Bloomin’ Brands(BLMN) - 2024 Q1 - Quarterly Results

Q1 2024 Financial Highlights Bloomin' Brands reported a 4.0% revenue decrease in Q1 2024, resulting in a GAAP diluted loss per share of $(0.96) First Quarter Financial Results Bloomin' Brands reported Q1 2024 total revenues of $1.195 billion, a 4.0% decrease year-over-year, posting a GAAP diluted loss per share of $(0.96) primarily due to a loss on debt extinguishment, while adjusted diluted EPS was $0.70 - CEO David Deno stated that Q1 was a solid start to the year, with sales and profit meeting expectations Sales trends strengthened throughout the quarter, outperforming the casual dining industry, particularly at Outback[1] Q1 2024 Key Financial Metrics | Metric | Q1 2024 | Q1 2023 | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenues | $1,195.3M | $1,244.7M | (4.0)% | | GAAP Operating Income Margin | 6.4% | 9.7% | (3.3)% | | Adjusted Operating Income Margin | 7.5% | 9.7% | (2.2)% | | Restaurant-level Operating Margin | 16.0% | 17.9% | (1.9)% | | Adjusted Restaurant-level Operating Margin | 16.0% | 17.9% | (1.9)% | Q1 2024 Earnings Per Share (EPS) | Metric | Q1 2024 ($) | Q1 2023 ($) | Change ($) | | :--- | :--- | :--- | :--- | | Diluted (loss) earnings per share | $(0.96) | $0.93 | $(1.89) | | Adjusted diluted earnings per share | $0.70 | $0.98 | $(0.28) | - A one-week shift in the fiscal calendar negatively impacted Q1 2024 comparable restaurant sales by approximately $16.5 million and adjusted diluted EPS by $0.06 compared to Q1 2023[3] Financial Performance Analysis This section analyzes the factors contributing to the 4.0% revenue decrease and margin compression, alongside comparable restaurant sales performance Revenue and Margin Analysis The 4.0% decrease in total revenues was primarily driven by lower comparable restaurant sales (including a fiscal calendar shift), the net impact of restaurant closures, and the lapping of a Brazil value-added tax exemption from 2023 - Reasons for the decrease in total revenues include: - Lower comparable restaurant sales, including the impact of the fiscal calendar shift - Net impact of restaurant closures and openings - Impact of the Brazil value-added tax exemptions in 2023[36] - The decrease in restaurant-level operating margin was primarily due to: - Lower comparable restaurant sales - Higher labor, other operating expenses, and commodity costs from inflation - Higher advertising expense[37] - The decrease in GAAP operating income margin was primarily due to a decrease in restaurant-level operating margin, impacts of the 2023 Closure Initiative, higher depreciation and amortization, and the impact of lapping the Brazil value-added tax exemption[8] Comparable Restaurant Sales For Q1 2024, combined U.S. comparable restaurant sales decreased by 1.6%, with Carrabba's Italian Grill showing positive growth at 0.4% while Bonefish Grill saw the largest decline at -4.9% Q1 2024 Comparable Restaurant Sales vs. Q1 2023 | Brand | Q1 2024 Comp Sales (%) | | :--- | :--- | | U.S. Brands | | | Outback Steakhouse | (1.2)% | | Carrabba's Italian Grill | 0.4% | | Bonefish Grill | (4.9)% | | Fleming's Prime Steakhouse & Wine Bar | (2.0)% | | Combined U.S. | (1.6)% | | International | | | Outback Steakhouse - Brazil | (0.7)% | Capital Allocation & Corporate Actions The company declared a $0.24 per share dividend, authorized a $350 million share repurchase program, and completed its 2023 Closure Initiative Shareholder Returns & Debt Management The company declared a quarterly dividend of $0.24 per share, authorized a new $350 million share repurchase program, and retired $83.6 million of its 2025 convertible notes while executing a $220 million Accelerated Share Repurchase (ASR) agreement - A quarterly cash dividend of $0.24 per share was declared, payable on May 31, 2024[38] - The Board approved a new $350.0 million share repurchase authorization, expiring August 13, 2025, to provide flexibility in retiring the 2025 convertible senior notes[9] - The company retired $83.6 million in principal of its 2025 Notes in exchange for approximately 7.5 million shares of common stock and $3.3 million in cash[9] - A $220 million Accelerated Share Repurchase (ASR) agreement was executed, with a final settlement resulting in the repurchase of approximately 7.9 million shares in total[12][39] 2023 Closure Initiative The company completed its 2023 Closure Initiative, closing 36 underperforming restaurants and five Aussie Grill locations, resulting in $13.0 million in severance and closure charges during Q1 2024 - All restaurant closures under the 2023 Closure Initiative have been completed, involving 36 predominantly older, underperforming restaurants and five Aussie Grill locations[13] - The company incurred severance and closure charges of $13.0 million during Q1 2024 related to this initiative[13] Business Outlook The company updated its fiscal 2024 outlook, revising GAAP diluted EPS guidance downward, while providing Q2 2024 projections Fiscal 2024 Financial Outlook The company updated its full-year 2024 outlook, lowering its commodity inflation forecast to 2-3% and significantly increasing the GAAP effective tax rate projection to 29-31%, consequently revising GAAP diluted EPS guidance downward to $0.79-$0.94 while reaffirming adjusted diluted EPS guidance Updated Fiscal 2024 Outlook | Financial Metric | Prior Outlook | Current Outlook | | :--- | :--- | :--- | | Commodity Inflation | 3% to 4% | 2% to 3% | | GAAP Effective Tax Rate | 14% to 16% | 29% to 31% | | Adjusted Effective Tax Rate | 14% to 16% | 14% to 16% | | GAAP diluted EPS | $2.27 to $2.46 | $0.79 to $0.94 | | Adjusted diluted EPS | $2.51 to $2.66 | $2.51 to $2.66 | Q2 2024 Financial Outlook For the second quarter of 2024, Bloomin' Brands anticipates U.S. comparable restaurant sales to be in the range of flat to positive 1.5%, projecting GAAP diluted EPS of $0.53 to $0.58 and adjusted diluted EPS of $0.55 to $0.60 Q2 2024 Outlook | Financial Metric | Q2 2024 Outlook | | :--- | :--- | | U.S. comparable restaurant sales | Flat to 1.5% | | GAAP diluted EPS | $0.53 to $0.58 | | Adjusted diluted EPS | $0.55 to $0.60 | Strategic Initiatives The company is exploring strategic alternatives for its Brazil operations to maximize shareholder value Reviewing Strategic Alternatives for Brazil Operations The company announced it is exploring strategic alternatives for its Brazil operations, including a possible sale, to maximize shareholder value, retaining BofA Securities as financial advisor for this review - The company is exploring strategic alternatives for its Brazil operations, which may include a sale, to maximize shareholder value[16][40] - The Board of Directors has retained BofA Securities, Inc. as its financial advisor for the process[40] Detailed Financial Statements & Reconciliations This section provides unaudited consolidated financial statements, including operations, balance sheet, segment results, and non-GAAP reconciliations for key performance metrics Consolidated Statements of Operations (Unaudited) For Q1 2024, total revenues were $1.195 billion, down from $1.245 billion in Q1 2023, with a net loss attributable to Bloomin' Brands of $83.9 million, or $(0.96) per diluted share, primarily due to a significant loss on extinguishment of debt Consolidated Statements of Operations (in thousands) | Line Item | Q1 2024 (13 wks ended Mar 31) | Q1 2023 (13 wks ended Mar 26) | | :--- | :--- | :--- | | Total revenues | $1,195,327 | $1,244,746 | | Income from operations | $77,093 | $120,633 | | Loss on extinguishment of debt | $(135,797) | $— | | Net (loss) income attributable to Bloomin' Brands | $(83,872) | $91,311 | | Diluted (loss) earnings per share | $(0.96) | $0.93 | Supplemental Balance Sheet Information (Unaudited) As of March 31, 2024, the company held $131.7 million in cash and cash equivalents, with total debt of $951.8 million and total stockholders' equity of $305.4 million, reflecting an increase in both cash and debt and a decrease in equity compared to the end of fiscal year 2023 Balance Sheet Highlights (in thousands) | Account | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $131,664 | $111,519 | | Total assets | $3,394,239 | $3,424,081 | | Total debt, net | $951,778 | $780,719 | | Total stockholders' equity | $305,435 | $412,003 | Segment Results (Unaudited) In Q1 2024, the U.S. segment generated $1.04 billion in revenues and $97.5 million in income from operations, both declining from the prior year, while the International segment reported revenues of $152.2 million and income from operations of $15.8 million, also a decrease from Q1 2023 Segment Performance (in thousands) | Segment & Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | U.S. Segment | | | | Total revenues | $1,043,104 | $1,092,996 | | Income from operations | $97,484 | $133,243 | | International Segment | | | | Total revenues | $152,223 | $151,750 | | Income from operations | $15,762 | $24,508 | Non-GAAP Reconciliations The company provides several non-GAAP reconciliations to help investors assess core operating performance by adjusting for items such as the 2023 Closure Initiative costs and the loss on debt extinguishment Restaurant-Level Operating Income Reconciliation Consolidated restaurant-level operating margin was 16.0% in Q1 2024, down from 17.9% in Q1 2023, with both U.S. and International segments experiencing margin pressure Consolidated Restaurant-Level Operating Margin Reconciliation | Metric | Q1 2024 ($ thousands) | Q1 2023 ($ thousands) | | :--- | :--- | :--- | | Restaurant-level operating income | $188,184K | $219,551K | | Restaurant-level operating margin | 16.0% | 17.9% | | Adjusted restaurant-level operating income | $188,618K | $219,551K | | Adjusted restaurant-level operating margin | 16.0% | 17.9% | U.S. Segment Restaurant-Level Operating Margin Reconciliation | Metric | Q1 2024 ($ thousands) | Q1 2023 ($ thousands) | | :--- | :--- | :--- | | Adjusted restaurant-level operating income | $162,410K | $187,808K | | Adjusted restaurant-level operating margin | 15.8% | 17.4% | International Segment Restaurant-Level Operating Margin Reconciliation | Metric | Q1 2024 ($ thousands) | Q1 2023 ($ thousands) | | :--- | :--- | :--- | | Restaurant-level operating income | $27,157K | $34,015K | | Restaurant-level operating margin | 18.3% | 23.0% | Adjusted Income from Operations Reconciliation Consolidated GAAP income from operations of $77.1 million was adjusted for $13.0 million in charges, primarily from the 2023 Closure Initiative, to arrive at an adjusted income from operations of $90.0 million, a significant decrease from the prior year Consolidated Adjusted Income from Operations (in thousands) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Income from operations (GAAP) | $77,093 | $120,633 | | Total adjustments | $12,955 | $— | | Adjusted income from operations | $90,048 | $120,633 | Adjusted Net Income and EPS Reconciliation A GAAP net loss of $(83.9) million was reconciled to an adjusted net income of $63.5 million for Q1 2024, primarily by adding back a $135.8 million loss on debt extinguishment and $13.0 million in operational adjustments related to closures, resulting in an adjusted diluted EPS of $0.70 Adjusted Net Income and EPS Reconciliation (in thousands, except per share data) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net (loss) income attributable to Bloomin' Brands (GAAP) | $(83,872) | $91,311 | | Loss on extinguishment of debt | $135,797 | $— | | Income from operations adjustments | $12,955 | $— | | Adjusted net income | $63,514 | $91,311 | | Diluted (loss) earnings per share (GAAP) | $(0.96) | $0.93 | | Adjusted diluted earnings per share | $0.70 | $0.98 | Supplemental Operating Data In Q1 2024, combined U.S. restaurant traffic declined by 4.3%, partially offset by a 2.7% increase in average check per person, with the company ending the quarter with 1,451 total restaurants system-wide, a net decrease of 29 from the end of 2023 Q1 2024 U.S. Traffic and Average Check vs. Q1 2023 | Metric | Combined U.S. (%) | Outback (%) | Carrabba's (%) | Bonefish (%) | Fleming's (%) | | :--- | :--- | :--- | :--- | :--- | :--- | | Traffic | (4.3)% | (4.2)% | (2.9)% | (7.1)% | (5.0)% | | Average check per person | 2.7% | 3.0% | 3.3% | 2.2% | 3.0% | Restaurant Count Change in Q1 2024 | Metric | Dec 31, 2023 | Openings | Closures | March 31, 2024 | | :--- | :--- | :--- | :--- | :--- | | System-wide total | 1,480 | 12 | (41) | 1,451 |