Brinker: Reports Covid-19 Impact Update And Q3-2020 Results

Dallas / TX . (bi) Brinker International Inc. announced a business update related to the novel strain of coronavirus (“Covid-19”), in addition to results for the third quarter of fiscal 2020 ended March 25, 2020. Brinker began experiencing the impact of the Covid-19 pandemic on March 8, 2020 resulting in decreased traffic and the closure of all of our dining rooms as we transitioned to a 100 percent off-premise model by the end of the third quarter. We have adapted our existing to-go and delivery sales channels in order to deliver a safe and quality experience for team members and guests during this pandemic. Our strategic decision to enhance our off-premise business over the last few years including online ordering, mobile app, curbside service and third-party delivery, has enabled us to conveniently serve a significantly higher volume of off-premise guests during this pandemic.

«Before the crisis hit, Brinker’s strategies were working extremely well and the third quarter was shaping up to be very strong,» said Wyman Roberts, CEO. «Since Covid-19, we have focused on the safety and health of our team members and guests while shifting to a to-go and delivery only model. We have supported our team members with a relief fund of more than USD 15 million, and worked hard to keep as many employees as possible. Our absolute and relative sales growth is a testament to the strength of the strategies we have been working on the past few years and will ensure our continued strength post Covid-19.»

In the third quarter of fiscal 2020, through March 8, 2020, our multi-year strategies were delivering comparable restaurant sales growth. Company-owned Chili’s comparable restaurant sales had increased by 3.3 percent, and Company-owned Maggiano’s comparable restaurant sales had increased by 0.6 percent. Our Chili’s off-premise sales, which includes both to-go and delivery, also grew reaching approximately 20 percent of sales, with approximately 14 percent coming from to-go and 6 percent from delivery. While the spread of Covid-19 dramatically changed the full-quarter results, we believe these intra-quarter results are further evidence and provide a good foundation for our brands as they move forward our multi-year strategies.

As Chili’s and Maggiano’s operate in an off-premise only model, below are some current preliminary results related to Company-owned restaurants for the weeks subsequent to the third quarter of fiscal 2020:

• Off-premise sales have grown each week since the Covid-19 pandemic, and have captured 57 percent of prior year Company total restaurant sales during the week ended April 22, 2020, adjusted to exclude the Midwest region acquisition that occurred in the first quarter of fiscal 2020
• Online ordering at Chili’s accounted for approximately 70 percent of all off-premise orders from March 26, 2020 to April 22, 2020
• Delivery sales are approximately 20 percent of total sales from March 26, 2020 to April 22, 2020
• Total restaurant sales represent the total sales dollars per week of Company-owned restaurants, including the Midwest region restaurants, as well as the percentage change from the prior week from April 1, 2020 to April 22, 2020:

	Week Ending																Percent Change from Prior Week
Total Restaurant Sales	04/01/20				04/08/20				04/15/20				04/22/20				04/01/20			04/08/20			04/15/20			04/22/20
Company-owned	USD	23.9			USD	26.2			USD	30.9			USD	34.3			12.7	%		9.6	%		17.9	%		11.0	%
Chili’s	22.2				24.3				28.3				32.2				13.3	%		9.5	%		16.5	%		13.8	%
Maggiano’s	1.7				1.9				2.6				2.1				6.3	%		11.8	%		36.8	%		(19.2)	%

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• Comparable restaurant sales represents the percentage change in Company-owned comparable restaurant sales for weekly results from April 01, 2020 to present:

	Fiscal 2020 versus Fiscal 2019 – Week Ending
Comparable Restaurant Sales	04/01/2020			04/08/2020			04/15/2020			04/22/2020
Company-owned	(64.6)	%		(59.7)	%		(53.1)	%		(46.8)	%
Chili’s	(62.9)	%		(57.8)	%		(51.6)	%		(42.5)	%
Maggiano’s	(77.0)	%		(73.7)	%		(64.6)	%		(73.7)	%

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As of April 24, 2020, we have total liquidity of USD 175 million, comprised of total cash and revolver availability. Given the current sales levels and reductions in expenses, we estimate an average cash burn level of approximately USD 5 million per week while our business is primarily operating as off-premise. As a precautionary measure, we continue to evaluate additional sources of capital as we navigate through this evolving situation, and the Company is filing an automatic shelf registration statement on Form S-3ASR to provide the Company with flexibility to access the public capital markets in order to respond to future financing and business opportunities if and when the Company deems appropriate.

Fiscal 2020 guidance is withdrawn as discussed on 2020/04/07.

Third quarter of fiscal 2020 results

Highlights include the following:

• Earnings per diluted share, on a GAAP basis, in the third quarter of fiscal 2020 decreased 38.2 percent to USD 0.81 compared to USD 1.31 in the third quarter of fiscal 2019 primarily due to reduced traffic and incremental expenses for employee assistance payments made in connection with the Covid-19 pandemic, partially offset by the impact of reduced performance-based compensation expenses
• Earnings per diluted share, excluding special items, in the third quarter of fiscal 2020 increased 1.6 percent to USD 1.28 compared to USD 1.26 in the third quarter of fiscal 2019 primarily due to reduced performance-based compensation expenses and income taxes partially offset by the traffic decline resulting from the Covid-19 pandemic (see non-GAAP reconciliation below)
• Operating income, as a percentage of Total revenues, was 4.8 percent in the third quarter of fiscal 2020 compared to 8.4 percent in the third quarter of fiscal 2019 primarily due to reduced traffic and incremental expenses for employee assistance payments made in connection with the Covid-19 pandemic, partially offset by the impact of reduced performance-based compensation expenses
• Restaurant operating margin, as a percentage of Company sales, was 12.8 percent in the third quarter of fiscal 2020 compared to 14.3 percent in the third quarter of fiscal 2019 (see non-GAAP reconciliation below
• Brinker International’s Company sales in the third quarter of fiscal 2020 increased 3.5 percent to USD 840.4 million compared to the third quarter of fiscal 2019 primarily due to increased capacity from the 116 Chili’s restaurants acquired in the first quarter of fiscal 2020, partially offset by the traffic decline resulting from the Covid-19 pandemic. Total revenues in the third quarter of fiscal 2020 increased 2.5 percent to USD 860.0 million compared to USD 839.3 million in the third quarter of fiscal 2019
• Comparable restaurant sales for company-owned and franchise restaurants experienced significant traffic declines due to the Covid-19 pandemic in the third quarter of fiscal 2020 compared to the third quarter of fiscal 2019 as follows:
  • Chili’s company-owned comparable restaurant sales (5.3 percent)
  • Maggiano’s company-owned comparable restaurant sales (9.9 percent)\
  • Chili’s U.S franchise comparable restaurant sales (6.3 percent)
  • Chili’s international franchise comparable restaurant sales (9.5 percent)
• Cash flows provided by operating activities in the thirty-nine week period ended March 25, 2020 were USD 237.8 million, and capital expenditures totaled USD 82.0 million resulting in free cash flow of USD 155.8 million.