Greetings and welcome to the Bloomin' Brands Fiscal Fourth Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session following management’s prepared remarks. It is now my pleasure to introduce your host, Mark Graff, Group Vice President of Investor Relations. Thank you, Mr. Graff. You may begin.

Thank you and good morning, everyone. With me on today’s call are; Dave Deno, our Chief Executive Officer; and Chris Meyer, Executive Vice President and Chief Financial Officer. By now, you should have accessed to our fiscal fourth quarter 2019 earnings release. It can also be found on our website at bloominbrands.com in the Investors section. Throughout this conference call, we’ll be presenting results on an adjusted basis. An explanation of our use of non-GAAP financial measures and reconciliations to the most directly comparable GAAP measures appear in our earnings release on our website as previously described. Before we begin formal remarks, I’d like to remind everyone that part of our discussion today will include forward-looking statements, including a discussion of growth strategies and financial guidance. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from our forward-looking statements. Some of these risks are mentioned in earnings release, others are discussed in our SEC filings, which are available at sec.gov. During today’s call we’ll provide a recap of our financial performance for the fiscal fourth quarter 2019, an overview of company highlights, a discussion regarding progress on key strategic objectives, an update on our review of strategic alternatives and 2020 financial guidance. Once we’ve completed these remarks, we’ll open up the call for questions. With that, I’d now like to turn the call over to Dave Deno.

Well thank you, Mark and welcome to everyone listening today. We have two objectives for the call. First, Chris and I will cover Q4 and 2019 results and 2020 priorities. Once that is finished, we’ll provide an update on the exploration of our strategic alternatives. As noted in this morning’s earnings release, adjusted Q4 2019 diluted earnings per share was $0.32, representing a 19% increase on a comparable adjusted basis versus last year. Combined US comp sales are up 1.9% with positive comp sales across all concepts. Importantly, traffic was up 90 basis points and significantly outperformed the industry. We have intentionally tempered our average check increases to further strengthen value relative to competition. As a result, Q4 traffic outperformed the industry by 380 basis points with a modest average guest check increase. We will continue this strategy of prudent menu pricing into 2020. This combined with traffic momentum from our strategic investments in areas such as digital, loyalty and off-premise give us confidence about maintaining top line momentum entering the New Year. For the total year, all US concepts finish with positive comp sales, including another strong year at Outback, where comps are up 2%. We combine good top line performance with solid productivity and cost management to grow adjusted operating margin by 60 basis points for the year. And Q4 represents the fifth consecutive quarter of comparable operating margin expansion. In addition, adjusted 2019 EPS grew 10% on a comparable basis, which was in line with our initial guidance expectations for the year. Overall, this was a very good year for our company. We built on the platforms and investments that will implement over the last several years to improve execution in our restaurants and unlock new growth opportunities across the portfolio. None of this would be possible…

Thanks, Dave and good morning, everyone. I’ll kick off with discussion around our sales and profit performance for the quarter. I’d like to remind everyone that when I speak to results, I will be referring to adjusted numbers that will exclude certain costs and benefits. Please see the earnings release for reconciliations between non-GAAP metrics and their most directly comparable US GAAP measures. We also provided a discussion of the nature of each adjustment. With that in mind, our fourth quarter financial results versus the prior year were as follows. GAAP diluted earnings per share for the quarter was $0.32 versus $0.12 in 2018. Adjusted diluted earnings per share was $0.32 versus $0.27 last year on a comparable basis after adjusting for the new lease accounting standard. Total revenues increased 0.9% to $1 billion in the fourth quarter. Total revenue increases were primarily due to higher comp sales and the net impact of restaurant openings and closures. These increases were partially offset by lower revenues from the refranchising of 18 Carrabba’s locations earlier this year and foreign currency translation. US comp sales were up 1.9%. This was driven by a 0.9% increase in traffic and a 1% increase in average check. Q4 traffic growth was our best results since Q4 2017 and was 380 basis points ahead of the industry. As we discussed on our last call, we benefited from a strong start to the quarter, driven by a promotional lineup which included our popular steak and lobster promotion at Outback. Our traffic slowed some over the holiday season, but was still well in excess of the industry. Importantly, 2020 has started with strong traffic growth that is ahead of competitive benchmarks. Our Q4 average check benefit of 1% was similar to Q3 and as we have indicated on prior…

Well thank you, Chris. Back in November, we announced the exploration of alternatives to maximize value for shareholders, including a possible sale of the company. Since then management has been actively working with the Board and our financial legal advisors to evaluate various alternatives, including analyzing all aspects of how we operate and go-to market with our business, including a review of our cost structure. Evaluating portfolio composition, including our business in Brazil and US concepts. Assessing capital allocation and use of free cash flow as well as sale of the entire company. At this point in time, nothing compelling has materialized in terms of an outright sale of the company. However, one area within our portfolio that has received significant interest is our business in Brazil. Although we under no obligation to sell this business, discussions with interested parties are ongoing. One fact remains clear, this is a great business with an outstanding management team that has significant runway for future growth. We’ll provide updates on Brazil as events warm. Independent of the strategic review and potential outcomes, the company developed a plan that accelerates growth and transforms us into an operation-centric company that can thrive the public marketplace. We believe this plan coupled with investments in off-premise, remodels and improving the guest experience will provide an attractive return for shareholders. The following major initiatives represent the key tenants of this plan and are included in the guidance that Chris will be presenting shortly. First, we align leadership resources and structure to prioritize growth, efficiency and scale. Specifically, the casual dining brands will now report directly to Gregg Scarlett, our new Chief Operating Officer of Casual Dining. Organizing Outback, Bonefish and Carrabba’s under our Casual Dining portfolio allow us to improve operations and leverage equities between these three brands,…

Thanks, Dave. With that context, I will now take you through our thoughts on 2020 guidance. Starting with EPS, we expect GAAP diluted earnings per share to be between $1.63 and $1.68. We expect adjusted diluted earnings per share to be between $1.85 and $1.90. This is a growth rate of 20% to 23% over 2019. For additional context, this guidance that includes the first $20 million of additional cost savings related to our restructuring efforts. The benefits of these savings will increase profitability, while also improving efficiencies and decision making in our organization. These cost savings will benefit EPS by $0.17 in 2020, and will be largely split across Q2 through Q4, with little benefit occurring in the first quarter. Most of the impact from these savings will be in the G&A line, which we expect will be significantly below 2019. Our GAAP EPS will be impacted by one-time costs related to this restructuring. We expect US comp sales growth to be between 1% and 1.5%. We expect comp sales to be driven by a modest level of check average increase throughout the year of approximately 1%, continued momentum from our investments to improve the guest experience, and ongoing benefits from the growth at our off-premise business. We recognize the importance of maintaining healthy sales growth, particularly at Outback and we’ll utilize our many levers to continue to take share. On the cost of sales line, commodities are expected to be up approximately 2% in 2020. Beef inflation is expected to be in line with 2019. Seafood, which represents approximately 20% of our food basket is going to experience higher inflation, particularly in lobster and is the primary reason we expect our 2020 guidance to be higher than 2019. Persistent labor pressures had been a reality in the industry…

Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question is coming from Jeffrey Bernstein of Barclays. Please go ahead.

Great. Thank you very much. Yeah so one question and one follow-up. The question on – the first question just on comps. Just wondering as we think about 2020 you know, I think you said 1% to 1.5% with a 1% check. I’m just wondering how you’re thinking about that relative to the industry? And then that you mentioned that you have a strong start and good momentum in the year, I’m just wondering directionally how that compares to the 1% to 1.5% that you are seemingly expecting for full year ’20? And then I had one follow-up.

Good morning, Jeff, we’re off to a good start. We’ve seen it with trends move up with the industry and as Chris mentioned in his prepared remarks, our traffic trends do really look great. We’re just calling a 1% to 1.5%, we feel that’s where the industry is going. If the things improve and continue to be strong, obviously our guidance will change up. Importantly, we have a 1% PPA change in our guidance and we talked about the importance of being very careful about value as we go forward. And then obviously we’ll be prudent on Q4 to see what impact the election has and we’ll provide update during the year.

Yeah and that – Jeff that certainly would imply positive traffic for the year for us.

Got it, but you’re assuming the industry relatively similar to your sales at 1% to 1.5% or would the industry be below that?

Our hope is to beat the industry, but we’ll see. You know, like I said before, the industry is off to a good start so far this quarter.

Got it. And then my follow-up was just on cash usage. I’m just wondering if you can give any color on the Board still at process, it seems like you’re leaning heavily on the dividend versus repo. I know in the past you’ve talked about your view that your shares were meaningfully undervalued. So I’m just wondering how the Board thinks about that and if there’s any separate color on just on the commentary around Brazil. I know in the past you talked about maybe selling it by collecting royalties and maintaining ownership. But I’m just wondering now if it sounds like maybe you’re considering full separation? Thank you.

Hi, Jeff. Again, I think on the cash usage, what we wanted to do was to provide some terrific returns for our long-term shareholders. We looked at carefully, had long discussions with our Board and felt that a doubling of the dividend to a 4% yield at today’s prices was you know, really smart thing to do. Obviously, we have with our free cash flow power, we have opportunity to continue to buy back shares and continue to believe our company is undervalued. And so we’ll continue to look at that as we go forward. And we also want to you know, pay down some debt as well as part of an overall balanced approach to our business. On Brazil, more to follow. One thing we know for sure, we’ve got a fantastic business down there. Comps were really terrific. We had margin expansion for the year. There’s a lot of interest in the business, I don’t have any more updates on it, but as things transpire, you know, we’ll be happy to provide more color.

Yeah. And, Jeff the only thing I’d add in terms of the cash flow usage, we do expect our EBITDA to continue to grow as well and that provides us even more flexibility. The bottom line is, is that free cash flow is a strength of this company, and our shift reflects that.

Great, thank you.

Thank you. Our next question is coming from Jeff Farmer of Gordon Haskett. Please go ahead.

Great, thanks. Good morning. Can you guys just provide a little bit more color on the interaction between DoorDash, your internal delivery infrastructure and then what you’ve been doing with to-go sales? How all of those three methods are working together?

Yeah, Jeff. We’ve been very pleased with it. We’ve seen incrementality in each channel. We have our own network we set up which we work so hard to set up. We’ve seen the third-party come together and provide incrementality in our sales. We see margins on the third-party that’s favorable to us. So when you look at what our to-go business overall is looking like, for both Carrabba’s and Outback, it’s very, very strong. And we’re very pleased with the – where our parties – where our third-party partnerships are going.

That’s helpful. And just one unrelated follow-up. Over the last several months obviously, we’ve been getting a lot of inbound questions on the Brazil business. Is there anything you can share in terms of specifics as it relates to G&A from Brazil D&A Brazil, the CapEx number in Brazil, anything like that that helps investors better understand the cash inflows and outflows of that business?

Well, we provide segment information, we haven’t provided a detailed guide on international, but I think a couple of things that I just – that investor needs to take a look at. Number one, we got very strong sales growth well say, a PPA change and traffic. Number two, we had margin expansion during the year. Number three, our new unit openings continue to be well ahead of our expectations, and there’s a lot of opportunity for growth there. Number four, it’s a free cash flow positive business, so they fund all of their spending. So when you take them together, and with a really strong management team led by peer, you take them together, we’ve got a really very attractive business down there. And we can be very thoughtful about how we go forward with that business.

Thank you.

Thank you. Our next question is coming from John Glass of Morgan Stanley. Please go ahead.

Thanks and good morning. First, David can you just clarify where you are in the strategic review process holding Brazil aside, which I think you were clear on? Does the fact that you’ve changed your capital allocation strategy given out some of these restructurings? Does that mean you’ve completed the review of the rest of the business or is there still rest of the business review ongoing?

We are ongoing, John I’m not going put a timeline on it per se, but we continue to examine our alternatives. Like I mentioned in my prepared remarks, we haven’t seen any compelling offers come our way. But we have really taken a deep look at our business as you can tell, we’ve been very, very, very busy since we talked to everybody in November. And you’ve seen some really strong actions as part of it. But we made the actions independent of the strategic review, because we want to create a stronger company to go forward. And if something comes our way, we’ll obviously update everybody, but that we aren’t complete, shall we say.

Okay. And my follow-up is, first, where do you think restaurant margins land specifically? I know you gave pieces of it, although you didn’t maybe address the specific restaurant margin in 2020. And where does the incremental cost cuts in the G&A beyond the $20 million that you’ve identified? Where did those come from? And where do you think the $20 million and $21 million comes from specifically? Thanks.

Yeah, a couple of things and then I’ll turn over to Chris for some of the details. On restaurant margin, I think one thing that I want to make sure everybody’s aware of, we were only you know looking at a 1% change in PPA, so a lot of our margin expenses that come from costs outside the restaurant. And importantly, regarding those costs outside the restaurant, decisions have already been taken, past tense. So we have a very, very clear runway to where those cost reductions are coming. So I’ll turn over to Chris now to talk a little bit more about some of the details.

Yeah. So as it relates to restaurant margins, you’re right, John, we don’t provide specific guidance on that line. But I can give you some perspective by bucket in terms of how we’re thinking about it for 2020. On COGS, I would say we expect some favorability year-over-year as we make progress on our waste initiatives. Labor will likely be a tad unfavorable due to wage inflation. And then, our restaurant operating expense would likely be a little unfavorable due to higher operating supplies from the rollout of our delivery business and probably some insurance as well. But I think it’s important to remind everybody that all of this includes the assumption of a 1% benefit of average check versus closer to a 2% in 2019 and that’s going to put some pressure on restaurant margins, but that’s why the cost savings are so important in our ability to prove that, you know, improve our overall operating margins of the business. And again, I guess finally a thing on restaurant margins, I’d say, the good news is, is we have another year of productivity that help us with our margins in 2020.

On the costs saves themselves, it’s mainly in our infrastructure costs here in the restaurant support center, and how we address that. And we were able to do that, because we made a lot of really smart and significant investments in our company over the last few years. And as a result, now that we’ve been able to monetize that, and those of you that have been following our company the last few quarters, you know, we’ve talked about that at conferences and stuff, the ability to monetize these costs saves. Now, some of them go into 2021, because of some timing and pay – as you pay it on sequence some of these things, but most importantly, John, the decisions have been made and the runway for cost reduction is there.

Thank you.

Thank you. Our next question is coming from Alex Slagle of Jefferies. Please go ahead.

Hey, thanks. You talked about some of the drivers behind same-store sales outlook for 2020, but in terms of the brand performance, do you still expect Outback to dominate or should we expect some of the other brands to see an improvement in coming quarters? And if there’s any specific initiatives you want to call out that might help drive the inflection in comp there?

Yeah, sure. We expect all of our brands to do well in during the year, but we know that Outback is our largest brand and most important brand in the portfolio. And so we’ve talked about some of the customer-facing initiatives we’ve done, the investments in food, our remodel programs, our relocation program, and just tremendous operations that we expect to continue to improve under our leadership of our new president, Brett Patterson and you know, with a Gregg Scarlett being our COO of Casual Dining. So I think at Outback, you can see more of the same. And also I want to stress that if we are prudent in our change in PPA, we think over the long-term, we’ll continue to see our traffic, you know, get better and we’re seeing that as we talked with time and time again about our traffic trends in our company, they’re very good versus the industry. Carrabba’s has continues to pursue, you know, gains in restaurant traffic, but the customer clearly is voting that off-premise at Carrabba’s is really important, and we are really pursuing that with our third-party initiative, our to-go Rome and our own independent delivery platform at Carrabba’s. Bonefish has long had a strong product offering, they’ll continue to innovate around their menu, the three-course dinners and things like that continue to do well at Bonefish. And Fleming’s, they had eight out of nine positive same-store sales growth, they do very well in the fine dining area. New restaurant openings are happening and they’re above expectations and best Beth Scott and her team continue to upgrade the look of their restaurants. And we’re finding that bar dining is in a more and more important part of our fine dining. So that’s a real quick look at some of the initiatives in our brands. And obviously in Brazil, we’ve got the number one position by far, they’ll continue to offer great product at a great price point with tremendous operations and we are well ahead of our opening plan there. And the new restaurants like you mentioned earlier, continue to open well above expectations.

That’s great. And then on development, I may have missed it, if you could just provide some of the details on how many you expected in Brazil and at each brand?

Yeah, it was 25 overall for the company. I’d say the majority of those will end up being in Brazil, they’ll be a handful of Outback Steakhouse locations, and then a much, much smaller number at the other brands, we – and that we know for sure, they’ll be a couple of Fleming’s, one to two.

I think one of the things too that we’ve seen and Chris mentioned in his prepared remarks as, there’s more room of opportunity for Outback Steakhouse new units. And we’re pursuing that. We think we can take share and expand that business even more. And then you know, relocations is just flat out of function of finding great sites, the returns are terrific well above 30% in sales gains, and it’s a really testament to the power of that brand. So you’ll see a step up in Outback new units in the coming years as well.

Thank you.

Thank you. Our next question is coming from Katherine Fogertey of Goldman Sachs. Please go ahead.

Hi, this is actually Jared on for Katie. Can you guys just talk about some of the quarter-to-date trends you’ve maybe in January, we know January was pretty strong. Whether it was weather or our customers trading up? So just what do you think in the industry and kind of how you’re thinking about that playing out the rest of the quarter? Thanks.

The industry was – has shown a rebound in January. We participate in that rebound and our traffic trends continue to outpace the industry, which we’re very pleased with. And where it goes from here, you know, we’ll see, but we participate in the increases in the industry.

Yeah, I think it’s, as other folks have noted and out there, weather was certainly more mild up north in the Midwest, and we think that benefited industry results. You know, given our footprint in the south, we get a little less of a benefit from that, but you know, we really didn’t start off the quarter pretty strong.

Great. And if I could just – one quick follow-up. You guys talked a little bit about some of the capital allocation strategy. Are you guys targeting a specific leverage ratio with the debt pay downs? And also, if you were to sell the Brazil business as you noted as, is sort of, you know, being discussed, how are you thinking about uses of cash there? Thanks.

Yeah, on Brazil we still need to come to a final decision as to what we’re going to be doing there. Like I said, there was a bunch of interest in that business and we’re working on – working through that. How we allocate the proceeds between, you know, debt pay down and share repurchases is yet to come. But there’ll be some sort of mix. But let’s focus on what a fantastic business we have there. And Chris, I’ll turn over to you for the other piece.

Yeah. So 3 times net debt to EBITDAR is the metric that we’ve targeted and we’ve talked about getting down to 3 times as a goal here. And, you know, it’s a multiyear process, but certainly a healthy combination of EBITDA growth and more focus as we noted in the prepared remarks on debt reduction will allow us to make progress more rapidly than perhaps, we have over the last several years.

Great, thanks so much.

And one of the things, it was just, you know, with our growth in operating earnings is last year ‘19 and our forecast for ‘20 and ’21 and Chris mentioned this, I mean, it just gives us more and more free cash flow to provide to shareholders and to debt holders. So that’s the reason why we’re looking at things as we are.

Thanks. Appreciate the time.

Yeah.

Thank you. Our next question is coming from John Ivankoe of J.P. Morgan. Please go ahead.

Hi, thank you. I wanted to talk about, you know, some of the cost savings a little bit more. Obviously, we saw, you know, the changes at the leadership level at Carrabba’s and Bonefish, but we really are talking about, you know, very big numbers, you know, for relative to your overall G&A base. So I was hoping we could talk more specifically about, you know, what you’re cutting? How a smaller organization actually becomes a better organization? How these $20 million cuts, you know, roll into ‘21 where you find another $20 million of cuts and, you know, Dave, I’ll ask the question directly, I mean, there is a point where, you know, cuts can go too far, you know, as we know, you’re actually not very high in a per-store basis. So, you know, how do we look at you know, this business okay, they’re really is fat in the business and you know, you can be kind of a leaner, meaner, you know, company that’s more effective versus you’re actually putting the organization at risk and digging too deep into some of the muscle and bone that is necessary for all organizations?

Sure. First of all, John as you know, and you and I’ve been working together on various things for over 20 years, I’ve got 30 years plus in the restaurant business and a very good sense of what the support needs to look like and where our opportunities are. So that’s number one. Number two is, as I mentioned, we made some pretty significant investments in our infrastructure over time, we’re reaping the benefits of that through digitization, through automation, through all the things I mean, just a shout out to Phil Pace in our Controller Department has just done a great job, you know, managing costs, working through it, and we’re seeing that you know, as he’d automated some of those functions in the controller area. And then Michael Stutts has come in and over the last year and done a really great job and he runs our Digital and IT organization and he’s helped us identify opportunities in the company. So I think, John our back of the house infrastructure is the very first place that we’re going. And I think we have made significant progress in that area. Secondly, we took a really careful look at the management of some of our smaller brands. We think leveraging Gregg Scarlett and all of his experience in Casual Dining will help us reach some efficiencies, in training, HR, how we go-to market, et cetera, in some of our overhead costs. Three, the reason why you’re seeing some of that go into 2021 is, it’s spacing and sequencing here, right, as you put in new systems and new infrastructure, you know, you got to space and sequence this stuff. So, I think, John, you know, we’ve taken a really, really, really hard look at, you know, our infrastructure costs. And, you know, from our time together at last fall, we talked about the cost cuts that were coming and monetization of that, and I think our guide for 2020 and 2021 reflects that. G&A as a percent of sales was high versus competition and we needed to address that and we’ve done that.

Specifically on here kind of the tech in the data side, I mean, I think most companies are finding, whether in CapEx or in OpEx, it’s actually more than what they thought a couple of years ago. And, you know – there’s different ways to define efficiency. It’s like, you know, they’re finding more opportunities to spend money, not less. Could you focus on your cost efficiency, specifically on the tech side of why you’re actually able to reduce your net spend, and you don’t find it necessary to maintain it?

Yeah. Well first of all, we’re investing behind consumer-facing technology. So that’s continuous. But John is the infrastructure, the systems, the networks, et cetera, that we had in our company, and the people managing them that we’ve been able to address and we’ve done that and so it’s back of the house infrastructure costs the customer doesn’t see, we will continue to invest in digital consumer-facing things whether it’s a new POS device, whatever, we’re going to continue to invest in that. But when you looked at what we were spending and where it was being spent and the infrastructure behind it and the investments that we made over the years and the enhancements we made to our systems, I talked earlier about the enhancements we made in our comm. control function, for instance, that’s all paying dividends now, and we are monetizing that in 2020 and 2021, that’s what’s happening.

Thank you.

Thank you. Our next question is coming from Gregory Francfort of Bank of America. Please go ahead.

Hey, thanks for the question. Can you maybe tell me and give the detail of where you’re expecting the debt levels to go, but maybe that the change in philosophy there kind of what drove the reason that maybe stepped down the targeted leverage? And then I have a second question, thanks.

Yeah, we’ve had a 3.0 ratio target in place for quite some time. We’ll continue now that are especially now that our operating income is growing and we’re going to be able to, you know, over time to Chris said over a period of years achieved that target. So I don’t really see a broad change in philosophy. One of the things that is happening is, we did lean him more heavily into our dividend and double that, that was a change that was made. And we’ll still have money over – left over to do some share repurchases. That has to do – all of that has to do with the free cash flow coming out of the company as we grow earnings.

Hey, got it. Thanks. And then the smaller brands this quarter had kind of better performance and they’ve been having for a little while. Any reason for maybe why both Carrabba’s and Bonefish a little bit of an inflection and kind of your expectation on that continuing? Thanks.

Yeah, we like I mentioned, we expect the small brands to continue, Fleming’s as well. You know, Beth Scott and her team do a great job in fine dining. So I – we expect the fine dining brand to grow. We are focused at Carrabba’s on you know, growing our dinner traffic, but you also have to go where the customers going and Carrabba’s is all over off-premise doing a fantastic job and Bonefish I think if we continue to offer, they offer such a unique and terrific set of products and continue to offer that an attractive price point, not discounts, but just be really careful about menu price increases and stuff, and continue our operations focus. I think we’ll continue to see, you know, same-store sales gains on that brand as well.

Thank you very much.

Thank you. Our next question is coming from Brett Levy of MKM Partners. Please go ahead.

Great. Good morning. Thank you. I guess we could start, just one clarification. You’ve talked about on the strategic side that you’re continuing to evaluate. Is there anything that is off the table?

No. I – we’ll always – since we started as a public company, we look at all of the alternatives in our company. We certainly know where the value drivers are. And we’ve talked about some of those today. But we don’t take anything off the table. We try and look at things across our company very carefully and aggressively.

And then just one theoretical strategic kind of question. Given that you’ve gotten to north of $10 million on your loyalty, and you’re growing your off-premise, but you’re also now starting to go outside of your original customer cohort. What are you seeing and learning about how your most loyal customers are using your product? Are you seeing like are you seeing cross permutations with how they are inside your box, off-premise and also any cross usage of the third-party aggregator? Thank you.

Yes, loyalty is a big weapon for us. We’re really glad we invested behind it. We’ve got the database. It was really smart to do. We will continue to, you know, look at it and work it. We’re seeing our very loyal customers use us in all channels. And we’re seeing our very loyal customers use us for all of our brands. And it’s something that we’re very pleased with that we need to continue to look at how we optimize it and modernize it and move it forward. And Michael Stutts and team, we talked earlier about some of the investments we’re making in consumer-facing technology and things. Their team will be working on that as we go forward.

Thank you. Our next question is coming from the Matt DiFrisco of Guggenheim Securities. Please go ahead.

Thank you. Most of my questions were answered or asked, but I just had a couple of follow-ups regarding relocations. I think you guys had 9 for 2020. How many did you do when was it 11 you did in 2019, if you can confirm that?

Yeah, that sounds right. We’ll confirm for you though.

And then also when I look at the – I think you said something about interior remodels. How many will be sort of [technical difficulty] what inning are we in, in that as far as how many left to be done and how many will be sort of at that same level of the most contemporary interiors?

Yeah, it’s early days on - our next wave of remodels at Outback, you know, we find that every seven or eight years we need to refresh inside of the restaurant. And last time we did it was seven or eight years ago. So it’s early days, Matt we’ll be rolling forward over the next couple of years or so on our remodel program and we’re still finalizing the scope and stuff. I imagine we’ll have a high, medium and low scope as how we work it based on the restaurants, but that’s something you can see from Outback Steakhouse over the next couple of years.

And 11 is the correct –

Got it.

[indiscernible].

Got it. And then my last question with respect to off-premise has obviously been a large part of your business and I think when you think back over like your history of the brand, most casual diners really didn’t give off-premise that much of a consideration when they modeled their same-store sales. Have you changed at all, you know, like the brands like Cracker Barrel have adjusted how they account for traffic and check? Has there been anything there where now that off-premise is so much more of your sales, you’ve – have you changed the methodology, switched from maybe ticket to entree? Has there been any difference there as far as how you’re calculating traffic versus check when you look at your comp?

Yeah, no real change. We’ve always used the entree counts at our – at most of our casual brands for accounting traffic. So there’s been no change there as it relates to our off-premise business.

Excellent. Thank you.

Thank you. Our next question is coming from Sharon Zackfia of William Blair. Please go ahead.

Hi, good morning. Just a clarification on the 2021 cost savings. Should we assume that those are flowing through to the bottom line or will there be reinvestments? And then secondarily, the Brazil’s margins in the quarter were a little softer than we ever expected, and were down quite a bit year-over-year if you could give any color on what happened there?

Yeah, sure. Brazil ran a very successful value promotion called All Star which features some of our, you know, great products and a couple of menu extensions there. We saw 8% increase in traffic – 8.9% increase in traffic with a 3.3% drop in PPA. And so we had some commensurate margin pressures. But clearly it was part of our overall strategy as part of overall outperformance. And for the year, you know, Brazil margins were up 80 basis points. So we’re talking about the international segment there, but Brazil is a large part of that. But so great comp performance, great traffic performance, and I think you’ll see, you know, continued comp and margin expansion from Brazil in our international segment in 2020.

Yeah, and I’d say on the cost savings, we’re not going to, you know, provide 2021 guidance or thoughts on that at this point. But I guess the thought I believe but as the savings are real, and we do expect to benefit from those savings and our P&L in 2021.

Thank you. Our next question is coming from Andrew Strelzik of BMO Capital Markets. Please go ahead.

Hey, good morning. Two questions for me. I believe you noted that discounting was flat in the quarter. And I guess it seems from your PPA comments for 2020, that there isn’t expected to be a big delta there this year either. I just wanted to confirm that that was the case or is there more room to kind of move that lower?

Yeah. Look I would say that you’re correct. We don’t go into the year 2020 with an assumption that we’re going to have a dramatic shift in the way we think about discounting. But what I would say consistent with what we’ve always said is that, we will be opportunistic if there is an opportunity to reduce discounting whether it’s via a particular promotion we’re doing or what have you, we will keep, we will reserve the right to do that as the year progresses, but there’s no stated strategy entering the year.

Okay. And my second question is on the decision to consolidate the leadership of the Casual Dining brands. It’s obviously a change from the strategy that you’ve employed as well as some of the other, you know, kind of multi brand portfolios from other companies in terms of the strategy. So my question is, in making that change, what gives you the confidence taking aside the cost savings and clearly sound optimistic on the sales side, but what gives you the confidence that that won’t have some sort of adverse impact or create some disruption from a top line perspective?

Well, we got one of the best operations restaurant leaders in business running it and Gregg Scarlett, so I couldn’t ask for a better partner and that gives me a great deal of confidence. Number two is, we have tremendous brand leaders at Carrabba’s and Bonefish on the operation side working through that and we’ll provide – continue to provide distinctive brand operations go-to market experience. Number three is, we have some terrific people that are supporting the Carrabba’s and Bonefish brands, and our Outback team has always been you know, really, really strong. Number four, we’ve got Brett Patterson running Outback, those of you that know Brett in the industry, he’s got deep experience and he and Gregg will be terrific partners, you know, as they work on the Outback brand. The last piece is, we will continue to reinvest in these brands, pursue our opportunities and grow the sales as we’ve talked about. So you can expect additional reinvestment in those brands. But most importantly, we’ve got the people, the bench, the talent to make this work. And I’m really pleased with how this came together.

Great, thank you very much.

Thank you. Our next question is coming from Brian Vaccaro of Raymond James. Please go ahead. Brian, please make sure phone is not on mute.

Sorry about that. Good morning, Brian Vaccaro, Raymond James. Just on the cost savings side and the G&A line in the low 240s, is that the right level that you see the appropriate level of infrastructure support for the business or is there some sort of targeted percent of sales or other target that you’re looking at over the next few years?

Yeah, Brian there’ll be more like Chris talked about on 2021 and we want to our overhead as a percent of revenue to be in line with our competitors, and yet still provide a fantastic service to our customers and our partners in the field and everything and we’re – we have a runway to do that.

Okay. And the productivity savings that you talked about at the store level, I know it’s something that you’ve been focused on for a while. Could you help frame the opportunity that’s still there on the food waste and you said menu simplification, any more color there and I guess where are you on improving efficiency of the labor model as you look at 2020 or even into 2021 leveraging technology and the like?

Yeah, I think you hit the nail on the head with the last comment. I think that when we think about productivity, it has shifted to some degree, we are more focused on the technologies now that can unlock further productivity savings down the line, whether it’s simplification in the kitchen with kitchen equipment that can be utilized to better prepare and to more efficiently prepare the food. Those are the types of things that I think are still ahead of us, Brian. But you know, pivoting right really quickly back to the COGS and the cost of goods sold line, we made really good progress as you guys saw in the cost of goods sold line throughout the year on food waste in 2019, but there is more work to be done. So I would say the opportunity for cost of goods sold and I mentioned this a little bit and as it relates to 2020, we still feel like cost of goods sold can come down as a percentage of sales in 2020. And it will be driven by some of these opportunities that we’ve talked about.

That’s great. And last one for me just on the commodity outlook, Chris the 2%. I just wanted to make sure I heard correctly. You said beef costs are expected to be flat versus ‘19? Did I hear that right?

Yeah, in the – at the same level of inflation as it was in 2019, sort of in the 1.5% to 2% range.

Okay. And how much were you contracted on beef for the overall basket at this time?

Beef were in really good shape. We feel real confident. I think for the overall basket, we’re probably in the 80% range. You know, typical things like produce or in some seafood baskets are not fully locked at this point. But we’re in really good shape on 2020.

Great, thank you.

Thank you. We’re showing time for one final question today. Our final question will be coming from Jon Tower of Wells Fargo. Please go ahead.

Great, thanks for putting me in there. Just a quick clarification and then a question on I believe your international CapEx is about 17.5% of your total CapEx, and I just want to confirm the majority of that is coming from Brazil and that was referencing 2018 numbers? And then the Question, Dave you mentioned earlier in your remarks, the idea that there’s an opportunity to grow the Outback unit based in the US over time, but that’s down about 30 stores over the past, you know, five years and I know traffic’s improved, but you’re also going through a relocation program right now and some remodel programs. So, realistically looking at this store basis 724 stores, where do you think that can go over time? And when can we start thinking about, you know, that unit growth actually picking higher?

We’d like to get our 50 and once we get in our 50, we’ll look at doing some more. The brand has done extremely well Outback, we think with the changing, you know, improving demographics at some of the key markets that we participate in, like in Florida, for instance, we have chance for infill new locations. It’s a brand that can expand more and we’re going to do it and we’re seeing the returns and we’re going to do relocations as fast as great sites become available. We’re not going to push it and have bad openings, but when you have 30% plus sales increases, it shows the power of the brand. So the performance of Outback over time, the relate with the relocation gains that we’ve seen, and the new units performance for the few that we’ve done at Outback, give us confidence so we can get to at least 50 more.

Yeah, and on the CapEx question, right now international, we’re targeting cost close to $40 million I think of our total CapEx spend will be International. Now of course that subject to foreign currency, you know, fluctuations, but $40 million, which is about 18% if you’re using the $190 million on the high end of the range.

Great, thank you.

Thank you. At this time, I’d like to turn the floor back over to Mr. Deno for closing comments.

Well thank you, everyone for listening today. We are look forward to talking to you in April and updating you on our progress for 2020 and beyond. Thanks again.

Ladies and gentlemen, thank you for your participation. This concludes today’s conference. You may disconnect your lines at this time and have a wonderful day.