Brinker International, Inc.

Good day and welcome to the Brinker Q4 S26 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 Hochman, Chief Executive Officer and President of Brinker International and President of Chili's, and Micah Ware, Chief Financial Officer. Results for our fourth 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.

Thank you, Kim, and good morning, everyone. Thank you for joining us as we discuss our financial and operating performance for the fourth quarter, as well as provide guidance for fiscal 27. Q4 Chili's same-store sales of plus six marked our 21st consecutive quarter of same-store sales growth and again significantly outpaced the industry. This strong result was rolling a plus 24 from last year and a plus 15% from two years ago for a three-year cumulative comp of 50%. There are lots of different ways to look at our results, but the key conclusion is that Chili's turnaround is real. Fiscal 26 saw this brand increase its lead as the number one casual dining traffic brand and the results are sustaining year after year. It's important to note in this difficult operating environment that instead of using precious resource and investments on initiatives to drive short-term sales, we at Chili's focus our resource for long-term sustainable growth, improving food service and atmosphere and the team member experience, as well as positioning our brand to be more relevant, easy and distinctive. These experience improvements coupled with our everyday value leadership represented by a per person average spend that is $3 to $4 below competition, are supporting a powerful flywheel of traffic, sales growth, margin expansion, and then reinvestment into our business. And this steady approach is why the business will continue to win. The American consumer demands experience and great value, and they are showing up for those brands who consistently deliver that. Third-party syndicated data confirms Chili's continues to be ranked in the top tier across key measures like value, quality, service, and overall experience. We still have room to improve, but our progress gives us confidence that we will sustain traffic gains and repeat business. We are very appreciative and proud that Chili's is one of the small handful of brands the American consumer trusts and we're willing to increase their visits to. And we will work hard for our guests to maintain both our value leadership and improving our guest experience year after year. Now I'll give some updates on the Chili's business. We're now four months post-Big Crispy launch and we can share some more detail on how it's performing. The launch has been a success over delivering on our lofty estimates going in. We were selling 20 chicken sandwiches per restaurant per day pre-Big Crispy launch. By the end of Q4, we were selling 55 sandwiches per restaurant per day, an increase of 175%. And that number continues to build in the current quarter. For perspective, the Big Crispy is bigger than the 24 Big Smasher launch and the 25 Big QP launch. And as you all know, those were two very successful launches. The customer reviews and social media comments have been excellent, declaring Chili's victorious for size, price, value, and taste versus fast food. The Big Crispy is now a signature sandwich and another important chapter in our better than fast food story that will continue to position Chili's uniquely as a restaurant destination. In addition to culinary upgrades, our team continues to deliver world-class marketing and drive traffic. Q4 highlights include the successful Big Crispy launch, The remake of our famous 1985 Baby Backs Ribs jingle commercial featuring pop star Lizzo and a continued success with our Margarita of the Month program. As a reminder, our marketing strategy is driving sales overnight and brand over time. It's clear the marketing is driving sales, but they are also doing an amazing job strengthening the brand's positioning over time. We are two and a half years removed from the initial viral cheese pull in early 24, and YouGov's third party data reported that Q4 was Chili's highest level of buzz across all cohorts ever recorded. Chili's is everywhere. It continues to be America's hottest restaurant brand and the sustained relevance of the brand proves this repositioning has legs beyond one social event. Now let's talk about operations. We continue to focus our efforts on both removing friction as well as improving restaurant throughput as this is a key piece of our sustainable growth flywheel. In addition to listening to our managers' ideas of how to make operations easier, we now have the North of Six team, our highest volume restaurant leaders, to formally source ideas from too. I think the important thing to note is North of Six leaders typically have the additional perspective of increasing throughput because of their incredibly high volumes. We recently made some very significant changes to free up managers' time to coach teams to be with guests on the floor. The first is the ruthless simplification of of our shift line checks, a set of tasks the manager is mandated to perform to know their team is ready to take on guests. We have taken that bi-daily process down from eight pages to one page and freed up 30 minutes of manager time per day. Think about that as 22 years of manager time freed up annually across our system, and that's time much better spent side-by-side coaching their teams and in the dining room with our guests. A second important change we made is upgrading hot schedules. Our tool managers used to schedule labor to make it easier to schedule the right number of team members per shift. We know the number one thing that can set up a shift for success is properly written labor schedules, and anything that makes the task easier to do correctly is a big win for our managers and improves our ability to take on more and more traffic. And lastly, the VPs of operations have chosen their obsession metric for fiscal year 27. This year they have chosen traffic for a third year in a row, but have added a second metric, profit improvement. They chose a second to begin developing a stronger ownership culture on restaurant expense with things like R&M. We recently made profits a bigger percentage of their bonus structure, so it is even more important to field leadership to nail the flow through of all the incremental sales. Before I close out Chili's commentary, I do want to touch on one more important thing. Last quarter, I talked about a new initiative we have started with the objective of speeding up restaurant cycle time, meaning looking at everything that goes into the total time of kitchen prep and the dining experience and finding ways to remove time to serve as another traffic building block. Most cycle time improvements may seem small, but will continue to compound to make meaningful impacts as well as improve the guest and team member experience. Remember, this is about attacking anything that gets in the way of a smooth dining experience, which should also improve overall guest satisfaction. The first of these initiatives have now been successfully rolled out. Supermarket simple for loyalty reward redemption. In the newly rolled out system, the guest simply puts their rewards telephone number into the Ziosk, and at the end of the meal, the discount that is available, like free chips and salsa, is automatically removed from the check. Then the Ziosk tells the guests how much they saved by being a rewards member, kind of like what happens when you put your loyalty number in at the supermarket. The Ziosk software upgrade will reduce the manager time needed to resolve check issues, deliver faster table turns, and more importantly, improve the guest dining experience. To summarize, Chili's long-term growth year after year is a result of a deliberate set of choices we make to deploy resource and capital to improve the guest and team member experience while driving same-store sales now and over time. The traffic growth reinvestment flywheel continues to spin and create sustainable, profitable growth. Now I'll give a short update on Maggiano's. A reminder that given the success we've had focusing on Chili's, Maggiano's now only represents 8% of sales. For perspective, Chili's outside of the U.S., which is a licensed model, is expected to live 4% of brinker profits this fiscal, and that will actually surpass Maggiano's profit contribution. While we are seeing some green shoots with financial results improvement and guest value scores, the turnaround at Maggiano's has been mixed. We've made progress on operational and culinary improvements, but some of that progress has been offset by losses with our core guests from our prior strategy. So we're headed in the right direction. The turnaround is happening slower than we had planned. We think we're on the right strategy, but we need to be more focused on delivering a few important changes that can make the biggest impact. These updates are all contemplated in the fiscal 27 brinker guidance we have provided today. Before I close, I want to share two weeks ago we had our annual General Manager's Conference in Arlington, Texas. To summarize the event, the restaurant leaders are proud of their results, excited about the plans for fiscal 27, and ready to lead their teams for another year of growth significantly ahead of the industry. Because of their leadership and their success, almost 80% of GMs now earn more than $100,000 this past fiscal and that number keeps growing annually. Our stated goal to those GMs four years ago was to make their jobs more fun, easier and more rewarding and you can sure feel that in the room that we have collectively delivered on that commitment. Manager turnover has been well ahead of the industry for years now and now hourly turnover recently moved ahead of the industry too. We also recognized our GM of the year, PJ Tremblay, leader of the East Fort Myers Chili's and our above restaurant leader of the year, Dale Bellotta, the VP who leads our California region. I also want to recognize Dale's colleague, the legendary vice president in the Northeast region, Todd Pierce, who was inducted into our Chili's Hall of Fame along with 35-year director of operations in South Florida, Tony Viola. Congratulations to all four of these amazing leaders, and thank you for your years of making guests feel special and leading our restaurant teams. To close, Chili's delivered another strong quarter, rolling very big numbers from the prior two years. The macro headwinds the industry is experiencing are still there, but Chili's is positioned to continue winning in this environment with improvements in food, service, and atmosphere, coupled with our industry-leading value. That formula has proven quarter after quarter to be resilient in driving traffic and outperforming the industry. and with all of the initiatives we have planned for fiscal 27 that continue improving the fundamentals, we are poised to have another year of profitable growth that significantly outpaces the industry. Now I'll hand the call over to Nika to walk you through fiscal 26 fourth quarter numbers. Go ahead, Nika.