EAT - Earnings call transcript Q4 2018 | Brinker International, Inc.

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Operator

Good morning, ladies and gentlemen, and welcome to the Brinker International Q4 Earnings Call. At this time, all participants have been placed on a listen-only mode and we will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Mika Ware, Vice President of Finance and Investor Relations. Ma'am, the floor is yours.

Mika Ware

Thank you, Kate. Ware, of Mika Relations. and is this Vice Finance President Investor Again, to Brinker year for earnings fourth Welcome call fiscal International's the quarter of XXXX. are quarter this at the released available and brinker.com. for Web-site on Results our were morning earlier Roberts, Taylor, Financial Joe here Dallas. Officer, President, morning Chief this Chief Executive me Wyman and in and Officer join

related operating performance and is Wyman Joe and our As will first initiatives. to our practise, make prepared comments strategic

provide will for fiscal guidance performance. In addition, we year modeling XXXX

call the for open then questions. will We your

please comments, Harbor our Before remind Safe me beginning of our let regarding everyone forward-looking statements.

such filings more in that discuss completely from operations. will SEC. to include call, management items and financial risks items our those into of uncertainties statements based of factors differ the this During could release insight statements course, not morning's that And certain which considered press Litigation described business and with the the and ongoing uncertainties All in entirely be review historical may within provide actual anticipated. are the such certain Any subject Securities results which the of risks to meaning said, Act uses we Private call facts. management And to to are I Such cause may with turn will the measures Company's of non-GAAP refer Wyman. the its on the call, forward-looking on believes Reform Company's should XXXX. and over

Wyman Roberts

Thanks, Mika. Good morning, everyone.

Fourth sales ongoing strategy growth, designed traffic pleased I we traffic reflected three at earnings saw and comp in at best quarters $X.XX, At sales into performance momentum. Brinker solid Chili's Chili's, with positive years. and X.X, you than and delivered fourth more quarter the new As drive this am of are to sustainable results with morning's brand's in release, quarter our press positive three X.X. comp

quarter traffic. plus our by saw Maggiano's, X.X, Chili's third at around committed results fourth Chili's investing of industry but on-premise, we'll gives challenges. the while global journey our points Latin incented guests throughout continues who by the base. reflects through been food actively portion to operational increasing That's these than macroeconomic visits East proposition. already us optimize its will guests and of areas comp sequential of with and loyalty improving to positive year both are join in and incremental specifically the sales Joe efficiency seeing basis our with capability continue. the drove Middle recall, marketing we and percentage the a we and than more our brand battle of consistency, direct platform we this outperformed This and trend a to engaged substantial our sizable in delivered comp the positive additional the more database increase quarter those meaningful marketing XXX Fourth At that sales accounting, channels. more consecutive our program, database. and on drive My expand we to continue areas, the quarter focused to to XXX leverage points, nearly us strategy remain on the quality, details to in, you'll guest Rewards quarter significant the partners to the the We grow sales continue the experience, XX%. guest of convenience to value As is deliver America, four improvements traffic The we give have four critical you number basis during investment, on,

year was which menu for in enable enabled of deliver and restaurants. that fiscal to our our fajitas, simplifying new our I'm of improvements in and ribs, by what performance quarter restaurants business, Chili's for food $X strengthened with hotter reduced times to the with we We total We for our at important XX us during restaurants significant our execution. XXX innovation by our value consistent our X proud faster to strategy $XX and quality international half. around coupled XX%, specifically proposition operations our longest during and seven opened partners Chili's. margaritas bringing burgers, and We global new and pivotal ticket launched margaritas, XXXX, our Our a presence cut an offering.

better, their that by all-time highs our This elevating and guests and is quarter. class. simplify Sales Engagement in industry. back-to-our-roots value to-go of traffic than faster, the execution strategy And experience. the convenience is commitment at scores in driving Finally, scores in best experience us working. telling our employee we appreciates to and are the food double-digit better team and and the business are growth is takeout, are our sequential their platform ending strategy significantly the the this in our is turnover improvement is up, satisfaction our through improved throughout fourth technology year, both their

as to Now we our broad keep frequency the see we drive base, Against Chili's a strategy. with a guests. we'll fiscal enter lot working consumer XXXX, of opportunity

dialing to So we'll we in as our in these keep look grow the areas business. effectiveness key

our platform. First, industry-leading how to we'll continue improve technology leverage we

marketing with Second, our aggressive get capabilities. we'll even more direct

the continue and to capital continue experience. optimize outside our target we'll restaurant. proposition. also the And multiple value leverage we'll finally, in to occasions We'll investing our guest inside Third,

shared program. and our before, by we encouraged our reimage are be pressing We results. first with we forward the market As completed to continue we

We in while that and most accelerate we are with the a simple in and we investing technology help the operation to them growth. significant guest. the our record track team brands makes also Maggiano's, in experience. to At speed the a pleased President. our Kelly the keep as growing help the easier. restaurant, focus the Kelly and is welcome And talented in is person investing team Maggiano's leader team at veteran industry on right great brand's guest a new We've potential to and to with enables a jobs important brand's convenience so for Kelly enhancing proven got our brand Baltes and are our the are team's

Our global develop focus Asia, where first to in expand and our in presence. our our and further we'll This especially will open is working Vietnam restaurants. team successful fiscal China continue year partners

expect XX our XX-plus to business. momentum open another excited grow the we to We consecutive partners and fiscal opportunities XXXX, and in restaurants internationally. ample fiscal of category XXXX third accelerate than the see in about I'm the marking the more outpacing year openings

scale a flow critical to our market comp tough independents. leverage increasing chains a from and on our pressure aspects hear in business our invest you'll positive moment, As will our capture share and from environment, and traffic. of cash has and in help sales us In commitment returning to both our to Joe us competition guidance put our

need Our giving entire are they is them we everything and that. committed passionate do team getting every for better about to guest, just day, every every to shift,

turn Joe Now call Joe? to the to I'll the through over walk you numbers.

Joe Taylor

good and to Wyman, everyone. Thanks, morning

we Before continue our of comments a questions, to me couple covering prepared by topics. your let move

detailed our First, some some and our additional for performance release. insights financing, XXXX of related year press to fiscal context our this sale-leaseback morning's in guidance recent a finally and quarterly summary

EPS fashion, to ended positive underlined fourth line my comp quarterly quarter return million. $XXX driven XXXX with This improvements. positive both for sales improvement Chili's growth, comp an continuing sales sales traffic quarter in in most reporting positive Our X.X% and to the a importantly fiscal to the from increasing year top Company Company

our per For excluding quarter, to items X.X% special adjusted the by $X.XX. earnings share increased

of the range end $X.XX, a For year, over share of our increase the per guidance year. at fiscal earnings high we've the prior reported adjusted X.X%

note me As items. performance, it couple relates to Chili's quarterly let a comp sales of

its in territory, continued gain improvement positive traffic Importantly, to is and X% steady now a reporting quarter. the for year-over-year close

performance be dependent sales in on improvement on price year. had intended we approach will continue fiscal more this to incremental to driving we traffic. As and to comp less year, top earlier improved This focused noted the drive line

program comp the and for quarter our comment, by noticed of sales level and our transition earlier are of the promotional the marketing Plenti efforts, X%. net for approximately increase reactivation quarter in believe for comp activity included price marketing X%. likely sales as our from a comp direct price. quarter impact for Reiterating the this a the heightened loyalty a loyalty reflects reduction Wyman's accounted we in negative reduced expense year-over-year This which of You following

to Our margin operating restaurant sales quarter decreased XX.X%. a as the in percent of Company's

from in primary areas impacting propositions, value such cost increased investing of of driver much was related headwinds to guest labor, which as higher While of the decrease hourly food and compensation reduction, ongoing traffic. sales, to and margin this restaurant bonus are the contributed

flow and to the EBITDA of Our remained which $XXX share million million, a $XXX little than utilized more with free flow dividend strong, fund and for repurchases. year was cash cash fiscal

during shares of X.X shares EBITDAR of million to year or to shares quarter XX% to beginning year-end. the in outstanding at over our We brought of leverage quarter. X.XXx the the This capacity repurchased, our This million at our result activity repurchase the also almost lease-adjusted did during year. the total the approximately buying the for X.X shares utilized increasing shares borrowing increase number in repurchased

repay of successful portion revolving our allowed proceeds the a However, us credit announced our completion of meaningful borrowings. recently sale-leaseback use the to to transactions

be expect range. We X.Xx this our in leverage to the year adjusted Xx to

sale-leaseback our of let summary. quick a provide Speaking me financing,

XX XXX to for the the be back purchase several properties of last us agreements weeks, extension for we leased into terms year with options. course the entered to Over three of separate sale restaurant

on We the $XXX closed properties of combined anticipate closings a proceeds. number wrapping generated future. transactions and the but The up have additional subsequently of few gross approximately have all million near small the in

items structure into these partially offerings mainly a unlocked fiscal depreciation by ability the and the with from timely The estate holdings. year. real which expense both of the impact manner, significant the guidance rent will forward, current transactions, the believe expense, lower several to transaction pleased are expense, incorporated We our are offset increased we close in of for going value

our the our the guest restaurants, to guests. and is guidance, our our XXXX guidance brands, Now with the of strategy improving in we fiscal continuation invest feel year drive underlying to value at the to of experience, look traffic and the respect offer

better improve programs. line capital to earnings through a looking and of balance organic are allocation our our We growth bottom

with be of our the full Web-site, this area press in Investor along guidance can our Our Relations guidance release found morning's policy brinker.com. in

several are Here highlights.

growth franchise new note year, marketing of X.XX% I fiscal inclusion our due rules. For We to of revenue marketing to the a fiscal was of the for the in and year included step-down contributions, a SLB expenses year, the revenue revenue primarily X% this growth, lower. as not these do growth line. X.XX%. restaurant currently we by comp growth contributions Without range revenue XX operating rent would credit contribution adoption in for in approximately X.XX% would forecasting of margin previously of growth to basis in recognition are that driven marketing expense and restaurant be the which fiscal growth, to revenue our sales expect comp recognized recognition marketing positive franchisee mentioned are points the previously our change the the

down sale-leaseback positive. financing the the restaurant margin for For are to impact restaurant standards, margin forecasted revenue and year, be operating Without would slightly recognition operating been to X.X% our we have to the expecting in X.X%. year to be flat change

We to our our for $XXX into restaurant existing of million million. investment $XXX and are capital the year fleet expect increasing capital expenditures

scheduled fiscal project $XXX,XXX and for earlier, the As XX program, average restaurants $XXX is of per and The $XXX estimated year. driver million, year take years. will weighted and reimage complete for are are between the shares. our of Free three between $XXX,XXX flow forecasted CapEx and Wyman most of increased into leading spend shares the restaurant is between million end fiscal spend by the we XX year. restaurant fully we to next approximately reimage estimated is outstanding XXX mentioned average overall million The this the cash to now which million a

our guidance earnings XXXX My are for share now a $X.XX. fiscal $X.XX per is adjusted Finally, complete. comments range to of year

you back Let's open facilitate. the call to will it turn Kate, to for I your questions.

Operator

question announce affiliation is then today pose Nicole from your Our Instructions] first question. and Please Miller. coming [Operator your

Nicole Miller-Regan

what you if saying your core between the understand, done remodel difference to satisfaction tease it scores and remodels, want you believe can yet on just a because month, guest that in I now? out market are customers you I had tell have questions. last quick base, Two us I the think

Wyman Roberts

other cleanliness, guests has Obviously positive. movement see atmosphere they expect hard the the would into appreciate are piece experience we the also the better we that also the market in they the working come the all the we and of the biggest opportunity with project the we feedback the stepped from scores, you the gets guest in very to the are the when give as experience relevance, guests that make that's and excited sure really most restaurants the But when and about aspects to a investment playback. make operators The been up. are of

importantly, is So, years just visitation and finished feedback, the And ago encouraging. previously with had very market their we what right now they doing and is while more as and Northeast done, said seven are first frequency our are we reimaged that encouraged as we we their been in market I but had reimage. well the seen think had that which we that in out, never playing you had up referencing are how by prior have is the what the market

Nicole Miller-Regan

to Maybe are box brand you a going or again, development is, what say bit to future so Kelly for of more want total little Can about Is just I about little And now? to now talk to the you want this different be I same why understand Maggiano's. a you much. hi accelerating model? about just and economic the bit acceleration? Thank the the level adjustable why and a

Wyman Roberts

first, question really is I we have want to opportunity. are to the and we Kelly give answer Kelly that excited your onboard, to think,

then will how in putting now. for or and to has plan So Maggiano's, plan that it the growth. right and work want he's strengthen quickly development very substantial and footprint other together his to a first Kelly specific that towards share on it team with there develop know to ground, and grow we the to getting prototype just feet isn't brand the for the his got ideas you

going. So, that's are we where

Operator

question next today affiliation your is John Please coming announce Our from your pose then Glass. question. and

John Glass

Stanley. Morgan It's

and throughout that to cost, forecast was do that building upstart on is if an First something and direct really it it or Joe, will, negative being to the just the that back relates your marketing continues, persist? comments up as on that pricing you XXXX, program, just you doesn't

Joe Taylor

is our it particularly sales really which fourth question activity the mentioned, I comp to reduction really that both. the relates in heightened really quarter. as answer Again, reinvigorated the of embedded price. as to that as the expectation spend, an the John, it we guidance is, to to program is we had a it's But marketing in

So, we incremental from the coming that kind to is of that X%-ish drag mentioned that range you.

John Glass

tails sort of at peak sort tails clear, that level you is or Just off spending does if and to stay be it it off, the this of as the will?

Joe Taylor

parse think in we to again, level quarter. to fourth in it an out. and mean, think basis will normally the a on would it's you see I we the higher I marketing have tool use, expect it I than but ongoing was

John Glass

also about the as then guidance, just element And you highlighted are traffic And presumably can your that be still for a on if why maybe of case? then up to you little just what there flat bit the the is cost is expense and can headwind comps, margin feasible? the by XXXX? is planning driven lease so continue quantify would Okay. restaurant just incremental talk that positive you particularly it, positive Is to labor a on of another specifically you

Joe Taylor

things of couple A there.

do maybe still contributor fairly way. We across look if a the continue positive there, segment. out flat line operating at without the the for we leverage emanating environment. benign restaurant much the top opportunities growth on basket and look the in of would within slightly inflationary efficiencies of the adjustments, at some the of cost First that you is top sales biggest to get places Obviously but be broader of environment, line from you the other look that at slight a to touch

expense. you you, revenue items restaurant the $XX in roughly and to I It's of million basis the rent close combined split the and gave and on bit it far that as question? And $XX as shift franchisee depreciation SLB million little rent marketing two between relates actually the were on for then more it's the between margin, a impact them. expense a the to recognition the As had operating which relatively two impact contributions, a

John Glass

can but want. if answer No, you you

Joe Taylor

as that of of offsets rent do expense. under have and remember to related the the assets was decrease a in just we that too, depreciation quarter sale there the those to Actually offset a

John Glass

Thank Okay. much. very you

Operator

Our and your Please question. Jeffrey Bernstein. today next pose from announce affiliation question your coming is then

Jeff Bernstein

Coming think about I give how into One, some Barclays. as of the you industry from then at I And think just that, adds that for you the that to to to about questions. maybe can on follow-up. XXXX? Couple arrived of quite had you for casual fiscal you think specific XXXX that that and wondering but guidance at in which if and I'm the positive mentioned was relative fiscal X.XX up assumes how traffic, insight comps, maybe components a dining you X.XX, terms

Wyman Roberts

plans low we about We I don't today, given it's comp where from assumption obviously we X% everything of positive think probably that at the see build kind so dramatically in and base we know too. sales our make an it the from changing industry.

see ourselves doing from sales then we like of taking we few and quarters, but on driving throughout traffic. from to specifically significantly So, last been have perspective traffic, share gaining and kind see a we gains that the XXXX, share continue share

Jeff Bernstein

if fourth off-premise, aggressively double-digit are your you then mentioned maybe Seems think and Got you some growth. the updates. can said the I it. peers you of you just quarter it. And provide pursuing all had like wondering I'm

margin, opportunity components is is to-go are So you delivery, much maybe today? maybe delivery to-go, check, that the of average your and what the where of any mix and around percentage how that of kind

Joe Taylor

and on the would moving XX.X% mix I growth one between We the to very teens From isn't the to little but more aggressively forward, This we but the business, much I see to which and consistent impact continues overall to a teens be mix gives Interestingly component having the going some operations growing of the fiscal of the the Delivery room see small standpoint, of are be mid a mix. that to-go point the we to in on whole because a we're it to-go out basis move We're Joe. a pie. we there. in-dining things is pleased as as year. XX%. to-go to-go our half into and in less fiscal is continuing to year-over-year upper direction leaning are year, our growing with both ability real enough, anticipate impact business second very move are we particularly would delivery throughout our

Jeff Bernstein

fiscal it. Got maybe what's on paydown, factual of expecting be, that but and absolute us thinking level side thought are clarification debt I I And maybe are leverage lastly leverage just much the a gave guidance the know the long-term interest of you you debt how XXXX? think what you things, the long-term within would you your after expense

Joe Taylor

ending what So you things the is will again, the I be program. investing business to X.Xx expect our move year. throughout into like we gave see is obviously the We Xx to would reimage we quarter to that as

a on rate to be manage have increases $X an of probably probably From $X.X in and that as up It's ability our interest little at year, we going level. will But comfortable in that a anticipating to to delta million an comfortable So that but we're the we are the nature. interest range things of million in bit at we move interest. that. throughout increase perspective, fiscal are depending

Jeff Bernstein

million your at fiscal actual? above the I $X XXXX mean

Joe Taylor

We should that be million range Correct. above. in $X

Operator

David Our your announce is then and from affiliation Please coming next your pose question. question today Palmer.

David Palmer

RBC.

how margin quarter sacrifice it XXXX, into offset year? to and more about you're it keep to and fiscal that margin you and in some this is $XX, those was stick introduced other for that find going with in flat that restaurant what restaurant, something only XXXX underlying restaurant to the in fiscal fiscal Just you that a marketing-wise it, about ways return pulled to shape that specifically X question marketing performance lately, and your that will works

Wyman Roberts

effectiveness a things. of say we regard of tactics competitive marketing a mediums the a be thinking mix strategy, non-traditional rising. couple specific is, with specific One, importance in think going and less is I'll general about promotional are them perspective. and their to from on marketing our What just little our I and to our

that measure, So, advantage digital, feel that here are the leaning is great loyalty, including CRM and team we into. social, a we job marketing competitive are that kind can more areas doing direct, on a have really our of and things

going is And so, again offering going from the on are $XX of are focused the vest. we more to the dial-in little the are regard areas a specific value to keep changing offers how proposition, we there bit. mix to for our some a that tactical been little for to team a those With how strong X and that are and perspective, has a we closer us. the marketing getting out

works We for and about laid business, structure both forecast does what of how and dayparts are for margin the in we've it's and you've out it it the here seen excited us, for it that to in make you. hard within work our kind

Joe Taylor

David, we overall that operating of comp an Specific opportunities mix And look sales when will activity. the those and opportunity one, dynamics, some add are impact, of and you but come to them would extent the the at about of to of opportunities, are restaurant impacting to mentioned obviously cost particularly at understand you have you I we if think some traffic margin, that to driving looking they the out the that.

but we driving look at positive costs, So benefit and that's where typically impact line. on top would offsets

Operator

question your next today Our pose question. Senatore. your Please from then Sara announce is and coming affiliation

Sara Senatore

Bernstein.

last the two is your the impact conference In [indiscernible] [indiscernible] really of follow-up had call you Just One questions. implied on

Joe Taylor

question. are having of first trouble. missed Sara, We the part we some your

Wyman Roberts

Sara. up, breaking You're

Mika Ware

up. breaking are you Yes,

Sara Senatore

me now? Can you hear

Joe Taylor

better. That's

Sara Senatore

Okay, investment understand you to and kind negative the than line just the the last this or call. looking if you can sort point are of underlying? quarter to had color trying of just the please. there any then have are organic in you you return numbers how conference is comp's the about on would another the you that the digits pricing, question, Was the out of single the in I'll low returns pricing, And fact that guiding expect at about of more asking the trajectory to with been just X% last on have back sorry. expected loyalty I was thinking see? I kinds that this I'm and give you on kind are at just you

Wyman Roberts

I was made we more planned. quarter a had in maybe think than Sara, it to decision aggressive be originally the we

the Chili's the excited XXX% We restart the the are our program the opportunity Plenti grow after about of it. the CRM program with to My to back kind loyalty control of of and sunsetting our get and in

over And longer an about so what you he time. it, marketing that's did. if a in strategy, that of It's out think period pays investment a

So, not if and that those relationships months, years. names leverage those investment for will

one that more with future will in than My insights. a before, the a that's in And little investment to we bring but again, into, probably quickly competitive mentioned did will the for tactic we've make It team a we to think wanted and as strategy we aggressive with we what and category was Chili's it's quarter the lean a So, to the us. continue reestablishment that our do of Rewards. our and advantage we

Joe Taylor

returning particularly direct So from feel attributes perfect and a return as perspective, we compared the how to higher that piece channels. as the it to marketing other to it relates do equation, the learn marketing piece, channel it, enhance has some of we of marketing

can be over well investment an you extended So, period that going drive of worth and one the is it time. to

Sara Senatore

second helpful. was pay That's rates first of get cap great. of a on guess what of Okay, debt. the math rates rationale terms sort rough if rate if better thinking this my in I for that than you all the funded just sale-leaseback, the on funded wonder then Thank And I sale-leaseback right, if I'm higher the doing are is, arguably could what of then debt? perhaps you underlying – and about all, are you.

Joe Taylor

targets. below at rates we offerings very cap came the the Sara, market. transaction, our with the of transaction. compelling One, structure in be The looked When to we we are found pleased very the our in

So, the we of are a mean long-term to it that. is relative financing financing, with sort pleased market. I long-term

It's do very also value impact below significantly of of the amount think the I adjusted that unlocked did, our the we we ability it's compelling. that leverage in the amount when So that unlock you on to value Xx is transaction. the

rates paid the are we pleased think I right line and in transaction. with the So,

Operator

Our your today next affiliation Please Gregory is question. from question then pose announce Francfort. your coming and

Gregory Francfort

I have two questions.

just margin. maybe The getting the understand on XXX me XX first basis from XX is you like and basis then bridge rec help the to rev like another on I'm XXXX? points XXXX to Can of points on the of incremental kind question so And was rent, had I'm leverage the other right. then sense and to get that use I of a guess just on I trying the proceeds.

just stock of Company keep from this to the delever reason ahead with leverage Xx? kind at deal. sort of You guys was here? the not Why X.Xx of the back a lot What revolver to bought of

Joe Taylor

a the is the right restaurant talking what as and There's think bigger I to, higher those assuming obviously marketing. about I'm franchise are then you referring rent you of impacts are context number re-accrual, are Greg, operating of at, bridge look you're bonus, a in think and re-accrue top margin different you as we the target have do being to offsets into manager the things flow-through. what offset that play, comes line we're biggest back, from come impacting, into you going the we play,

flat I talked offset and And changes, operating guide. to those benefits areas to largest are by there's line number that really pieces other again, to but of the So back a the would the is just equation. of restaurant margin Without you X.X% about the top that throughout get takes slightly X.X% positive. puts down

you those and puts think get takes. for I feel can the So, relative

You about right it are the way. thinking in

manner. position, to. As are Company the you of comfortable in do to level we have we at unforeseen dynamics ability capable we delever, from than leverage the The wanted or guided that it some managing leverage. relates If position cash to that market some more and that strong consistent a the of it for to issue remain fairly very I dynamics leverage reason flow that of

cash from flows have reform tax improvement also and are from operations that improving ongoing the We adjustment.

So, that leverage a dynamics that us to keep very level. comfortable of number continue at

Gregory Francfort

And you follow-up, one losing year's payments all maybe expected next is numbers? Plenti of the at margin that the color. Thank is for in just benefit and there from a sort

Joe Taylor

a it's about numbers into in restaurant into the we for to Plenti for the It's marketing incorporated, definitely mean next if offset you think from earlier. about talked in I incorporated is that was it loyalty where change price a want accounted expense expense year. to shift the

Gregory Francfort

Understood.

it was sale basically So of to sort flip? a margin

Joe Taylor

Correct.

Operator

next question then from Chris question. affiliation pose Our is today your announce Please O'Cull. coming your and

Chris O'Cull

Joe, the than maybe you it changes? how you are can would slightly Stifel. if on being of seen to have for comp cost the growth guys to XX greater margin give little us sales, wondering equate so and labor promotional maintain that, seem you points as the color sale-leaseback but accounting a of to maybe pressures, impact to cost the excluding the of bit leverage, XXXX I'm impact fiscal you more basis just It's activities, targeting positive flat

Joe Taylor

is restaurants. that It's to different puts that When I the leverage compared the think growth. Again, one into smaller about how to little throughout of I line of the a look the sales. expenses equation and There look are talked the that from takes, benefit. bit at in that out it's top fixed piece like going is efficient, We're margin. expense we we significant opportunity how biggest have marketing relatively at opportunity of a a and the as in about, to other is coming other sales run of and shift ones of cost we the where be the pieces talked I

with the combined cost effective an as that efficiency is ability the going think piece fixed we to be year we move to this equation. throughout again, of lever So

Chris O'Cull

What you from kind it increase impact impact in – margin of a XX% do than expect you do a from I X% comps? pull-through? Is expect mean a leverage greater

Joe Taylor

a think puts the there, Chris, come you but… of it. right has play of obviously into range that potential being takes about really, that when in It lot and There's

Wyman Roberts

price is there in well. And some as there

Joe Taylor

bit A little price. of

Wyman Roberts

a typical. at So your obviously better will than flow that through it

the you of that mix, to into are that we're get position looking So net able for. when you factor that neutrality in kind

Chris O'Cull

excluding is from consumer's what what you help kind expecting? pricing Wyman, accounting machinations? of you are all understand, Can perspective, price mean I the the effective us increase the

Wyman Roberts

XXXX. little And to a We talked ourselves extensively about back call. into this in we that fairly XXXX backed which kind where is we want last We got I and of to aggressive think be, X%. X% in

kind X.X% changes of that having their the enough everything really gives We that So the us. seen make without sweet significant kind feel of like consumers we leeway in absorb on spot is to visitations. based have to that price for

Chris O'Cull

proceeds And interest year-over-year Company if the Okay. used you, the apologize the I expense you Joe, fiscal then misheard did sale-leaseback but debt? would because I the to from thought I say XXXX, in be up repay

Joe Taylor

forward. we We repay thinking the to you. embed sale-leaseback the increases, rate on that have did cost reimage gave the debt that floating to move debt. rate some could into so from to use I the into consistent think very interest ramifications X.Xx But Obviously business, think such forecast. is I are that through the is investments Obviously the proceeds our with we'll anticipating you as if X.Xx make levels we we curves, continue the

Chris O'Cull

And from one of one, gain including expense? net as Okay. you your amortization are a last in rent the the transaction sale-leaseback just

Joe Taylor

From intend go that will adjusted over not a but out to GAAP of basis. amortized earnings forward deals, to so that dial it we it an impact life perspective, the have will on be a those

Operator

then affiliation your and Robert your coming question Our is next question. today from Please announce pose Derrington.

Bob Derrington

am I all pretty you it of curious, recently protective know been I'm as your typically of relates have and view, I from Court to rules us most gaming, the the the the land family just curious Wyman, and environment Advisory. within of consideration $XXX,XXX that some you're but changed Telsey think out trying ultimately renovate to bars, way frankly is may to also within could your an update you Chili's spending figure given any quite participate to opportunity. you that? that Have Chili's there offer Supreme which that,

Wyman Roberts

smaller kind franchisees there opportunities or There lean the them. way Obviously, opportunities sources a oriented that reposition on think advantage at of there revenue is building continue a opportunities brand now. that brand. our in but and not reposition may is options. basis within some We're in state offer a that us are to to local Chili's and of varied of to to explore don't significant take some would not take positioning mix of it that in Grill we that and that's will the Bob, advantage into the allow alternative that allow way, gaming way others for maybe major & would are a some kind family us heavily looking menu Bar a I a not

some but So, a perspective from at exploring would major gaming Chili's. those, embrace kind we brand positioning of that are of nothing

Bob Derrington

use advantage within own certainly see And you or follow-up, one technology, and got to to-go, the foresee your on of delivery, the there opportunity ability your Chili's delivery easiest your your and order do or the program a you've through place in a you third-party ultimately I your improvement how Okay. think the a whether apps there industry, app, it's ultimately to the is taking of app, probably big means? through do as then delivery

Wyman Roberts

I think and where bear. our to again this can technology bring scale our is we

how for to ability manage adoption think so I consistent And can see the is use that operators make consumer to you consistent we the which can see and and multiple that and guest deliver partners of their operators. integrate job keep take infrastructure the to from amazing team the delivery. can the about delivery picked the and have talking like do making information we with into restaurants great seamless as with in idea that you we we When suppliers supports the it sure the how is into keep benefit, primarily so wonder that the idea, tablets in much that walk app delivery technology we'd partners are flow. see platform, we're up, we or growth that operators, takeout to you as people, the that it we the delivery use significant, the just Chili's simple it of easy our that experience multiple that a and everything be, app, really as convenient with we benefit the so and simple has restaurant, app, same we in seeing how it's done building the experience, able and to whether it for some with in are

Bob Derrington

Terrific. Thanks for that update.

Operator

pose Our and next question today is your coming from then Stephen announce Anderson. your question. affiliation Please

Stephen Anderson

Group. Maxim of From questions. couple A

of year little your you the fiscal lapping effects mind And are in within first a hurricanes your the a and you Harvey of guidance have that's the Irma? X.XX keeping that quarterly X.XX, to something look First, at cadence, follow-up. bit half of I can

Joe Taylor

obviously expect and back obviously growth sequential continue XXXX, seen those Steve, through that consistent we be Chili's lap lap and get we and and to of year. hurricane wrap Yes, to have at and tougher and end maybe throughout growth we three see We're little stays some we that from a hope we from XXXX, let's boost strategy events as would as that but of here the we'll the those anticipate the quickly up quarters season fairly benign. [indiscernible] are getting coming into fairly the

Stephen Anderson

in increased And some dividend. quite of use you signaling your are committed it's at Are the like that way Okay. first year. the you of some or view in still the follow-up that question the in time you end dividend? is you fiscal on cash seen how shift your time I've some to done quarterly haven't my dividends noticed I Usually other is,

Wyman Roberts

dividend Honestly, this so quarterly that part as announcement, the continues. payout Board of approved commitment a

the the with dividend that been generating. and it comfortable ratio had are yield payout We

in the Steve. for it itself regard, think commitment is signaling that don't that significance any anything dividend I speaks level. from So I think of

Operator

coming next question. Our then your today your from Holthouse. is Please announce Karen and question pose affiliation

Karen Holthouse

give did the remarks, was one, inflation commodity I did One quick Sachs. in Goldman what quarter? miss in you prepared

Joe Taylor

it, quarter, is prepared Karen, We for your that the fourth in But remarks. didn't ask? say the

Karen Holthouse

Yes.

Joe Taylor

that. delta to market We the maybe it's – as look chain. it of relates that there, is broad mentioned, going of we kind benign think I haven't a as forward There the frankly, flattish going fairly you environment reach supply inflationary disclosed And major anticipate over slightly isn't a I year-over-year. stay

Karen Holthouse

should particularly then given year. [indiscernible] mentioned margins quick about How that Okay. on modelling cost that of the year? improving through year, one headwind And next the the other think one, re-accruals bonus trajectory the we manager cadence you through

Joe Taylor

the in will side fourth end higher equation. on performance throughout quarter. year bonus, particularly the as It the impact mentioned, the this last of The manager had bonus of the manager year, I

RSC, a little from is the incentive that dollar move So scope tell we you the across the of probably the it $XX can is compensation I as of you of the the in third bit impact within that our both cadence into greater and year-over-year. right as the and programs half if perspective, front million about quarter. of all look programs, accruals all to real those restaurant relates a

Operator

your question question. from affiliation next coming pose Strelzik. is Our today announce and Andrew Please your then

Andrew Strelzik

BMO.

is the my about So question same-store guidance. sales

you been? you over XX you stronger have better prior the that, that to even kind rates now quarters. if had a industry the kind of So, at the the acceleration last as you industry been think dining talked been over or in so return months and comp than we've an your the bit outperformance for to And stays has it you of looking industry or casual last about couple those where accelerate levels to can of anticipating are XXXX, are that do were trajectory of

Wyman Roberts

it of I in again, mean range. not we right, a it's look see that response been dramatic, I in same Yes, or staying being mean, although but minus range. tremendously sometimes that Andrew, we it's is, kind plus at point,

Andrew Strelzik

on my question And CapEx the Okay. other was trajectory.

the the of said remodels you prior to CapEx. respect peaks kind of wouldn't You've with return to that previously

here the perspective. see of couple CapEx or it holds foes for of So we quarters is trajectory this CapEx high couple and years program the the from next ramp? I'm wondering that from as over it kind the does forward next point about a of just

Joe Taylor

driving going is is those consistent that delta of and year-over-year. obviously the three relatively similar years. it over is be pacing program to pretty reimage be The The designed to

Operator

Brian question Vaccaro. your your today Please question. is next from announce and Our coming pose then affiliation

Brian Vaccaro

Raymond James.

right be the do Is back that it And to spoke Just the pricing When was back the get [indiscernible] flat. the to the you the impact that sort thinking level? exclude the the expect back to you you in to quarter, into Wyman, getting about of menu? target like looks currently mid-Xs. menu pricing way of to if pricing, bps in XXX loyalty impact

Joe Taylor

me answer and second. let the talk to then piece it Brian, first Wyman can the

the the was was points. pricing it about XX in basis quarter – menu fourth So, about

So, lower it seen we discipline. price we significantly had that maintain there than again was to quarters as but try in previous

Wyman Roberts

forward. And we close should going to that be

we menu that I on. some rollouts, much targeting range are timing of be first just or X.X fluctuations give We pretty and should think quarter and take there

Brian Vaccaro

Okay.

I but expectation and into around inflation in wage inflation quarter if your fiscal sorry wage what XXXX? fiscal fourth missed what's was And it the

Joe Taylor

didn't the Brian, you. but quarter. will about in no, tell It miss was X% I you it,

We year. to expect that wage price in move this inflation X% range as through kind to be of X.X% we

Brian Vaccaro

the just Okay, you are us of end many then might delivery last of back can remind Chili's, And fiscal one, the system how XXXX? at units how by great. by and one be to covered currently many delivery covered

Wyman Roberts

support the level It's level we And we that that quarter Chili's, I'll we actively major get business a say, better this, the for understanding is and business. lot you, really that in have for most or of of delivery the both Brian. story with guest to understanding more need players, what a perspective, understand and bigger No, are to we the about then just and restaurants we a from guest two. then don't the aggressively is that players working much are issues very we next okay, actively of well, big players to but Maggiano's details business in a in of of many restaurants are minor we're from just and learning and understand, the developed. much impacts, first, and Chili's. a mean, and with having especially delivery does for, part Again, talking acceptance, as we tests and major anticipate testing

Operator

today affiliation your announce your Please Ivankoe. coming from question John Our then pose next question. and is

John Ivankoe

outperformance With try together said a that in JP I that have relative by trends right here. I current meant the and heard you call. Hopefully quarter wanted I traffic you to remarks different say on context things your prepared to piece I the think think Morgan. peers. of I to were couple that into the Wyman, have were continuing

Wyman Roberts

Right.

John Ivankoe

all it first mean but very, then And Okay. basis had easy before certainly and explain that, together have the correctly? that quarter, relatively you, at the did comparison same-store you loyalty question the promotional you that be brand work, changes, expected nominal trends did you say but to very hear was on sales especially look of looking really traffic your part what year, I put throughout changes, hurricanes another that major I during consistent the

Wyman Roberts

No, but are significant we to We've the bit sales we we upside there, weather the impacts. anticipate that then lapping very first little that obviously continue quarter probably we can year. some said or do grow project of throughout got a and comp traffic

John Ivankoe

we and yet, that other be much into your year? Texas in particular the laps insight now is published is of annual something that to they coming a should number these maybe hurricanes hurricanes average above are strong, I states difficult insight your to basis Texas first of I the given numbers markets first the beyond haven't are considering be some it? the above there that [Malcolm] so into [ph] I more range, and mean we Okay, sensitive monthly in what's the and that is around but are be with what lapped comparison. know the on has later guess presumably What quarter happening know quarter I oil but would so that

Wyman Roberts

with markets rebound we markets seeing experience we concepts oil by are those encouraged in our the they in the our markets represented those the and markets. are that think and in very in have well Obviously rebounded. is we I are

So, also the lap country broad in but I to think some and settle we are pretty seeing that they'll frankly. strength start throughout

what not the well. we're the momentum in are when parts happens about the country we concerned other It's about So, and seeing of not carrying as what oil excited lapses. actually we're our thing only

John Ivankoe

new cost, those what's of can some And type best to well-executed think are also kind some markets, restaurant competition, the labor those. markets high of several core of small-chain level very going of construction the well-branded, independents markets? your of in especially of your independent what viability as on it to relates the activity attract terms view But your performing competitive of without I competition. in of restaurant year-over-year, is has

Wyman Roberts

decide seems earnings it. think those the large It's I the [Malcolm] large as it like industry for and from trackers kind way national on macro the then than companies, the in at as two the are and John, the in guys interesting, you try [ph] publicly doing the dining. seeing calls [ph] I of than from numbers better casual see represented least from traded [Blackbox] It evaluate brands and major and you this you are think basic, I various

to acknowledge, the a little hot in and is are to people So, town and are, struggling like I there always whatever they than item think concept be independents the some going would the more you are hot actually in.

category pressure I I it, they the with lot big So facing think the there a & the them. think we headwinds hot lot and industry leverage, a and and bit of a not little the are struggling is scale, in on of industry is new insight the and to up putting don't are with the make on of lot of the that they have are a all of smaller deal that a pressure piece Bar they independents continue thing and the to sexy Grill the

Operator

affiliation is pose coming and today your question Will from next then Our your announce Please Slabaugh. question.

Hugh Gooding

off versus progression quarter to going of in of industry that was in for you seen month some haven't is somewhat the peers that on the question, morning. first last back early said the the quarter like period, date to really realizing it date Will first outperforming in the to but have traffic looks this. period. slowed insight the broader more quarter, the actually This I sounds XQ, question, comp give Stephens. you And I you know color and the could hoping Hugh last to us on this was on then going just

you So gaining to just if markets or of I wondering was initiatives was that more stronger exposure just traction? thought these your

Wyman Roberts

quarter, felt general level a in probably of inter-period improved I'll sequential stuff. quarter, the not seeing detail and continue the general, the Chili's, improved we're seeing. to we especially are good just probably at in we progress as of in going traffic into I mean feel that we you by quarter we and throughout give continued plan kind this traffic, good about in asking the to momentum, year the for are are improvement say we the with just about walk brand the sales progression

going to month, of to the into detail. month just not So, get that level

Hugh Gooding

off-premise Got in food your a loyalty additional value, leveraging stepping it, has of that, improvement bit, same-store at what over to believe quality, at do thanks. course And of do the the growing investments then you been earliest just and this focus kind the you the opportunity sales largest you XXXX? the point back little of where piece, the in base when on the contributor see kind look

Wyman Roberts

and excited that are done that to the that about grow that's we as the in better have kind about We On of you seeing in business. anything that's we that, And kind simplification, things could getting a double momentum faster, on in to and then we who base are difference quality a hotter, takeout be the experience are that know very moving continue recipes. We anyone terms quarter we competitively in Chili's, the of makes at have giving been food experience, the I can of we laid there else anticipate out too that we mentioned, out the of the and out excited experience we work forward. insight, without we focusing the top improving delivering much of do and ended and listening fundamental guest put digits.

using teams seeing to the proposition and to are the that about, that our competitors the continue some the to are and we we excited leverage we table and and then working bringing how things are differentiate to value ability on there. the of then market hard relative the that So, to with all that mediums are different

Operator

queue. We further in have no the questions

Mika Ware

results Kate. look appreciate Bye-bye. us view call the Have joining on our wonderful to you, Thank October. today for our We day. forward updating we quarter and a All everyone first right, great. in

Operator

conclude conference and gentlemen, this Thank does today's you. call. Ladies

disconnect at may you for You time participation. day. phone this wonderful a your your and lines Thank have

Brinker International (EAT) 14 Aug 182018 Q4 Earnings call transcript