Brinker International, Inc.

Good day, ladies and gentlemen, and welcome to the Brinker International Q1 Fiscal 2023 Earnings Conference Call. At this time, all participants have been placed on a listen-only mode. The floor will be open for questions and comments following the presentation. It is now my pleasure to turn the floor over to your host, Micah Ware. Mom, the floor is yours.

Thank you, Paul, and good morning, everyone, and thank you for participating on today's call. With me are Kevin Hockman, our Chief Executive Officer and President, and Joe Taylor, our Chief Financial Officer. Results for the quarter were released earlier this morning and are available on our website at brinker.com. As is our practice, Kevin and Joe will first make prepared comments related to our strategic initiatives and operating performance. Then we will open the call for your questions. Before beginning our comments, I would like 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 with 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 believe will provide insight into the company's ongoing operations. And with that said, I will turn the call over to Kevin.

Thanks, Micah, and good morning, everyone. I'm now five months into this role, and I'm encouraged by our quick progress to grow top-line sales and to simplify operations while we still have work to do and there's some uncertainty in the macro environment to navigate, the business is moving in the right direction, and we're putting the initiatives in place that we expect will grow the business and improve our four-wall economics over time. This morning, I'd like to share the results of the changes we talked about in August to create near-term momentum and the progress that we've made in defining Chile's North Star and a longer-term strategy. The last time we talked, I had chartered two teams, one focused on driving sustainable and profitable sales layers, and the other one taking unnecessary cost and complexity out of the business to reinvest in more impactful areas. Our team in charge of growth implemented an initiative we called Raise the Bar, comprised of new drink offerings, delicious new food like loaded corley fries and the Chili's Philly, a robust happy hour platform, and marketing that positions Chili as the bar destination during football season. Our field restaurant teams are excited by the new offerings, and we're seeing more energy at the bar as well as improvements to sales and mix. We plan to build upon that momentum to drive profitable traffic through additional sports-driven group viewing occasions like March Madness and the NBA playoffs, which will also include new food and drink offerings. Our simplification team led efforts to streamline operations, finding ways to quickly reduce complexity and focus on growing the core Chili's business. They made good progress collaborating with operators to take things out of the system that didn't add to the guest experience and to make our team's jobs easier so we can spend more time and more energy on the things that will really improve the business. We quickly learned that simplification has to be an ongoing priority for us, so we will regularly partner with operators to implement more ways to make it easier to run restaurants. We expect over time these efforts will show up on the P&L through lower waste, improved labor productivity, better margins, and increased retention. We also implemented a new pricing strategy to help expand restaurant margins and grow profits. by providing a value price point for cash-strapped guests who need it, moving away from frequent deep discounting, reducing the amount of mix on deal, and increasing trade-up opportunities to drive check. Last week, we launched a new menu with 470 basis points of price, including a reconfigured value platform. We protected 1099 as the entry price point for our three-for-me value menu, but we right-sized the number of offerings to reduce the overall mix in the value platform. We also introduced more premium price points at $13.99 and $15.99 for those value-focused guests who want a little something more, like steak or shrimp. As a result of these three-for-me menu changes, we are seeing more trade-up off the value menu, and we're selling more full-revenue entrees off the a la carte menu. We're also well underway to right-sizing our investments in My Chili's Rewards promotional offers. That change, in addition to decreasing our value menu mix, has reduced the percentage of checks on deal from the high 30s to the low 30s. As expected, we did see traffic slip a little bit with the initial reduction of discounts, which we're closely monitoring, and we're also seeing favorable mix and profitable growth as a result of these changes. We expect these growth simplification and pricing initiatives will allow us to invest back into restarting our marketing voice sometime in Q3. In the new calendar year, we know that cash-strapped customers will be seeking great deals without sacrificing quality, and we're making plans to create broader awareness of our unbeatable Chili's value. Now we'll talk a little bit about our long-term strategy. Since our last call, we completed the work on the Chili's North Star and longer-term strategy. We are now in process of aggressively putting plans in place that we believe will strengthen Chili's position in casual dining and deliver value to our guests, and deliver value to our shareholders over time. We started by defining the four strategic pillars that we believe are fundamental to growing market share now and sustainably over time. Each pillar will have a senior executive owner, action plans, and KPIs that we will measure and track performance against. Our first pillar is team members, which is all about making the job easier, more fun, and more rewarding for our operators and our hourly's. The three areas we prioritize here are stabilizing turnover, ensuring that we're fully staffed, and reducing complexity to make it easier to run our restaurants. While we've seen both manager and hourly turnover start to improve, we still have more work to do to return to pre-pandemic levels. To accelerate our progress, we restructured to bring critical people functions closer to our operations. And I'm pleased to share that Aaron White, who was most recently our co-COO, has taken on the role of Chief People Officer. During her 21-year Chili's career, Erin has held leadership roles in human resources and operations, and I'm confident that she will add huge value in this role and help us tackle our turnover challenge. The second pillar is food and drink, which defines the core categories that we want to win on. We will double down on four segments that we're already known for, which also happen to be huge opportunity and growing segments of what Americans eat. burgers, fajitas, chicken crispers, and margaritas. We believe that making sure that we have the best possible offerings in each of these categories, we will improve the guest experience and increase traffic and our pricing power over time. To enable our restaurant teams to focus on those core segments, we'll continue to remove SKUs and operational complexity from the categories we're over-invested in, like salads and sandwiches. And of course, we'll protect our other famous recipes, which are customer favorites like baby back ribs, skillet queso, and our Southwest Egg Rolls. An example of how this plays out to grow the business, we're working on relaunching our chicken crispers platform in the back half of the year. Boneless fried chicken is a huge segment, and we see tremendous upside. Our insights tell us customers want a variety of dipping sauces, the best possible fries, and the ability to get larger piece counts of chicken tenders. And we already have a terrific chicken tender product. And by expanding the flavor profiles using It's Just Swing sauces, that are already in the restaurants, upgrading our fries, reengineering the merchandising to provide trade-off opportunities, we think we can explode that segment of the business. This is what we mean by more focus on large strategic growing segments of our menu. Our next pillar is hospitality. This is all about making sure we deliver a great experience for both our dining guests and our off-premise guests. On the dining side, which represents two-thirds of our business, We're working to redefine the labor model to make service jobs easier so they can spend more time connecting with our guests. They've told us that serving the guest is why they chose to work in the hospitality business, and we need to allow them more time and more focus on making our guests feel special. We're serious about improving hospitality, and we will make some needed investments in this critical part of the business. From an off-premise standpoint, it is now over $1 billion of business for us today. which tells us our guests see Chili's as a whole meal replacement. So we've structured our organization to be more deliberate about improving the off-premise experience end-to-end, removing friction for both guests and team members, and optimizing food quality for takeout and delivery. We believe this focus will accelerate the growth of this important part of our business. The fourth and final pillar is atmosphere. There's two legs to this pillar. The first is providing a better atmosphere for our heart of house kitchen team members by ensuring the restaurant facilities and equipment are well maintained and fully operational. Like many others, we deferred some maintenance items during COVID, which we know is impacting the experience for team members and guests. So we're working to accelerate getting restaurant maintenance and equipment back on track to pre-pandemic levels. The second leg of atmosphere is the guest facing experience in our dining rooms and bars. We're committed to making the Chili's atmosphere more fun and vibrant for our guests as they return back to our restaurant dining rooms. Last week, we finished cascading the North Star and strategic pillars throughout operations and across the restaurant support center, refining it based on their input. And the response has been incredibly positive. Our operators are already feeling the impact of short-term changes we've made to make it easier to run their restaurants and grow the overall business. We just completed our annual employee feedback survey, both at the restaurant support center here and out in the field. Engagement and intent to stay saw very significant lifts, driven by implementing team members' recommendations to simplify operations and also giving them more of a voice in our business outcomes. While this is a multi-year strategy for the Chili's brand, with investments designed to improve four-wall economics over time, we also have plans in place to improve the guest experience to mitigate the negative traffic headwinds in this fiscal year. We're focused on strengthening our voice in the marketplace, building incremental sales platforms around core equities, and improving the team member experience, which we believe will strengthen our ability to move through a tough macro environment. We're planning an investor day later this fiscal year, so our senior leadership and I can share more details around our longer-term strategy. We look forward to seeing you all, and we'll announce the date soon. Now, I'll hand the call over to Joe to walk you through the numbers. Go ahead, Joe.