Brinker International, Inc.

Good day, and welcome to Brinker's first quarter fiscal year 2025 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, Kim Sanders, Vice President of Investor Relations. Ma'am, the floor is yours.

Thank you, Holly, and good morning, everyone, and thank you for joining us on today's call. Here with me today are Kevin Hockman, President and Chief Executive Officer, and Micah Ware, Chief Financial Officer. Results for our first quarter were released earlier this morning and are available on our website at brinker.com. As usual, Kevin and Micah 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 risks and uncertainties which could cause actual results to differ materially from those anticipated. Such risks 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.

Good morning, everyone. Thank you for joining us as we share insights from our first quarter and and our outlook on the remainder of fiscal 25. We are off to a strong start in Q1, with Chili's delivering 14% sales growth on a 6.5% traffic increase. We also continue to see meaningful progress on our formal economics on both brands, with Brinker year-over-year restaurant operating margin improvement of 310 basis points. The simplification in investments we've been layering into the business over the past two years have put us in a position to win in a market where customers want great food, great service, at a great value. And from our own guest scores, I can say with confidence that our restaurant teams are delivering. Our daily Chili's metric guests with a problem came in at an all-time low of 2.7% for the quarter, which is even more impressive given the significantly higher traffic trends. This would tell us our decision to invest in additional labor in June to keep up with the dramatic acceleration in traffic worked to keep service levels high. We're excited about our progress, and we still see plenty of upside in the business. At Chili's, we continue to work through improvements on our core menu. Over the past two and a half years, we've removed around a quarter of our menu to focus on our core four offerings, burgers, crispers, fajitas, and margaritas, which now represent 47% of our business. On burgers, our Big Smasher Better Than Fast Food advertising campaign continues to win with guests. The three-for-me 1099 bundle includes an appetizer of unlimited chips and salsa, a seven-and-a-half-ounce burger and fries, and a bottomless choice of Coca-Cola soft drink, which is tough for competitors to match. Our three-for-me value offer clearly resonates with guests who are looking for high quality and abundance that may not be the lowest price, but it is a very reasonable price. And when new guests come in, we often get feedback that the burger looks just like the ad and that no one else has a value like this. Despite the industry's challenged consumer and our significant traffic lifts being driven by the Big Smasher campaign, We've only seen a 1% increase in three-for-me mix since last quarter, and nearly half of those guests are still choosing the more premium three-for-me tiers at $14.99 and $16.99. We will continue with the Big Smasher campaign in the Q3, a period we know consumers seek out value coming off their holiday spend. On margaritas, our barbell strategy is helping drive the top line and margins with super premium margaritas, while our Margarita of the Month is protecting entry-level price points to drive drink incidents. In Q1, we introduced the new super premium Don Julio Margarita in our over $10 price tier. The Don Julio is off to a good start and on expectations. On the other side of the barbell, the entry price point, we introduced the October $6 Margo of the Month, the Witch's Brew, and it's now one of the best-selling promotional margaritas ever. While some competitors are offering more aggressive discounted margaritas, including one being advertised on TV, our success proves that value isn't necessarily offering the lowest price point. but that the price-quality equation is critical for this guest. Our barbell strategy has proven an effective way to meet all our guests' needs and balance great value while driving profitability. Another key driver of our results is the success of the triple dipper. We saw the social media discussion of the triple dipper picking up momentum with our campaign in the spring, and it remains at high volumes even six months later. We recently introduced the natural hot mock sticks to the triple dipper, via social media, and it's been so successful that we've actually taken that item now to our permanent menu. The Triple Dipper continues to gain steam and now represents 11% of our business, with sales up over 70% versus last year. It's very relevant with younger guests and how they prefer to eat, with more variety, customization, and experiential flavors through a wide variety of dips. Because of the Triple Dipper's ability to attract the next generation of guests as well as drive guest check, We are expanding our core four menu strategy to become the five to drive. With the addition of the triple dipper, those five items now represent 58% of our business. We're confident this five to drive focus will increase opportunities for innovation and further accelerate sales growth. I also want to share some insights into the guest count list that we are experiencing at Chili's that gives us increased confidence in the sustainability of our results. The tokenized data is telling us that we have two big traffic drivers right now, The primary one is our Three for Me Better Than Fast Food campaign, which is bringing in more new guests across all demographics. Turns out that all households, regardless of income, want unbeatable value, high quality, and a great experience. In addition to increasing Chili's penetration, we also see that guests who purchase Three for Me return to Chili's more often than those who have not. The second primary traffic driver is our social media marketing campaign. Social mentions about our triple dipper started accelerating in April and May, and with people talking and experiencing the unique food items that you can only get at Chili's. This dialogue is attracting new guests to come experience the brand. We now know that guests who purchase the Triple Dip or SKU younger, their check average is approximately 20% higher, and we're driving frequency with that group as well. In addition to getting tokenized data up and running, I'm pleased to announce we have a new data analytics leader, Alex Knight. Alex comes to us from a large restaurant company where he was the senior director of data analytics. Having worked with Alex previously, I know he has the experience and track record to build out our data analyst capabilities to accelerate our business. In summary, these strong business results are being driven by great marketing, which is doing an exceptional job of bringing guests in. And these results are being sustained by the improved guest experience our restaurant teams are delivering. Our operations leadership chose traffic as their fiscal 25 obsession metric, and they are delivering by focusing on a few simple fundamentals of a better guest experience and then executing like crazy. Now I'd like to give an update on Maggiano's. We're applying lessons from the Chili's turnaround to our Maggiano's brand to strengthen the four-wall economics and help build more relevance back into the brand, what our Maggiano's president, Dominique Bartolone, calls bringing the magic back. Dom has spent the past six months deep in the field listening to Maggiano's teammates to understand what's working and what needs to change to improve the brand's experience. Now Dom and his leadership team are focused on the fundamentals, simplifying the menu and operations, so we can elevate the food, speed up service, and more relevant. And we already have a few quick wins. The new cocktail innovation and Master Sommelier wine curation we launched last quarter has successfully reversed a 10-year declining alcohol trend. And the Maggiano's Old Fashioned, which is presented to the guests in a smoking box, has quickly become the Maggiano's number one selling cocktail. We also recently launched two classic dishes that our guests are already raving about, and are mixing very well, rigatoni alla vodka and a new Maggiano signature Caesar salad finished table side. Dom and team are also working on simplification to shift labor to areas that will improve the guest experience, which in turn will drive profitable and sustainable growth. One example of this simplification is removing our $6 take-home pasta offerings. To prepare and package six different take-home meals daily requires significant kitchen prep labor as well as time for service to sell this offering to guests. but it's not a profitable business driver. We estimate that exiting this business in December will be a 1% drag on Magiano's top line and traffic assumption, but will have minimal impact on profitability. The time, attention, and investment we are putting towards $6 take-home pastas will now be redeployed to elevating and accelerating the business. I'm excited to share more details of the Magiano's transformation plan to bring the magic back in future calls. Lastly, I do want to quickly give an update on an issue that is touching both brands, are moved to replace legacy back office systems with the modern Oracle ERP system. The objective of this project is to upgrade it to a more stable, secure, and productive back office system, which touches finance, supply chain, and human capital management. We're in the middle of transition now, and overall it's going well. We're experiencing the normal bumps you would expect with a large-scale ERP implementation, and the team has done a good job working through these bumps and managing the change. Most importantly, The Oracle transition has not materially impacted our day-to-day operation, and this is evidence in our great results. I'm very encouraged by the momentum of our business. Our results demonstrate we're working on the right things the right way to drive long-term growth. Specifically, Q1 results are a proof point that we are building significant and sustainable improvements in both the top and bottom line. Our focus on consistently improving the fundamentals of casual dining, food service, atmosphere, and team member engagement is working. This improved experience combined with driving differentiated relevant brands, is becoming Brinker's unique strategic advantage that we believe will consistently outperform the industry. Now, I'll hand the call over to Micah to walk you through first quarter numbers and our updated guidance for the remainder of the year.