Bloomin' Brands, Inc. Common Stock 2026 Q2 Earnings Call

Thank you, good morning, everyone. With me on today's call are Mike Spanos, our Chief Executive Officer, and Eric Christel, Executive Vice President and Chief Financial Officer. By now, you should have access to our fiscal second quarter 2026 earnings release and our investor presentation slides, both of which can be found on our website at www.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 and investor presentation 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 in a material way 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 www.sec.gov. During today's call, we'll provide a brief recap of our financial performance for the fiscal second quarter 2026, current thoughts on fiscal 2026 guidance, and an update on our turnaround strategy. Once we've completed these remarks, we'll open the call up for questions. With that, I would now like to turn the call over to Mike Spanos.

Thanks, Tara, good morning, everyone. I will discuss our second quarter results and provide an update on our turnaround. Eric will then review the financials and our thoughts on guidance. First, I want to congratulate our team on the progress on both the Outback turnaround plan and our financial results. Our focus on consistency of execution on food quality, service, experience, and providing affordable offers is making an impact. As Pat Hafner, President of Outback, told his team at our managing partner conference in June, "Motivation gets you going. Consistency of execution keeps you growing." We remain committed to consistency of execution that delivers a cumulative impact in delivering a great guest experience. While our success will not be linear, we believe these commitments will lead to sustainable and profitable growth in the long term. Turning to our second quarter results.

Outback's guest metric scores continue to improve, with year-over-year gains for the fourth consecutive quarter, reinforcing that we are getting better every day. This is the power of consistency of execution. In Q2 of this year compared to Q2 of last year, Outback's guest scores increased across service by seven points, atmosphere by seven points, value by six points, intent to return by five points, food by four points, and brand trust by two points. I will share more details of our Outback turnaround progress shortly. Our Q2 U.S. comparable restaurant sales were positive 230 basis points, with traffic down 190 basis points. We have continued to narrow the gap versus the industry as defined by Black Box each quarter, and our Q2 comp sales were in line with Black Box, while traffic trailed by 110 basis points.

Affordable entry price points at our casual dining brands, combined with consistent execution and craveable service, is improving our what you get for what you pay for value equation. Outback's Q2 comp sales were up 140 basis points, with traffic down 280 basis points. As we mentioned in our first quarter earnings call, we chose not to lap some dilutive traffic offerings from Q2 2025, particularly in our third-party delivery space. While third-party delivery remains a key part of our business and plays an important role for convenience, our focus is on delivering a remarkable dine-in experience to drive sustainable traffic growth. Outback continues to drive traffic and loyalty from the Aussie three-course affordability offering, with about 60% of the guests consistently trading up from the entry price point into the higher price tiers and approximately 20% trading up on the dessert option.

Carrabba's comp sales were up 170 basis points, with traffic of negative 250 basis points. Similar to Outback, we chose to not lap some dilutive third-party delivery offerings from prior year. This is the sixth consecutive quarter that Carrabba's drove positive comp sales, driven by continued focus on the in-restaurant experience and delivering elevated, authentic Italian food with warm hospitality. We are seeing positive results and increased guest satisfaction from our updated day-of-week offers and continued strong interaction with our experiential wine dinners. Bonefish's comp sales were up 810 basis points, with traffic of positive 450 basis points. Bonefish continues to steadily improve traffic growth with momentum in day-of-the-week offers such as Margarita and Martini Mondays and Bang Bang Shrimp Wednesdays. The team has done an excellent job of engaging guests with an energetic bar in a polished, casual seafood environment, leveraging our core menu items for exciting affordability offers.

Fleming's comp sales were up 160 basis points with traffic down 280 basis points in achieving the eighth consecutive quarter of positive comp sales growth. The team continues to provide memorable special occasions for our guests through disciplined execution and approachable offers. I will now update you on our turnaround focused on Outback Steakhouse. The turnaround is anchored on four strategic platforms as previously communicated, which are, first, deliver a remarkable dine-in experience. Second, drive brand relevancy. Third, reignite a culture of ownership and fun. Fourth, invest in our restaurants. These platforms will be supported by non-guest-facing productivity savings, balanced capital allocation, and a strong management team. Starting with an update on the first platform to deliver a remarkable dine-in experience. The first step was the launch of our new steak lineup in November of last year. We continue to see our steak score in the top box.

Consistent with Technomic, our Ziosk guest scores are showing noteworthy improvements year-over-year across intent to return, food quality, service, steak temperature, and value. The commitment to consistency of execution has driven 4 consecutive quarters of year-over-year improvements in Outback guest metric scores. Moving to the next element of a remarkable dine-in experience, craveable service. As we have previously communicated, we identified that our one server to six table station ratio during peak hours didn't provide the right level of guest interaction and satisfaction. In Q2, we successfully rolled out our new service model to all Outbacks, reducing our ratio to four tables per server during peak hours. We are receiving positive guest feedback from this change. Our Q2 absolute service scores were over 90% top box and increased by nearly three points year-over-year.

Like our steak quality, guests are telling us they see the difference in our enhanced service model, improving the what you get for what you pay for value equation. Our Outbackers continue to leverage the tabletop Ziosk data to drive accountability and close any gaps in performance in each restaurant. We will continue our commitment to delivering a great guest experience with training for front of the house Outbackers this month on our enhanced hospitality experience model to deliver a fun, casual, Aussie, no rules, just right experience. Our second strategic platform is driving brand relevancy at Outback to differentiate the brand. We will embrace the core of our Aussie brand roots by inviting customers to come as our guests and leave as our mate.

Our brand communication will primarily showcase the quality of our steak lineup with a balance of brand equity and the affordability of our Aussie three-course offer and craveable service. We are increasing our marketing spend year-over-year in the second half of this year and will continue to shift our marketing mix into social and digital channels. Marketing will bring them in with a no rules, just right Aussie irreverence, and our relentless focus on consistent execution will bring guests back. Reignite a culture of ownership and fun is our third strategic platform. Our people are the key to our turnaround, and we are focused on having strong leadership throughout our restaurants, starting with our managing partners. Reigniting a culture of ownership and fun begins with recognizing the achievements of our partners and Outbackers. We held our Outback Managing Partners Conference in June.

This was the first time since 2019 that we have had our partners together, and it was a great event to get them energized around the elements of the turnaround. We have great partners, and they are clear on their ownership to deliver a great guest experience. We were privileged to have one of our Outback founders, Tim Gannon, who invented the Bloomin' Onion, spend two days with our team, inspiring them on the core of the brand, our special culture, and the potential of our business based on the turnaround plan. What was particularly motivating was Tim's feedback that we are doing the right things to turn around Outback. I want to congratulate Market Vice President Robbie Adkins for being named Outbacker of the Year.

Robbie exemplifies our principles and beliefs as a leader, setting the standard that success is growth in sales and profits and is the result of taking care of our people and guests. Congratulations, Robbie. Additionally, consistent with what we communicated in our previous earnings call, we implemented the phase 1 of an updated MP compensation model during Q2. The phase 1 of our MP compensation program has two key goals. First, to ensure total cash compensation is competitive with the local market, starting with a competitive base salary. Second, to ensure that total cash compensation remains tied to the growth of sales and profit of the restaurant. Lastly, let me update you on our fourth strategic platform, invest in our restaurants.

We are on track with our goal to touch nearly all of the Outback restaurants by the end of 2028 with targeted initiatives to refresh the interior and exterior, expecting to spend on average between $350,000-$400,000 per refreshed location. We have completed approximately 31 Outback refreshes through the end of July and are on track to complete around 85 for the full year of 2026. This asset refresh approach focuses on improving guest ambiance in the restaurant interior and exterior, which will improve the dine-in experience. Additionally, we have completed the rollout of our char grill expansion across Outback. This cooking platform enhancement allows our Outbackers to have the optimal cooking platform for our new steak proteins and non-steak proteins. Let me now turn it over to Eric to review our financial performance for Q2 and guidance for Q3 and full year fiscal 2026.