant future. Obviously, we see a lot of upside for virtual brands. Listen, with the uncertainty surrounding COVID and the economy, we anticipate some volatility ahead. Like the rest of our country and the world, we are hoping and planning for a vaccine and an end to the sickness and deaths from this virus. We are hoping and planning for economic stability and continued recovery in a post-election environment. But despite the things no one can know, here's what we do know. We will keep running our own race and working our strategy. We will stay flexible and agile, and we'll take care of each other and our guests. We will continue to manage our P&L and our balance sheet with discipline to create an even more stable model for our shareholders. And we will boldly grow these brands so we can continue to be a great place for our team members to work and our shareholders to invest. And with that, I'll turn it over to Joe. Here you go, Joe.