PR Newswire
DALLAS, Aug. 16, 2023
DALLAS, Aug. 16, 2023 /PRNewswire/ -- Brinker International, Inc. (NYSE: EAT) today announced its financial results for the fourth quarter ended June 28, 2023, and provided financial guidance for fiscal 2024.
Fourth Quarter Fiscal 2023 Financial Highlights
Brinker International reported net income per diluted share of $1.19, in the fourth quarter of fiscal 2023, a 32.2% increase compared to the fourth quarter of fiscal 2022. Net income per diluted share, excluding special items (non-GAAP), was $1.39 in the fourth quarter of fiscal 2023, a 20.9% increase compared to the fourth quarter of fiscal 2022. Our results for the fourth quarter of fiscal 2023 were primarily driven by an increase in Company sales, favorable food and beverage costs as a percentage of Company sales, and favorable income taxes. Comparable sales increased 6.6%, with an increase in comparable restaurant sales of 6.3% for Chili's and 9.1% for Maggiano's. Comparable restaurant sales improved due to menu pricing and favorable item mix. Operating income margin increased to 5.5% and restaurant operating margin (non-GAAP) increased to 13.4% for the fourth quarter. During the fourth quarter of fiscal 2023, we amended our revolving credit facility to increase the capacity by $100.0 million to $900.0 million and successfully issued, in a private offering, $350.0 million 8.250% senior notes due 2030. Additionally, long-term debt decreased $87.0 million in fiscal 2023.
"We are proud of our team's progress on improving operational performance and bringing our new strategy to life. Simplification, a focus on the Core Business, and key strategic investments in labor, repairs and maintenance, and advertising have driven a better guest & team member experience, stronger sales and improving margins," said Kevin Hochman, Chief Executive Officer and President of Brinker International, Inc. "And that progress gives us confidence we have laid a strong foundation for continued sustainable & profitable growth in the long term."
Fourth Quarter Financial Results
Fourth Quarter | Fiscal Year | ||||||||||
2023 | 2022 | Variance | 2023 | 2022 | Variance | ||||||
Company sales(1) | $ 1,064.8 | $ 1,012.2 | $ 52.6 | $ 4,093.2 | $ 3,764.5 | $ 328.7 | |||||
Total revenues | $ 1,075.5 | $ 1,021.5 | $ 54.0 | $ 4,133.2 | $ 3,804.1 | $ 329.1 | |||||
Operating income | $ 59.3 | $ 44.7 | $ 14.6 | $ 144.4 | $ 159.5 | $ (15.1) | |||||
Operating income as a % of Total revenues | 5.5 % | 4.4 % | 1.1 % | 3.5 % | 4.2 % | (0.7) % | |||||
Restaurant operating margin, non-GAAP(1)(2) | $ 142.6 | $ 126.2 | $ 16.4 | $ 460.1 | $ 459.6 | $ 0.5 | |||||
Restaurant operating margin as a % of Company sales, non-GAAP(1)(2) | 13.4 % | 12.5 % | 0.9 % | 11.2 % | 12.2 % | (1.0) % | |||||
Net income | $ 54.2 | $ 40.2 | $ 14.0 | $ 102.6 | $ 117.6 | $ (15.0) | |||||
Adjusted EBITDA, non-GAAP(2) | $ 114.5 | $ 100.2 | $ 14.3 | $ 345.6 | $ 355.1 | $ (9.5) | |||||
Net income per diluted share | $ 1.19 | $ 0.90 | $ 0.29 | $ 2.28 | $ 2.58 | $ (0.30) | |||||
Net income per diluted share, excluding special items, non-GAAP(2) | $ 1.39 | $ 1.15 | $ 0.24 | $ 2.83 | $ 3.09 | $ (0.26) | |||||
Comparable Restaurant Sales(3)
Q4:23 vs 22 | FY:23 vs 22 | ||
Brinker | 6.6 % | 8.1 % | |
Chili's | 6.3 % | 7.0 % | |
Maggiano's | 9.1 % | 17.3 % |
(1) | Certain reclassifications have been made to prior year revenue amounts to enhance comparability to the fiscal 2023 presentation. See Basis of Presentation section below for more details. |
(2) | See Non-GAAP Information and Reconciliations section below for more details. |
(3) | Comparable Restaurant Sales include restaurants that have been in operation for more than 18 full months. Restaurants temporarily closed for 14 days or more are excluded from comparable restaurant sales. Percentage amounts are calculated based on the comparable periods year-over-year. |
Full Year Fiscal 2024 Guidance
We are providing the following guidance for fiscal 2024 based on our current outlook. The uncertainties created by current macroeconomic conditions, among other risks, could cause actual results to differ materially from those projected.
- Total revenues are expected to be in the range of $4.27 billion - $4.35 billion;
- Net income per diluted share, excluding special items, non-GAAP, is expected to be in the range of $3.15 - $3.55;
- Weighted average shares are expected to be in the range of 45 million - 46 million; and
- Capital expenditures are expected to be in the range of $175 million - $195 million.
We are unable to reliably forecast special items without unreasonable effort. As such, we do not present a reconciliation of forecasted non-GAAP measures to the corresponding GAAP measures.
Basis of Presentation
Effective for the first quarter of fiscal 2023, we are presenting certain revenue streams within Company sales to better align with the presentation used within the casual dining industry. Our presentation of Franchise revenues will now include only revenues related to the franchise-operated restaurants. Comparative figures in prior years have been adjusted to conform to the current year's presentation. These reclassifications have no effect on Total revenues or Net income previously reported.
Company sales include revenues generated by the operation of Company-owned restaurants including food and beverage sales, net of discounts, gift card breakage, Maggiano's banquet service charge income, delivery, digital entertainment revenues, merchandise income and gift card discount costs from third-party gift card sales.
Franchise revenues include franchise royalties, franchise advertising fees, franchise and development fees and gift card program fees.
Fourth Quarter of Fiscal 2023 Operating Performance
Segment Performance
The table below presents selected financial information (in millions, except as noted) related to our segments' operational performance for the thirteen week periods ended June 28, 2023 and June 29, 2022:
Chili's | Maggiano's | ||||||||||
Fourth Quarter | Variance | Fourth Quarter | Variance | ||||||||
2023 | 2022 | 2023 | 2022 | ||||||||
Company sales(1) | $ 943.6 | $ 895.0 | $ 48.6 | $ 121.2 | $ 117.2 | $ 4.0 | |||||
Franchise revenues(1) | 10.5 | 9.2 | 1.3 | 0.2 | 0.1 | 0.1 | |||||
Total revenues | $ 954.1 | $ 904.2 | $ 49.9 | $ 121.4 | $ 117.3 | $ 4.1 | |||||
Company restaurant expenses(2) | $ 821.7 | $ 787.5 | $ 34.2 | $ 100.2 | $ 98.4 | $ 1.8 | |||||
Company restaurant expenses as a % of Company sales(1) | 87.1 % | 88.0 % | (0.9) % | 82.7 % | 84.0 % | (1.3) % | |||||
Operating income | $ 76.0 | $ 59.5 | $ 16.5 | $ 16.0 | $ 14.1 | $ 1.9 | |||||
Operating income as a % of Total revenues | 8.0 % | 6.6 % | 1.4 % | 13.2 % | 12.0 % | 1.2 % | |||||
Restaurant operating margin, non-GAAP(1)(3) | $ 121.9 | $ 107.5 | $ 14.4 | $ 21.0 | $ 18.8 | $ 2.2 | |||||
Restaurant operating margin as a % of Company sales, non-GAAP(1)(3) | 12.9 % | 12.0 % | 0.9 % | 17.3 % | 16.0 % | 1.3 % | |||||
(1) | Certain reclassifications have been made to prior year revenue amounts to enhance comparability to the fiscal 2023 presentation. See Basis of Presentation section above for more details. |
(2) | Company restaurant expenses includes Food and beverage costs, Restaurant labor and Restaurant expenses, and excludes Depreciation and amortization, General and administrative and Other (gains) and charges. |
(3) | See Non-GAAP Information and Reconciliations section below for more details. |
Chili's
- Chili's Company sales increased primarily due to increased menu pricing, and favorable menu item mix, partially offset by lower traffic.
- Chili's Company restaurant expenses, as a percentage of Company sales, decreased primarily due to sales leverage and menu pricing, favorable commodity mix, and lower delivery & off-premise supplies, partially offset by commodity price inflation, increased staffing levels and hourly wage rates, advertising, and other restaurant expenses.
- Chili's franchisees generated sales of approximately $227.0 million for the fourth quarter of fiscal 2023 compared to $207.6 million for the fourth quarter of fiscal 2022.
Maggiano's
- Maggiano's Company sales increased primarily due to increased menu pricing, slightly offset by unfavorable menu item mix and lower traffic.
- Maggiano's Company restaurant expenses, as a percentage of Company sales, decreased primarily due to sales leverage and lower advertising, partially offset by increased staffing levels and hourly wage rates.
Income Taxes
- On a GAAP basis, the effective income tax rate was a benefit of 21.0% in the fourth quarter of fiscal 2023. The effective income tax rate is lower than the statutory rate of 21% due primarily to leverage of the FICA tip credit and the impact of aligning fiscal 2023 year-to-date tax expense with the current annual tax rate. Excluding the impact of special items, the effective income tax rate was a benefit of 9.0% in the fourth quarter of fiscal 2023.
Webcast Information
Investors and interested parties are invited to listen to today's conference call, as management will provide further details of the quarter and business updates. The call will be broadcast live on Brinker's website today, August 16, 2023 at 9 a.m. CDT:
For those who are unable to listen to the live broadcast, a replay of the call will be available shortly thereafter and will remain on Brinker's website until at least the end of the day August 16, 2024.
Additional financial information, including statements of income which detail operations excluding special items, franchise revenues, and comparable restaurant sales trends by brand, is also available on Brinker's website under the Financial Information section of the Investor tab.
Forward Calendar
- SEC Form 10-K for the fiscal 2023 filing on or before August 28, 2023
- Earnings release call for the first quarter of fiscal 2024 on November 1, 2023
Non-GAAP Measures
Brinker management uses certain non-GAAP measures in analyzing operating performance and believes that the presentation of these measures in this release provides investors with information that is beneficial to gaining an understanding of the Company's financial results. Non-GAAP disclosures should not be viewed as a substitute for financial results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Reconciliations of these non-GAAP measures are included in the tables below.
About Brinker
Brinker International, Inc. is one of the world's leading casual dining restaurant companies and home of Chili's® Grill & Bar, Maggiano's Little Italy,® and the It's Just Wings® virtual brand. Founded in 1975 in Dallas, Texas, we've ventured far from home, but stayed true to our roots. Brinker owns, operates or franchises more than 1,600 restaurants in the United States and 29 other countries and two U.S. territories. Our passion is making everyone feel special, and we hope you feel that passion each time you visit one of our restaurants or invite us into your home through takeout or delivery. Learn more about Brinker and its brands at brinker.com.
Forward-Looking Statements
The statements and tables contained in this release that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We intend all forward-looking statements to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All forward-looking statements are made only based on our current plans and expectations as of the date such statements are made, and we undertake no obligation to update forward-looking statements to reflect events or circumstances arising after the date such statements are made. Forward-looking statements are neither predictions nor guarantees of future events or performance and are subject to risks and uncertainties which could cause actual results to differ materially from our historical results or from those projected in forward-looking statements. Such risks and uncertainties include, among other things, the impact of general economic conditions, including inflation, on economic activity and on our operations; disruptions on our business including consumer demand, costs, product mix, our strategic initiatives, our partners' supply chains, operations, technology and assets, and our financial performance; the impact of competition; changes in consumer preferences; consumer perception of food safety; reduced consumer discretionary spending; unfavorable publicity; governmental regulations; the Company's ability to meet its business strategy plan; loss of key management personnel; failure to hire and retain high-quality restaurant management and team members; the impact of social media or other unfavorable publicity; reliance on technology and third party delivery providers; failure to protect the security of data of our guests and team members; product availability and supply chain disruptions; regional business and economic conditions; volatility in consumer, commodity, transportation, labor, currency and capital markets; litigation; franchisee success; technology failures; failure to protect our intellectual property; outsourcing; impairment of goodwill or assets; failure to maintain effective internal control over financial reporting; downgrades in credit ratings; changes in estimates regarding our assets; actions of activist shareholders; failure to comply with new environmental, social and governance ("ESG") requirements; failure to achieve any goals, targets or objectives with respect to ESG matters; adverse weather conditions; terrorist acts; health epidemics or pandemics; tax reform; inadequate insurance coverage and limitations imposed by our credit agreements as well as the risks and uncertainties described in "Risk Factors" in our Annual Report on Form 10-K and future filings with the Securities and Exchange Commission.
Guidance Policy
Brinker provides annual guidance as it relates to key line items in the Consolidated Statements of Comprehensive Income (Unaudited). We are unable to reliably forecast special items such as restaurant impairments, restaurant closures, reorganization charges and legal settlements without unreasonable effort. As such, we do not present a reconciliation of forecasted non-GAAP measures to the corresponding GAAP measures. If special items are reported during fiscal 2023, reconciliations to the appropriate GAAP measures will be provided.
BRINKER INTERNATIONAL, INC. Consolidated Statements of Comprehensive Income (Unaudited) (In millions, except per share amounts) | |||||||
Thirteen Week Periods Ended | Fifty-Two Week Periods Ended | ||||||
June 28, 2023 | June 29, 2022 | June 28, 2023 | June 29, 2022 | ||||
Revenues | |||||||
Company sales(1) | $ 1,064.8 | $ 1,012.2 | $ 4,093.2 | $ 3,764.5 | |||
Franchise revenues(1) | 10.7 | 9.3 | 40.0 | 39.6 | |||
Total revenues | 1,075.5 | 1,021.5 | 4,133.2 | 3,804.1 | |||
Operating costs and expenses | |||||||
Food and beverage costs | 279.9 | 291.1 | 1,146.3 | 1,048.5 | |||
Restaurant labor | 362.9 | 338.7 | 1,389.3 | 1,288.1 | |||
Restaurant expenses | 279.4 | 256.2 | 1,097.5 | 968.3 | |||
Depreciation and amortization | 42.3 | 41.3 | 168.5 | 164.4 | |||
General and administrative | 38.8 | 35.3 | 154.5 | 144.1 | |||
Other (gains) and charges(2) | 12.9 | 14.2 | 32.7 | 31.2 | |||
Total operating costs and expenses | 1,016.2 | 976.8 | 3,988.8 | 3,644.6 | |||
Operating income | 59.3 | 44.7 | 144.4 | 159.5 | |||
Interest expenses | 14.5 | 11.3 | 54.9 | 46.1 | |||
Other income, net | — | (0.6) | (1.3) | (1.8) | |||
Income before income taxes | 44.8 | 34.0 | 90.8 | 115.2 | |||
Provision (benefit) for income taxes | (9.4) | (6.2) | (11.8) | (2.4) | |||
Net income | $ 54.2 | $ 40.2 | $ 102.6 | $ 117.6 | |||
Basic net income per share | $ 1.22 | $ 0.92 | $ 2.33 | $ 2.62 | |||
Diluted net income per share | $ 1.19 | $ 0.90 | $ 2.28 | $ 2.58 | |||
Basic weighted average shares outstanding | 44.3 | 43.8 | 44.1 | 44.8 | |||
Diluted weighted average shares outstanding | 45.3 | 44.6 | 45.0 | 45.6 | |||
Other comprehensive income | |||||||
Foreign currency translation adjustments(3) | $ 0.1 | $ (0.5) | $ (0.7) | $ (0.6) | |||
Other comprehensive income (loss) | 0.1 | (0.5) | (0.7) | (0.6) | |||
Comprehensive income | $ 54.3 | $ 39.7 | $ 101.9 | $ 117.0 | |||
(1) | Certain reclassifications have been made to prior year revenue amounts to enhance comparability to the fiscal 2023 presentation. See Basis of Presentation section above for more details. |
(2) | Other (gains) and charges included in the Consolidated Statements of Comprehensive Income (Unaudited) included (in millions): |
Thirteen Week Periods Ended | Fifty-Two Week Periods Ended | ||||||
June 28, 2023 | June 29, 2022 | June 28, 2023 | June 29, 2022 | ||||
Restaurant level impairment charges | $ 12.1 | $ 8.5 | $ 12.1 | $ 8.5 | |||
Restaurant closure asset write-offs and charges | 1.7 | 2.0 | 8.3 | 3.7 | |||
Enterprise system implementation costs | 1.4 | ||||||
