Greetings, and welcome to the Bloomin' Brands Fiscal Second Quarter 2023 Earnings Conference Call. It is now my pleasure to introduce your host, Tara Kurian, Vice President, Corporate Finance and Investor Relations. Thank you, Mrs. Kurian, you may begin.

Thank you, and 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 2023 earnings release. It can also be found on our website at www.bloominbrands.com in the Investors section. Through this conference call, we will be presenting results on an adjusted basis. An explanation of our use of non-GAAP financial measures and reconciliations to the most directly comparable GAAP measures appear in our earnings release and on our website as previously described. Before we begin formal remarks, I'd like to remind everyone that part of our discussion today will include forward-looking statements, including a discussion of recent trends. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from our forward-looking statements. Some of these risks are mentioned in our earnings release, while others are discussed in our SEC filings, which are available at www.sec.gov. During today's call, we will provide a brief recap of our financial performance for the fiscal second quarter 2023, an overview of company highlights, and current thoughts on 2023 guidance. Once we've completed these remarks, we'll open the call for questions. With that, I'd now like to turn the call over to David Deno.

Well, thank you, Tara, and welcome to everyone listening today. As noted in this morning's earnings release, adjusted Q2 2023 diluted earnings per share was $0.74, which compares to $0.68 last year, up 9%. Combined U.S. comparable sales were up 80 basis points, with each of our casual dining brands having positive same-store sales. Importantly, this reflected 110 basis points outperformance on traffic versus the industry in Q2. I am pleased with our U.S. results as they continue to validate the strategic and operational framework we outlined for the year. This includes leveraging our leading off-premises business, the addition of sales layers, growing digital capabilities, and improving operational effectiveness and efficiencies. Turning to our international business, simply put, we had an exceptional quarter, led by our Brazil business. Q2 revenues were up 17% due to new unit openings, the Brazil tax benefit, and strong same-store sales growth. Additionally, operating profits and margins were up significantly versus a year ago. Our international business is very strong with lots of growth ahead. For us, international is a unique asset in casual dining. I'd like to thank our teams and the restaurants and the restaurant support center for their continued commitment to serving our guests. Your dedication to great hospitality service and experience is what makes our company so successful. As you look ahead to the rest of the year, we are focused on achieving our full-year guidance and objectives. We continue to have confidence in our strategy to elevate the customer experience while achieving sustainable sales and profit growth. As a reminder, our key strategic priorities are to drive same-store sales growth, maintain off-premises momentum, become a more digitally driven company, sustain the progress we've made in operating margins, and increase new restaurant openings. Improving same-store sales growth is a multifaceted approach. Sustainable traffic growth, especially at Outback, continues to be the primary focus. We have several initiatives in process to achieve our goal. As I mentioned last quarter, we are utilizing innovative technology to improve execution and consistency in our restaurants. Outback servers now use handheld technology, which allows them to spend more time with guests and deliver a differentiated guest experience. Our new cooking technology in the back of the house, including advanced grills and ovens, is on track to be completely rolled out in the third quarter. Our guests will experience improved product quality and overall meal pacing. Recently, the annual ACSI Restaurant Study of customer satisfaction was released, and Outback Steakhouse has emerged as the industry leader in casual dining, moving from number six in 2022 to number one in 2023. This is a tremendous accomplishment. The investments we are making are clearly paying dividends. Our guests recognize the actions we are taking to improve the overall guest experience. Over the long term, we expect this to drive sustainable traffic growth. Complementing our restaurant operations is more targeted marketing designed to drive guest frequency, leverage our heritage, and build brand equity. Earlier this year, Outback brought back the 'no rules just right' platform leaning into our Aussie roots. This is an attitude that goes beyond just marketing. It's how we reenergize our restaurants with new food offerings, exceptional service, and importantly, it ties back to our past. No rules just highlights our great menu and everyday value. For example, our current seasonal offerings feature new menu innovation that starts at an acceptable $16.99 price point. The third element to our sales-building strategy is introducing additional sales layers. For example, Fleming's launched 'Social Hour' earlier this year. This captures our creative food and drink offerings during the early evening. At Carrabba's, they have reintroduced their successful wine dinners. These highlight the quality and great value that Carrabba's is known for, and Bonefish has enhanced their weekend brunch and introduced a social hour. The response to these offerings has been positive, and we are seeing early success. The final sales-driving strategy is improving our asset base. We spent the last two years developing different scopes that can now be deployed depending on a restaurant's need. This is the beginning of a multi-year effort to touch a large percentage of our restaurants. We are on track to remodel over a hundred locations this year and will accelerate our remodel pace in years to come. All the initiatives I just described are designed to build sustainable sales and traffic growth now and over the long term. Turning to our second priority, we continue to capitalize on our leading off-premises business. Total off-premises was 24% of U.S. sales in Q2, and our third-party delivery business continues to perform well. Importantly, off-premises profit margins are comparable to margins of the in-restaurant business. Catering continues to be a growing opportunity for our brands, and the Carrabba's team is an industry leader in this space. We recently launched Carrabba's Bistro, which is a lunch-focused catering option featuring a wide variety of sandwiches that represents Carrabba's Italian heritage. We are very excited by the early results and believe this could represent growth opportunities beyond catering. We're also very pleased by the strong momentum we are seeing in catering at both Outback and Bonefish. As a result of all the above, we expect off-premises to remain a large part of our business. The third priority is to capitalize on our progress to become a more digitally driven company. Consistent with Q1, approximately 79% of Q2 total U.S. off-premises sales were through digital channels. This compares to approximately 75% of total U.S. off-premises sales in Q2 last year. We continue to see positive results with our new online ordering system and mobile app, which has three million users. Our fourth priority is to maintain the significant progress in operating margins over the last four years in a highly inflationary environment. During this time, we grew our adjusted operating margin from 4.6% in Q2 2019 to 7.8% today. This starts with growing healthy traffic across our in-restaurant and off-premises channels. We reduce the reliance on discounting and promotional limited-time offers and reallocate advertising spend to more targeted high-return digital channels. We remain disciplined in managing the middle of the P&L and are aggressively pursuing efficiencies in commodity, labor, and overhead. The final priority is to build more new restaurants, especially at Outback. Fleming's and in Brazil each have strong sales and profit margins and offer great returns. Domestically, Outback and Fleming’s have significant growth opportunities in core geographies. In Brazil, we can more than double our footprint. Today, we have 148 Outbacks, and we expect to have nearly 300 Outbacks in Brazil by 2028. More to come on new unit development on future calls, but we expect to have a meaningful increase in new restaurant development in 2024. In summary, we are pleased with the success in our business for the first two quarters of 2023. We are focused on achieving our annual goals while building a great business that will continue to thrive for many years to come. And with that, I will now turn the call over to Chris, who will provide more detail on Q2 and thoughts for the remainder of 2023.

Thanks, Dave, and good morning, everyone. I would like to start by providing a recap of our financial performance for the fiscal second quarter of 2023. Total revenues in Q2 were $1.15 billion, which was up 2% from 2022, driven by a 0.8% increase in U.S. comparable restaurant sales as well as a 4.1% comp sales increase in Brazil. In our U.S. brands, traffic was down 4.2% in Q2. This is in line with expectations, and importantly, we outperformed the industry by 110 basis points. Average check was up 5% in Q2 versus 2022. Benefits from average check will continue to move a little lower as the year progresses as menu pricing rolls off. We do not intend to replicate the same level of menu pricing this year as we took in 2022. At 24% of U.S. sales, Q2 off-premises increased 100 basis points from Q1. Importantly, the highly incremental third-party delivery business remains healthy and was 12% of U.S. sales in Q2. In terms of brand performance, Outback's total off-premises mix was 26% of sales, and Carrabba's was 33% of sales. Carrabba's already strong off-premises business has been supported by consistent growth in catering, which was over 5% of Carrabba’s sales in Q2. We are also seeing success in catering at our other brands and will continue to emphasize this sales layer across our portfolio moving forward. As it relates to other aspects of our Q2 financial performance, GAAP diluted earnings per share for the quarter was $0.70 versus negative $0.72 of diluted earnings per share in 2022. Adjusted diluted earnings per share was $0.74 versus $0.68 of adjusted diluted earnings per share in 2022. The difference between our GAAP and adjusted results in 2022 was almost entirely driven by the required accounting treatment for the Q2 2022 repurchase of a large portion of our convertible notes. Restaurant-level operating margins were 16.4% versus 15.5% last year. Domestically, the benefits from our pricing and productivity initiatives continue to offset inflation. The technology we are putting into our restaurants is having an increasingly positive impact on our margins as it relates to inflation. Commodity inflation was up 2.8% in Q2. We had favorability in dairy and produce, which helped to lower the overall inflation levels. We do expect commodities to be higher in the back half, particularly Q4 as we lapped some 2022 beef favorability that we were able to realize. We still expect total year inflation to be mid-single digits. Labor inflation was up 5.6%. This was in line with our full-year guidance expectations of mid-single digits. Restaurant operating expense inflation remained elevated at 7.6%, driven by higher advertising, repair and maintenance, and utilities. Also worth noting as it relates to restaurant margins, international segment restaurant margins were up 280 basis points. This was driven by the continued growth in our Brazil business as well as the Brazil tax exemption benefit. Total company operating income margin was 7.8% in Q2, flat from last year. Depreciation expense was up in Q2, consistent with our increased levels of capital spending and our investments in infrastructure. Overall, we feel good about our margins, and we remain well above pre-pandemic levels. Turning to our capital structure, total debt was $770 million at the end of Q2. Our current lease adjusted leverage ratio remains below 3 times. In terms of share repurchases year-to-date, we have repurchased 1.8 million shares of stock for $43 million. We still have $97 million remaining on the new authorization that the board approved on February 7th. The board also declared a quarterly dividend of $0.24 a share payable on August 25th. We are pleased with our balanced deployment of free cash flow and will continue to allocate dollars against additional debt pay down, share repurchases, and our dividend. Before I turn to our guidance, I wanted to provide an update on the latest developments in Brazil as it relates to our eligibility for the Brazil tax exemption we discussed in our February earnings call. During our February call, I mentioned that the Brazilian government enacted legislation that introduced a 0% rate for both corporate income taxes as well as certain federal gross revenue taxes for a period of five years. A Brazilian court order reinforced our eligibility for this exemption, and we began to realize this benefit in our financial results. Recently, the Brazilian legislature unexpectedly passed a new law that eliminated the ability for many businesses to benefit from this tax exemption impacting many restaurant companies, including our business in Brazil. This change will have the following impacts on our financial statements: first, we had a $4 million one-time tax benefit to our Q2 financial statements as we had to revalue certain Brazil deferred tax assets; second, we will now be subject to Brazil gross revenue taxes beginning in the fourth quarter of this year. This will reduce our fourth quarter operating income by approximately $6 million. Given the impact of the Q2 tax upside and the Q4 tax downside, largely offsetting this new legislation should not impact our ability to attain our 2023 full-year EPS guidance. Finally, beginning in 2024, Brazil will once again be subject to paying full corporate income tax at an approximate 34% rate. Although we are disappointed with this latest development, we remain on track to receive an approximate $0.25 EPS benefit from this tax exemption in our 2023 income statement, representing significant cash tax savings. Now turning to our 2023 and Q3 guidance. First, we are reaffirming all aspects of our full-year 2023 guidance previously reported on our February 16th earnings call, aside from a change in our tax rate assumption. Given the one-time tax benefit we received in the second quarter, we have lowered our full-year tax rate assumption to be between 12% and 13%. As it relates to the third quarter, we expect U.S. comparable restaurant sales to be 0.5% to 1.5%, and we expect Q3 adjusted earnings per share to be between $0.41 and $0.46. 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. And with that, we'll open up the call for questions.

Our first question came from Jeff Bernstein at Barclays. Please go ahead.

Great. Thank you very much. Two questions. First one, just thinking more broadly about the consumer. It seems like your comp trends were pretty much in line with expectations and ahead of the industry. I'm just wondering if you're seeing any changes in behavior that would apply to any or all of your brands, presumably any kind of softening. And then I had one follow-up.

Sure. Good morning, Jeff. We just see the consumer hanging in there. If you look at the economic reports and everything else about the economy, we're seeing that as well. The high end is doing well, and in our casual dining brands, we see the consumer hanging in there.

So, there's been no noticeable change in trajectory over the past few months, whether it's traffic or mix or anything like that. It seems like it's relatively stable.

Yeah. No. If you look at the mix line, I think, like we said, middle of Q4 of last year we turned negative in mix. We were down a couple hundred basis points in Q1 due to mix and still down a couple hundred basis points in Q2. I expect that negative mix trend to be somewhat consistent as we head throughout the year until we start to lap it in the middle of Q4. So, it's still negative. I think a lot of that on our part we believe is engineered, but there is probably some small element of consumer trade inherent in that mix number. But other than that, no. Our guidance implies if you look at Q3 there would be a tick up in traffic from where we were in Q2, and if you look at Q4, you could apply another tick up in traffic in Q4. So, there is an expectation that the consumer continues to hang in there and that our trends continue to improve as we do the things we need to do to improve our trends.

Understood. And then just the follow-up related to your commodity and pricing commentary; regarding commodities, you said still mid-single digit inflation, but I'm just wondering what your thoughts are specific to beef, which seems to garner outside attention, whether you expect any change. I think you're pretty well protected for this year, but as you start to think about 2024 regarding that and on the flip side, I think you said that your pricing won't be as aggressive in the second half of '23. So if you could just clarify what the pricing will be in the third and fourth quarters to mitigate those inflationary pressures.

Yeah, sure. The good news is that we've done an excellent job this year mitigating exposure to beef. One thing that I called out last quarter that I would continue to call out is that because we did have beef upside in the back half, particularly the fourth quarter of last year, we were able to take advantage of some of that favorability. We do have a more challenging lap from a commodity perspective in Q4. So, our commodities in Q4 will be a little more elevated in that 7% to 8% range versus the 3% or 2.8% that you saw here in Q2. So that's something to keep in mind for the balance of the year. But look, it's way too early to be talking about 2024. We see the same things you do as it relates to commodities, but our performance this year has shown that we can navigate uncertain environments in the commodity landscape and feel pretty good about that. In terms of pricing, I expect average checks to continue to tick down. In Q1, our average check was in that 6% range, Q2 it was in the 5% range. I wouldn't be surprised if Q3 lands in that 4% range. And then even lower than that in the 3% range in Q4. I would expect that check average to continue to decline, driven largely by menu pricing. Our menu pricing was pretty consistent in that 7% to 7.5% range over the first half of the year. I think it will tick down a little in Q3 and then even more in Q4; we'd probably exit the year in that 4% to 4.5% range in pricing. However, because we've had such success with productivity and due to being able to navigate the commodity environment effectively, our intention is not to take additional pricing for the balance of the year, which is why we're sticking to the guidance we've laid out for the full year.

Thank you.

Our next question came from Alex Slagle from Jefferies. Please, sir, go ahead.

Hi. Thank you. Good morning. I wanted to ask about the development plan and your expectations for the years ahead. It sounds like you're still looking for a material increase in '24, and the comments on Brazil getting near 300 units by '28. Are there any changes or alterations to your view at all on where that growth is coming from in the next few years, by brand or region? Or is that still kind of in line? And then just any comments on the remodels accelerating further in '24 and years ahead, if that's altered at all?

Yeah, sure. In a future call, we will provide greater visibility into our development plan, but it's very similar to what we've talked about in prior calls. We will see a meaningful step-up in development next year, particularly in Outback and Fleming’s, which we’re very excited about because both brands have a lot of white space ahead of them, especially in core markets. So, we will continue with our remodel plans in the U.S. as we upgrade our restaurants. The growth you'll see in new unit development is something we haven't provided to investors in quite some time, and we have the pipeline to prove it and the returns as well. Additionally, I can't say enough about the Brazil business; the sales and margins are strong, and at one point, we thought we could get to 100 Outbacks in Brazil, but we now think we can get to 300. It's got an unprecedented market position down there and is generating cash to build the new business. It’s primarily led by Outback, and we do have an Italian business down there we call Abbraccio, but Outback is the lion's share of development in Brazil. So, that business just continues to perform extremely well and we can do all this while maintaining our long-term cash distribution strategy of paying down debt, returning cash to shareholders, and spending capital within those plans. More to follow in future calls.

Thanks. As a follow-up to that, the international operating margin was up year-over-year, like $15 million in the first quarter, and another $6 million year-over-year here in the second quarter. I know there's some of the Brazil tax exemption benefit, but it seems like the underlying margin trend is really strong. Can you break that down a bit further and provide a read-through of how the margins are doing there just on a base basis?

Yes. They continue; even if you pull out the tax benefit—and again, it's going to be outsized—if you look at the international segment, the tax benefit from or the tax exemption benefit that we've been receiving is having a materially positive impact on their margins. But outside of that, the benefits we’re getting from check average and traffic in that business are driving their margin upside. Particularly when looking at lines like cost of goods sold, where we've seen pretty favorable conditions over the last several quarters. They're still experiencing inflation, but their inflation is in line with the trends we've seen here in the U.S. Given the high volumes generated by those businesses and the ability for them to generate strong sales and traffic growth, that's what's really driving the strong performance in the Brazil business.

Thank you.

Thank you. Our next question came from John Ivankoe, JP Morgan. Please, sir, go ahead.

I have a couple of questions. First, regarding COGs, there was a 200-basis point decline in the second quarter, which is significant for a restaurant company year-over-year. However, at least in the U.S., same-store traffic is negative. How do you view the potential to use gross margin to reinvest and drive traffic? I understand that 'no rules just right' starts at $16.99 if that's the correct price point. Philosophically, how do we reconcile the increasing gross margin with the declining same-store sales?

Yes. Well, first of all, I want to clarify that our traffic trends outperformed the industry. But I completely agree, John, managing the margin and traffic trade-off is important. When you have strong margin performance, you can reinvest that back into the business. As for why we’re seeing improvements in cost of sales, it's due to the productivity initiatives we've talked about with ovens and other improvements. The supply chain team has done a great job managing cost of sales. We're seeing that in our financials.

Okay. Understood. Secondly, in Brazil, it looked pretty consistent between the first and second quarters, but there was a noticeable year-over-year decline of over 4% between those two quarters. Is 4% a number you're happy with in Brazil? What does that kind of mean for traffic, and how is the Brazil consumer absorbing your expansion in the market?

The Brazil consumer is doing well. Each time we build a new restaurant, I tease our development team down there because their projections often surpass expectations. Every new restaurant we build exceeds its projections. Moreover, as we've seen in other businesses and markets, when entering smaller towns outside the major cities, being the primary player opens opportunities we didn't think were possible. Capital returns are strong, cash flow is robust, and the Brazilian consumer is in good shape.

And is there a ticket comment you can make on Brazil just so we know that we're pricing?

I don't have it off the top of my head, but we can certainly provide that to investors.

Okay, that's fine then. And the final point, regarding development remodels, can you at least provide a sense of guidance for CapEx in 2023 versus 2024?

It should be in the ballpark, John. We might see a slight increase as we uptick our remodels, but it's too early to call that. We've had significant spending this year on ovens and handhelds, which won't carry over into next year. Therefore, I think we'll remain in that range but might see a slight uptick.

Okay, thank you.

Our next question came from Sharon Zackfia, William Blair. Please, go ahead.

But I recall prior to the pandemic, you were looking to potentially sell the Brazilian business. I'm just wondering kind of philosophically where you are on key sell strategic alternatives for Brazil?

There really isn't a market for an IPO or sale right now in Brazil. As you heard from my earlier comment, we're thrilled with the direction of the business. However, it's more market-based, and we will always keep our options open regarding that business. Our current goal is to grow it as rapidly as possible, but there's no market for it right now.

Okay, thank you. Then, in the second half of the year, it sounds like you have different things planned. We saw Carrabba's lead and Fleming's lag, with Bonefish and Outback in between domestically from a comp perspective. Is that how you expect the second half of the year to progress? Or are there initiatives where you expect one concept to strengthen or another to taper off?

Let me talk about a couple concepts. First of all, Fleming's trends are very strong, even though they were negative in the quarter. They outperformed the fine dining category. If you look at their trends week to week, we see that business as very strong. Additionally, we see a nice addition to Fleming's with the private dining business, which we'll continue to develop. Carnabba's as well continues to do a terrific job in restaurant dining, catering, and off-premise. The main thing I want to stress is they've just introduced a line of Italian heritage sandwiches that are performing extremely well.

Okay, thank you.

Next question came from Jeff Farmer, Gordon Haskett. Please, go ahead.

Great, thanks. Good morning. Just focusing on the Brazil tax legislation, street estimates across revenue, operating income, EPS, basically every line item reflect the guidance you provided in early February. Should we be unwinding 100% of those impacts in our models for 2024 and beyond?

Yes, in 2024, we would resume paying full taxes back in Brazil. For the first three quarters of 2024, you'd face a $30 million reduction in sales, relatively evenly split, and a corresponding $15 million reduction in operating profit for the same period. In terms of taxes, anticipate about a $10 million to $12 million increase in tax expense spread over all four quarters of next year. It's a little lumpy, but not worth detailing any further.

Alright, that's helpful. Just one follow-up on operating expense inflation, which looks like it's come down slightly to 7.6%. How do you feel about operating expense inflation in the back half of the year?

Operating expense inflation should start to mitigate, probably into the mid-single digits. The elevated initial half of the year reflects some one-time costs related to utilities. As you start to lap those, it should improve in the latter part of the year, trending towards low to mid-single digits in that timeframe.

Alright, thank you.

It'll step down from Q3 to Q4.

Hi. Thank you. I wanted to ask about the shift in your traffic; you talked about intentionally reducing reliance on discounting, which has led to reduced traffic from price-conscious consumers. How are you replacing that traffic as you move towards positive traffic growth? Are you seeing higher visits from core customers or bringing in new customers? In this context, could you discuss your advertising strategy?

Yes, you're correct that we reduced our discounting, which has impacted our pricing-sensitive customers, but that was a planned move. We're replacing that traffic through our margin performance that allows reinvestment into product quality and service. Our ACSI ratings illustrate that we are sustainably improving traffic moving forward. We're taking a prudent approach with pricing to ensure that value is conveyed to consumers alongside exceptional food and service. While we will continue with some traditional advertising, we're focusing more on digital advertising to target both returning and new customers.

Okay. Understood. Do you see an increase in frequency among your dining guests and carryout customers? What kind of early indicators suggest where that traffic may be coming from?

We are seeing improved frequency among our dining and carryout guests, along with more reach through our third-party delivery improving traffic gains overall.

Our next questions come from Brian Harbour from Morgan Stanley. Please, sir, go ahead.

Chris, can you clarify any pressure expected for Q4 EPS? Is any pressure here related to the Brazil change or commodities, or are there any other drivers for Q4 EPS?

Yes, you lose the $6 million related to the Brazilian tax changes, which will affect patterns from previous months in terms of how you think about our fourth quarter. Importantly, commodity pressures are another factor that may not yet be fully recognized by some. Just a housekeeping note; we are in a 53-week year, and comp sales results for the fourth quarter will be reported on a 14-week basis.

Okay, got it, thank you. Regarding new ovens, grills, and handhelds, are you seeing impacts on labor costs or food costs, possibly in the form of reduced waste?

Yes, we are seeing improvements in food costs and labor efficiency, which positively affect our P&L, and we expect further gains as we continue rolling out the ovens this quarter. These investments in handhelds and ovens have significantly contributed to our productivity and margin improvement this year.

Thanks.

Our next question comes from Brian Vaccaro at Raymond James. Please, sir, go ahead.

I wanted to circle back on the new tech and equipment package. How many of your units had that package in place at the end of Q2? For those that have had it in place for six to nine months, can you quantify any benefits you're seeing in key operating metrics?

We are about three-quarters of the way through the Outback system and will be completing our rollout this quarter.

We had about 460 Outbacks with the package and heading into the quarter with a hundred or so remaining.

While for competitive reasons, I won't detail specific metrics, we’re already seeing improved customer service and satisfaction leading to better table turns, improved food quality, and better overall service in the P&L. Importantly, these enhancements will lead to increased customer traffic.

Looking into 2024, the new equipment provides us with more options to optimize labor models and kitchen configurations, presenting opportunities to enhance the operating model moving forward.

I also think it's worth noting that we can apply what we've learned at Outback to Carrabba’s business in the future.

That’s helpful. I noted significant improvements in the Outback guest satisfaction scores going from number six to number one. What areas of the guest experience improved the most?

Our internal data shows improvements in steak accuracy and customer satisfaction regarding how we’re cooking our steaks, along with service attentiveness and responsiveness to our customers. We want to see our managing partners engaging with customers in the restaurant.

Thank you. On advertising, what was the spend in Q2, and how does that compare to last year? What guidance do you embed for the second half spend?

In Q2, we spent about $27 million, which includes international; last year, we spent $23 million. You can expect year-over-year increases in advertising; it's a bit too early to determine specific levels, but expect increases in Q3 and Q4.

And on pricing, your second-half guidance assumes no additional pricing from here; can you remind us of pricing actions taken in Q2 or the first half of the year?

We took a small amount of pricing in Q2, which reduced the urgency for pricing in Q3 or Q4. Pricing was at low levels. In Q3 and Q4, we hold the option for pricing adjustments but are not anticipating material increases based on guidance provided.

Our next question came from Dennis Geiger for UBS.

I want to ask again about expected improvement in traffic trends and how satisfaction scores have improved. Any thoughts on the lag in conversion from improving scores to actual visits? How do you see this playing out over time?

Yes, this will build because our customers don’t come on a monthly basis; they visit a few times each year. Our frequent visitors will likely notice the improvements faster, but overall, this sustainable improvement in traffic will be supported by remodels and upgraded ambiance. We’ll be able to evaluate impact through remodelling sections of the country, starting in Florida.

Thank you. Just one last question; can you expand upon opportunities in the off-premise and delivery areas? What are your thoughts on those opportunities going forward?

The consumer wants convenience, and we've built our capital strategy around providing that. Through our technology enhancements, we’re making ordering easier for customers. The off-premise and third-party delivery business, particularly catering, is a significant opportunity we plan to invest further in because of strong consumer response.

Our next question comes from Andrew Strelzik from BMO Capital Market. Please go ahead.

Good morning, thank you. My first question is about Carrabba's development. Within your unit growth outlook, Outback and Fleming's have been great growth drivers, but any thoughts on potential growth for Carrabba's given the off-premise opportunity?

Yes, there’s an opportunity in Carrabba's. I generally prefer not to share publicly until we have a solid pipeline built, but there is potential for expansion. The performance has been terrific, which bodes well for future growth. However, we're currently focused on finalizing the pipeline at Fleming's, Brazil, and Outback.

Okay, great. Regarding competitive activity within the category, does it still feel rational, and with expectations for pricing to roll off, are you concerned about more aggressive actions across the category affecting your business?

In our categories, competition remains rational. We're not pursuing discounting; instead, we aim to build value through our other initiatives. Overall, it has been a rational business environment.

There are no further questions at this time. I would like to turn the floor back over to Mr. Deno for closing comments. Please, sir, go ahead.

Thank you, everybody, for listening and your interest in our business. We look forward to talking to you in October during our Q3 call. Take care.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a nice day.