Greetings, and welcome to the Bloomin' Brands Fiscal Second Quarter 2021 Earnings Conference Call. 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. 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 second quarter 2021 earnings release. It can also be found on our website at bloominbrands.com in the investor 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. Be fore 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 second quarter 2021, a discussion regarding current trends, and select Q3 2021 guidance metrics. Once we've completed these remarks, we'll open up the call for questions. With that, I'd now like to turn the call over to David Deno. Thanks, Mark, and welcome to everyone listening today. We are very pleased with the second quarter sales and profit performance. Our strategies are working and setting the company up for even more sustainable growth. The success is directly tied to the planning and hard work that has taken place in our company over the last few years. In 2019, we presented a comprehensive plan to build a stronger, leaner, operation-centered company, one focused on providing even better service and food to customers. This plan was designed to significantly improve total shareholder return. Before we get into the details of the second quarter, I want to take a few minutes to discuss the progress against the key five initiatives that underpin our 2019 plan. First, grow in-restaurant sales by improving service levels and food offerings in the restaurants. Over the last few years, we've made investments in these areas to elevate the customer experience across the portfolio, especially at Outback. As a result, we are taking market share versus the industry. In the second quarter, U.S. same-store sales were up 12.1% on a two-year basis versus 2019. This was 890 basis points ahead of the industry. We also made significant investments in our people. Since the start of the pandemic, we have not furloughed any employees. This decision contributed to retention employee engagement scores that are among the best in the industry. With sales volumes exceeding 2019 levels, these actions provide a competitive advantage in retaining talent in this challenging environment. Maintaining a motivated and well-trained employee base is critical to our long-term success. Second, grow our leading off-premises business. We continue to capitalize on our strong off-premises capabilities during the pandemic, and the high off-premises retention levels in 2021 are contributing to sales outperformance. During the second quarter, the company generated over $275 million in off-premises sales, representing approximately 28% of total revenue. Importantly, profit margins in the off-premises channel are approaching the margins of the in-restaurant business. This is the result of initiatives that were completed the past few quarters. We expect off-premises to remain a large and growing part of the business going forward. Third, rapidly improve operating margins by growing sales and reducing costs. Our goal is to grow operating margins by nearly 300 basis points to 7.5% of revenue. Margins in the second quarter were well ahead of this long-range goal. Chris will provide additional detail regarding future margin targets. We will leverage learnings from the pandemic, including efforts to further optimize how to run and support restaurants. Importantly, a number of technological and equipment innovations are in test that we hope to roll out in restaurants in the coming quarters. These innovations should improve customer service and reduce costs. Fourth, become an even more digitally savvy company. In Q2, digital sales represented approximately 20% of U.S. sales, a 318% increase over 2019 levels. We have made several investments to grow digital volumes and increase our capabilities throughout all aspects of the company. Recently, we rolled out a new and improved Outback app that has significantly improved the off-premises ordering process. Early data and consumer feedback has been very positive. The app will later showcase substantial investments we made to digitize and streamline the carryout experience. These new app features will be rolling out in the coming quarters, we expect them to accelerate our very attractive carryout channel. Finally, build a much stronger balance sheet. Given our very good year-to-date results, we generate a great deal of free cash flow and are paying down debt. Our credit metrics are improving each quarter, our goal is to be at 3x lease-adjusted leverage by early next year. This will give us the liquidity to withstand unforeseen shocks. A strong balance sheet also provides great flexibility to pursue business opportunities that will enhance shareholder value. All of the initiatives above played a major part in producing an excellent second quarter. Importantly, the sales momentum has carried forward into the third quarter. Through the first four weeks of Q3, two-year U.S. comp sales versus 2019 are up 15.2%. These results would not have been possible without the talented and dedicated employees throughout the company. I would like to thank the hardworking team members in the restaurants and at the restaurant support center. Your commitment to serving guests with the highest levels of service, hospitality, and experience is what makes our restaurants so successful. We intend to build on the progress we've made against these major priorities and are excited about the potential ahead. Before concluding, I would just like to add a couple of other priorities that you'll be hearing more about in the future. First, we believe there's an opportunity to accelerate new unit growth at Outback and Fleming's. Outback is a leading brand with substantial headroom for unit growth. The success of the Outback relocation program is a clear indicator of this demand. In the past five years, we've relocated approximately 50 restaurants with sales lifts of 35% and average unit volumes of $4.6 million. We recently developed a new, less expensive prototype that will enable meaningful restaurant growth with healthy returns. We also have the opportunity to open additional Fleming's in California and Florida, our best performing markets. Fleming's is a proven category leader by any measure and will be a source of growth for our company. Second, continue to grow Brazil as it manages through the pandemic and resumes expansion. Sales in Brazil are bouncing back quickly. Case counts from the virus are dropping rapidly and there's a strong adoption of the vaccine in the country. We've already had category-leading brands in Brazil, and the company will be in even better position as we emerge from the pandemic. As a reminder, Brazil is funding its own growth through internally generated cash. In summary, Q2 was another terrific quarter. We remain very focused on executing against our key initiatives. We are optimistic that we'll capture these opportunities and drive total shareholder return. With that, I'll turn the call over to Chris. Thanks, David, and good morning, everyone. I would like to start by providing a recap of our financial performance for the fiscal second quarter of 2021. Given the significant impact of COVID on Q2 2020 results, most of our discussion today will compare against the second quarter of 2019, which we believe provides better context to our underlying performance. Total revenues in Q2 were $1.08 billion, which was up 5% from 2019, driven by an improved sales environment in the U.S. Total revenues in the U.S. segment were up 10% versus 2019. This increase was fueled by additional in-restaurant volume, a high level of off-premises retention, and increases in average check. Total revenues in our international segment were down 37% on a two-year basis. The decline in international revenues was driven by Brazil, which had a significant headwind from COVID-related capacity constraints in Q2. As I will discuss in a moment, the sales trajectory for Brazil is much improved thus far in Q3. Q2 U.S. comp sales finished up 12.1% on a two-year basis. Average unit volumes were $75,000 per week in Q2. Geographically, states in the Southeast, such as Texas, Georgia, and Tennessee, continued to post outsized sales gains, while Florida posted a 14% increase over 2019. Importantly, states in the Northeast and Midwest have reopened, and nearly every state within our portfolio posted positive comp sales gains relative to 2019. Q2 sales gains were driven by a healthy combination of traffic and average check, both of which were up 6% versus 2019. Our increases in check average relative to 2019 were driven by a 21% reduction in discounts, increased menu mix, and to a lesser degree, 2019 pricing actions. As a reminder, we made menu price reductions at Outback in late 2020 to make some of our more indulgent menu items more accessible from a price point perspective. The trade into these higher priced items has validated our strategy and been a key contributor to the increases in average check. Importantly, we have seen our sales momentum carry forward into the third quarter. Through the first four weeks of Q3, our two-year U.S. comp sales have been +15.2%, and we have maintained nearly $71,000 in weekly average unit volumes in what is traditionally a slower time of the year. Turning to off-premises, this business has proven to be very sticky, even as in-restaurant volumes have improved. In Q2, we averaged $21,000 per restaurant per week in off-premises sales. Off-premises volumes were only down $2,000 per week in Q2 from Q1, despite significantly higher in-restaurant volumes in Q2. Off-premises is a large part of our ongoing success and will remain a key part of our growth strategy moving forward. In terms of brand performance, Outback Q2 comp sales were up 11.3%, and Carrabba's comp sales were up 16.7% on a two-year basis. The two-year sales results at both brands were well ahead of major competitive benchmarks. In-restaurant sales are building as we emerge from the pandemic, and the continued high levels of off-premises retention have enabled these brands to surpass 2019 volumes. Total Q2 off-premises sales were 31% of revenues at Outback and 36% of revenue at Carrabba's. At Bonefish Grill, comp sales were up 4.2% in Q2 on a two-year basis. The in-restaurant experience and bar-centric culture of Bonefish was more impacted by capacity restrictions than our other casual dining brands. Despite this, we have built an impressive off-premises business at Bonefish, and it represented 19% of their sales in Q2. Fleming's comp sales were up 24.4% in Q2 on a two-year basis and was nearly 1,400 basis points above the Knapp high-end steakhouse category. Fleming's is differentiating itself in this competitive segment and is capitalizing on the reopening of California to drive outsized comp sales performance. Brazil comp sales were down 36% versus 2019. Brazil COVID cases increased significantly in early March, which was the start of Brazil's second quarter. The corresponding restrictions on restaurant capacity had a large impact on Brazil sales over the first two months of Q2. Comp sales versus 2019 were down 58% in March and 41% in April. As the vaccination rate in Brazil increased and case counts began to moderate, we saw an immediate increase in sales. Comp sales in May were only down 9% versus 2019. This building momentum has continued into the third quarter, despite ongoing capacity restrictions. Currently, São Paulo and Rio are operating at 60% capacity and 40% capacity respectively. Sales, however, are now approaching 2019 levels, with the most recent three weeks down 5% on average versus 2019. Our team in Brazil continues to execute at an extremely high level, and we are confident in their ability to navigate the current environment. As it relates to other aspects of our Q2 financial performance, GAAP diluted earnings per share for the quarter was $0.75 versus a $1.05 of diluted loss per share in 2020. Adjusted diluted earnings per share was $0.81 versus $0.74 of adjusted diluted loss per share last year. Adjusted operating income from the quarter was $118 million. This result exceeded our adjusted operating income from 2019 of $47 million. This level of adjusted operating income is the highest in Bloomin' Brands history. Adjusted operating income margin was 11% in Q2 versus 4.6% in 2019. This improvement is driven by our strong sales recovery, ongoing efforts to drive efficiency into our business, and lower marketing expenses. In terms of our Q2 adjusted performance by cost category, COGS was 150 basis points favorable to 2019, driven primarily by waste reduction and increases in average check. The labor line was 200 basis points favorable to 2019. The large change in average unit volumes from 2019 drove significant leverage on labor in Q2. In addition, we also benefited from simplification efforts. This showed up in a permanent reduction in food prep hours. Operating expenses were 180 basis points favorable to 2019, due primarily to a $20 million reduction in marketing expense and higher average unit volumes. This favorability was offset by increases in to-go supplies and third-party delivery fees related to the growth in off-premises. On the G&A front, Q2 was down $4.4 million from 2019, net of adjustments. This includes the ongoing benefit of cost savings initiatives that we have detailed on prior calls. In addition, Q2 contains additional incentive compensation given our strong performance expectations for 2021. On the franchise front, over the last several weeks, our California market has been averaging close to 21% comp sales on a two-year basis. We are collecting current royalties and have begun collecting on past due amounts as well. Our non-California franchise locations, both domestically and internationally, also continue to perform well. Turning to our capital structure, our total debt at the end of the second quarter was $850 million. Our trailing 12-month lease-adjusted leverage ratio is 3.8x. We are making significant progress towards our targeted leverage ratio of three times net debt to adjusted EBITDA. Once we reach our targeted ratio, we will evaluate further debt paydown or other uses of cash to enhance shareholder value. Turning to our Q3 guidance. We expect Q3 total revenues to be at least $1.015 billion. This outcome for total revenues assumes a weekly average sales volume of approximately $69,000 in the U.S. for the remaining nine weeks of the quarter. This is a slight decrease from current Q3 volumes on the assumption that some traditional seasonality will resume as we move throughout the quarter. Should this seasonality not materialize, there will be upside to this outlook. For perspective, total revenues in the third quarter of 2019 were $967 million. We expect adjusted EBITDA to be at least $115 million, and we expect GAAP EPS to be at least $0.45, with adjusted EPS of at least $0.50. These profitability measures for EBITDA and EPS would represent the highest levels our company has ever attained in a third quarter. For perspective, in 2019, our third quarter adjusted EPS was $0.10. We believe our Q3 guidance reflects continued optimism for our current performance in the U.S. and a more bullish outlook on Brazil as they finish out their quarter. In terms of full-year 2021 guidance, we do have a few items that need to be updated. First, we now expect commodity inflation to be approximately 1% versus our previous guidance of flat. Although we are locked on our largest commodities for the year, such as beef, our heavy sales volumes have required us to secure additional chicken and seafood supply outside of our contracted terms. Most of this inflation will impact the back half of the year and has been incorporated into our Q3 guidance. Second, G&A is now expected to be between $240 and $245 million for the year on an adjusted basis. Our prior guidance was G&A of between $225 and $230 million. This increase is largely driven by a change in incentive compensation expectations for the year, given our strong performance. Half of this increase was embedded into our Q2 results. The remainder will be spread equally across Q3 and Q4. Despite this increase, we are still on track to achieve the $40 million of transformational savings that we committed to in early 2020. Finally, CapEx is expected to be between $140 million and $150 million for the year. The reduction from our prior guidance of between $170 million and $185 million is driven by shortages in raw materials, particularly steel, pushing some remodels, relocations, and new restaurants into 2022. Finally, I wanted to give a little more perspective on the long-term margin framework that we have discussed with investors over the last couple of quarters. As a reminder, that framework suggested that once sales achieved 2019 levels, our adjusted operating margin would be between 6.3% and 6.8%. We have also committed to a longer-term framework to achieve 7.5% operating margins as sales improved over 2019 levels. Given our recent performance, we are more optimistic about the margins in the off-premises business, new Outback menu, and our marketing strategy than we were a few months ago. We now believe that we can achieve a longer-term operating margin of 8%. There are a couple reasons for this increase. First, we have continued to improve the efficiency and execution of the off-premises business. These efforts have resulted in higher off-premises profit margins that are now approaching in-restaurant margins. Second, we think much of the favorability in average check will stick moving forward. The new Outback menu is contributing to a more permanent increase in average check than we expected. In addition, we have found new ways to provide value to consumers beyond traditional discounting. Although it is too early to discuss where 2022 may land at this point in time, we continue to have confidence in our margin improvement efforts. The levers I have outlined make us comfortable raising the bar on our long-term framework by 50 basis points from 7.5% to 8%. In summary, this was another successful quarter for Bloomin' Brands, and we are well on our way to becoming a better, stronger, operations-focused company. With that, we will open up the call for questions. Thank you. Our first questions come from the line of Jeffrey Bernstein with Barclays. Please proceed with your questions. Hey, guys. This is actually Jeff Priester, Jeffrey Bernstein. Thanks for the questions. Just on the margin front, given the commodity environment and given that you guys are going to have to buy more commodities outside of your contract terms on the spot market than you originally anticipated, what are your thoughts on the restaurant margin in the second half? Also, what is your level of pricing in the menu right now? Then I have one follow-up. Yeah, pricing is relatively benign. It's in that low 1% range. A lot of the change in average check that you saw in the third quarter is driven by sort of an equal combination of discount reduction as well as menu mix with a smaller degree of average menu pricing. I would say, look, we gave guidance for the third quarter, that should give you a pretty good indication of how we're feeling about margins, certainly in Q3. I think to look beyond that into Q4 is probably a bit premature. The only dynamics that we've talked about publicly that we know for sure are going to impact us from a margin perspective in Q4 are the commodity guidance that we gave. Obviously, given the guidance being up to 1%, we had a relatively benign commodity environment in the front half. The second half, that implies somewhat of a 2% or so inflation in Q3. Probably closer to 3% commodity inflation in Q4. On the wage front, we have talked about the Florida minimum wage increase kicking in in September. That should cost us about $1 million a month relative to our run rate. Just to add a couple things. This is all in the context of a rapidly improving margin story for the company, and Chris talked about the long-term margin goals. That's really great news. Secondly, our supply chain team has done a great job navigating commodities over the years. You saw our performance this year. You've seen performance in the past, and I'm very confident that we will do a good job going forward on managing commodity costs. Yeah, just as a reminder, our Q3 adjusted operating margins in 2019 were 2.3%. Our guidance would suggest an op margin closer to 7.5% for Q3 in op margins or a 500 basis point improvement relative to 2019. Gotcha. That makes complete sense. Just on the CapEx guidance, you lowered it $30 million to $35 million, noting the constraints on raw materials are pushing some units and remodels to 2022. Your unit guidance is still for 20-25 units. Can you just give us some more color on the moving parts there and kind of where that $30 million to $35 million is actually coming out of? It really just is a move from the higher end of our new unit guidance to the lower end of our new unit guidance. As well, there's probably three or so relocations that got pushed, as well as some remodel expense. There's also some infrastructure projects, shortage of chips and things like that got pushed into early 2022. Gotcha. Then the last one from me, just on off-premise, I think it's gone down from 35% of sales to about 28 this quarter. Where do you think that settles long term? Then what portion of your customers do you believe use the brand for both off-premise and in-restaurant dining? Well, I think our long-term mix, and I think it's important to look at revenue dollars, not necessarily mix, because as in-restaurant dining comes back, it's natural that mix will drop a bit. Revenue dollars, $275 million in revenue. We hope to grow that from there. We also hope that the in-restaurant dining continues to improve. We want the off-premises volume to be a big part of where we go as a company. Importantly, the third-party delivery business is $100 million, and that's growing right now. Incremental. That's clearly an incremental business for us. I would just wrap this up by saying, we want to look at revenue dollars. Mix, who knows where it's going to end up. A lot of that will depend on what happens with in-restaurant dining. The most important thing is that we have a multi-channel business in-restaurant, carryout, and delivery that's very strong. As Chris mentioned, the margins in the off-premise business is now pretty much equal to our in-restaurant dining business, which is a very important development. Appreciate it, guys. I'll pass the phone. Thank you. Our next question has come from the line of Brett Levy with MKM Partners. Please proceed with your questions. Great. Thanks for taking my question. You spoke a little bit about some pretty significant market share gains. Can you give a little bit more granular detail on just, you talked about the strength that you're seeing across some of those, the Southeast regions. How are you seeing your share gains in both the earliest markets and also some of the more recently recovering markets? Then just on the labor front, you've obviously done a great job of retention. Where are you right now in terms of your turnover or what percentage of your system still needs to supplement your labor force? Thanks. I think on the labor front, I'll turn over to Chris on the sales. We didn't let anybody go. We didn't furlough anybody. We didn't let anybody go. Our initial starting point was much higher than many others in the industry. We got tremendous employee engagement and retention. Our turnover levels, we believe, are among the best in the industry. Our staffing levels are very strong. There are pockets of opportunity, no doubt, but our staffing levels are very strong. The other thing is we've done a really good job managing the labor model, and we're not at 2019 hour utilization. We're not at that level. We've been able to take some efficiencies in the restaurants through some equipment investments and some other things. I think our payroll practices have been extremely important for us. Our retention and turnover levels are very good, and I think we've got a good situation with our staffing with some pockets of opportunity, but we're in pretty good shape. I'll turn over to sales. I'll turn that over to Chris. In terms of the regional performance and the relative performance versus the industry, I don't think it's unique in the industry to have pockets, certainly in the Southeast, where we're seeing outsized same-store sales performance. I think a lot of companies are also seeing a resurgence in California. I think that the relative comparison, though, in terms of our outperformance for the industry, I think that that's pretty across the board. I don't think that there are a tremendous amount of pockets where maybe we're underperforming relative to where the industry is. I think that's good news for us because it does suggest that our relative strength is pretty widespread. Just if you could talk a little bit about your customer. You've retained strong check. What are you seeing in terms of the health of the customer in either states that kept the enhanced unemployment benefits longer or rolled them off earlier? Are you seeing anything within the consumer cohort that gives you any economic variances out there? No, we haven't seen any economic variances across the states. Chris just covered what he's seeing around the country. We haven't seen any major economic variances. What we're seeing is with the Outback menu changes that we made and some of the pricing tweaks that we made and some of the other things that we did, people are trading up. We're getting a greater share of alcohol with the attachment on the checks. We're seeing greater appetizers. We're seeing trade up in steaks. So it's pretty healthy across the board. Thank you. Thank you. Our next question has come from the line of John Ivankoe with JP Morgan. Please proceed with your question. Yes. Hi. Commodities of up 1% and labor inflation of up 3% to 3.5% seems to be expressing a reality for you, which is very different than what the rest of the industry is seeing. I want to go two places with this. First, in an industry which is seeing, according to government data, labor inflation somewhere in the high single digits. Walk through all the different factors of why your costs aren't that high, and I guess why they won't be so high going forward as just higher industry pressure, wage pressure basically puts pressure on everyone. That's the 1st point. 2nd, commodities up 1%. Do you have some contracts that are so deeply favorable relative to current spot in 2021 that you're beginning to be worried or just sensitive at least in terms of what the 2022 versus 2021 costs are? David, you talked about a number of things that could potentially offset some higher costs to the extent that they come in regarding, I think you said, tech innovations that are in tests that will be rolled out in coming quarters. It sounds like you've decided on the rollout. If you could give us more specifics in terms of what that is, when the rollout will be, and potential operational benefits that you would see from that? Sure. There's quite a bit there, John, so if we miss something, we'll come back to it and just remind us. On the commodities front, it's very early. What I've learned in my over 30 years in this business, John, it's very early to make a commodities call on 2022. All you can do is look at our history and what we've done in the spot market with long-term contracts, et cetera, has put us in a very favorable position. We think we can handle 2022. To make a call in July on something that's going to happen in 2022 is premature. We'll just see how it develops, but I think our supply chain team is going to do a great job of that. You can look back over time, you've seen us do that. That's number one. Number two on the labor costs, I'll ask Chris to add anything else when I finish here. Number two on the labor costs, retention levels and lower turnover really helps. We've got people that are engaged in our restaurants. We don't have to go out and recruit a whole bunch of people and stuff. We've got pockets of opportunity, no doubt. We participate in the restaurant industry. The retention and turnover levels are very strong, and that helps us in so many ways. If I'm missing something else there, Chris can jump in when I finish. On the technology and equipment front, I'm not going to get into it for competitive reasons, but we've spent an enormous amount of time and effort and capital on equipment opportunities and technology opportunities. I think our IT and digital teams are doing a great job. If you haven't downloaded the Outback app, I'd encourage you to do it because there's more developments coming forward. Our online ordering system has been very well received. You can see more technology come into our restaurants, and you're going to see some equipment innovation in the back of the house. I want to stop there, John, if you don't mind, because we've got to compete in an environment. That's what we plan on doing there. I'll turn it over to Chris for anything else on labor. No, nothing really significant to add other than to say one of the things that we are benefiting from that some of our peers may not be able to, is that we are seeing a relatively benign inflationary environment in Brazil from a labor perspective. That kind of helps the overall number a little bit. Very helpful, guys. Thank you. Thank you. Our next question has come from the line of Jeff Farmer with Gordon Haskett. Please proceed with your questions. Good morning, and thanks. Couple of follow-ups. Just following up on the off-premise margins, what have you done to improve those to almost, it sounds like the in-restaurant margin levels? What are some of the drivers you guys have pursued to improve the margins of that off-premise business? The menu offerings that we have, the mix of the menu offerings, the great relationships we have with our third-party users. They can provide driver utilization that we cannot. That helps margins as well. I'd say it's menu innovation and partnerships with our third-party providers that are so helpful. The other thing is, I think it's a completely underappreciated part of our business, and that's carryout. It's a gigantic part of our business. Margins are very high. The customers are in control. They do some of the work. They order up. We've been doing this for a long time, and it's a very important part of our business. That's a very attractive part of our business, Jeff. Just to follow up on that specific question, have you guys, I think a lot of your casual dining peers are beginning to do this, taking some menu pricing premiums on the delivery part of it? Has that happened for you guys? To what level? We'll mix the third party some on price. We won't get into the levels, but we will manage our third-party delivery some, but pricing hasn't been a big part of our success story, but we do some of that, yes. Yeah, I would say, too, if you look at our curbside and takeout business, for example, our new online ordering platform is really good, and it's led to enhanced add-on sales. Check average may just be up naturally because of some of the technology enhancements, some of the efficiencies that we've built into that business. We try and use price as the last lever. Let me put it that way. Just final question on Brazil. I'm just hoping you guys can help me frame out a little bit here what the consolidated restaurant level margin and operating income margin would look like if Brazil sort of pick a performance level. If we go back to 2019 and Brazil was doing well. Ultimately, said more hopefully clearly, I'm just trying to figure out what magnitude of either EPS or EBITDA drag you're seeing from Brazil on 2021 and what the opportunity is in terms of recapturing that EPS or EBITDA as we get out into 2022 and 2023 could be. Order of magnitude in terms of the Brazil economic drag on the business right now. If you go back in history, the Brazil business was historically 3%-4% points higher from a restaurant margin standpoint than our U.S. business. There's really no reason to expect or anticipate that they wouldn't be able to continue to get back to those levels of margins that they had prior to the start of the pandemic on a go-forward basis. Again, when you think about the puts and takes of our margins, particularly as the balance of the year plays out, some of these inflationary pressures that we've talked about, as that Brazil business recovers, you are going to start to see sort of an improvement in that international margin, which can help offset some of the inflationary pressures that you may have in the business. Yeah. Jeff, let's just also just step back and look at the market broadly. We had the number 1 restaurant brand before pandemic came in, one of the best brands in the country. We had a leading market share by a lot. We think that about 30% of the restaurants, not us, 30% of the restaurants down there have closed. We don't wish any ill will on any restaurant company anywhere, the fact is about 30% of the restaurants have closed down there. We are in a unique position to take a significant amount of share. Additionally, they've got an economic footprint that works really well. We're going to continue to expand down there with their cash flow, not ours, their cash flow down there that they're generating. Lastly, they have built an off-premise business that didn't exist prior to the pandemic. All these factors coming together lead to a very attractive business model that had higher margins in the U.S. and very good volumes. All right. Thank you. Thank you. Our next question is coming from the line of Brian Mullan with Deutsche Bank. Please proceed with your questions. Hey, thank you. Hey, guys. With the EBITDA growth, your balance sheet de-leveraging is happening pretty quickly. You shared a target of three turns, lease adjusted early next year. Chris, would be curious, updated thoughts on the potential for further de-leverage and also dividends versus buybacks, how you might incorporate the current valuation of the stock into that thought process. Related in addition, is there a scenario where you might look to get acquisitive? I mean, you've got a company doing north of $4 billion of sales, and I'm wondering if you might view that as a platform for additional brand growth over time. We feel that long-term target of 3x leverage on a lease-adjusted basis is a good target. Once we get to that target, which is candidly coming faster than I think we would've anticipated, could be early next year, we will reevaluate where we go from there. We're not going to make any commitments at this time. We could decide to keep paying down debt, to your point, or we could reintroduce a dividend, or we could add a share repurchase program. We could do some combination of those. A little early for us to make that call publicly, but what I would say is, honestly, it's just exciting for our company to be in a position to be able to make those kind of decisions given where we were a year ago. Yeah. Just building on that, we want to have a fortress balance sheet. We want a balance sheet that can withstand shocks. Chris and team are doing a great job getting us there. Then it gives us opportunities going forward, Brian. When you look at the capability of the company, you look at our operations capability, you look at the financial muscle we have, look at the digital capability and IT capability that we're building. I talked earlier today about the strength we have in supply chain. Those are all opportunities for us to potentially look at other things. Most importantly, we've got some fantastic brands in our portfolio. We talked about that chance to grow the Outback footprint beyond where it stands today, through relocations and new. You'll hear more of that from us. We can expand that footprint by quite a bit, and we have a new economic prototype that we think makes a lot of sense, that can enable us to do that. Number two, the Fleming's business is, and I hope the investors and analysts pay some attention to it's crushing it in fine dining. The numbers, the sales, the operations, the profitability of that business has been truly remarkable. You look at the quarterly numbers, they're just great. We've got opportunities in our strong markets like California and Florida and a couple other places to expand that footprint. We'll be doing that as well. Yes, there are opportunities maybe to look at other things, but boy, do we have some great brands that we can grow. Okay, thanks. That's a good segue to the follow-up. Just on the unit growth, you spoke to Outback and Fleming's. Just as we think about that next phase, I'm wondering when you think Bloomin' Brands can be a consistent net unit grower in the U.S., even in something like that, 1%-2% range. Is that next year? I'm also, is Carrabba's a part of that calculus too, just given all of the AUV gains, which have been great? Thanks. Yeah. I really believe next year. It's too early to lay out targets for 2022 and beyond. I think we've got some opportunities for unit expansion, a lot of opportunities for unit expansion. We quoted the relocation opportunities we've had, but also just flat out new units, especially at Outback and Fleming's. The other piece is Carrabba's, they have just been a spectacular performer during the pandemic. If you look at the off-premises gains and everything else that they've done, the net team has done, it's just been wonderful. It may be a little bit too early to talk about what we're doing from a standpoint of Carrabba's, but clearly that's gotten our attention, given their performance. We're going to focus now, and we have been focusing on building our pipeline. Our development team's doing that, building our pipeline for new unit development relocations. Lastly, in Brazil, they've always been a big net unit add. They're funding with their own cash flow, and we've got the economic prototype down there that works really well, too. Thank you. Thank you. Our next questions come from the line of Sharon Zackfia with William Blair. Please proceed with your questions. Hi, good morning. A couple of questions. I guess on the on-premises business, can you help us calibrate where traffic is now on-premises relative to 2019 and trying to figure out how much more you might be able to get into the restaurants at this point? Secondarily, there's a lot going on in cost of sales that's been really great, seeing it sub 30% for two quarters in a row is pretty notable considering it used to be around 31%-32%. Can you help us dimensionalize the benefits of reduced discounting versus menu optimization versus waste reduction and help us understand what part of that may be sustainable or what might have some kind of give back as on-premises returns? Yeah. We're very pleased with the cost management as well. Product simplification has clearly helped. The new Outback menu has clearly helped as people have traded up and done higher cuts of steak and also added on to the appetizers and things. Waste management in the restaurants because we're more simple in how we do things, waste has come way down in the restaurants. All of these things are contributing to what we are seeing in the restaurants, and we think that's sustainable. Obviously, on the marketing front, we'll see where the marketplace goes. We hope that we're not going to certainly lead the way in discounting and things like that. We like where we stand as a company and what we're doing. On the restaurant side, we are seeing restaurant businesses still coming back and improving. We still think there is a ways to go, and this is an opportunity to go in restaurant dining, and we certainly hope to see that in the coming quarters. Yeah. Some specifics. The in-restaurant comp sales result in Q2 on a two-year basis was down about 8%. When you factor in then check average appreciation of about 6%, you're down in that 14% or so range in traffic on a blended basis, little bit lower than Outback, obviously getting supported by resurgent in-restaurant business at Fleming's. Kind of in that mid down 15% or so range in Q2. That actually improved steadily as the quarter progressed. Yeah. We anticipate as people come back in the restaurants for that to continue to improve, which we think could be potential upside to our business. Yeah, it's a tailwind. Yep. Great. I just want to be clear too. It sounds like you don't think you're seeing any impact at all from the increased media coverage of the Delta variant. Can you just confirm how the trends were throughout July? Have you seen pretty consistent trends there? Yeah. We laid out some very strong Q4 or Q3 to date results, and it's pretty clear that we've got great trends. Thanks. Thank you. Our next question has come from the line of Brian Vaccaro with Raymond James. Please proceed with your questions. Hi, thanks, and good morning. Just a few questions on the margins, if I could. I guess starting with labor in the U.S., specifically. I think you said staffing levels were down versus 2019. Do you expect to add hours, or do you see this as a sustainable level where you can deliver your targeted guest experience? Can you help frame or quantify the impact of overtime or outsized training costs or other pandemic-related costs, kind of near-term things that went in that item as well? Then last one on labor is how do you expect second half labor costs to compare to what we just saw in the second quarter? Yeah, I'll take the first piece about staffing, then maybe Chris can provide some more details on some of the labor piece. On the staffing front, Brian, we've made some really good equipment investments and some other things in our restaurants. We don't anticipate getting back to staffing levels of 2019. And that's not a knee-jerk reaction. That's been planned for a long time for us. That is something that we're going to continue to do, but we don't anticipate at all coming back to 2019 staff levels. Then just on the inflation side and back half, front half. We've been, I think, at the low end of our inflation guidance through the second quarter. We're seeing higher inflation in the U.S., as I mentioned earlier, offset by a relatively benign inflationary environment in Brazil. It may tick up a little in Q3, and then of course, it will be higher in Q4 as we have the Florida minimum wage increase, which starts in September. I think we would say back half, we're trending to the higher end of the guidance range. Overall, we feel really good about where we stand from a labor perspective. Yeah, and I think as you look at these kind of things, Brian, I know you will, just step back and look at our margin performance today in 2021 versus what it was in 2019 and prior years, and you're seeing significant improvement. Yep. Circling back on off-premise. I think you mentioned some changes in third party, and I know you were doing some self-delivery as well. Have you stopped doing self-delivery in most of your units and now just mostly leveraging third party? Chris, what was off-premise sales mix? Sorry if I missed it in the quarter-to-date period. Where's this current split between carry out and third party delivery these days? Yeah. What we will be is on the delivery business, we will be continuing to do our own in-store business. We need to have that capability just to provide some flexibility. We've got some restaurants that do really well in in-store delivery with high volume. We're going to continue to do that. We obviously like the partnership we have with our third-party providers and what they can do. We'll continue to have a mix, Brian. Yeah. Quarter-to-date, we're at 25% of sales. Most of that change from where we were in Q2 is just a trade between the curbside business and the in-restaurant as in-restaurant recovers. Interestingly enough, the third-party business has stayed flat from a percentage of sales basis from Q2 even into Q3, again, just reinforcing the stickiness, the incrementality, all of that of that business, which is pretty exciting. Okay, that's great. Then back to the increase in your long-term margin framework, what does that assume in terms of where your marketing spend settles out? We've talked about the need to reinvest in marketing dollars from a sales building perspective. Obviously, if sales stayed exactly where they were today without the need to spend additional marketing expense, then our long-term framework would probably look a little different. Our anticipation is that over time, we're going to rebuild that marketing lever. We spent 1.3% of sales in marketing in the 2Q. Our long-term framework that we laid out, we talked about in 2019, we spent 3.5% of sales. Longer-term, we think we can keep that below 3%, but certainly, it's going to be elevated from where it is today. Somewhere in the 2.5%-3% range is kind of where we're thinking. Brian, one of the things that we did that we learned during the pandemic is just the digital marketing, the return on investments, a different way to go to market, to identify customers more granularly, all those kind of things. We're going to use all those learnings. I think we're going to get a bigger bang for our marketing buck with less cost, and we'll see where we settle in. There has been significant capability, digital marketing capability, built within the company during the last 18 months. All right. That's very helpful. Just lastly, on the Brazil business, great to hear that that's improving. Where does the potential licensing of that business stand? Is that still a priority, and have those conversations started up again yet? In your long-term framework, does it give effect for any potential change in the ownership structure of Brazil? Thank you. Yeah. We're going to enjoy the comeback in Brazil. It's a tremendous potential tailwind for us throughout 2021 and into 2022. Then we'll make some decisions after that. It's a great business. It could be a significant tailwind for us in the next few quarters. They've come back quickly. It was not contemplated in our long-term framework. That's contemplated to continue to own, but that doesn't mean that we won't examine things. The team down there has done a fantastic job. It's bouncing back very quickly, and it could be a significant tailwind for us for the next few quarters. Great. Thanks very much. Thank you. Our next questions come from the line of Alex Slagle with Jefferies. Please proceed with your questions. Hey, thank you. Good morning. You mentioned the improved performance in the California franchise business. Wondering if you could give some perspective on the expected cadence of the franchise revenues as collection of royalty income comes back. Yeah. We're effectively right now collecting current royalties from our franchisees, which is fantastic. As you know, we have an amount to recoup from past due royalties. We are now recouping those as well. I would say of the past due amounts, it's probably next 12 to 18 months, you'll see those come back into our P&L. That does mean that relative to where we were historically, you can see upsized revenues out of the franchise, the other revenue line moving forward. Got it. Second, I just might have missed this, but with the confidence to increase the long-term margin target from 7.5% to 8%, any reason that does not also translate into higher near-term outlook on that 6.3% to 6.8% when the volumes get back to 2019 levels? Is there something different, the timing, how that plays out? No, nothing different. Rising tides lift all boats. Got it. Thanks a lot. Yep. Thank you. Our next question comes from the line of Lauren Silberman with Credit Suisse. Please proceed with your questions. Thank you. Just a follow-up on the margins. Talked about 7.5% operating margins above 2019 sales, now at 18%. Given you're trending above 2019, how are you thinking about the timing to achieve the 8%? Any line items that you can call out on where you're seeing the additional leverage or efficiency there as it across the P&L? It's mostly a confidence in our sales story. I think if you look at the framework that we laid out a couple of quarters ago, all of the key tenets in terms of efficiencies and cost savings are still in place, whether it's COGS. We talked about upsizing COGS, we talked about the labor efficiency, we talked about the marketing efficiency. We did reference the fact that from an operating expense standpoint, we'd expect that to be a little higher just because of the increase in off-premises business. All that framework still exists. It's really this change in outlook going from the 7.5% long-term to 8% long-term is really about the increasing confidence and the stickiness of some of these sales levers, particularly what we're seeing with the Outback new menu and sort of the off-premises business and the thriving nature of that business. That's the framework that's changed. I would say, in terms of just short-term, long-term, we feel very good about where we think we're going to land in 2021 from a margin perspective. Obviously, we're ahead of schedule in terms of our long-term expectations. I think that the framework we're trying to lay out here is that over the long term, if we can fundamentally change the business where we now have an 8% long-term operating margin framework versus a 4.8% operating margin framework in 2019, the value that that creates for our shareholders is immense. We are committed to that number, and we're going to hopefully take advantage of that in terms of our long-term shareholder value. Great. Just on Dine Rewards, can you talk about where you are with Dine Rewards members and how you're thinking about opportunities to leverage that program from here? Then just from a brand perspective, do you see greater utilization from customers at any of your brands more than others? Yeah. Dine Rewards continues to grow for us. We're over 12 million. We think there is a tremendous opportunity to leverage that program, especially with all of our digital marketing capability. I'm not going to get into it, but watch that space. I'm sorry, what's the second part of the question again? Do you see any greater utilization of the loyalty program at any one of your brands more than others? Well, just because of its ubiquity, it's Outback, but it's available to all of our customers. We see trade between customers, and that's hopefully something that we'll be able to take more advantage of going forward. More news coming on the loyalty program in coming quarters. Fantastic. Thank you, guys. Thank you. Our next question has come from the line of Jon Tower with Wells Fargo. Please proceed with your questions. Hi, this is actually Karen Holthouse on for John. Just one quick clarification. Earlier in the call, you had mentioned about a $1 million impact from the Florida minimum wage kicking in. Was that specific to the fourth quarter, or how we should think about it on an annual basis? It's a $1 million a month impact, so it's $12 million annually. It will be $3 million in Q4, $1 million in September. That's all baked into our guidance. That was baked into the Q3 guidance. Okay. On the CapEx outlook, if we get to 2022 and some of these supply chain issues are kind of worked through, is there the potential for sort of catch up CapEx in 2022 for sort of getting what would've been in the plan for 2022, and then also wrapping up what you were hoping to do in 2021? Yeah. We've always talked about potentially up to $200 million in capital spending. That'll ebb and flow depending on timing insights and everything else. As we build that balance sheet I talked about, we could uptick that. Our development team's doing a great job building the pipeline, and we can move very quickly, and we'll just manage it appropriately. We think we've got a significant footprint expansion opportunity and market share opportunity. All right. Thank you. Thank you. Thank you. Our next question comes from the line of Jared Garber with Goldman Sachs. Please proceed with your questions. Hi, this is Michael on for Jared. Couple quick ones. First, we've noted a little bit of an uptick in the number of limited time offers that you guys have had, for Outback particularly. Any particular reason why you guys have started to kind of redeploy these? I guess that was more back in March, and maybe they've continued to shift. Any certain lever you're looking to pull there? Thanks. No, we've had no significant change in our marketing plans. Like I mentioned earlier, we hope to continue this marketing effort as it is, and certainly don't want to lead any way in discounting. Our sales trends are very strong, and there's been no real change in limited time offers or any of that kind of stuff. Yeah, we talked about the 20% or so discount reduction relative to where we were in 2019. I think if anything, I think we've talked about how we can offer more indulgence to the consumer because this is a time when the consumer's looking for that. You saw that show up in our average check increase in Q2 because that wasn't driven by menu pricing. Yeah. Great. Thanks a lot. One other quick one. Any updates on Tender Shack or Aussie Grill or any of those initiatives? Just wondering if you guys have any and saw anything particular in the quarter, maybe as reopenings ramped. Yeah, no. Tender Shack is not up to the levels we want to be quite yet. We've got ways to go in that business. I think it is directly related to the rapid, very rapid growth back in the restaurant business this past six months or so. We dedicated our efforts to that. We've got more work to do on Tender Shack, and we're looking at marketing and product opportunities there. That's a business we'll continue to pursue. Secondly, Aussie Grill, we hope to open up three more this year. The economics are good, the sales are good, and I think there just follow the money. If we're opening more, that means we like what we see. We're spending more CapEx. The team's done a really good job there with that concept, and we think it could be a really big opportunity for us as we go forward. Thank you. There are no further questions at this time. I'd like to hand the call back over to management for any closing remarks. We appreciate everybody spending time with us today, and we look forward to updating you on the company in October. Take care, everyone. Thank you for your participation. This does conclude today's teleconference. You may disconnect your lines at this time. Have a great day.