EAT - Earnings call transcript Q4 2019 | Brinker International, Inc.

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Operator

Good morning ladies and gentlemen, and welcome to the Brinker International Earnings Conference Call. [Operator Instructions]. It is now my pleasure to turn the floor over to your host, Mika Ware. Ma'am, the floor is yours.

Mika Ware

Thank you, Holly, and good morning everyone. call International's earnings fiscal quarter the XXXX. year to for fourth Brinker of Welcome

on are Financial today’s Executive today me With call President; Joe Officer Wyman and Taylor, Chief Officer. and Chief Roberts,

were released website our Results for brinker.com. the earlier morning available at and this on are quarter

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

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

your for We will the then questions. call open

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

During items call certain within which considered our Private may management items XXXX. historical statements of the are discuss on entirely Securities facts. not Act Litigation the forward-looking should based meaning of Any Reform such be

results include to and the from Such statements risks more release morning's the anticipated. factors SEC. differ such subject and are uncertainties actual All those uncertainties described risks filings with and press to in completely company's this which cause could

the uses of review call, management ongoing that we on to operations. business financial into measures refer may and the provide believes in company's And insight course, will certain its the of non-GAAP

said, I that over the turn with And to Wyman. call will

Wyman Roberts

to performance Thanks share as we ‘XX joining Mika. how and us ‘XX. morning our momentum fiscal we're Good for review into our everyone thanks build going fiscal on and

X.X% basis up fee the XXX and driven industry, industry. by traffic, Brinker of through results a $X.XX delivered were sales, strength the for those a year, with $X.XX a points the XX%, points drove year strong basis those Chili's took comp at quarter primarily to XXX us to and XX%. for earnings fee up the ended adjusted a great which the quarter, up X.X%, to the which sales up year comp We

future achieved During we the performance. up or strong for expected and fiscal levels set the business ‘XX performance we beat

take committed ability because gives share and remain to of continues in to to us confidence our drive still because it there's business. the first, which our second, to continue we strategy; and plenty grow So results upside

Now our our for a strategy lay leverage operational X.X First, threefold: our strengthen proposition; when convenience value improve to third, this guests. our year we increase technology and out, second, digital objectives were execution;

value, needed $XX that we've wanted In work platform and refresh had that industry proposition. two we a but of we across for led both for to more with now. We years got terms flexible the would that parts,

segment and compelling for offer and at driven. are lunch structure It $XX guests value who right margin dinner. of delivering mixing our rapped a It's in that and our able is it's works level in the are of to now grow and both we the Three now and on resonates within our to the performance continuing preference, hold base, base. this of to off mid-teens; it we cost check are sales

operators our them our and continued our guests. our operators. one class help encouraged delivered to our From guest focus gave operators become but systems is we brand focus build commitment we're by an significant slower execute perspective to any working. We’ve our is, and narrowed it’s leadership in standards This and as a strategy class and improvement metrics operations across world best

and digital better leveraging we're efficiencies personalization technology financial guest and share experiences in drive leading technology increasing the for we're industry to years our effectiveness, restaurants. now And our members both in team With level gains. of to our accelerate in used our database our operational using We're creating investing of also marketing.

piece still And and that continue else we’ve growth crucial expect can growth teens platform to we're easier trend wrapped has and our order the throughout than And driving the take-out our in the that in supported faster and fiscal business. technology on category, through that in business and e-commerce Chili's solid this takeout solid we of guests anyone ‘XX. of

introduced proposition, we and guests. execution year drove personalized fiscal for leveraged better convenient to value our strong and deliver experience So, operational in more technology a one

building strategy ’XX, in Looking on growth the our we're by to of investing fiscal our business.

First, in investing we restaurants. to the are grow frequency

now support, of our our in With and more to targeting our can innovation metrics value as oriented our the better to will challenge to and having segment often, which new help heights. marketing with take value we stronger proposition, the guest, them ourselves problems are frequency layer encourage drive and guest fewer operational strength we execution, of return which experiences guest us

new in investing digital bonuses compensation helps all system managers perspective our the our are higher training and our from forecasting are systems; with a kitchen like We operators, systems now and better that run that both new program better.

our We're also business. investing off-premise grow to

are the existing our to guests. team and our for a platform provides to Delivery and orders our offer to e-commerce operational integrating unlocks same guests using our potential experience We growth. delivery drive which members seamless the significant system, to

and exclusive DoorDash with significant accretive margins, scale. our to in already We've an incremental now entered investing that’s we're agreement and to we've growth grow off-premise seen

in believe to and the brand restaurants. ability We run our

So acquisition biggest the our our we're we domestic welcoming Chili's into pending from fleet complete to partner. looking franchise XXX additional when owned forward locations company

We to are performance invest with our restaurants. owned driven an in pace, have the company programs proven midst restaurant in at accelerated solid in of these that developing plans

from and strength. a ’XX of was great enter So position fiscal year a we ‘XX fiscal

more many planning show deliver competitive double to we're we're We when again this in beyond digit for what our see we on environment, examples about EPS you for in you here very in fiscal ‘XX our to confident of and plans are specifics of Day. Thursday share excited Dallas ability growth and Investor

confidence to continue We for when it would special. this introduced to strategy their at feel and we operators said you build be I'd rise every a long strengthen of day. the make trust like challenge to thank relentless commitment to brands guests and the our guest every our both to

fiscal specifics relates walk I'm the guidance on now over will it quarter the ‘XX through clarity first proud to provide fourth and Joe quarter. team you who some more be give turn our to call to I’ll this and you on results, as

Joe? So

Joe Taylor

morning good and Wyman, everyone. Thanks

Our growth. year fiscal in ended quarter line the with ‘XX company good another form reporting fourth and of top quarter EPS

in good a impacting positively areas of operating margins Additionally, operators job control. our did they restaurant

fourth of sales year. X.X% Chile's a fiscal comp basis, of million, $XXX same sales X.X%. positive for start comp sales prior quarter quarter by of successful a driven Brinker Brinker’s up comp recorded the positive up which to represents sales combined were company On from from the positive year lapping also last X.X%, quarter

Our XX.X% adjusted per $X.XX. share the by quarter earnings increased to for

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

let to underlying activity. direct promotional business our This is the As of for a a sales our base X.X%. decrease The related The promotional in comp it sales me of press performance composition detailed relates in release. us improved the expense. as the pricing quarter on year-over-year reflection and Chili's a to quarterly comment of meaningfully performance, impact allowed our comp marketing comp activity included reduce

expense adjustment this in in As the we price. have mentioned expense case lower before price. the In in in fourth comp we as account increase an changes an resulted for net to comp year-over-year quarter

quarter for menu Now was increase price X.X%. the the actual

opposed a timing run, X.X% to differences our short is of as to in target It year-over-year pricing change pricing took range price Following the our X%. to reflects than the when strategy. we annual higher this

the to to the price of range top-end annual X.X% maintain and we menu increases expect as in price Our right our fiscal forward. target is move same we annual for at year range X% ‘XX

of the Our revenue and sale restaurant recognition as financing operating XX.X% in the leaseback of impact the percent sales, the company adoption due the margin a decreased standard. quarter to accounting to of

XX.X% to Excluding have the impact the of quarter. items, restaurant two these increased in margin operating fourth would

to our program more from related improved and certified wage contributions shift primary positive leaders for negative sales brand's platform, and Positive of inflation, employee shift effective for continued health of operating efficient mix marketing, our year-over-year commodity digital wins Produce margins impact the margin the came the operating leverage, our impact the rate experience. quarter. to hourly increases $XX and headwind the three where to

fourth The our to with program and $XXX industry Our us through development. generation restaurants fiscal strong invest EBITDA remains of million restaurant cash from ongoing the leading quarter year technology the for the significantly business into our reimage cash level allowed respectively. development, of and back million $XXX and flow

and fiscal funded X.XXx at adjusted leverage a leverage EBITDA debt EBITDA lease at also year-end. stable with at comfortable leverage position We X.XXx and maintained

performance outlook Turning dining and to cash fiscal can and release driven for at be number strategy our press in view capital our positive Brinker.com. industry, performance morning's the the our our area brands estimates casual incorporates found of allocation current this investor a to of This guidance relations specific our existing year, flow our website the programs. drive of our on

the closing restaurants first press release, our acquisition of of in our incorporates later franchise our acquisition bit in Chili's We announced noted quarter. the partners. anticipate As previously from one a this XXX guidance

X% sales we by For are of XX%, to X.X%, growth positive growth from comp the X.XX% fiscal of capacity driven positive the to acquisition. increased the aforementioned year primarily forecasting currently revenue

our expect restaurant be flat. points year negate the range the in margin fiscal to operating We to for XX basis of

the expenditures capital expect million. year million $XXX for of We $XXX to

reimage and to year. XXX expect XXX We will program continue to reimage between and restaurants our fiscal complete this

million, returning more to million a flow typical cash is us and stronger between capital available and allocation. Free estimated $XXX level $XXX for

is earnings share $X.XX guidance adjusted for to of our per range $X.XX. ‘XX Finally, year fiscal a

anticipated first my to by wrap-up comments our some to providing me insight Let certain performance. impacts quarter

to the quarter, superior in sales manner comp performance comparatively peer captures to positive seeing share traffic group. are in a We our market performance that

of the closing the comp capacity, the anticipated to incremental revenue range from the will Assuming of favorable quarter, to successful capacity the year-over-year see impact beyond company sales. likely acquisition, X% contributing we sales the start for additional in to X% ERJ growth from

a acquired sales. see revenue XX% to Conversely franchise for reduction shift quarter. other We the payments royalty and of from reduction this in a restaurants we generating will to anticipate company as XX% year-over-year

is to sale an incremental that negative the the last quarter rent have from year-over-year earnings financing close related perspective, impact leaseback From this a August. we’ll last the

now the are we of part and that is operating month, this of base. completion transaction margin our it of lapping As

positions based to annual senior quarter full take is required as flat. year. the million. of annual first the The first expected time of expense stock in to expense as course executives compensation is in this be the programs increase approximately purely $X.X compensation year-over-year for differential to stock based vesting expense is timing a the to we full For the history certain are over opposed recent by of change the This

first into be to range Taking our $X.XX guidance all all for we incorporated to $X.XX. anticipate in quarter this below consideration quarter per per is Naturally, first share. adjusted annual last this earnings year's our into of a share earnings

your with we which to comments last hour. Now the move you top it can turn Holly, I of will my the back questions will to facilitate. complete, until to

Operator

[Operator Instructions]. Thank you.

affiliation, O’Cull. from is announce Chris question. your please first Chris, coming question Your your then pose

Chris O’Cull

fourth the from comp for as up Good guidance quarter a implies The pretty improvement year morning. comparison. you this lapped healthy for

As can that speak trend achieved the in shows recent weeks, you segment some can this we've so and significant be the in what performance ’XX? current softness seen maybe confidence you to give

Wyman Roberts

quarter to fourth category the the with yeah great we soft was the a kind of as share category find differential month, Chris, improve right, not continue It for little of the of kind that then the Yeah been was so running April and we move for take continuing through to was well. Its as soft. most and we've a early, quarter. of kind especially that year

and shape start in improvement quarter good, in sequential quarter ended So really we good shape. the this quarter the good was really we and through

comps kind that about give of see, can really the them. we know that guided and that we things to we fold us in talked The continue confidences sales are improvement to three you

there into with put now our of strength opportunity that. marking and value First, the we that still in the us can is proposition

degree and delivery great year's seeing an for turned kicked from numbers The system good not into to off operational it integrated basically but off on very all restaurants our our any we’ve excited how the both, last some a in top-line of that's us from was DoorDash system and and also overnight that program program and and movement perspective, perspective about seamless. really now. of It's working we're

program a got Phase So to our at – feeling there, just very of we that know have good and our in then got push exciting there on that We’ve X executing before. some about gear you to right now. never and really we level potential continue seen operators we've things are

the we the they've with us we've We achieved fourth ever Our guest to been. ended move that those there as here been can high quarter though even quarters. and as so things Chili's of will over guest couple have at best are you metrics in casual space metrics continue the last confidence some the pockets softer give dining if ever forward

Chris O’Cull

any give the of seeing you can from you delivery up, seeing, as follow response initiative? color to kind are a what as Just what are you demand

Wyman Roberts

Joe. Go ahead

Joe Taylor

it we a coming we better delivering about of very very are at process. levels, performing expected on the It delivery. what a are is It delivering we encouraged months line Chris, is we're It just Again, early to it's PPA. incrementality out with into high is delivering the and test better by two are we seeing our what right check perform. in shows. and as

of is that standpoint now. make One to platform profitability for not is everybody on sure from want things delivery we $XX I three the are right the understands offering a

and So again in helps that’s regard. standpoint additive from a that check

the out clearly it's gate. the driver there. commentary good think a that a of of There I've of I lot been seen around out has month July

commentary that reasons this we Wyman on the just delivery was You and has we mentioned when line in month the right not quarter, to coming be was that based out ones us think of the of the in where I at provided look know other a gate with weak besides July you. guidance one expect for we

Chris O’Cull

Great! Thanks guys.

Wyman Roberts

Chris, Alright thanks.

Operator

question next affiliation, your pose Slabaugh. from is Your coming your then Please announce question. Will

Will Slabaugh

question on comment Stephens, value your had on a guys. Its thanks I follow-up Wyman.

about have do You today how what look platform. value opportunity value, and more you you opportunity are your a with doing that that on might say Can maybe you would little you a of feel said you that to you terms talk look well both with still versus like? in big bit

Wyman Roberts

both we no initiatives, run our activity, didn’t our our dividends extremely do is got paid great awareness, guest more systems running day-to-day the simple, now keeping powerful, two-fold. Well, is of lot so at know from for operators opportunity know get a perspective now been that – and One the promotional let so we really a we've a and year life though proposition increase an this even and an on no we've focused from business proposition us, to new comfortable we we that is right, so LTO, perspective. and much operations their operators

could to value there we've the lot with opportunity year is a on that What message is adding are our to that them. it, now and the add the of life know some take we've some it research and test don't been strength on there some though we it. that that of of even out build innovation harder people us about build got for based in make have also work and now that awareness We to things by about are that still we opportunity of a Even of exciting off for know that then and idea. platform the today continue to the

under. within now So there's works and it model to go the room we are that

Joe Taylor

value those go. it And works dining of platform the strength guest, businesses. Again, two off-premise is of equation data-points that to both is well, more we having playing the we’ve consumer a and is, the the that response offer right add one our where on an that preferences that as side well I’d to and into both see plays commentary of to more helping in see going. drive around It’s well

of piece business. I the other a a in industry the equation, about obviously we casual time mean so And for frequency the dining long lower being talked.

we’d moving about see its you a guest, to happen. you frequency guest, like exactly them value which You working makes that that much think valuable more know visits, of higher when our from see frequency how

Wyman Roberts

in Joe using not mentioned, even as And we're it delivery.

I it we is do to look on be to a build pull relates proposition think that’s that and going important continue we we to value play future. to but value levers we with, as so, the that could got how And vehicle as to

Will Slabaugh

the a far you're I there were Thanks, the thinking wonder restaurant little commodity margin quick into type incorporated we about on know up better I talk a gave what’s you on looked guidance guide. which us the follow- the as maybe what if could. expecting. and and level you of could if protein, guide, I what inflation as what than

Wyman Roberts

things digit, into X% I they say are taking side we've is impact the X% are Sure taken a question. through number sure year. again, the the a we think the contracting to this let’s commodity single low closely, to expect a that make it's and Will. of Obviously the guidance do Incorporated level, very but we also volatility and watching to of protecting steps inflation

We are and particular Chicken the protein probably a at things for up position, at can particularly XX%. through the contract, in that pork along the close right out contracted a are are aggressively – year you to in we more contracted Overall now contracted and we space. pushing year. those

produce the guidance. kind with good some of of We at when for see expect it But that out incorporated years. corn not through yesterday area has know markets into much that That’s dealt That's be on the do crops the too some got now the are inflation. We reacting you right plays know of last to you space. the an news norm. couple industry some will the back just how interesting you dynamics the look

I But time sure of the you coming you system a and it's off also bit protect us for commodity to low inflation prudent know we might against to very it cycle, from know a into that time. hit little spikes any low make level think expect

Will Slabaugh

thanks that. Great, for

Operator

Please line is Your next announce Brian question live. is Vaccaro. question. coming your pose affiliation your from Brian then your

Brian Vaccaro

Hello.

Wyman Roberts

Hey Brian.

Operator

your Brian, is live. line

Brian Vaccaro

Hello!

Wyman Roberts

Brian. Hey

Brian Vaccaro

hear guys you Can me?

Wyman Roberts

Brian. can We

Brian Vaccaro

Fantastic, thank you.

circle you implying your said on with higher. correctly comments. comps guidance to annual today’s Did line that wanted in back quarter-to-date Just I are hear or XXX

Wyman Roberts

right are yes, we moving for guidance this quarter, in-line that though with provided would we heard do expect to what You well, very level you. we

Brian Vaccaro

you store needed G&A and a us help also with of question What EPS sort accretion? terms on the building block, any incremental these of assumed had to have I margins support you the in units? AUV’s, you. Alright, thank Could acquisition. ERJ

Joe Taylor

Yeah, tell What you the go in will today and I one, we’ll a at detail. those into obviously you know is little are on more Day all think Thursday incorporated those Analyst I numbers. bit of

I after we debt over we are rate. to think of current consideration taking is you taking down our for the it even pay nature, years accretive back the debt that, can into accretive you know target that will the fact on think in

obviously down little know Haven't – be mid-single we thinking to It’s about from are you stand think well it would your would point. accretion an and a that yet, digit I bit the track path give weeks, us couple here in to it are involved opportunity opportunities. also the on more and of which some to restaurant's in right the understand of will closed the a close where get directly really

are guidance you impact restaurants those We can held during restaurants as be non-top from the year upside this that of better until not into run. a for a they we And have in feel know we this too. will baking lot where fiscal short

you. So assumed their not guidance that gave is performance we comp in

Brian Vaccaro

you are pennies? you're talking and Okay are digit, about you accretion percentage percentage say about when as you – mid-single mid-single talking talking digit EPS EPS of a or

Joe Taylor

for Pennies. Yeah. Thank the clarification. you

Brian Vaccaro

then of G&A is fiscal regional flat And guidance fiscal level the last fiscal in flat me, assume ‘XX on to incremental there. G&A for maintain help one infrastructure. G&A I with assume ’XX? but alright. the what some Can from guide be on you would inflation in there's there's some into the ’XX, Okay, dollars of dollars. I us some maybe in offsets ERJ,

Joe Taylor

of F’XX sharing The the important you to pace. at allowed incentive nice I'm compensation on and equation, performance pay remember point. compensation out the I programs profit a incentive to the raised the it’s side piece think Yeah, glad

there's in of target, multipliers like above move you most When there. the programs there's

of So profit related $X a $X the numbers, little that incremental million fourth in an the F’XX over quarter. year-over-year was is in over payout to million there sharing

bonus happy to that the to then we for equation. members similar are talked know So able at but the next pays that it very rate, to be to see year. side bring we of you team on about out our performance we the back target manager It’s what

piece that a target, that big resetting know managing. of you resetting to So amount target, is

perspective can there way. back in incremental is bring how expense equation over there through important F‘XX is that’s fact in some a not efficiency there, delta. in the we biggest required the It's that Yes, from equation; other that But think in positive that flowed sets to time. we now ERJ to and inflation the G&A some understand much

Brian Vaccaro

Thank helpful. Very you.

Operator

question. Ivankoe. question next Your announce John Please your then coming is from your affiliation pose

John Ivankoe

I please. rewards Hi, Chili's comp the couple the questions you. much the the How you just was the from quarter, us, terms remind A the in that of the by year? on driven of lapping price of fourth if know that. you I'm missed and of composition price especially prior thank My in Could sorry

Joe Taylor

comp there's in it John, from that changing point about XX expense. impact basis year-over-year

John Ivankoe

you quarters through will why? will Do any and get of fiscal and mean much Okay, think that? do we go mean be? ’XX, how change as I that you three expect I we

Joe Taylor

Three the… quarters of

John Ivankoe

the basis comp benefit expense. in point Of XX

Joe Taylor

No, will to that. of we I it come you mean the decision making quarter-over-quarter not and below some relative promotional. when may run may it to again I in or any we think definitely do know depends on

expectation be our it's basis XX So point. that less going is than to

You'll start couple move again to impact into next the quarters, price the of X.X% to back range. over X% from that down see

to in in like you a seeing had it net big we smaller fourth impact I pricing. neutral would and this some the We big get year a to – quarter going over time we year. think differential, a a be between a range. you're should get fairly gross had neutral you're – Last fairly differentials

are normalize that comfortable So over of range. being that but we the X% year, will to X.X% in

John Ivankoe

And the sorry. Wyman, – go ahead

Wyman Roberts

in that that obviously Sorry offset being just with saying $XX year. for year, whole the mix John. three a I shifts of lot last for was we also

base You that either. that’s know won't the you so offset have in now,

will, more the mix if comp the evenly, the year, you play now. to and year really we’ll through as as then program will last right flow dramatic not this and the be loyalty So probably market the price marketing

we – fully be – not with we're Again, could our program. not as or we're we aggressive loyalty as

metal and we we saving on the need of we to have are be loyalty” now the of that pedal don't kind like some are on if so “Hey we We listen, to the future maybe trends a of for we’re and date kind saying it.

John Ivankoe

on actually question That's mix. great, exactly the was and next

As lap $XX fully like and XX, secondly, that know for I we've we flat mean we to maybe lap you that. isn't the reason little there as know $XX, mix just doing you mean talked any about I possibility in is for value a fiscal’ bit more three believe something three and of with you

Do you opportunity seen up. income have menu for actually been in other some an have brands at higher elsewhere introduce trade your that that. some for opportunity maybe that higher customers, of given obviously the more opportunity the of pricings or for trade-up have surprised maybe success We’ve

you’d we are terms fiscal where ‘XX like in to in where for thinking So of live? mix

Wyman Roberts

Yeah, I you John. it hit kind of think

We are same right. the thing, doing

different of audience and guests We the the to with are address segments going our appropriate.

you bigger in and we've delivery from quality but with mix more are focused that on abundant, channel and to this if will really of we with that’s of appeal folks marketing will oriented some kind the menu different and a got going of a offers that that probably end got put and the also then of to whole families whole perspective out those more guest to continue for and value other portions messaging there innovations, maybe terms three it, on $XX So we're kind it. target associated those have some aspect of

to those, the and each going drives compelling segments for there and of offerings we think and that out various that So guest business. the we are appropriate put at are looking

Hello! you Are there?

Joe Taylor

question. Holly, there is next a

Operator

question Anderson. from is announce next question. pose affiliation, your Your Stephen your Please coming then

Stephen Anderson

growth I not to ask, for you you're any One Yes, discussed know name to planning like see wanted I well? I this to been hear to there wanted hasn’t more, wanted and have do just what from call Maxim to been on going top-line Group. looking as just on with just unit you new delivery you're Maggiano's. drive has what there.

Wyman Roberts

let Okay just about Stephen, Maggiano. well me talk

how a Maggiano's you comp year, New he Year, was know some we're year and you on So so to a Kelly restaurants grow of locations, new take in and about Maggiano’s walls ended both positive the focused within sales. of comes then had year about really the It know is Maggiano's, four and can ideas and very traditional the at existing good we with organically to how Baltes excited with the now year both they non-traditional. also this

airport from done of of space also we this both is for Maggiano's. brand, the extremely of year that and working we such restaurants potential grow, have that grow Maggiano's tons initiatives, and team of the get opened to our powerful to wide This brand. continue it’s we the a on it can energy continue well. four again but brand about locations, walls spread so for of a lot perspective to around how inside take to just today, where because by the out, XX have we we of first a to lot its kind a the Maggiano's There's excitement It’s guests location have love

Stephen Anderson

Great, thanks.

Operator

Your Please question from your question. then next Gonzalez. for coming pose announce Eric is your today affiliation,

Eric Gonzalez

KeyBanc. its thanks, Hi

ones here. Just two quick

you ERJ expected that you to know ERJ is from about impact about in this acquisition If normalize can and and quarter, then you can with in was had quarter-to-date when will. maybe if talk that price what talk and comp you fiscal the you is go the impact the you ‘XX separately, guidance, the can X.X% to Thanks. pricing the what the margin back margin

Wyman Roberts

get little the from a bit of I more again close know to day-to-day but you at that, and neutral actually on looking missed ERJ a in do the fairly as last margin weeks right now, the basis, we need are it ERJ Eric, the actually, acquisition a perspective. margin piece we but

margins a perspective not radically walls do run different. they From us, operating a four bit little behind

but is have would line You dynamics expected states, know we in of their. right that in, to on they but are on the they what slightly the of based below, that are the see some cost states with

But a ROM change year you have accounting you in essence also impact, the of of with in reversal saw because the what is standards. last some

sales a revenue, restaurants, other equation, effect through into company's they're marketing you the from and support franchise the ROM moved side change impacting marketing there, neutral up contributions emanate not for presentation. coming XXX of other the now have because we’re in that due will So the over actually year-over-year, back and side that know know ROM, revenue that you being the the flow to equation will to of ended on

you board a So we as impact expecting line. it's on all-in-all, are fairly on neutral know them – a the overall ROM bring we

Eric Gonzalez

expected and has quarter higher had second your in related on normalize was of Just expected is target any to when comp? the had that pricing the level The given you comp quarter-to-date the how just than a pricing impact impact question the to that's range? to roll-off and wondering that fourth

Wyman Roberts

Yeah, that see couple it's, the versus first price it price when you'll rolls Again I think timing you take off. aspect over other is of the when quarters. normalized

it So still through, above in a quarter. little that target we normalize you bit know then and second you will come kind as into of this the more range move and quarter down probably as be get

Eric Gonzalez

Thanks.

Operator

pose for your affiliation, from Palmer. Your question. then announce today next Please your coming is question David

David Palmer

ISI. Thanks, Evercore

the for to you industry think ’XX. Just in course there's a that then tougher $XX and variable with concern three, maybe on be the industry the big there, comparisons economy. the to big be in another you with would coming I and delivery, that about front, investor how point imagine concerns your the comp three incrementality are look going wrestling comp of the the about would have quarters regard of lap but comp there this the I and fiscal which for would people are

guidance? So what could talk space same-store you for sales expectation your your is industry perhaps about

Joe Taylor

negative give David, the a some specifics well start don’t believe we but around we drivers, do hi, industry. on with those and of again

You you know up seen six to go nine to drivers so volatilities again incremental based clearly will some we But course last the all we that a business and months months know those over and that developed environments. down, we’ve of economic probably that we’ve in work expect forward. think continue

start through from currently we perspective, which drive have see four. a as industry of continue about we in. again, positive So in talked delivery an come you Particularly recently to the impacts to all

looking around the at in off that at it's confidence and a build forward. very is, multiple of we reiterating Wyman’s have we and as levels, know we comp specific control you But are built we insight can what that moving comfortable comp, some

know into can and driving come through levers delivery So a we economic of conditions. perspective you go, all value, a base know business think from you the variety that are play to drive CRM

David Palmer

the guess mentioned, place I into I a mentioned that from in $XX, other as and things delivery that last some three weeks second are you lapping of two for that now phase months you that's major the in couple year, been now. for

big of other things it’s here this to terms two the if if on that pretty those are So perhaps the for falls you just visibility or variables, becomes that helpers in paid whether you really fair year? big those or two that comp in industry have variable say as are good apart – maybe means those later three from fiscal is difficult, more $XX and the

Wyman Roberts

and got a year a for seven executing we us of we to we while and Yeah, of excited are forward. our we a into things months I weeks I high wrapped we've at and have quite $XX operators have under about you've bring think some here today, delivery three got David. are kind level, and the other now sitting still for couple it on are mean

that's gave. we So guidance the why we gave

couple spot, the great not and we forward. confident do are will weather that Now you soft July are But bringing specifically category. we has that, April industry to continue to to the of months through and continue we're we're able that know things the about and we seen for be excited a

kind that's of where at. So we're

Joe Taylor

Hey one interesting that as that core around discussion platform we manage value bring you to it, expect over know move grow. discussion that that’s belief we forward. that and lap. the that have, done, view how is to there They have a for XX experience about think is I ability What it three we you We’ve years’ we've that's a $XX forward. on know seen promotional a we as thing in that David, the lapping you that well know

bring value those and we mentioned before. of out a we confidence guests can of the platform lean as incrementally have We in can how a I've into

to forward. to which we move come pick of would up frequency see increased We we out as continue that, expect

as that grow we maybe think question base promotional of it can same I of underlines vein the So think lap we business a as being don't we forward. that solid It's that in a move activity.

David Palmer

Thank you.

Wyman Roberts

Thanks David.

Operator

Your announce from your question. Glass. pose Please John question next and is coming affiliation your

John Glass

I it's wonder Stanley. Morgan a for Hi, if talk you about labor could moment.

I your labor. on you few a managerial think ratios it and including at least cited was more favorable versus our things, view labor

that we quarters or how shift – that's before this journey? of think been program. this one-time may within that labor other and to in it part Is at it's about to healthcare that you on else etcetera. the structural, moment whatever certified are no have concert leader you words your What know accelerating lapped offsetting it. very or not benefit Where is or with I that many go line wasn't think have

Wyman Roberts

about it. me Let talk

Joe Taylor

Yeah.

Wyman Roberts

so the shift kind kind CFL of target, of about full program certified will a of again our to want talked that a we should getting we of be fully up. to in for shift standpoint up still favorability be have that next and program providing… leaders leader them you program levels full in at to that the But with quarters of the potential half lot from, couple From which out all you means before we’re know we year first at, that kind which there we target if laps, the certified close get is of of just this means we

its went be leaders is internal really that done from now has mostly it beyond the it’s we what to proven and our you changed and belief has know we recruit recruits about Really, significantly recruits to external effective. more where much impact, also financial and develop what done new do

guests’ now way lower, options. from we to nice move members operational through is at the and career some really then results are and turnover of better all The all the key level career management into move our the up metrics our for ranks path their way to that start a have

kind you this we So about if of you really rolled think love if probably half the will, about year. fully it’s program way and

Joe Taylor

I I that. experience, to we the related John, shift health benefit besides leader saw year-over-year think expenses Yeah the certified mentioned, employee from as a

You that feel inflationary market. that's to know an going we forward continue

the build now and current that. try and You opportunities we our are through guidance manage mitigate that thought work know programs the and into continuing to again and process, wellness we

expense in It the the items you definitely is you know you I on other know based because one in as develop, significantly so now an of was quarter that do experience see in some there. cited volatility so that they that, it’s

John Glass

Joe buyback, then are know you up flow on and the cash your your of from sense. guidance your the just just How free built expect is sheet in Okay, you much free how or a following guidance. What dollar What use assumptions What cash? into the leverage on Thanks. fiscal target XXXX? to during perspective leverage maybe deleveraging? balance on do get much a

Wyman Roberts

short a under Yeah we John, being dollar be typically have the this we will run. revolver. to don’t we in That in market do the the buyback amount. give acquisition short in here Again, run Obviously the year. anticipate the complete financed

should year, year, will times leverage level year-over-year around by and we fiscal to course similar relatively over a We're – four from year the return of going so debt perspective. to we the that ended we be right end that the

the continue cash kind the we a move saw and is dividend, flow rest to obviously approved be press of We share as release there from you for purchase. then free and will we which the will the from payout just use available we’ll when dividend that of use scenario part

be will the it as we throughout the back in moves So year. market

Operator

you. Thank

next is then from Strelzik. pose your question question. your Please coming Andrew Your announce affiliation

Andrew Strelzik

how thank interact expecting a to delivery with Go. Alright, much, I'm To curious you very BMO. you're business

To a You to been Go so those far contributor such What it seeing are comps? know was nice different that has your experience customers. are given that

Wyman Roberts

are there because significantly marketing it there's some right forward, so is like that relationship in think more most a to especially through may we know have I pushing the and and more our the but we go delivery direct some you different guests coming tradeoffs right, our be the of so with seen, be incrementality and Yeah, crossover as very may will future there, we’ll little DoorDash's or direct guests see we we today, now are initiatives well channels know that that tests… monitor but we are going that current tradeoffs both the worth we've think contact

period of delivery but this it's we with testing you all of of the players over extended time after multiple know comes And from big it DoorDash's different over and introduced years partnership, funny two channels. an

delivery. job the and has at ability great feel the We've the got grow team its I the we've partner a done right and – right a setting to So our we're up for ourselves and cannibalize operators us too that with not has got success about like we level concerned. business model, excited

Andrew Strelzik

there. bit with deal a plan the to How program? constructs? of that do Chili's gone? step rewards forward your your you months back the just XX Are data you have us that's incrementally how on Could over sign then the take you little And happy you My the of leverage a post relaunch kind now give program, assessment the going hindsight of ups, and on the

Wyman Roberts

with element to guests strong be that's that traffic. to build of fantastic. It rewards. the and level Chili's program continues My drive The to we’re been real in our happy engagement extremely continuing work program to Now is done marketing a our with

each but the to to the we about we’ll with forward look more and us to continue data We point, we’ll offers, that we're like into we are restaurant so of out is It getting to bring in as of machine intelligence base exactly and more and and additional it able help program like smarter. offer flex move in ability know now forward and smarter of grow more understand what our all artificial and the to seems more and with you learning in F’XX. the more is to that those it just, is program there the now them just mix information, things just kind motivate aspect and would better using the to come marketing to guests team’s of some and the manageable,

Andrew Strelzik

your Geiger. question. today your affiliation, pose then The announce thank for next is coming Great, you much. from Please very question Dennis

Dennis Geiger

UBS. its Thanks,

you've what mentioned. beyond guidance margin already your on one another Just

wondering into on just relative about little think different it as bit about this well looking sale if tailwinds pretty year. year-over-year you year’s marketing I technology, could from efficiency, a kind to think year. you program, you this of a This how a that impact rebase efficiencies to but Just of any more talk bit the also the as well, covered have

the that about thinking just address the And to kind what last to that, you you update piece thought to kind an today. of flat if care hold comparables any are there's of if margins with of Thanks.

Wyman Roberts

Go ahead John.

Joe Taylor

Again, efficiencies around we there’s at margins. think continued do to work opportunities

alignments side move but to the effective pace. it's about the which has to think have efficiency the continued aspects, little bit it, also a of the more digital equation, a we talked I marketing

Sales sales been leverage is a big for last of through piece couple of seeing quarters. the the move equation. We've the leverage margins

a think leaseback, as of piece as more getting directly, sale accounting that aspects, the you're changes, seeing the I now thinking little of through – lap we obviously a probably so of that's it equation. some other you're

business. from that operating equations on margins and sharing restaurant our of and There’s variability bonuses that’s compensation builds piece flexed with manager into margin standpoint the profit both incentive an and that’s the G&A the

as that will there, not as it, something we we performance these to in is appreciated be at much so again because targets set as guidance. look it's your if maybe So

or it's top it to that. The performance flow If close know at not out performance under through there combines is you there, and guests’ and into we will all metrics, performance line is the pay targets. those and above programs,

you'll You’ll restaurant extent protect some the that margins margin side the both and see which G&A the equation. that in of below the target pay-outs see and to operating

there in appreciated. flex think there's as may So be point I not a quite that

looking operate those continue to high the we again, at for Managers are a efficiencies. business level. So

in can effort spends a don't sure lot to that control R&M care things guiding the of spends. and taking not get systems the JRC spend, disciplines careful systems and if place of around you're that if those place those nature from we're restaurants, making in away and which us making time have of sure help the in We’re you are

Wyman Roberts

and but where some of to introduction think add, had and just margin about last kind impact the the forward. you the I that year, we the three in know relationship you margins platform, in And fully won't think it now this i if as want just year be, the mix right again we have would we move kind challenge of to anticipated for on $XX and

our and our So kind that'll rate and lift-check flow of and pricing higher help and as the things merchandising much well. do help margins will through to we a at

Dennis Geiger

you. Thank

Wyman Roberts

Yeah.

Operator

The please then coming question. next is pose question from your Jon Tower, your announce affiliation,

Jon Tower

Fargo. talking for questions. Wells Thanks Great! the

Just two pretty clarifications. much

acquired investment quarter the store first earnings the about potential in talking are you Thanks. including $X.XX call, you the being year, if so, comment in potential base CapEx earlier in think developing the from the stores, your last about of on potential XXX those and to base. then guidance? $X.XX fiscal the Joe or of and either First, mentioned potential are speaking margin off ‘XX invest for down On $X.XX are that investment, captured secondly to about year-over-year, I plans Wyman, you

Joe Taylor

quick The answer, adjusted the from yes, last first $X.XX off year. that’s

Wyman Roberts

with years to made acquisition, think we regard we yeah a of few a franchise the so Okay, there's the partner. to similar ago acquisition

two got we've there's these experienced. restaurants some that think program now, on, some both of opportunity cycles with haven't the I remodel

in there's know we power So that program.

some little we reimage they into may cycle, that fall a our that then where So of into where to front more. up Joe continue comments them fall mentioned the going know that, program, these in you we are to his new and restaurant move

some to results our investments, will there about that And that as are excited restaurant. investments restaurants very proven company have you know in shown technology we some that, know well make the owned we bringing as other then are

a have want better don't couldn’t have restaurants not you great restaurants; that Bridgeman, well are they're run. franchise great restaurants. partner, to Junior Junior. great been the they than I you a know These partner give It’s impression had franchise

to leverage now direction can the strategy example. it company the we just base excited it's broader and so to chosen the were believe much get in across scale, you So in environment opportunity scale, XXX more of into our right these for because this they've this really the fits back restaurants kind in to and around bring market technology can company we bring to owned, when powerful different and move to Chili’s a you investments their

So about, that's the what we're are talking in they numbers.

we “oh! but the are or in capital in. going in be is those this excited go quarter with, more third know factored about restaurants to fourth some those need and You surprise We this,” a to we do bringing

Wyman Roberts

we’re Thanks questions as for a come o’clock. Jon. have think against more time up we XX Holly, I couple

Operator

question. your next Miller. Please your is affiliation, announce The pose question Nicole from then coming

Nicole Miller

you specifically ones Piper you year? talk buckets the good bit morning. imagine you, CapEx also the and for little On could then this I maintenance. Jaffray. remodeled that big just about like last are technology Thank question, said, a more

might Just up. be necessarily kind down. are imagine with the of Thanks. Can't ended, what compare year going even going contrast more they and just

Joe Taylor

the have the the we up a nothing same notch opportunity in The new two. start have for take we think I XXXX increase as place, with – ’XX. have the and do prototype a or big larger we restaurant past, but are incremental opposed in to capacity we’ll think spend to little different to you buckets to that a radically Again bit coming We targeted we think for new development. market, than know

The continuing reimage program much is level. know established you pretty the along, at

still program, reengineer as actually for to been it. be the so a same to it's spend getting the overall going move bit. to think it’s little we of versus ‘XX able positive I We’ve dynamics it, probably of through that the response some cost ’XX, reimage down

as be to and on to million $XX move to which those we spend know just R&M are those continuing that typically condition two a in keep forward, $XX things. the range, should And fleet so and levels as to be spend the combined think technology along at buckets again, about big be We you those the that want are also of basket the the it to million as continue can. necessary efficient is able IT talked we basis, we’ve the

‘XX the into not that part in that bucket Which the the that accounting buckets moved I’ve is and and new just thing the those of in expectation to done is incorporated was the CapEx ‘XX One of was fits we've you building. some headquarters in talked for since bucket is associated out already that around with falls equation ERJ spend that about.

in those programs you to go XXX range, again, as we forward. XXX that of are accomplishing we in all kind So know

Nicole Miller

helpful, thank Very you.

Would XXX owned not or lower what’s system, they have it the similar they essentially want your fall units or sure And best. franchise when system why about how comp then help I'm than think you the us acquired, be base On the Thank or in higher to comping? they compare it do comp or line? Is you. going if been higher company they on would forward, to lower?

Joe Taylor

just we clear, going and them to One, hold so as again we're are non-comp.

want embed sure little but So a I provided. that into thinking about that guidance I’ll the people just make comp don’t talk we the that, around to

digit, that network, kind of low that franchise that know They now. largest comp They you of the in a really have seen been kind positive that have more single comps year the of drive been of you've the over course than range the piece again expect of the you equation. they

with So restaurants that the know building restaurants understanding the perspective. things in them we've from as and will taking franchise as partners of about they've one into that those been comp the a was now we momentum working be been pleased you

Nicole Miller

Thank you.

Operator

announce Please from pose your question. Senatore. affiliation, then next coming Sara Your your question is

Sara Senatore

a Hi, business. I Bernstein. of wanted on quick I to couple just, the its ask delivery follow-ups

it's the it make to a and margins. delivery just I delivery that margin as opposed of profile in I accretive able it you're sort the to presumably of fee. the was offset charges, to associated similar to on-premise, of said and want You incremental sure because as with store understand, way that's minimize having the in amount labor unless sort

beverages highly first, the its kind the little because and know nature it. you of that's a that higher deserts also guess $XX. said and thought Is might I I I you only know can for So on thing. of because clarify no if of incremental have less it get just you then sort I would the and PPA, accretive accretive you just three attached, surprised, was

have person because groups So though delivery, per Thanks. higher bigger but it seeing orders? are you that like are doing you that just check also sounds higher

Joe Taylor

you and profitable we've mind early Yes, with basis, the minds our and Sara. structure you and our ongoing it equations definitely of thanks these in negotiated, deal the and business. the And but comfortable that with in in industry that obviously that analyze starts process, we we're watch the will piece of on done through testing very best in base cost again a is is know kind It’s the commentary. an the

Incrementality our testing and at seeing big role in excess continuing we're levels, to what it saw roll forward. of a very we incrementality plays in that's in we XX% that’s as we high and what and see are it

lot But lot there of it also are a costs. – I has mean a

you lot allocate the of thinking know There that costs answer delivery. when fully dining get don't different restaurant, You associated with go applied about or channels. a in-a-restaurant cost to you are the are to

basis. cost look at allocated a fully each different they a have So and we attributes

helps equates customer a preference that of I a know if for it for just value, The probably basically value a having go think some mix get to Go on obviously Delivery $XX on has of the which probably guest oriented to looking basis. an I'm equation you regard willingness not and To the offer, that a higher fact piece frankly target stronger The too. different to customer. for in and three place, that

a which I have think playing the lot lesser to value oriented numbers is maybe to a very of delivery driven think get now. ability of probably sensitivity significant attributes it. customer, I there's and different responsiveness some we to you it deliveries to those playing to of But a by number from charges with a and that guest, profitable know less go is

the and watch Now business that you a of will closely. you the in and incrementality equation time the watch shifts over that piece be

Wyman Roberts

now, know And we channel running delivery. though again, marking basically marketing the DoorDash just are channel: for right one You

them. we So and and really partner up open aggressively market we’ll see as additional we to what channels happens with start more as

Sara Senatore

you. Thank

Mika Ware

One more question.

Operator

is coming then Bernstein. Jeffrey Please affiliation, question. question your Your last pose from announce your

Jeffrey Bernstein

thanks From Great! very Barclays, much.

about and ERJ scale for one is being in Just to question me. how powerful. talked you Wyman bring excited

model. that flip the your on prefer reducing mix. restaurant I side you wondering view operating company and obviously yourselves operators recognize Just you franchise are the as

were I'm refranchising. franchisees from wondering, just existing new there if is or demand interested you in

wondering examine or existing from but labor to help it not volatility not pursuing there's you the refranchising, seemingly Just commodity which mentioned insulate interest inflation. the that are whether would actually of just franchisees I'm now, against consider you’d sales implications potential that if earlier and would going you why new wondering, forward? and and you

Wyman Roberts

know and that business. interest of it’s and you being power it’s of the there's always think this Jeff, our with a model good brands, I good a part business, busy

casual it's think at casual an at you operator we XXX% company a large least dining degree, of a being your owned and whether we portion that to think restaurant’s strategically in I you know owned dining look you company important. know or know significant is

end difficult. our have important when in think company the a is I quickly organization to and franchised when smaller we're age it think that, when you into move that units, it up are able scale restaurant into is the more and day and large makes two owned. Speed to I again base - we in powerful bringing you this brand

a strategic people organization predominantly. we out aren't like in at to better it’s being of to owned think just model the were but that strategically interested company the that a we a owned franchised. brand So put mean be us, reasons the if for model company as model there predominant part doesn't We the

are we that I you way that bottom partnership all is to going you can and promotions, embedded kind its get. partners as kitchens, what down of we deep the And and line. just top not the models service our that the sales, focusing out also, but a because driving day-in of day-out what's of the are starts think top what's we so business, on with the with this aspect the operations the they on all just on franchise line not as from And in us going of in know, business the overall know love there, with have line, you

Jeffrey Bernstein

thank Understood, you.

Wyman Roberts

Jeff. thanks Alright

Mika Ware

us Alright, Dallas many joining and you Investor Day. seeing today in you Bye. look our for everyone, - we for to it, thanks thank appreciate here we Thursday of on

Wyman Roberts

Thanks everybody.

Operator

call. This gentlemen. conclude and ladies does today's you conference Thank

day! your may You phone disconnect lines at this and wonderful have time a

Brinker International (EAT) 13 Aug 192019 Q4 Earnings call transcript