Brinker International, Inc.

Good day, and welcome to the Q4F23 earnings 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, Vice President of Finance and Investor Relations. Ma'am, the floor is yours.

Thank you, Holly, and good morning, everyone, and thank you for participating on today's call. Joining me on the call 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 usual, 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 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 Kevin.

Thanks, Micah, and good morning, everyone. Thank you for joining us as we recap the progress made during Fiscal 23 and and highlight our plans to build on this momentum and drive traffic in fiscal 24. During fiscal 23, we made significant shifts to our strategy to drive our core dine-in channel business and help us drive margin improvement over time. We pulled back on deep discounting. We reduced our focus on investment in virtual brands and started the pricing to recover inflation while still maintaining best-in-class value. We acted on our restaurant team's ideas to simplify operations. We invested in our labor model to improve our food grade scores and service. and we returned to national advertising for the first time in more than three years. And we saw very good progress in our results. We are now significantly outpacing industry sales growth since the middle of February, which is being driven by improved food scores, improved service scores, and a return to traffic-driving advertising. Our traffic gap versus the industry is also beginning to narrow, even though we continue to strategically shed the unprofitable Maggiano's virtual brand sales and some chili sales that were driven by deep discounting as we continue to reduce our reliance on coupons. From a retention standpoint, we significantly improved managerial turnover, and we are now better than pre-pandemic levels. A year ago, we challenged our vice presidents of operations to get after one obsession metric. They chose manager turnover, and the results have been exceptional. We are now beating the industry. This year, they have chosen the obsession goal of hourly team member turnover, and I'm confident the team will deliver improvements there, too. All in all, good progress in one year that has set the business up for a longer run of sustainable, profitable growth. Before we shift our focus to fiscal 24, I'd like to share an update on the relaunch of our chicken crispers, the first of our core four improvements, as an example of how our strategy is creating value. Our goal was to make it easier for operators to execute higher volumes, improve the recipes on chicken and fries, bring in new mac and cheese and new dipping sauces, and lastly, merchandise crispers in a more relevant way that would drive bigger piece counts. We launched this platform at the end of May, and we've already seen some very positive results, including over 40% more crisper volume. The best part is these results came before we turned on advertising next month in conjunction with the start of football season. We'll also be featuring this improved platform more prominently on our new bar menu rolling out in September, and we'll also introduce a new and incredibly delicious flavor, that uses the existing operational procedures and adds no new complexity to the kitchen. Guest feedback on the new crispers, fries, and mac and cheese has been phenomenal and has confirmed moving to one type of breading to both improve the recipe and allow teams to produce much higher quantities consistently has been the right choice. The end result, a much bigger and margin accretive crisper business driven by both higher pricing, higher piece counts, and better taste with less complexity because we eliminated the low mixing original crisper. and our restaurant teams love the changes. More sales with less complexity is a big win. In fiscal 2024, our goal is to accelerate this momentum by focusing on two key areas. Number one, we'll continue to improve the team member and the guest experience through service levels and atmosphere while driving the core four through improved operations and innovation. The core four now represents 43% of our sales, We took many of you through those plans on improving guest and team member experiences when you attended the Investor Day here in Dallas last quarter. Number two, we're laying several strategic initiatives to drive incremental traffic and accelerate our sales even more versus the industry, and I'll detail them here. So let's dive a little deeper into those initiatives, starting with our advertising strategy. Last quarter, I shared the encouraging results of our Three for Me TV campaign, This was our first national advertising window in more than three years, which helped narrow our traffic gap and accelerate Chili's market share growth. This year, we'll follow that same strategy, but increase from four weeks on TV to 21 weeks. That advertising will focus on value and core four menu items. We will use offers and innovation to bring guests in and then use menu merchandising to drive check. We'll supplement these ad windows with a social media and digital strategy to drive awareness and continue to increase the brand's relevance. The marketing team is doing a great job getting Chili's back in the cultural conversation and engaging with customers through these channels. For example, over the past six months, we've been a top trending topic on the platform formerly known as Twitter four times. Finally, we're building a more sophisticated CRM program to drive frequency. I'm excited to announce our partnership with Gale, the award-winning digital and CRM agency who is known as best in class in the restaurant industry. We'll continue reducing CRM discounts and redeploy those dollars to more effective and sustainable communication that delivers relevant targeted messaging to reduce time between visits. I'm so pleased to have the caliber of the Gale team working on our business and look forward to bringing you more updates on this program throughout the year. The other area of the business we're leaning to drive incremental traffic is the bar. With last year's Raise the Bar initiative, we are now selling more premium margaritas and our bars are more profitable. Building on that success, we're launching an updated bar menu later this month in conjunction with football. That includes compelling happy hour specials, premium drinks like our Casa Amigos Rita and our new Terra Mana Tropical Rita, as well as a completely new food lineup with an emphasis on crispers and wings. In addition to featuring our premium burgers and chicken crispers on that new bar menu, I'm pleased to share we'll be graduating the virtual brand It's Just Wings to the real world, where they will now have the marketing power and distribution of Chili's Grill & Bar. It's Just Wings is one of the largest, if not the largest, virtual brand in the world and and it's likely to get a lot bigger in the for real restaurant world. We see an opportunity to leverage It's Just Wings brand as a trip driver for bar visits and providing credibility to Chili's as a wing player. We'll start with football season and drive the wings business throughout the year, leveraging relevant sports viewing occasions to drive traffic. It's Just Wings will also appear on the everyday dining room menu, and we expect it to drive add-ons and trade-ups in the appetizer section. In summary, we expect these multiple traffic driving initiatives to improve traffic trends. We also expect the negative traffic impact of our CRM deep discounts reduction and Maggiano's virtual brand removal to have less of a drag on traffic as we move through this fiscal year and we cycle those impacts out. We're excited about our plans to continue growing the Chili's business in fiscal 24, and we expect to continue to significantly outpace the industry on sales. and we expect our traffic driving initiatives to improve traffic trends versus the industry, which will continue to accelerate market share growth throughout fiscal 24. Now let's move on to Maggiano's. The Maggiano's team has delivered impressive results during fiscal 23, as the recovery from the pandemic is now complete, finishing the year with an impressive $9.5 million AUV. I'm encouraged by the progress the Maggiano's leadership team is making clarifying their brand positioning. The team is currently working plans based on this positioning to modernize this iconic brand and accelerate growth on top of this past year of impressive results. I did want to take a moment to recognize Maggiano's president, Steve Probost, who is retiring at the end of this month. Steve has made many contributions to our business during his 14 years at Brinker. He started at Maggiano's brand and served as the president for many years. When the company needed him to jump into Chili's, he did so, acting as the chief marketing and innovation officer. And in that role, Steve created and launched It's Just Wings brand during the pandemic, which is a big help to the business during a very tough time. And now Steve has finished his career leading Magianos for the second time, and Steve's done a great job leading the brand through the pandemic, thoughtfully supporting managers and teammates, and ultimately creating a stronger Magianos post-pandemic. We're grateful for the many hats Steve has worn here at Brinker, and we'll miss his infectious energy and passion for the business and the people. Chief Concept Officer Larry Konecki and I are co-leading the brand as we search for the right leader to grow the business in the long term. I wanted to close with a brief update on what we experienced at our annual manager conference here last week in Dallas. Our chief people officer, Aaron White, and chief operating officer, Doug Cummings, hosted all of our Chili's restaurant general managers at our annual conference. There we shared our fiscal 24 plans. It was incredibly encouraging to hear the managers' alignment and see their energy about the new Chili's direction. The job continues to get easier. The job continues to be more fun. and more rewarding for them and their teams. They feel like they're being heard and a big part of shaping the future of Chili's, and they love winning again and growing faster in the industry. So the teams are really fired up and they're ready to deliver another year with accelerated growth and profitability. Net, we have confidence in the plans, we have the enthusiasm of our field restaurant teams, and we have the alignment to what's important across our entire organization that will allow us to deliver stronger results this fiscal year. Now I'll hand it over to Joe, and he'll walk you through the numbers and share guidance for fiscal 24. Go ahead, Joe.