Brinker International, Inc.

Good day, ladies and gentlemen, and welcome to the Brinker International Q2F22 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, VP of Finance and Investor Relations. Ma'am, the floor is yours.

Thank you, Kate, and good morning, everyone. Welcome to the earnings call. for Brinker International's second quarter of fiscal year 2022. With me on today's call are Wyman Roberts, Chief Executive Officer and President, and Joe Taylor, Chief Financial Officer. We released full results for the quarter earlier this morning, which are available on our website at Brinker.com. As usual, Wyman and Joe will make prepared comments related to our operating performance, and then we will open the call and jump straight to your questions. Before beginning our comment, 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 item 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, in 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.

All right. Thanks, Micah, and thank you all for joining us this morning. I'm pleased with Brinker's second quarter performance and the progression throughout the quarter. It was great to see the effects of the Delta spike dissipate, our momentum come back, and flow through improve. Takeout and delivery remained strong in the mid-30s, while dining room demand was on the rise. All our brands had impressive holiday results as guests got more comfortable coming together in groups, which helped us deliver a better-than-expected quarter with positive sales of 17.7% and adjusted EPS of 71 cents. These results demonstrate that with diminished COVID interference, our business model continues to perform well, particularly at volume. Now, we, along with the rest of the restaurant industry, are not without our headwinds. Obviously, there are cost pressures with inflation at the highest levels we've seen in years. We responded with appropriate pricing actions, and with our most recent price increase, our menu price is now up over 4%. We've been deliberate about taking incremental price increases throughout the year, to ensure that with every step we protect our traffic advantage. And we've done exactly that. Chile's continued its trend of beating the industry, marking the 16th consecutive quarter of traffic outperformance. This trend has continued into January, despite the Omicron spike. Our fundamental belief is that the key to healthy, sustainable growth is to have an increasing number of guests choosing us, so we will maintain a disciplined approach to determining the timing and amount of future pricing actions. To ensure we deliver a great guest experience and continue to grow the base business, we're focused on making sure Chili's is staffed with stable, well-trained teams and smooth operational systems. The staffing situation across the country has been the most unique I've seen in my career, but we're pleased with the hiring progress we've made. We have more team members on a per restaurant basis today than we did pre-COVID. Just last week, when I was out in restaurants, Managers were saying that where they used to see only two or three applicants for a job, they're now getting 10 or more. So we're devoting increased time and attention on providing high-quality training and improving retention for our new hourly team members and managers. And with the added pressure that COVID has put on our operations team, retention today is about more than just a paycheck. It's also about improving quality of life and creating a sense of belonging. We found new ways to leverage our technology to accomplish these goals. We're implementing a virtual learning platform that allows us to train both hourly team members and managers from the Restaurant Support Center. This is a live, interactive experience that improves the speed, quality, and consistency of our training while reducing costs and the burden on our restaurant managers. With this system, we're experiencing a 20% retention improvement for new hourly team members. For managers, We're also focused on increasing career progression and diversity that's so important to our business. We're doubling down on leadership development programs for both new and tenured managers, like our highly successful Women Take the Lead program. We see much higher retention levels among those who've engaged in these programs. Our rehire rates also demonstrate further evidence of the positive impact of these efforts. Historically, the rehire rate for managers who, for whatever reason, chose to leave Chili's and then come back to us has been in the low to mid single digit range. Today, that rate is more than doubled, and it's even higher at the hourly level, which speaks to the power of our culture and the strength of our business. We know how crucial it is to support our teams with efficient, effective systems that enable smooth operational execution, improve the guest experience, and strengthen our base business. This is another area where our technology expertise gives us a big advantage. At Chili's, we recently completed the implementation of two major technology systems. The first is our handheld system, which redefines how we serve our guests. With this system, our servers cover more tables and earn more money. We're already seeing an average of 15% higher server earnings and significant improvements in guest metrics. We've been testing this in restaurants for years now, so we know the potential once it's fully up and running. We're also capitalizing on the consumer's increased demand to dine off-premise with a new curbside system that provides a more seamless guest experience. The operators are getting comfortable with it now and restaurants that have fully adopted are generating 15 to 20 point improvements in guest metrics. These efforts to strengthen our base set us up to accelerate additional growth vehicles. We've ramped up Chili's development plans and currently have in excess of 20 new full-size restaurants in the pipeline. We're also testing small footprint, off-premise-centric designs for densely populated markets that don't make sense for a full-size prototype. We've opened our first urban kitchen in Manhattan, offering both Chili's and It's Just Wings. And I never thought I'd see the day when I'd see a Chili's in Manhattan, but it's been up and running for a month and we're encouraged by its early performance. We plan to open two small footprint locations in trade areas adjacent to college campuses in the near future. And virtual brands continue to be an important growth vehicle for us. We remain fully committed to this strategy. Our size and scale are uniquely suited to enable growth through this vehicle. It's just wings continues to perform well. And as of this week, Maggiano's Italian classics is up and running in over 700 restaurants. We're actively working to expand sales channels, build brand awareness and accelerate this part of our business. Second quarter proved that when our business operates with minimal COVID impact, guest demand is high and the model is strong. We generated solid cash flow and good earnings. As we continue to navigate the inflationary pressures and respond prudently for the long-term health of our business, we want you to know we're committed to keeping our business model strong and we still have growth ahead of us. We see a lot of opportunity to leverage our scale, our ownership model, to grow the brands in our portfolio and move the business forward and deliver a great return for our shareholders. And this is only possible because of our amazing teams working tirelessly in the restaurants, and in the support center, and I want to thank each of them for their passion and commitment. And now I'll turn the call over to Joe to give you more details on the quarter. Joe?