Greetings, and welcome to the Bloomin’ Brands Fiscal First Quarter 2022 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 your presentation.

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 first quarter 2022 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 first quarter 2022, an overview of company highlights, and an update to 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 Q1 2022 diluted earnings per share was $0.80 versus $0.72 in Q1 2021, up 11%. We also saw good sales growth in Q1 with positive comp sales across all concepts. This momentum is directly tied to the planning and hard work that has taken place in the company over the last few years. We prepared a comprehensive plan to build a stronger, leaner, operation-centric company, one focused on providing even better food and serve customers. It's clear our strategies are working and reaffirm our ability to deliver on key commitments and drive even more sustainable growth. These results would not have been possible without the talented and dedicated employees in our restaurants and the restaurant support center. Your commitment to providing guests the highest level of service and hospitality is what makes our restaurants so successful. As we build upon the momentum from the first quarter, we remain focused on executing against the following key priorities to deliver sustainable growth. First, grow in-restaurant sales by improving service levels and food offerings. The investments made over the past years to elevate the customer experience are showing up in improved social and customer scores, especially at Outback. As part of this effort, we continue to look for ways to simplify the business to improve execution and consistency. This includes rolling out several innovations such as new cooking technology, including advanced grills and ovens, to improve food quality and productivity. We also are deploying kitchen display system for meal pacing and handheld technology for our servers. These innovations should reduce costs and further improve customer service. While all this is going on, we continue to upgrade our asset base. Investments in remodels are offering good…

Thanks, Dave. I'm excited about the opportunity to discuss our strategy to accelerate new unit development particularly in the US. The improvements made over the past several years to enhance the customer experience, simplify execution and capture the off-premise business have strengthened the economic model. In parallel, we've been patiently designing a smaller, less expensive outback prototype that we believe will enable more meaningful restaurant growth with healthy returns. These smaller units provide fill-in opportunities in markets as we're able to pursue new trade areas. When combining the growth initiatives we see across the portfolio, we believe we can achieve 3% unit growth each year in the near-term with attractive ROIs. We are prioritizing these efforts domestically without that. Additionally we'll focus on Fleming's and internationally with Brazil. Let me provide some more perspective on each of these opportunities. Outback is a leading brand and remains a category leader with significant opportunity for unit growth. The success of the Outback relocation program is a clear indicator of this demand and brand strength. In the past five years, we've relocated approximately 50 restaurants with sales lifts of over 35% and recent average unit volumes of $4.6 million. We believe we have the opportunity to relocate an additional 100 restaurants. Recent new Outbacks are also opening about $4 million. We believe the smaller prototype asset helps us capture the opportunity in key markets in Florida, Texas and other states in the South. This can be done one of two ways: first by building new restaurants in rapidly growing markets; and second, by building additional restaurants in major metro areas that still in opportunities. The new design incorporates the following aspects in the restaurant. We reduced the overall size of the building by 16% to around 5,000 square feet. We accomplished this by…

Thanks Mark, for providing an update on this critical initiative. In summary Q1 was another terrific quarter and this sets us up well to achieve our 2022 goal. Given the momentum we are seeing, we remain bullish on the business and we have raised full year guidance. And with that I'll now turn the call over to Chris who will provide more detail on Q1 and thoughts on 2022.

Thanks Dave and good morning everyone. I would like to start by providing a recap of our financial performance for the fiscal first quarter of 2022. Total revenues in Q1 were $1.14 billion which was up 15.5% from 2021, driven by a 14% increase in U.S. comparable restaurant sales. Our same-store sales results consisted of a 5.6% increase in pricing a 6.9% increase in mix and a 1.5% increase in traffic. This increase in traffic came, despite an approximate 300 basis point impact from the Omicron variant and unfavorable weather that we discussed on our last earnings call. The increase in mix was driven by two factors. First, there was significant trade in the higher-priced menu items and additional sales of appetizers and beverages. In addition, in-restaurant dining carries a higher check average than off-premise dining. Off-premises was 35% of US revenues in Q1 of last year and was 26% of US revenues in Q1 of this year. This shift in revenue channel also helped drive menu mix higher year-over-year. At 26% of US revenues off-premises was flat from where it was in Q4. Importantly, the highly incremental third-party delivery business continues to grow and was 12% of U.S. revenues in Q1 versus 11% in Q4. In terms of concept performance Outback was 29% of sales and Carrabba's was 34% of sales. Off-premises remains sticky, 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 Q1 sales. Brazil Q1 comps were up 36%. Brazil's first quarter reflected the combination of strong execution and the lapping of COVID-related operating restrictions. As it relates to other aspects of our Q1 financial performance, GAAP diluted earnings per share for the quarter was $0.73 versus $0.63 in 2021. Adjusted…

At this time, we will be conducting a question-and-answer session. Please limit yourself to one question and one follow-up. [Operator Instructions] Our first question comes from the line of Jeffrey Bernstein with Barclays. You may proceed with your question.

Great. Thank you very much. Two questions. One just on the menu pricing. I think you said 5.6% in the first quarter. I'm just wondering how much you would expect as we move through the rest of the year? And maybe whether there's any concern about elevated pricing and what appears to be a slowing macro. Just wondering how you maybe test to gauge and formulate so you don't take too much and negatively impact the traffic momentum that you seem to be building?

Hi, Jeff. Good morning. Yes, we are very, very aware of our pricing actions and we look at it competitively very closely and we've been watching what others are doing and what our customer wants. And we believe we're at or below our competition, which is very important. So managing this margin calculus along with the consumer and pricing and everything else is what we're trying to do. Now, the good news is too, is we have a lot of dry powder as far as how we can go to market with various programs. Our intention is not to do large-scale discounting and things like that, but we learned a lot during the pandemic about how to go to market, with digital, with different offers. We invest a lot in our service and our food platforms. So that's how we can maybe address some of the potential slowing consumer. Although, right now, we see the consumers still be pretty healthy in our space. So I'll turn it over to Chris now, to talk about the price details.

Yes. Hey, good morning, Jeff. And so, in terms of the go-forward thinking right now Q2 Q3, probably a stitch higher than what we saw in Q1, simply because we did take some mid-quarter menu pricing, but definitely below 6% I think is the idea. So 5.7%, 5.8%, somewhere in that range. And then, I think, when you get to Q4, that's when we want to just reassess, because that's when you start to lap the pricing that we took in 2021. And I think we're just going to make an assessment of where the consumer is, where we are as a company, where our margins are and then we'll make a call on what we want to do with pricing in Q4.

Understood. And then, just, the follow-up. Indeed when you oversee four brands in the US, it seems like you're reaching across the entire consumer landscape. I'm just wondering, maybe, you can give your sense on the current US macro. I know, you just mentioned that, the consumer still seems pretty healthy. But is there any change in behavior that you see at any of your brands to demonstrate a change in the economy? Or maybe, what do you look at your business as a leading indicator, maybe, what you've seen in years past to demonstrate that maybe the macro is slowing, because, obviously, casual dining is more vulnerable being a higher-priced check. So just asking you to put on your comments hat for a second and see if there's anything you're seeing or what you'd be looking for to demonstrate a slower macro?

Well, thanks Jeff, and trend [ph] is an undergraduate in economist, it's something I enjoy talking about. But we get information every day. And we -- the consumer for us is looking good and we feel good about where we stand. We feel good about what the current trends look like. We feel good about our channels. As we look at our off-premises business and look at our in-restaurant business, as people coming back into the in-restaurant business, the off-premises business is certainly hanging in there, especially third party. So we look at channels, look at the health of the consumer. And then lastly, the high end continues to do very well. You see it in the Fleming's numbers. Not only the Fleming's number is strong, but Fleming's is outperforming the marketplace. And then lastly, we have a large business in Brazil. And that business is doing extremely well. And we talked about what the future potential looks like as far as the number of units in Brazil. And if we look at the marketplace, you see same-store sales growing as it is. So we have to talk about that one as well. So we have four domestic brands and then our brands in Brazil. So Jeff, rounding out the question, our trends continue to be good.

So when you say current trends, is that a comment related to April that I guess momentum has sustained itself and there hasn't been a slowdown of late?

Right. And you see it -- we're very pleased to give everybody a quarterly guidance. We gave the second quarter guidance. It's very clear. We've got the full year there which we raised. April trends are incorporated in that guidance and we feel good about where we stand.

Great. Thank you, very much.

Our next question comes from the line of Sharon Zackfia with William Blair. You may proceed with your question.

Hi. Good morning. Just a clarification on the mix. I think you mentioned that consumers' on-premises are switching up to higher ticket menu items. I don't know, if I understood that correctly. I understood the difference between on-prem versus off-prem and attach payer. But are you seeing consumers actually spend more or trade up when they're in the box? And is it noticeable at one concept versus others? And then a question on Brazil. I may have missed this, but did you give any color on kind of how Brazil is trending so far in the second quarter? And how is the inflationary dynamic in Brazil kind of compared to what you've seen in the US?

Sure. Let me answer the Brazil question first and then I'll turn it over to Chris to handle the other stuff. The Brazil trends are very good in April as well just like in the US. The inflation environment is something that that country is very used to. We are on top of pricing. We're on top of our margins. And if you look at our segment reporting, you'll see very strong results, Sharon. And so for that marketplace, we clearly have a very good momentum. Before I turn it over to Chris, that gives us the confidence to continue to expand the business. And we talked about -- when we first bought this business, we talked about having potentially 100 Outbacks there someday. We now think we can have 240. And that has to do with the economics of the business, the growth of the country, the innovations we're making and how we build the box, those kind of things. So that's an indication of where that country is going. And I'll turn over to Chris to answer the other question.

Yes. Hi Sharon. So the mix component, we talked about mix being 7% of sales or so or 7% lift in Q1 versus last year. It's basically two components, one of which I think we would call a little surprising and one of which was not such a surprise. The piece that was not such a surprise was the fact that a larger percentage of customers returned to in-restaurant dining this year versus last year. And the fact that that in-restaurant consumer carries a higher average check relative to the off-premise consumer drove some change in mix. That was probably half of the mix benefit. The other half was a little more surprising. It's just consumer health appears to be pretty good. And we've seen trade up into additional appetizer sales, additional alcoholic beverage sales things like that I think carried the day on the other side of the mix components. So it was a bit of a tale of two cities on that one.

Yes. I just want to add one other thing too. We're seeing the benefit of the investments we made in customer service and food over the years. And customers are noticing that and that's what offering some of the trade-up for us because of the enhanced service and the food and we're seeing it in our restaurants and our operating scores by third parties are improving nicely.

Thank you/

Our next question comes from the line of Alex Slagle with Jefferies.

Thanks. Good morning and congrats. I had a question on the off-premise. You talked about the margins being comparable to dining. And I don't know if that's a step-up from the previous comments that it was approaching that of dine-in but maybe you could just talk about the dynamics of what's driving the help there whether it's pricing or the sizable shift in digital, which was a pretty big jump? And have seen this happen even with delivery mix growing. Just kind of curious your analysis there?

Well so a couple of things. One, it depends on the channel when you're talking off-premises. We've talked historically that your curbside business is basically at parity from a margin profile of your in-restaurant dining experience. What we lose in average check we make up for in lower labor costs for example so you're able to maintain some parity there. In terms of third party yes, there is a pricing component to third party that we have that's above what we would have in-restaurant. But again, the fact that party mix continues to increase in an environment where off-premises mix is shifting from curbside to in-restaurant. It just speaks I think loudly to the incrementality of this business and the success that we're having driving third party through our box.

I had a follow-up on the marketing opportunities and leveraging digital and loyalty. I mean it feels like you've had really good headway on the digital front through the pandemic and leveraging a bunch of the investments and improvements building out that platform and the analytics and sort of the more efficient deployment of the marketing spend and kind of curious where you see the next phase of this going? And as you have more tools and insights at your disposable sort of what that opportunity looks like?

Yes. Single biggest opportunity is continued development of our various apps in our concepts. We're making great progress. And for competitive reasons I don't want to get into it. But the consumer is noticing. If you look at the percent of occasions that people are using on our apps you'll get the – what we're using what – how people are accessing us, we're making significant progress. And that was a lot of work done over the past couple of years by our IT team during the pandemic and we're now reaping the benefit of that. For instance, if you like favorites at Outback, because now a favorite button just boom, you can hit it and go with it and – it's we're going to make that ease of ordering and the ease look just great. Secondly, we have converted to a new Dine Rewards program that's points-based, that will give us more opportunity to access even more customers because they have a chance to use the points more frequently, that can allow us partnerships et cetera. So that's going to give us a chance for even more engagement and more consumer data, which is going to be really terrific. And then lastly, I think you're going to continue to see operations enhancements that go along with the app enhancements in the restaurants to make off-premises and ordering ahead very easy and seamless to our customer. Finally, on the marketing side yes we have learned a lot about the digital opportunities with various partners and that's primarily how we go to market now, and we know exactly it gives us a lot of flexibility and we know what the returns look like as we go forward and we've been investing behind that both from an IT capability standpoint and a marketing spend standpoint.

Thank you very much A – David Deno: Welcome

Our next question comes from the line of John Ivankoe with JPMorgan.

Hi. Thank you. Just looking at the Outback $24 average ticket there's obviously a lot of ways consumers can spend around that higher but also lower obviously as well. Can you talk about with all the new data that you have? Can you talk about exactly, who your customer is middle income it doesn't skew higher. Is there a sizable amount of lower income consumers that you in particular want to protect to the extent that they do cut back in some of the more discretionary occasions? A – David Deno: Yes, sure. A couple of things on the gas check, John. Chris talked about the trade-ups. I mean the Outback team did a really smart thing. 18 months ago and changed around some of their menu items and made appetizers more accessible and things so the tack rates are stronger. So that's helping a lot. Secondly, we aren't discounting as much. So some of those customers have locked away. So we've got a guest check build off of that. But we still are seeing – importantly, we are still seeing the middle income consumer use us. That's a very important point because they have price certainty, and they know what they're getting both from food and service. And as I talked about earlier, we've tried to moderate our pricing as much as possible and as we look at competition. So we're trying to manage the check that way the PPA that way. But -- and like you said there's different ways to access our company at the low end or the higher end as well.

And this might be too proprietary you have a question, but if you would answer it, it would be great. I mean what percentage of the Outback customers are below the American household income average? I mean what -- I mean just kind of you're picking just the number but you can obviously,say whatever you'd like. A – David Deno: Yes. I think John we'd like to keep that to ourselves if we could, because that's pretty proprietary and especially as we [indiscernible] Okay. So I usually like to answer your questions directly but that

I don’t know. I took a shot on that when I didn't think I'd get it but you never know. Okay. So let me switch to the technology side. I mean -- and I was a few minutes late on the call and I apologize if I missed this. KDS handhelds grills I mean where are we in terms of the supply chain, where are we in terms of getting some of these projects implemented in the store? And I mean, I guess, how excited are you that we could see some material benefit from both the customer employees and margins -- or might there be tweaks necessary to the projects as they come in relative to expectations? A – David Deno: No tweaks expected John, spot on versus the last time we talked on the call. KDS in the restaurants being rolled out, as we speak. Handhelds will be done in Q3. The backhouse equipment specifically the clamshell grills, will be rolled out over the next few quarters exactly like we talked about. It's on time and we're very pleased to see that. And the other thing John, which I think you appreciate is we're putting some of these clashes in some of our highest volume restaurants and they are responding. We didn't want to just put it in a bunch of average restaurant. We want to put it in a bunch of high-volume restaurants. One is kind of down the street from you import Charlotte. And I just think that we are seeing some really great results. Now I'll turn it over to Chris to talk about the financials. But let me -- let's talk about the customer. We're looking at an opportunity here to really address one of our biggest issues, which is stake accuracy on cooking and we're seeing that improvement. And we're going to see what that will come higher guest satisfaction and higher traffic. Secondly, speed of service throughput is really great. And lastly with our handheld it will be a lot easier to -- for our front-of-house employees to engage with customers. So those are the three things from the customer side that we really see. Now I don't think we're getting to great detail on some of the financials for proprietary reasons, but I'll turn it over to Chris to talk about a few of the financial benefits we're going to see.

Well, I guess all I would add to what Dave said is the fact that when you talk about our long-term margin target of 8% operating margin, one of the key catalysts to allow us to continue to drive efficiencies in the box from a productivity standpoint is going to be the technology. So this is clearly about service. It's clearly about execution, but there is also an efficiency benefit certainly in the front of the house with the server handheld technology, but also in the back of the house in the kitchen as it relates to the grilling technology et cetera. So again I would just say that it's part of the calculus that when you look out longer term allows us to think more broadly about this 8% margin target.

And lastly John, the goal here is to roll out the technology to enhance customer service. That is a big part of what we're trying to do here is enhanced customer service and our food quality offerings.

That’s clear. Thank you.

Our next question comes from the line of John Glass of Morgan Stanley. You may proceed with your question.

Thanks and good morning all. Chris just on your comments on the second quarter, can you -- and I'm thinking about the Outback brand in particular, a very tough lapping from the second quarter of last year. Can you comp positively against that? I think consensus doesn't have it as positive? Are you -- is your view on your revenue guidance and earnings guidance assumes positive comps in the second quarter for the Outback brand?

Positive. Well, what I would say is look the -- we're positive comps for the portfolio absolutely. And we're striving to get positive comps across all of our restaurant brands for sure, right? You're spot on though John. It's a tough lap given the success that we had last year all those thoughts are embedded in the guidance, as well as a pretty strong recovery in Brazil.

Okay. Thank you. And you didn't update or change your commodity guidance you thought it was going to be higher. Many restaurants have already updated their commodity guidance this quarter. A lot has changed since you issued your guidance last time in the commodity world. So do you have more visibility than others, more contracting? Maybe you could talk about the contracting rate in 2022 that gives you that sense that you'll see some declines in the back half? And maybe anything that's going on in the beef market specifically that maybe benefits you that doesn't benefit others for example?

Yeah. Look I don't think that anything has really changed. We're -- right now we're 78% locked on our 2022, and we're obviously pursuing spot and contract strategies for the remainder of the year. But look I think it's pretty consistent to say that overall landscape in commodities hasn't improved much and there really hasn't been any sustained positive news in the commodity category, but that was all really embedded in our thinking when we gave our guidance originally. So I think that nothing's really changed on our end but obviously it's a highly inflationary environment. Now in terms of, as you look at the year progression from an inflation standpoint, I would say, it's far more a product of the fact that we're starting to lap higher commodity periods from a year ago versus any big sea change in our expectations for the commodity landscape in 2022.

Okay. And beef specifically, is there any update on what the beef market is doing?

The curve of beef is somewhat representative of what you would typically see for beef cycle at this point in time. It's just elevated at that. In other words, the curve is the same, but it's elevated from where it would be historically. But again, we're locked in. So, we don't have that kind of volatility in our pricing.

Yeah. Thank you.

Our next question comes from the line of Lauren Silberman with Credit Suisse. You may proceed with your question.

Hi. Thanks so much. I wanted to ask about unit growth. So, you talked about the 3%. Is that a net unit growth number? And then, is this a 2023 goal?

Yeah. Good morning. It will be a bill. We'll provide more details on the 2023 guidance. Obviously, as CEO of the company, I'm interested to try and get to that build as quickly as possible, but I've got to be realistic about it with working with market team. But it's an expansion number total. We anticipate very few closures going forward. We'll always look at it. But the 3% is in a sense a gross number, if any closures happen, because we've done a lot of work following our company over the years addressing our asset base, but the 3% is what we look to achieve on a gross basis.

Great. Specific to Outback is the largest state concept by units, how are you thinking about the total unit potential in the US? And then, beyond Outback and just looking at broader portfolio, I appreciate all the color on the reduced cost, but our unit economics of the prototypes. Are there any other changes you've made to the development approach supporting confidence in the acceleration, I guess part of it is closures to your point?

Yeah. The big thing frankly is even though we were very sad to see what came out in the restaurant into during COVID. We came out in a much stronger place. So our unit growth opportunity now is pretty good, very good. And if you look at cities like we're really strong in the South, there's still in opportunities, there's new unit expansion opportunities. So, we're looking at 75 to 100 new Outbacks in the US. And hopefully, as time goes by we can continue to make progress on that -- beyond that. But, we're between the smaller building prototype that Mark talked about there's delivery and carryout enabled and we hold in really fast-growing markets in the South. We think that the Outback piece is available to us. And the economics are really much better. And our finance team led by Chris Meyer, looks the returns very carefully to make sure we're not making any mistake. So, we have that tool as well available to us. So, 75 to 100 more restaurants. Now let me add a couple more things real quick. We've seen a step change in Carrabba's and Bonefish performance, step change. And I think we can now look at in our stronghold markets selectively expanding those two markets. Those teams have done a great job addressing that marketplace. Lastly, the high end, like I talked about earlier, is extremely strong. Fleming's is performing really well in that environment. We're looking to expand our Fleming's business and also we're really strong in key markets in Florida, California and Texas is upgrading our assets, because we're seeing returns there as well. So -- and finally -- we talked about Brazil and what the opportunities look like there. I'd remind everybody that it's about $1 million of box in cash with wonderful returns. And we think we've got expansion opportunities there as well. So, that's kind of how you build up the 3%.

Fantastic. Thanks so much.

Our next question comes from the line of Jeff Farmer with Gordon Haskett. You may proceed with your question.

Thank you. Just wanted to follow-up on a couple of things. First would be John's questions. Can you guys share your top five commodity exposures? I think you said that you're roughly 78% covered or contracted for the year. But in addition to those top five exposures, which commodities are more or less contracted as we stand right now?

Yes. So, obviously, beef is the biggest. I would say from there, it goes to more like seafood. There's food other which is a popery of things dairy oil those kind of things. And then less exposed, but still a reasonable number for chicken. The rest of it is pretty small. So, I would say -- produce as well. Yes, so I'm sorry, I missed produce. So, it's produce, dairy, oil, beef being the largest, seafood being the second largest, and then poultry would be the five. And look I think that it's just a mixed bag in terms of what we're locked in and what we're not, obviously, with some of those things like produce, for example, you really don't lock-in for extended periods of time. But with beef, you've got to -- we're fully locked on beef and the rest of it is pretty much in the middle. So, 50% locked in a lot of those categories.

All right. That's helpful. And just one other quick follow-up which is on the off-premise business. Obviously, a lot of moving pieces with this business across both of your core concepts out back in Carrabba's. But I'm just looking for you to help us sort of size up the business and the opportunity. So, you have delivery to go the virtual brand meaning tender shock and catering which is -- looks like an increasing focus for the management team. I'm curious what the largest piece of off-premise is now and where you see the greatest opportunity moving forward?

Yes. So, I'll talk about the future of the business and Chris can give some of the pieces parts. We're going to grow this off-premise business. We piloted long ago. We started carryout long ago. We've been doing delivery for a number of years. We've got a specific management team dedicated to growing it looking at packaging pricing products all those things to make it come together. So, what are we seeing Jeff that is pretty interesting. Carryout, that Chris talked about, is a big part of our business and has good profitability. Third-party, as I mentioned earlier, continues to grow for us and we've got great partnerships there. And then finally, on the catering piece, we -- Carrabba's has led the way on that and Outback is to follow. So, we're seeing some good gains on that as well in the off-premises occasion. Clearly, if all of our concepts, Carrabba's has the food form and the capability to have the highest mix and best growth. It's -- if those of you on the call, if you've had it, you know what I'm talking about it really delivers well from a service and food standpoint. Over to you Chris.

Well, if you go back to 2019 and you think about where our mix was of our off-premises dining we were at -- I think we finished 2019 at 12% was our total off-premises mix and 9% of that 12% was curbside or to-go. You fast forward to where we were in Q1, for example, and your curbside and your delivery are basically at parity. And almost all of that delivery is now third-party delivery. So, I think you've just seen that fundamental shift. Like I said I think that the third-party delivery is something that will take all day long just given its incrementality and our ability to execute at a high level. But those have been the biggest shifts from what used to be and what is now.

And in closing, Jeff, I think what we've learned in the last few years from a customer standpoint is, consumers are seeing the fact that our products deliver really well. And it can be in their solution set where in the past maybe they thought about just other service specific food forms. They're seeing that what we offer works really well.

All right. Appreciate it. Thank you.

Our next question comes from the line of Brian Vaccaro with Raymond James. You may proceed with your question.

Thanks and good morning. I wanted to ask about the recovery in the dine-in business. And I guess I'll ask about Outback, but it's really a broader category question. And I guess the quick Outback in Q1 is that average weekly sales for dine-in are still down somewhere in the teens low to mid-teens versus pre-COVID. And I'd assume that's improved more recently exiting Omicron. But I'd love to get your perspective on why traffic within that category is still down as much, particularly given industry closures. And if you dig into your data are there big regional differences you see? Are there new thoughts on how incremental off-premise might be versus the dine-in occasion? Just any insights you have there might that would be helpful.

Yeah, sure. We -- as consumers begin to have their habits change and come back to the dine-in occasion in-restaurants. We're going to see more and more of that and that's an opportunity for our company. And especially as we keep the off-premises business going. Secondly, Brian, because of Omicron, until March, we really didn't turn our in-restaurant marketing back on and that's an opportunity for us, because I've talked about that in the digital space. So you'll see more of that from our brands as we go forward. The goal is to continue to have dine-in sales come back and with off-premise is staying the same. So those are two really important pieces. Then we talked about the importance of some of the investments we're making in the back of the house and the front of the house. That's going to improve traffic. The clamshell grills, the handhelds throughput that's all going to improve as a result. So those are the three or four things that we see coming forward for the company in the future quarters and we see it as an upside for us as we move forward.

But I guess if I could, how big of a range do you see across regions in terms of the magnitude of dine-in recovery you've seen? Can you give us any sense of that?

Yeah, we're still -- it's getting better and stronger as we look at the regional. Obviously, the Northeast and the upper Midwest were a little slower to come back, but they're coming back. And we're seeing that in our results. And the South continues to do well. So I think as the northern environment especially the summer coming back and everything else and outdoor dining and everything, we've got a chance now to build on this and that could be a nice opportunity for us.

All right. Thank you. And I appreciate the Q2 guide of course, but could you give us a sense of maybe where average weekly sales trends recovered at Outback and Carrabba's towards the end of Q1, perhaps ballpark where you are quarter-to-date? And also remind us just how the normal seasonality plays out moving through May and June?

Yeah. March is a really strong month for us in terms of average weekly sales. And then traditional seasonality would suggest from an average weekly sales standpoint, you do take a step down in April certainly at our concept. So if Outback was averaging in call it, if I'm looking at this year Outback was averaging sort of in the low-80s, you're going to be in the mid- to high-70s kind of in an April standpoint. And that's just seasonality. That has nothing to do with any kind of change in trajectory. That's just what you would typically see at this time of the year.

Okay. Okay. And in Brazil, obviously a strong recovery that you've seen take hold there. Can you -- were there any calendar shifts to be mindful of? I think, Carnival moved around a little bit, but anything there to be mindful of or to think about what we're seeing in the numbers you just reported versus the true underlying trend?

No. The true underlying trend Brian is very strong.

They're doing great.

And you talked about the U.S., some companies come out of pandemic strong. You can only imagine what a category leading business like Outback looks like in Brazil coming out of pandemic very strong.

Okay. And then last one for me. Just on catering. Can you remind us what percent of sales that channel was for Outback and Carrabba's pre-COVID?

Tiny.

Yes, it was a very small number.

And there are some new initiatives around that. I think I saw an announcement in recent weeks. There's sort of a broad strategic plan within that sales channel that you're moving forward with exiting the pandemic?

Yes, not so much at Caramba's, because that's been in place for a while. But at outback there's quite a bit of coverage on that which we were happy to see.

All right. I’ll pass along. Thank you.

Our next question comes from the line of Brett Levy with MKM Partners. You may proceed with your question.

Great. Thanks for taking my question. I guess, taking an opportunity to just further on the regional question, but also a little bit on the margin. We heard from an indirect competitor yesterday just about their labor challenges. Can you unpack a little bit more what you're seeing either regionally or by quartiles or quintiles? How you are in terms of staffing levels, staffing productivity, what your unit level margins are, or at least how they're trending? Just give us a little bit of sense of what kind of ranges we're seeing out there as you continue your venture towards a full recovery?

Yes. I'll take the broader question on staffing, I'll turn it over to Chris on financial updates, he'd like to provide. But -- I'm not going to make this too long, but I'll try and make it relatively succinct. We had a long history of a strong culture and strong people measures in our restaurants. That was only enhanced during the and how we treated our people, and we're benefiting from that. We didn't let anybody go. The people that were retained. And if you look at our turnover levels and our retention levels, they're among the best in the industry. Are there staffing challenges out there? Of course, there are. But we started in a much, much, much better spot than others did in the industry, first of all. Second of all, the staffing environment has improved even though it is challenging in certain spots the spots are what you'd expect parts of the Midwest and parts of the Northeast, but the staffing environment has improved. So our strong culture is paying off in a big way. We've got very good retention and turnover levels and that enables us to keep our customer satisfaction high and it cuts down on training costs and just churn costs in the restaurant. So for that I'll turn it over to Chris for anything else.

Well, I would just add, there's no question that there's a price to that in terms of inflation. We're seeing that across the industry. We're seeing it internally, our inflation being up 10% in Q1. But the good news again is that when you look at the way Q1 came together, the fact that we had such strong average unit volumes and we have these efficiencies in our labor model. We were able to offset the inflation that we saw in the period and we actually had some leverage year-over-year in the labor line.

Great. Thanks. And just – I know, you gave some color on this, but can you give a little bit more clarity in terms of what is implied within the new 1.1 to 1.13 guidance for 2Q in terms of like new unit productivity and how much that's contributing as well as the comps? Thanks.

Yeah. I think just to go back to the comp question. Again, we've said positive, we have positive same-store sales through April that would be embedded in our guidance. And then, the other piece that easy to miss, but we try to bring it up time and time again is that Brazil's recovery, especially when you consider that, they were largely – they had a lot of COVID-related closures last year that year-over-year recovery is going to be built into that number as well. So that's how you get to the 1.1 to the 1.3. In terms of the margins and how that came together from a profitability standpoint, again, I think it's pretty straightforward. We're just flowing through the sales and that's that we led to our increase for the full year. Our full year guidance going up by call it $50 million. Some of that's coming into Q2. And that's again, a product of the fact that, we are expecting to see some of this check average appreciation that we had in Q1 to continue into the second quarter. Now, probably not as much year-over-year as we saw in Q1. And that's more just a product of the fact that, Q1 was unique in the terms of the in-restaurant recovery was so strong, relative to the off-premises business. You don't have quite that same dynamic in the second quarter. So the check average benefit that we saw in Q1 probably isn't going to be as strong in Q2, as it was in the first quarter. Those are probably the pieces parts, I would call out.

Thank you. Very helpful.

Our next question comes from the line of Brian Mullan with Deutsche Bank. You may proceed with your question.

Thank you. Just a question on the outstanding convertible notes. I guess number one, can you just remind when you have the right to redeem those? And two, Chris you mentioned on the last call but are you still considering, or is there a scenario where you would do something before then in the open market or in negotiation with cardholders? I just maybe, what scenario would that make sense for to do that versus waiting?

Yeah. So May of 2023 is when we have our first right. However, you can negotiate, your way through these converts prior to that date. And look, I think that we're doing the math. The challenge is, there is a premium that you have to pay, not just to the holders, but also because we have warrants in place there's a premium associated with the warrants as well. And so we just have to run the calculus as to whether or not the premium that, we would have to pay to exit gives us outsized benefit relative to paying off that debt. I would tell you that, the reason why we're strongly considering some of that is, because there is a share overhang associated with the convert. I think that, just psychologically that creates a lot of challenges from a communication standpoint. But also the math has to make some sense too. So we're going to – it's going to be sort of a dual-pronged kind of conversation the math make sense? And is relieving that, overhang from the convert give us any breathing space in terms of our ability to be able to communicate our story. And I think that should those two make sense then we're going to explore something this year, if possible.

Okay. Thanks for that. And then just bringing back to the development topic. It's helpful to hear about how many additional Outbacks, do you think the US to support. I'm just wondering, if you could give that same type of commentary for Fleming's how many you think there could be over the longer term? Just trying to get a sense of the magnitude of the opportunity you see for that brand?

Yes. There's two opportunities at Fleming's. One is, we think there's additional 15 that we could do. And given their average unit volumes that's significant. Second, the other opportunity is we've got some great restaurants and some really strong trade areas that can we know given what we've done in other restaurants by expanding the bar, making the inside a little more modern shall we say and those kind of things can make big improvements in our sales. So we'll be doing both of those. We'll be enhancing and improving existing restaurants and strong trade areas and adding up to 15 more Fleming's.

Thank you.

Our next question comes from the line of Jared Garber with Goldman Sachs. You may proceed with your question.

Hi. Thanks for the question. Actually, sort of, all time to kind of follow-up on some of the commentary on the remodels that you just mentioned. But specifically as it relates to Outback and tell us about that new product that new asset in supply and some changes to the box in terms of ambience and customer feel. Just wondering -- if at specifically new -- units and this new assets, or are you contemplating sort of going back and remodeling and refreshing some of the older existing Outbacks in the portfolio to match this updated design? Thanks.

Yes. We will do both. There's a cadence to our remodels our interior remodels and we're going across the country and refreshing those restaurants as we speak. It's embedded in our guidance and we'll continue to do that in the coming years. And so between that and the new units we think we can have an elevated brand from where it stands today. And then obviously two we're making technology investments to enhance the customer experience in the restaurant and the back of the house.

Thanks. And do you have maybe a way to frame sort of what percentage of the portfolio you feel sort of comfortable with in terms of the asset design now? And maybe how many more is there are left to go? Is it -- are you 50-50 now? I'm just sort of curious as we think about the upside opportunity from those redesigns and remodels. Thanks.

Yes. We're always refreshing. We've got -- we've been doing remodels all along. I don't think Jared there's ever really -- I don't mean to dodge the question but there's never really an endpoint per se. As we build more restaurants, relocate more restaurants and continue to refresh the restaurants there will always be an opportunity to move forward and that will be a continuous loop for us in our -- as we grow the business. Because by the time you finish one iteration you start over again. But obviously with up to 100 more restaurants they'll be brand new that we can build with our relocation program that we've had underway those assets are immediately updated and then we'll continue over time to refresh restaurants each and every year.

Our last question comes from the line of Jon Tower with Citi. You may proceed with your question.

Awesome. Thanks for sneaking me in here. And just -- mostly follow-ups. I think you hit on some of these topics throughout the call but I just wanted to make sure that I kind of nail them down. In terms of looking at the first quarter it looks like the traffic for Outback slipped a little bit versus the pre-COVID levels. And I didn't hear you mention it too much on the call, but I'm assuming Omicron might have weighed on some of the in-store traffic or just traffic in general during the period. So first could you maybe explain why the traffic versus 2019 was a little bit weaker during the first quarter?

Yes, versus 2021 correct?

And versus 2019. Yes.

But Omicron had 300 basis points impact on the traffic levels. I mean that was -- and we called out in our last Q1 call. And we expected that and we talked about some of the things we're doing at Outback moving forward.

Got it. Thank you. I appreciate that. And then, just in terms of thinking about the marketing spend and the idea and I think David, you had hit on this a little bit earlier in the commentary. But what spurred the decision to take that up sequentially? And -- was it brought on by something that you're seeing in the data or staffing levels coming back to an area where you felt like the in-store environment could handle or the in-store staffing could handle incremental demand, or were you seeing something in your own data on the traffic side where you just felt that you need to go to market and remind customers that the brands out there and offering some good things?

Yes. We talked earlier about how in March we turned some marketing back on. And when you have something like Omicron, it's not always wise to spend it in-restaurant marketing. It's wise to spend on off-premise marketing and that's exactly some of the things that we did. Now, as I mentioned earlier Jon, we've got a really good sense of what projects marketing initiative et cetera work. So we're going to be investing behind those and looking at those returns, specifically in the digital space and specifically around products and specifically around in-restaurant dining. So you'll see more of that from us as we go forward. Our intention is not to engage in deep discounting or anything like that, but we believe we have the ideas to move this business forward and we have a good sense of returns that they offer and we have a very good sense of the vehicles that we can use to make that work. And hopefully, with some of the pandemic-related issues, who knows for sure if it's behind us, but if habits and believe return to in-restaurant dining. It's an opportunity for our company and we're going to capitalize on that with our marketing.

Got it. Thank you. And then just lastly on the unit growth piece of it. Thank you for all the details so far. I am curious just to learn a little bit more about how you're thinking about siting these stores versus the existing store base specifically when you think about customer demographics or even the market sizes of these stores today and even thinking about specifically getting it down to the pad. How are you thinking about co-locating with other brands on platforms? Is it any bit different than what you've done in the past maybe mall versus non-mall. Is the philosophy that much different than what we've seen before? Obviously, the footprints are but curious a little more.

Well, we talked at length about the footprint and all the freight work we've done there. Secondly, we talked about the fact that our stronghold markets are very advantage demographic and economic areas. We are very strong in the South and we intend to capture that. Third, we are seeing infill opportunities in quick growing major metro areas Nashville, Austin, Miami et cetera that we may not have contemplated in years past as little cities are just growing rapidly. Third, those cities are also growing rapidly in new areas in that particular trade area, so new developing area. We were just in Dallas for instance. And I think the team was very amazed at how much that city has grown and what the opportunities look like. Those are the things that we're looking at as far as our unit expansion opportunity. And then, kind of the extra, which we talked about for the first time today, in our core markets, that's also where Bonefish and Carrabba's generally tend to be strong. So we'll be looking at that as well not to the extent that we're looking at Outback, but can we do some things with those restaurants in some of our core trade areas. So, in summary, we've got the asset. We've got the team to pick the sites. We're in metropolitan areas that are growing rapidly and geographies that are growing rapidly. And we -- and we're in a much stronger position competitively versus the -- when the pandemic started and all those things are coming together to really provide us a development opportunity.

Great. Thank you. Appreciate it.

Ladies and gentlemen, we have reached the end of today's question-and-answer session. I would like to turn this call back over to Mr. Dave Deno for closing remarks.

Well, thank you for attending today everybody and we appreciate your questions and your interest in our company and we look forward to updating you in July on our second quarter call.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation, enjoy the rest of your day.