Greetings, and welcome to the Bloomin’ Brands Fiscal Fourth Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow management’s prepared remarks. It is now my pleasure to introduce your host, Mark Graff, Senior 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 David Deno, our Chief Executive Officer; and Chris Meyer, Executive Vice President and Chief Financial Officer. By now, you should have access to our fiscal fourth quarter 2021 earnings release. It can also be found on our website at bloominbrands.com in the Investors section. Throughout this conference call, we will 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 recent trends. 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 our earnings release, others are discussed in our SEC filings, which are available at sec.gov. During today’s call, we’ll provide a brief recap of our financial performance for the fiscal fourth quarter 2021, an overview of company highlights and 2022 guidance. Once we’ve completed these remarks, we’ll open up the call for questions. And with that, I’d now like to turn the call over to David Deno.

Well, thank you, Mark, and welcome to everyone listening today. As noted in this morning’s earnings release, adjusted Q4 2021 diluted earnings per share was $0.60 versus $0.32 in Q4 2019, up 88%. We also saw good sales growth in Q4 as sales outpaced the industry by 240 basis points on a two-year basis. This success is directly tied to the planning and hard work that has taken place in our company over the last few years. Back in 2019, we presented a comprehensive plan to build a stronger, leaner, operation-centric company, one focused on providing even better food and service to customers. I will talk about those plans in a minute. It’s clear our strategies are working, and this gives us confidence in our ability to deliver on key commitments and drive even more sales growth. Stepping back, we are a far different and better company today than we were in 2019. I want to highlight this in a few key measures to dimensionalize the progress we have made. In 2021, we earned $2.70 a share versus $1.54 a share in 2019, which is a two-year growth of 75% on an adjusted basis. U.S. comp sales finished up 4.5% versus 2019 and were up 30.5% versus 2020. Adjusted operating margins finished at 9.1% versus 4.8% in 2019. Our operating margins now compare favorably to many in the industry. And finally, we have a much stronger balance sheet. We generate significant free cash flow and paid down approximately $300 million of debt in 2021. As a result, our credit metrics have improved and are now below our goal of 3 times lease adjusted leverage. As Chris will lay out a bit, this now enables us to return cash to shareholders while paying down additional debt. These results would not have…

Thanks, Dave, and good morning, everyone. I would like to start by providing a recap of our financial performance for the fiscal fourth quarter of 2021. Given the significant impact of COVID on Q4 2020 results, most of our discussion today will compare against the fourth quarter of 2019, which we believe provides better context to our underlying performance. Total revenues in Q4 were $1.05 billion, which was up 2.4% from 2019, driven by a 5.3% increase in U.S. comparable restaurant sales. Our same-store sales results increased significantly over the last half of Q4, excluding holiday shifts. This increase was driven by two factors: First, in mid-November, Outback traffic and check average improved significantly after we lapped heavy promotional activity from 2019. Second, we took additional pricing actions in November and December to offset higher inflation. I will provide more detail on the ongoing impact of these price increases when I discuss 2022 guidance. Turning to off-premises, revenues were 29% of sales at Outback and an impressive 36% of sales at Carrabba’s. This channel continues to be very sticky, and both of these results were flat versus Q3. Overall, off-premises was 26% of our U.S. volume in Q4. Importantly, the highly incremental third-party delivery business continues to grow and was 11% of U.S. revenues in Q4 versus 10% in Q3. Off-premises is a large part of our ongoing success and will remain a key part of our growth strategy moving forward. And a final note on Q4 sales. Brazil Q4 comps were up 8.5% versus 2019. Brazil’s fourth quarter reflected the combination of strong execution and a reduction of COVID-related operating restrictions. As it relates to other aspects of our Q4 financial performance, GAAP diluted earnings per share for the quarter was $0.59 versus $0.32 in 2019. Adjusted diluted earnings…

Thank you. At this time, we’ll be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Jeffrey Bernstein with Barclays. Please proceed with your question.

Great. Thank you. Good morning. My question relates to operating margins as we look to 2022. Clearly, you saw a significant improvement in 2021 and definitely a part of the question is whether or not you’d be able to sustain that. So I’m wondering if you can just talk to what you expect the full year operating margin to be in 2022 and maybe the confidence you have to sustain that considering that inflation is now more heavily anticipated than prior. And then I had one follow-up.

Sure. Hey, good morning. Good morning, Jeff. This is Chris. As we talked about last time, hitting that 8% operating margin goal is a key part of our long-term earnings framework. And if you look at the 2022 guidance, to your point, despite what I would say is record inflation on the – but if you look at the top end of our guidance, the EBITDA guidance range allows you to get to that 8% margin for the year. And if you think about that dynamic last quarter, I laid out sort of the puts and the takes in terms of the inflation environment and how the pricing would be used to offset that, really the only change versus that outlook from last quarter is the fact that I have more inflation in my business in commodities and in particular labor versus what we were expecting last quarter. And I’ve taken additional pricing to help offset that. And I think the only variable left in that calculus after you factor that in is really just traffic and mix shift. We talked about Omicron. The number that we believe Omicron impacted our business this year was probably about $29 million, $30 million between Omicron and a little bit of weather early on in the quarter. So that already kind of puts you a little bit behind the eight ball and that’s why our revenue guidance is where it is. But if you look at the overall guidance from a margin perspective, we feel good like you can be in that 7.5% to 8% range over the full year. It really just depends on how traffic plays out over the back half.

Got it. But if the EBITDA hit the higher end of that, do you think you can hold on to that 8% which was kind of that long-term framework?

Correct.

Yes, Jeff, it’s clearly our expectation that, that’s a target we will hit over the long-term. And Chris has laid out the earnings format that gets us there for this year and what you need to expect.

Got it. And then my follow-up is just on the menu pricing. The 5% surprisingly is on the lower end of some of what your peers are taking, so that’s encouraging. Your confidence that there might not need to be further increases or your willingness, if necessary, to take some. Especially with steak, I mean I’m surprised, I’m expecting you to say that you were going to be floating steak in anticipation that prices ease. So what led you to ultimately decide to lock in steak prices? I think you said mid to high teens inflation, which obviously seems extraordinary. But any color on steak and the related pricing would be great. Thank you.

Sure. On the pricing piece, yes, we – our formula is pricing plus productivity offset inflation. And we tried to be as modest as possible on pricing because we want to be a great value equation for our consumers, and that’s extremely important. And we work very hard to try and protect that. Obviously, we had to take the 5% price this year because of some of the extraordinary inflation, things in front of us. But I laid out some of the productivity things we have coming up in our restaurants, back in the kitchens with our cooking equipment and our handheld in the front of the house. So that’s enabled us to keep pricing pretty muted. Obviously, we’ve got to survey the marketplace, we hope we don’t have to take much more than that, but we’ll have to watch and see what happens. I’ll turn it over to Chris now to talk about the supply chain and cost and what that means.

Well, I think specifically as it relates to beef, for us, and we’ve talked to you guys about this before, having supply assurance has benefited us greatly over the course of the last couple of years. But the good news is that we’re 100% locked on beef, we have that supply assurance, but we do try to structure the contracts that will help allow us to participate in a portion of the upside should beef prices fall towards the back half of the year. I think that’s just a byproduct of having great supply chain partners. And I think we’re being prudent in our approach.

And Jeff, I just want – as you consider the year-on-year gain and increase in supply chain costs, as Chris mentioned, we had a really good supply chain performance in 2021 of 1.7%. So we do have to lap some of that, but the team has done a great job keeping on top of things. And we have not had any product issues to speak of, of any significance in our company. So we’re serving our menu each and every day.

Understood. Thank you so much.

Thank you. Our next question comes from the line of Brett Levy with MKM Partners. Please proceed with your question.

Great, thanks. So you talked about your expansion on – your expansion targets with Outback, Fleming’s and Brazil. But you’ve obviously seen some great successes on Carrabba’s. What’s your thoughts on just what you’re seeing from Carrabba’s, how you’re looking at its growth prospects, both the in-store and the off-premise? And what did you see in the near-term? What did you see really across the general landscape, regional and different customer cohorts? Thanks.

Is the back half of that question on Carrabba’s? Or is it against the broader company?

That was across all segments.

Okay. First of all on Carrabba’s. I mean the team did a magnificent job in 2021. I mean, hats off to the Carrabba’s team. It was great. And to have the level of sales that they’ve achieved and profitability that they’ve achieved is really an unlock for our company. What I challenge them in a friendly way is, you’ve had a great year, now you’re going to lap it. You got to grow it. And when you do that, there will be opportunities to expand the business. And our team there is working with Mark Graff, our Head of Business Development, on what that could look like. We obviously – was the mix 37%?

Off-premise.

Yes. I mean the mix at Carrabba’s for off-premises and carryout and delivery is 37%. Catering is way up. We’ve got a whole new business here that we’ve never had before. And they’re doing a great job in restaurant dining. So Brett, that is a piece of our portfolio that is now an opportunity, that if you talked to us two years ago, we would say it’s a great business but it may not be the place that we are today. But as a friendly challenge, they’ve got to lap it and grow it. We certainly believe they will. And then Mark’s got to work with them on the asset prototype and things to go forward. That’s what we’re going to be doing. On the broader customer cohort, our – on channel’s piece, on delivery – third-party delivery, it’s a younger crowd that we see different times a day. On the in-restaurant dining, people are coming back into the restaurants. There is a mix between the carryout and delivery – carryout and in-restaurant dining does switch back and forth a little bit. But you saw the growth in the business in delivery and carryout and you see what the opportunities are going forward while we build back the business. From a geographic perspective, the Southeast continues to do really well, and we’re seeing some pickups in the Midwest and the Northeast. So, I hope that answers the question on the cohorts, if there’s anything else that you’d like to know.

Thank you very much.

Thank you. Our next question comes from the line of Alex Slagle with Jefferies. Please proceed with your question.

Thanks good morning. I have a question on your people strategy. I mean, people are pretty much the most important ingredient for success right now in the industry, it seems like. And you guys took a pretty bold people-first stance at the onset, holding on to all your staff. It seems to be paying dividends. So, now as we’ve shifted this for the new phase on the staffing front, I’m curious what you’re doing that differentiates Bloomin’ and elevates its brands in the eyes of the employees. I mean we hear, I guess, a lot of the same tactics across the industry. I’m just curious what you’re doing differently given you’ve taken a bit of the bolder stance in the past.

Yes, sure. First of all, culture and how you treat people is job one, okay? I mean, obviously, economics and how people are paid is important. But culture and the environment you create in the restaurants is really what we got to do. And we will continue to build on that culture. And frankly, the decisions we made in the pandemics help build that culture and that belief. And how do you know? Our retention levels and turnover levels are among the very best in the industry. So that’s job one. And then turning to the economics. I think we do a very good job with the person that we call our managing partner, they get – their leadership, their compensation systems. We do a good job with people at our associates that are hourly level, either front of the house or back of the house. The area we need to work on is that kind of second level of management. And we’re going to be continuing to do that to make their lives as enjoyable as possible, because they were the heroes and heroines during this pandemic, they worked so hard. So, we’re looking at their quality of life, the shifts that they’re working. We’re looking at expanding our manager bonus program. All those things are something that we’re looking at to improve our culture even more and retain our people.

Great. And just a follow-up on Brazil, just if you have any sort of first quarter commentary expectations, things we should look out for?

Yes. They’re doing great. It’s the only thing to say. We’ve got the best market position in the industry down there. We’ve got a lot of well-positioned restaurants. Comps in Q4 were up 8.5% on a two-year basis. We’re up 26.5% on a one-year basis. Strong trends continue down there. We’re adding restaurants right and left. Peter and his team are doing a fabulous job. They are doing their version of Carrabba’s called Abbraccio, and we’ve taken the Aussie Grill business down there, which is our fast casual business and done that. So, I just think that it’s been a fabulous business for us. And right now, on a two-year basis, they’re up 10%, so in the first quarter, so quarter-to-date. So they’re just – they’re doing a great job. And it’s a real jewel for us in the company.

Great. Thanks.

Thank you. Our next question comes from the line of John Glass with Morgan Stanley. Please proceed with your question.

Thanks and good morning all. My first question is, Chris, thank you for all the detail on 2022 in terms of guidance. How do you think about the shape of the sales growth in 2022? There’s some big laps, particularly in the second and third quarter, across your brands. And related to that, you’ve reduced – I think you indicated you reduced marketing pretty significantly versus 2019. Does marketing come back in your plans in 2022 as part of a formula to continue to grow the business off of that reopening laps later this year?

Yes. John, it’s Dave. First of all, one of the things that I’ve learned during the pandemic is to pay attention to your revenue trends because the laps year-over-year get a little crazy. So my comments next have nothing – we feel very good about our revenue trends this year. But clearly, when you look at, at the back half of March, April and May, with the stimulus checks and everything else, 2021 did have an uptick in sales. Doesn’t mean at all for one minute that we’re not completely bullish about 2022, but that’s a fact pattern that we’ve got to continue to look at. And then – so the lap in 2020 – the comp lap in Q2 and into Q3 will be more difficult, not because revenue trends are expected to change, but because we’re going to be lapping some extraordinary stimulus. On the marketing side, yes, we do have some of the marketing coming back on the balance of the year. But John, it’s far different than we were in 2019. We’ve developed a digital capability that’s really terrific. We have a really good understanding of our customers. We’ve gone to that channel hard. We’re now a multichannel environment where we’ve got delivery, carryout that’s very digital-heavy along with our in-restaurant dining. So, we’re going to turn that back on. We’re going to look at our return on investment that we see on marketing and the ideas that we have. And we’re going to be investing behind that. We don’t anticipate doing broadscale discounting or anything like that. It’s around ideas, product ideas and marketing ideas. So, we’re going to take that quarter-by-quarter. And we’ve got a very good sense of what the returns look like and the channels that we can use to make it work.

Yes. And I think the only thing I would add to that is when you think about marketing expense overall, the position we’re in now with some of these marketing ideas is that you can get a return on investment that not only yields a positive result to the company, but it also doesn’t necessarily have to be margin dilutive, right? And I think that’s a real sweet spot that we would aspire to maintain as the year progresses, which is why we can flex marketing up or down, depending on the environment, depending on what we see. And we can yield a good result for the company that can maintain margin as well.

And my second question is, how do you think about the tailwind potentially for the dine-in business to come back? I believe it’s a more profitable visit, just you’ve got higher beverage attach, you may have a higher check overall. So just looking at comps mean that total whole story, how do you think about the benefits you might see or the differential margin you might see as the dining room business comes back more than it did in 2021?

Yes. For us, John, revenue trends are really tough to predict, and we’ve tried to give investors our best sense of what’s going on. We would love to see tailwinds if people – as the virus calms down and people come back in the restaurants, and yes, it’s a higher margin. But I want to underscore, we’ve worked our tail off to have the off-premises business to be as close to a margin as possible as an in-restaurant business. But yes, we do get the drink. We do get the check billed and everything else. But John, I’m very hopeful that we have tailwinds in – beyond our guidance, that would be great. But I think we put our best thinking forward on in-restaurant dining. I think the biggest thing for us is, as you look at our channels, we’ll continue to see that delivery business move up, especially third-party, it’s been very good for us. There is a bit of a trade-off between carryout and in-restaurant. So they’ll go back and forth a little bit. But that will be – that will be something we have to watch. But we’re very hopeful that the in-restaurant piece comes back. And then lastly, I’d be remiss if I didn’t talk about catering. It’s a big channel for us. Carrabba’s is nailing it and Outback is moving in aggressively. So that will be something that we’re going to be doing as well.

Can you just remind us what was catering as a percentage of sales pre pandemic just sort of an understanding of how big that business was?

Tiny.

Tiny.

Not even – tiny, tiny, tiny. I mean I don’t know the number off the top of my head, but it was virtually negligent. We built it during the pandemic.

Thank you.

Thank you. Our next question comes from the line of John Ivankoe with JPMorgan. Please proceed with your question.

Hi, thank you very much. In your prepared remarks, David, excuse me, I just ran back to my desk, in your prepared remarks, you specifically pointed out Fleming’s, Outback and Brazil, not really in that order, in terms of opening restaurants and where your focus would be. So, I guess that leads to two interesting questions. I mean do you have an intention to now own Brazil at least in the medium term? In your portfolios, the economics there have come back so stronger. And I guess, the emission of Bonefish and the Carrabba’s from a portfolio management perspective, are you perhaps thinking about some alternatives that you may have with those mid-scale or mid-scale, I mean to say, domestic brands?

Yes. John, you know Brazil well, you know our market position down there. You’ve been down there. You’ve seen it. You’ve got great understanding of it. It’s coming back strong. And we’ve always said when it comes back, we’re going to ride it, we’re going to look at it, we’re going to grow it, we’re going to develop it and then we’re going to just watch and see what happens. We’ve got great optionality down there. The Team has built a great business. So we don’t have any – we’re not marketing the business right now, we’re not doing any of that. But the business is growing so well, so rapidly from both the same-store sales standpoint and a unit expansion standpoint, both, by the way, Outback and what we call Abbraccio, which is Carrabba’s, is just really, really doing well. As I mentioned on the call, in Q1, we’re going to talk some more about our development plans, but let me at least spend a minute talking about it. Outback, we’ve developed a smaller business of flowerbox that is carryout and delivery friendly that really encompasses the new kitchen equipment and operating systems that we have. We’ve been opening them. It works and it works at high volumes and we’re very optimistic about it. So that expansion plan is going to move forward. We talked about relocations over the years. That continues to do really well. So that’s point one on Outback. Fleming’s I hope our investors step back and take a look at Fleming’s performance versus others in a very good fine dining industry. The results are second to none. And the team has done a fantastic job. The new openings do really well. And we’re going to be building Fleming’s in some core markets in California, Texas, in Florida and Nevada. Those of you in Florida are going to enjoy even more Fleming’s and we’re doing really well. Back, John, the Fleming’s down the street from you in Miami is really doing fantastic number. Now let me talk about the two smaller brands. They have changed – their economics and sales have changed completely during the pandemic. They are a completely different business than they were in 2019, revenues, profits. We talked about Carrabba’s earlier, that’s a completely different business. Bonefish, again, revenues, profits, and they’ve built a pretty nice takeaway and delivery business. But as I mentioned earlier, they got to lap that. They got to grow it and we got to make it work. That doesn’t mean that Mark Graff is going to sit behind – wait behind and wait to see what happens, but we want to see these businesses continue to grow. And John, they’re in a completely different spot than they were three-years ago as far as sales and economics, those two brands.

That was very helpful. Let me pivot if I can. You mentioned several initiatives which you’ve talked about before. And I wanted to see if we could get a timing and kind of expected basis point impact from the grilled meat ovens, the handhelds, the KDS, obviously, understanding there’s a lot of delays in general in terms of getting technology, especially equipment and implementing that. So any update we can do there? And I think I heard you say $70 million of CapEx, is that specifically related to those three items and would that CapEx number drop from 2022 to 2023?

Yes, that’s specifically related to those three items. Our goal is to take each of them individually. KDS will roll in first, the handheld, depending on availability. We’ve made some great deal of progress there in the restaurants. They’ll be rolling out over the next four to six quarters. And depending on the availability and supply chain for our new grills and ovens, that will be rolled out over the next couple of years. We’re meeting with the manufacturer of those items next week. And obviously, I’m going to be encouraging them strongly to move very fast. So that’s the timing. So again, KDS next – within this year, handhelds next four, five, six quarters and the grills and kitchen equipment in the next couple of years, hopefully faster. As we roll-out through, that CapEx will drop a bit, but as the portfolio grows and we find more restaurants, we probably will have a more new unit capital next year, assuming the returns are there. As far as the basis point improvement, John, I probably don’t want to get in that kind of detail because of some of the competitive stuff, but we’re expecting at least a 20% return on investment on those type of equipment measures. Chris, do you want to add anything else?

Well, I would just say a big part of – we talked about the profit bridge last quarter about what it would take to get back to those margin levels and we talked about needing productivity. And we talked about menu pricing and the level of menu pricing. One of the things that we’ve always focused on that has allowed us to not have to take outsized levels of pricing is our productivity initiatives. The productivity initiatives that we have on deck for 2022 and then into 2023 are highly enabled by these technology investments, so if you think about the $30 million or so that we would like to get this year in overall productivity, it is fueled by these initiatives and then there will be a tail into next year as we roll out and deploy additional units.

And then lastly, John, what we’ll do obviously, because this is Outback, the stuff that works in the other brands will take the other brands. And that will be job number two here. So our capital plans and everything else will vary as we go forward. But given the level of innovation and the talent we have in the company to make this work and the financial resources we have now, we can move quickly on these kind of things.

Thank you very much.

Thank you. Our next question comes from the line of Lauren Silberman with Credit Suisse. Please proceed with your question.

Thank you. I just wanted to follow-up on the first quarter, noting just Omicron largely behind you at this point. Can you just talk about where recent trends are running relative to pre-Omicron levels and if you’ve seen any outsized differences in certain brands or regions?

The last – it’s just an interesting tale here for us. January, we saw the impact of Omicron. Chris talked about the $29 million, $30 million impact between Omicron and a bit on weather. The last few weeks for us have been very good. Hopefully, those trends will continue. We’re very bullish on those trends. And the only thing that we have in front of us is, as we talked with John Glass, sales do pick up a bit in Q2, into March and into Q2 from 2021, but our revenue trends are very good. So look, the last few weeks have been very good. We expect those revenue trends to continue. We talked about where it’s happening in the country. We talked about the Southeast being stronger. We talked about the Midwest and the Northeast picking back up a bit. And fine dining has been the best of the breed.

Yes. And the lap from last year really starts kind of in that mid-March time period. And the important thing is – and again, we look at the business a little differently sometimes. Although we do communicate things to the Street on a same-store sales basis, we do look internally at volumes. And I think from my perspective, just looking at the volume sort of pre-Omicron, in-Omicron and then post-Omicron, the volumes post-Omicron have been very healthy. And we’ve maintained that volume gap versus sort of a black box benchmark, and that’s really encouraging. In fact, that gap has actually increased a little bit. So we feel good about where we are.

Great. And then just on labor, can you expand on what you’re seeing in the labor environment that’s different than what you saw last quarter prompting the higher inflation? And just more broadly, what you’re seeing with respect to retention for hourly employees as well as managers relative to historical levels.

Yes. Again, it’s a tale of – the quarter is kind of a tale of two cities during the quarter. It was rugged in January. Not that people are getting really, really sick, but we followed all the guidelines and we had some staffing challenges because people are out. They didn’t leave the company, but they were out. And so we had to supplement that a little bit. The labor – so the staffing for us, the first part of the quarter, was probably the most difficult as far as staffing availability, but that’s getting better. As I talk to our operators and our leaders in the restaurants, it’s still a very frothy market in a market that it’s a war for talent, and you see the impact on inflation. But things are getting – things are getting a bit better from a labor standpoint.

Thank you guys.

Thank you. Our next question comes from the line of Brian Mullan with Deutsche Bank. Please proceed with your question.

Hey, thanks. Chris, could you just let us know your thinking on G&A spend in 2022 that is embedded in that guide? And then in the prepared remarks, you spoke to continuing to look for efficiencies. I know you’ve made great progress already on G&A. But is there an opportunity to get that number down further towards, say, 5% of sales or something closer over time? And if not, is there something unique at Bloomin’ that would prohibit that?

So first question, 2022 guide, $2.35 to $2.40 feels like the right number for G&A for this year. And then I would say, in terms of the overall goal, the goal is 5% of sales on G&A. Now the good news is we don’t have to get there by continuing to reduce G&A, although we do feel like there’s still a little bit of opportunity there. I think really for us, it’s about growing top line that can get you there. But yes, a little bit of both.

Okay. And then great improvement on the balance sheet, it’s very notable, congrats and kudos. I see the reinstatement of the dividend. It looks like there might be about a $50 million plus ongoing annual use of capital. Can you just talk about why that’s the right use of capital for Bloomin’ right now versus more aggressive share repurchases at this valuation or just more accelerated deleveraging? Just how you thought about that?

Yes. No, it’s a really good question. And I think that – look, it all starts with the work we did throughout 2021 to delever the balance sheet. So right now, we’re at $805 million of debt. That’s about the lowest we’ve been since we’ve been a public company. And we achieved that three times target ahead of schedule. And so now to your point, we’re in a position to evaluate other uses of cash. We generate a significant amount of cash. I mean our guidance for 2022 has us track into that $500 million or so of EBITDA. The first priority, as we think about, when we have that kind of cash flow, is deploying things via CapEx, for like new restaurants and the technology investments we talked about. So in 2022, that’s going to be $225 million. Then you have taxes and interest and call that this last year was $80 million, $85 million. So between $75 million and $100 million, that interest and tax number is going to be. So that leaves you a $175 million to $200 million of cash in hand to deploy to the business to shareholders via dividend, share repurchases or other uses. And I think that we talk about the dividend of $0.14, it represents, in our mind, a modest step-up from where we were previously, because we had a sort of an annual dividend of $0.11 per share back in 2019. So that’s a modest step-up from there. And I think, honestly, it provides a yield that is in line with our peer group. And we believe it is a sign of confidence in the stability of our cash flow that we could commit to this dividend on an ongoing basis. And to your point, it’s about $50 million. And I…

Yes. I just want to say, Chris, that was – you guys have done a great job – look where we were two years ago. We now have – we paid down debt. We got debt leverage ratio below our long-term guide of three. We are reinstituting a dividend. And we’ve now announced the share buyback plan. And we’ve got the muscle to pursue the capital opportunities we talked about earlier in the call. So that’s why you hear us so bullish on where we are and what we can do going forward.

Thank you.

Thank you. Our next question comes from the line of Brian Vaccaro with Raymond James.

Thanks and good morning. I wanted to just circle back on the 2022 EBITDA guidance. Chris, could you walk us through sort of the dollar bridge versus 2021 like we did in the third quarter, just as it relates to pricing, expected dollar inflation, COGS, labor, productivity. You gave us G&A, obviously. But could you just walk through some of those puts and takes getting you to the around that 500, 505 midpoint.

Yes, sure. So if you think about the – what we said last time, inflation, we said was going to be about $170 million headwind. The number now is $230 million, which is by far, by massive increments, the most inflationary environment we’ve had since we’ve been a public company. And that broke down. It’s about $120 million or so at the midpoint of our commodity number – of commodity inflation. Labor inflation, we were thinking it was going to be $45 million. That’s now going to be around $80 million headwind. And then you’ve got just typical operating expense inflation, which is going to be a little more elevated, but that gets you to the balance of the number, $30 million or so, to get you to the $230 million. And then how do you offset that? So we talked about the levers last time, but I’ll go through them again. Pricing, we said was we were going to get about $100 million out of pricing. That number is now going to be about $155 million benefit with that 5% price increase. Brazil, we talked about a recovery in Brazil between $30 million to $40 million, would be the guess that we would get back from Brazil, assuming that, that business continues like it’s been continuing early this year. Then we talked about productivity earlier in the earlier question being that, call it, $25 million to $30 million benefit that you get. And there was some incentive comp reload that we – and it’s a favorable move because we paid a higher incentive comp in 2021. We would normalize those targets for 2022. That would be a $10 million benefit for us. So that gets you back pretty close to neutral. And then the question is, well, okay, why…

All right. Thank you. That’s very helpful. I wanted to circle back on the Q1 trends, too. You have some unique AWS seasonality versus other companies in our universe. I guess just to make sure we’re on the same page, could you give us a sense of where AWS are quarter-to-date at Outback and Carrabba’s and maybe a sense of just the degree of improvement that you’ve seen in recent weeks. And have you seen any slowdown in Brazil on Omicron?

On Brazil, we haven’t seen any particular slowdown, business trends continue to be very strong. And I’ll turn it over to Chris to talk about any volume matters.

Yes. I mean it’s interesting, Brian, the first – so the first week of our year ended on January 2, you got to strip that out because that’s just a massive week for us because of the – coming out of the – that’s always the busiest – one of the busiest weeks of the year for us. So if you take that out and then you take out this most recent week, because there’s Valentine’s noise on week ending 213 [ph] I think I could confidently say that Outback, as well as sort of the total company, AWS, has been improving on a pretty regular basis. If you look at kind of where we are now, Outback has been in that mid $70,000 a week range which is a really good result. And again, that’s sort of pre. We typically see a volume pop the weeks – a few weeks after you get through the Valentine’s Day shift. And again, like I said, the important thing to consider in this is that, that gap, both at Outback and across our total portfolio, that gap relative to what you would look at, at a black box, for example, has maintained and grown, which is really encouraging.

All right. That’s great. And I guess the last one, going back to the kitchen equipment. As you’ve tested and studied sort of that opportunity, do you have a tighter sense of the labor efficiencies, a number of bodies in the back of the house, et cetera, that you might be able to realize in terms of efficiencies and optimizing the labor model as you roll out? I understand it’s over a few years, but do you have a tighter sense of those efficiencies that you’d be able to share?

Brian, I just don’t want to get into that because that kind of detail is pretty competitive. But we do have targeted a 20% return on investment on that kind of capital investment. So I think you can kind of begin to noodle around what that might look like in the back of the restaurant. And importantly, like I mentioned earlier, not only is this tested, this is in, and this is in high-volume restaurants. So we’re seeing the – what we need, this type of equipment.

All right. Thank you. I will pass along.

Thank you. Our next question comes from the line of Jeff Farmer with Gordon Haskett. Please proceed with your question.

Thank you. A handful of follow-up questions. The first one was on that. I believe you said $150 million, $155 million of menu pricing benefit all-in in 2022 with the menu price increases. But what does that assume in terms of price increase levels at Outback and Carrabba’s? Can you provide us concept across those? Or can you provide us any context across those two concepts?

Yes. It’s a little higher than the – I mean, Outback is so big that the average price increase is going to pretty be reflective pretty much at Outback. But it is a little bit higher at Outback, maybe a little lighter at the other casual dining brands.

And then just to be clear, so have you already pursued or are you sort of currently rolling out that – the newest price increase at Outback. Has that happened already? Or is it happening now?

March.

March. Okay. And then just another topic that was touched on, but staffing levels at the concepts. So all your peers were asked about this and a lot of people will point to staffing levels versus pre-COVID levels. But given that sales volumes were up pretty materially versus pre-COVID levels, how do you think about what the most efficient staffing levels are as you move forward? And where are staffing levels right now sort of vis-à-vis those efficient staffing levels that you would think about or what you would need moving forward in 2022?

Yes, Jeff, first of all, we’re a completely different business in 2019. If you look at the menu changes we made and the simplification, the equipment investments, some of the equipment we’ve done. So go back to 2019, looking at staffing levels doesn’t really make a lot of good comparison. So basically what we do is we look at our labor engineering in the back of the restaurant, in the front of the restaurant and compare versus where we’re staffed, and we’re in really good shape in our staffing levels. It doesn’t mean that we don’t have work to do, et cetera, I’m not saying that. But we’re very close to where we need to be. And the team has done a great job on that. But to go back and compare to 2019 would not be something that would be wise for us. What we do is we build the staffing models on the business that we have today, with the equipment that we have today and then compare that versus where we’re at. And we talked earlier about the strong culture that we’re trying to build in the company and we do enjoy. And our retention levels and our turnover levels are really in good shape.

And then just last one related. So as we moved past Omicron here hiring, just what sort of the high-level takeaway there in terms of number of applicants, qualified applicants. How much easier has it gotten to actually bring new staff members on board as we’ve moved past Omicron, if it has?

Yes. Jeff, it’s gotten better. It was tough for a while there. Obviously, our retention levels and turnover levels really helped us. But as we look for talent, it was – it’s been a war for talent. But if things have gotten better the last few weeks and months, and we think we’re very well positioned to do that. Does it mean that all of our issues are solved? No, not at all. But on a relative basis, the labor environment from a talent recruitment standpoint is getting better.

Alright, thank you.

Thank you. Our next question comes from the line of Jared Garber with Goldman Sachs. Please proceed with your question.

Hi, thanks for the questions and congrats on a, another strong quarter. Wanted a quick modeling question on pricing. I know you’re taking another incremental price in March, which you talked about. Can you just help frame what the effective pricing should look like for the first quarter? I think you noted it will be 5% once you pass through that incremental price, but just want to make sure, we’re understanding the first quarter implications properly. And then I had just sort of one follow-up.

Yes, it will be approaching that 5%, I’d say. And then going in Q2, it will be the full 5%. So 4.5% to 5%, somewhere in there.

Okay, cool. That’s helpful. And then if we go back maybe a year or 18 months, you took menu prices down at Outback and/or sort of improved the value proposition there to kind of shrink the gap between some of the Steakhouse peers. Can you just update us on maybe what you’re seeing in your own data or your industry data as it relates to sort of how consumers are viewing the value proposition at Outback versus some of your primary Steakhouse competitors?

Yes. No, we made significant progress with that menu change. The team did a very good job on it. At mix was up, appetite mix is up, drink attachments are up, people are trading up to higher cut of steak or larger steaks. No longer managing things and pursuing value initiatives because some of our pricing was on line. They just did a very thoughtful job, and we’re seeing that benefit in the company, both from a sales and profitability standpoint in mix. And also, the other thing that they did that was really smart was, the combos that they add to the menu have really been great. And it’s a prominent part of our menu and the team has done a great job. Obviously, we constructed our price increase at Outback, we had all that in mind. We wanted to preserve that as much as possible because it’s been a nice advantage for us.

Yes. And I’d say that tactically speaking, that the way that you deploy some of that is you can just move – we have menu pricing tiers across the country. You can just sort of play with those tiers and not take away any of the key tenets of the price increases that you – or the price decreases that we put in place.

Great. That makes sense. And then just one sort of follow-up as we think about heading further into the year with some potential pressure on the lower-income consumer. Not just to say that you guys don’t have maybe some pricing power, obviously, I appreciate the commentary that you took very little price last year, sort of on a two year basis, it’s quite low. But just how are you thinking about sort of those laps as we head into the heart of the fiscal 2022 and maybe some pressure on the consumer and some potential trade down? Just wanted to get your thoughts on how you’re contemplating some of that thinking into your guidance. Thank you.

Thank you. That’s one reason why we were so deliberate on our price increase changes and also offering value in other ways to the combos we talked about or some of the menu stuff that we did at Outback. We don’t intend on getting into a discounting situation or anything else. It’s all about great food, served at a terrific price with some really great marketing ideas that we’re going to be continuing to do. And that’s were – that equation has worked out very well for us. And that’s one of the reasons – that’s the big reason why we were very deliberate on our price increase.

Great. Thank you.

Thank you. Our next question comes from the line of Sharon Zackfia with William Blair. Please proceed with your question.

Hi, I think we’re going in alphabetical order again. So most of my questions were asked, but I did want to inquire about kind of the menu simplification that you’ve been so good at doing over the past two years and how that might enable more robust product innovation or menu innovation now. So can you give us your thoughts on how that might have cleared the decks for that and if we should expect any kind of more frequent cadence of new product news now in 2022?

Yes. Clearing the deck is exactly a great way of saying it, Sharon. And yes, we do want new product news around what we do so well in our concepts. So we’ll continue to do some steak innovation and things like that at Outback. We’ve got some combo meal ideas. The Bloomin’ idea, how we spice things and everything is always kind of fun. Those kinds of ideas are an important part of Outback going forward. What we can’t have, and to your point, is we can’t have renewed menu proliferation that takes us away from the core great opportunity for our people to serve our customers. Then on the – the other thing that is coming up, Sharon, is on the carryout and delivery standpoint, all kinds of opportunities on family bundles, packaging, all those things are just – that’s a whole new channel for us. And then when you add on the digital experience, that will be important. So that – those are some of the things that we’re thinking about. You can apply the same thing to our other brands. Lastly, I want to say that we’ll make sure that we don’t go in alphabetical order next time when we have our call, and we’ll address that, Sharon, our apologies.

No, appreciate that. Thanks.

Thank you. Our final question this morning comes from the line of Andrew Strelzik with BMO Capital Markets. Please proceed with your question.

Hey, good morning and thanks for squeezing me in here. I just had two follow-up questions on Brazil. The first one, you mentioned easing restrictions there being a help. How much are restrictions continuing to impact the sales trends? And do you have a sense of how much capacity has come out, I guess, of the industry in Brazil? I guess I’m just trying to figure out where those volumes could be headed. That’s number one. And number two, obviously, a lot of cost conversation in the U.S. But what does that look like in Brazil? I think I noticed that the – relative to 2019, the average check is down. So I’m just curious what the environment is like there. Is there any need to take price? And how the margin implications look. Thanks.

Yes. On the business itself, we – Chris will identify how much of capacity has come out of the business, but the trends have been very, very good there as they have progressed through the virus. That has been strong. We do – the team is probably best-in-class in our company, frankly, on identifying pricing opportunities, studying where they lie, et cetera. We can learn a lot from them. And so they do work that through as much as possible without losing the value equation. So I’ll turn it over to Chris to talk about what the impact on the capacity looks like for the overall category.

Yes. Well, so I think just a couple of stats. Brazil right now is effectively 95% plus capacity. I think that it’s – Rio and São Paulo are at 100%, but it’s really just a question of the other outlying areas, and that’s the only residual we have left. I think from a total industry capacity standpoint, look, it’s really difficult to get good data on this. But what we have seen and heard is, a they did not have the same level of benefits that they provided to employers throughout the COVID time period, so there were a lot of closures in the restaurant industry down there. So unlike here where maybe that number is lower, that number could be 20%, 30% of restaurant capacity potentially coming out of the category down there, which, of course, from our perspective, provides a great opportunity for us. But it remains to be seen how much that comes to fruition as well. And I think the third thing, in terms of the overall environment from an inflation pricing PPA standpoint, they have inflation down there as well. I think it’s that high, I’d say, again, high single-digit inflation overall seems right. They are taking an appropriate level of pricing. I think, ironically, they’re in that 5% or so price range. Now the PPA of Brazil overall does get a little bit influenced because this is a business that went from zero off-premises dining to now, what, 16% or so, I think, of the overall business is off-premises. So that does have a big impact on check, and it lowers a little bit. So I think that overall, that’s the way we would think about the environment in Brazil, very similar to the U.S., but obviously, the opportunity from a capacity perspective moving forward, it’s pretty good.

Great. Thank you very much.

Thank you. Ladies and gentlemen, that concludes our question-and-answer session. I’ll turn the floor back to Mr. Deno for any final comments.

Thank you, everybody, for the questions and interest today. We really appreciate it. Hopefully, we gave you a good sense of what’s going on in our company, and we look forward to talking to you after on our first quarter call in April. Have a good day.

Thank you. This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.