Bloomin' Brands, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Management’s discussion and analysis of financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and the related notes. Unless the context otherwise indicates, as used in this report, the term the “Company,” “we,” “us,” “our” and other similar terms mean Bloomin’ Brands, Inc. and its subsidiaries. Cautionary Statement This Quarterly Report on Form 10-Q (the “Report”) includes statements that express our opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results and therefore are, or may be deemed to be, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements can generally be identified by the use of forward-looking terminology, including the terms “believes,” “estimates,” “anticipates,” “expects,” “feels,” “seeks,” “forecasts,” “projects,” “intends,” “plans,” “may,” “will,” “should,” “could” or “would” or, in each case, their negative or other variations or comparable terminology, although not all forward-looking statements are accompanied by such terms. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this Report and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, strategies and the industry in which we operate. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Although we base these forward-looking statements on assumptions that we believe are reasonable when made, we caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and industry developments may differ materially from statements made in or suggested by the forward-looking statements contained in this Report. In addition, even if our results of operations, financial condition and liquidity, and industry developments are consistent with the forward-looking statements contained in this Report, those results or developments may not be indicative of results or developments in subsequent periods. Important factors that could cause actual results to differ materially from statements made or suggested by forward-looking statements include, but are not limited to, the following: (i) Consumer reactions to public health and food safety issues; (ii) Minimum wage increases, additional mandated employee benefits and fluctuations in the cost and availability of employees; (iii) Our ability to recruit and retain high-quality leadership, restaurant-level management and team members; (iv) Economic and geopolitical conditions and their effects on consumer confidence and discretionary spending, consumer traffic, the cost and availability of credit and interest rates; (v) Our ability to compete in the highly competitive restaurant industry with many well-established competitors and new market entrants; (vi) Our ability to protect our information technology systems from interruption or security breach, including cybersecurity threats, and to protect consumer data and personal employee information; 26 Table of Contents BLOOMIN’ BRANDS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued (vii) Fluctuations in the price and availability of commodities, including supplier freight charges and restaurant distribution expenses, and other impacts of inflation and our dependence on a limited number of suppliers and distributors to meet our beef, pork, chicken and other major product supply needs; (viii) Our ability to preserve and grow the reputation and value of our brands, particularly in light of changes in consumer engagement with social media platforms and limited control with respect to the operations of our franchisees; (ix) The effects of international economic, political and social conditions and legal systems on our foreign operations and on foreign currency exchange rates; (x) Our ability to complete the Brazil franchise partnership transaction and the impact of such transaction on our future results; (xi) Our ability to comply with new corporate citizenship and sustainability reporting requirements and investor expectations or our failure to achieve any goals, targets or objectives that we establish with respect to corporate citizenship and sustainability matters; (xii) Our ability to effectively respond to changes in patterns of consumer traffic, including by maintaining relationships with third-party delivery apps and services, consumer tastes and dietary habits; (xiii) Our ability to comply with governmental laws and regulations, the costs of compliance with such laws and regulations and the effects of changes to applicable laws and regulations, including tax laws and unanticipated liabilities, and the impact of any litigation; (xiv) Our ability to implement our remodeling, relocation and expansion plans, due to uncertainty in locating and acquiring attractive sites on acceptable terms, obtaining required permits and approvals, recruiting and training necessary personnel, obtaining adequate financing and estimating the performance of newly opened, remodeled or relocated restaurants, and our cost savings plans to enable reinvestment in our business, due to uncertainty with respect to macroeconomic conditions and the efficiency that may be added by the actions we take; (xv) Seasonal and periodic fluctuations in our results and the effects of significant adverse weather conditions and other disasters or unforeseen events; (xvi) The effects of our leverage and restrictive covenants in our various credit facilities on our ability to raise additional capital to fund our operations, to make capital expenditures to invest in new or renovate restaurants and to react to changes in the economy or our industry; (xvii) Any impairment in the carrying value of our goodwill or other intangible or long-lived assets and its effect on our financial condition and results of operations; and (xviii) Such other factors as discussed in Part I, Item IA. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2023. Given these risks and uncertainties, we caution you not to place undue reliance on these forward-looking statements. Any forward-looking statement that we make in this Report speaks only as of the date of such statement, and we undertake no obligation to update any forward-looking statement or to publicly announce the results of any revision to any of those statements to reflect future events or developments. Comparisons of results for current and any prior 27 Table of Contents BLOOMIN’ BRANDS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued periods are not intended to express any future trends or indications of future performance, unless specifically expressed as such, and should only be viewed as historical data. Overview We are one of the largest casual dining restaurant companies in the world with a portfolio of leading, differentiated restaurant concepts. As of September 29, 2024, we owned and operated 1,173 restaurants and franchised 290 restaurants across 46 states, Guam and 13 countries. We have four founder-inspired concepts: Outback Steakhouse, Carrabba’s Italian Grill, Bonefish Grill and Fleming’s Prime Steakhouse & Wine Bar. Financial Overview - Our financial overview for the thirteen weeks ended September 29, 2024 includes the following: • U.S. combined and Outback Steakhouse comparable restaurant sales of (1.5)% and (1.3)%, respectively; • Decrease in Total revenues of (3.8)% as compared to the third quarter of 2023; • Operating income and restaurant-level operating margins of 1.7% and 12.5%, respectively, as compared to 5.4% and 13.8%, respectively, for the third quarter of 2023; • Operating income of $17.2 million as compared to $58.2 million in the third quarter of 2023; and • Diluted earnings per share of $0.08 as compared to $0.45 for the third quarter of 2023. Agreement to Sell Majority Ownership of our Brazil Operations - On November 8, 2024, we announced an agreement to sell 67% of our Brazil operations at a total enterprise valuation of R$2.06 billion Brazilian Reais, which equals R$1.4 billion Brazilian Reais (approximately $243 million in U.S. Dollars based on current exchange rates) to Buyer. We will retain an indirect 33% interest in our Brazil operations. The sale transaction is expected to close on or before December 31, 2024. Following the closing of the sale, our subsidiary will enter into amended and restated franchise agreements with the buyer and our Brazil restaurants will be operated as unconsolidated franchisees. See Note 15 - Subsequent Events of the Notes to Consolidated Financial Statements for additional details regarding the sale agreement. Key Financial Performance Indicators - Key measures that we use in evaluating our restaurants and assessing our business include the following: • Average restaurant unit volumes —average sales (excluding gift card breakage and the benefit of value added tax exemptions in Brazil) per restaurant to measure changes in customer traffic, pricing and development of the brand. • Comparable restaurant sales —year-over-year comparison of the change in sales volumes (excluding gift card breakage and the benefit of value added tax exemptions in Brazil) for Company-owned restaurants that are open 18 months or more in order to remove the impact of new restaurant openings in comparing the operations of existing restaurants. • System-wide sales —total restaurant sales volume for all Company-owned and franchise restaurants, regardless of ownership, to interpret the overall health of our brands. • Restaurant-level operating margin, Income from operations, Net income (loss) and Diluted earnings (loss) per share —financial measures utilized to evaluate our operating performance. Restaurant-level operating margin is a non-GAAP financial measure widely regarded in the industry as a useful metric to evaluate restaurant-level operating efficiency and performance of ongoing restaurant-level operations, and we use it for these purposes, overall and particularly within our two segments. Our 28 Table of Contents BLOOMIN’ BRANDS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued restaurant-level operating margin is expressed as the percentage of our Restaurant sales that Food and beverage costs, Labor and other related expense and Other restaurant operating expense (including advertising expenses) represent, in each case as such items are reflected in our Consolidated Statements of Operations and Comprehensive (Loss) Income. The following categories of revenue and operating expenses are not included in restaurant-level operating income and corresponding margin because we do not consider them reflective of operating performance at the restaurant-level within a period: (i) Franchise and other revenues, which are earned primarily from franchise royalties and other non-food and beverage revenue streams, such as rental and sublease income; (ii) Depreciation and amortization, which, although substantially all of which is related to restaurant-level assets, represent historical sunk costs rather than cash outlays for the restaurants; (iii) General and administrative expense, which includes primarily non-restaurant-level costs associated with support of the restaurants and other activities at our corporate offices; and (iv) Asset impairment charges and restaurant closing costs, which are not reflective of ongoing restaurant performance in a period. Restaurant-level operating margin excludes various expenses, as discussed above, that are essential to support the operations of our restaurants and may materially impact our Consolidated Statements of Operations and Comprehensive (Loss) Income. As a result, restaurant-level operating margin is not indicative of our consolidated results of operations and is presented exclusively as a supplement to, and not a substitute for, Net income (loss) or Income from operations. In addition, our presentation of restaurant-level operating margin may not be comparable to similarly titled measures used by other companies in our industry. • Adjusted restaurant-level operating margin, Adjusted income from operations, Adjusted net income and Adjusted diluted earnings per share —non-GAAP financial measures utilized to evaluate our operating performance. We believe that our use of these non-GAAP financial measures permits investors to assess the operating performance of our business relative to our performance based on U.S. GAAP results and relative to other companies within the restaurant industry by isolating the effects of certain items that may vary from period to period without correlation to core operating performance or that vary widely among similar companies. However, our inclusion of these adjusted measures should not be construed as an indication that our future results will be unaffected by unusual or infrequent items or that the items for which we have made adjustments are unusual or infrequent or will not recur. We believe that the disclosure of these non-GAAP measures is useful to investors as they form part of the basis for how our management team and Board evaluate our operating performance, allocate resources and administer employee incentive plans. 29 Table of Contents BLOOMIN’ BRANDS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued Selected Operating Data - The table below presents the number of our restaurants in operation as of the periods indicated: Number of restaurants (at end of the period): SEPTEMBER 29, 2024 SEPTEMBER 24, 2023 U.S. Outback Steakhouse Company-owned 550 557 Franchised 123 127 Total 673 684 Carrabba’s Italian Grill Company-owned 192 199 Franchised 18 19 Total 210 218 Bonefish Grill Company-owned 162 170 Franchised 4 5 Total 166 175 Fleming’s Prime Steakhouse & Wine Bar Company-owned 63 64 Aussie Grill Company-owned 4 7 Franchised 2 — Total 6 7 U.S. total 1,118 1,148 International Company-owned Outback Steakhouse - Brazil (1) 172 153 Other (1) 30 37 Franchised Outback Steakhouse - South Korea 94 92 Other 49 47 International total 345 329 System-wide total 1,463 1,477 System-wide total - Company-owned 1,173 1,187 System-wide total - Franchised 290 290 ____________________ (1) The restaurant counts for Brazil, including Abbraccio and Aussie Grill restaurants within International Company-owned Other, are reported as of August 31, 2024 and 2023, respectively, to correspond with the balance sheet dates of this subsidiary. 30 Table of Contents BLOOMIN’ BRANDS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued Results of Operations REVENUES Restaurant Sales - Following is a summary of the change in Restaurant sales for the periods indicated: (dollars in millions) THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED For the periods ended September 24, 2023 $ 1,064.4 $ 3,430.0 Change from: Restaurant closures (1) (31.6) (92.8) Comparable restaurant sales (2) (18.1) (65.5) Effect of foreign currency translation (16.5) (9.5) Restaurant openings (3) 26.5 64.8 Brazil value added tax exemptions (4) 0.4 (18.9) For the periods ended September 29, 2024 $ 1,025.1 $ 3,308.1 ________________ (1) The thirteen and thirty-nine weeks ended September 29, 2024 include the restaurant sales impact from the closure of 58 and 67 restaurants since June 25, 2023 and December 25, 2022, respectively. (2) Comparable restaurant sales for the thirty-nine weeks ended September 29, 2024 includes an estimated $16.5 million negative impact from a one-week shift in the fiscal calendar. (3) The thirteen and thirty-nine weeks ended September 29, 2024 include restaurant sales from 56 and 75 new restaurants, respectively, not included in our comparable restaurant sales base. (4) During 2023, we were eligible for certain value added tax exemptions under the Brazil tax legislation until August 2023. Beginning on May 23, 2024, we are eligible for certain value added tax exemptions under the new Brazil tax legislation. See Note 12 - Income Taxes of the Notes to Consolidated Financial Statements for details regarding value added tax exemptions in connection with Brazil tax legislation. Average Restaurant Unit Volumes and Operating Weeks - Following is a summary of the average restaurant unit volumes and operating weeks for the periods indicated: THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED SEPTEMBER 29, 2024 SEPTEMBER 24, 2023 SEPTEMBER 29, 2024 SEPTEMBER 24, 2023 Average restaurant unit volumes (weekly): U.S. Outback Steakhouse $ 72,108 $ 72,072 $ 77,952 $ 78,325 Carrabba’s Italian Grill $ 64,038 $ 64,067 $ 68,867 $ 68,348 Bonefish Grill $ 56,477 $ 58,111 $ 62,342 $ 64,343 Fleming’s Prime Steakhouse & Wine Bar $ 95,755 $ 92,452 $ 106,296 $ 108,066 International Outback Steakhouse - Brazil (1) $ 52,606 $ 64,554 $ 56,351 $ 62,030 Operating weeks: U.S. Outback Steakhouse 7,148 7,269 21,461 21,947 Carrabba’s Italian Grill 2,496 2,587 7,534 7,761 Bonefish Grill 2,106 2,210 6,380 6,676 Fleming’s Prime Steakhouse & Wine Bar 819 832 2,474 2,522 International Outback Steakhouse - Brazil 2,219 1,982 6,387 5,661 ____________________ (1) Translated at average exchange rates of 5.50 and 4.85 for the thirteen weeks ended September 29, 2024 and September 24, 2023, respectively, and 5.17 and 5.03 for the thirty-nine weeks ended September 29, 2024 and September 24, 2023, respectively. Excludes the benefit of the Brazil value added tax exemptions discussed in Note 12 - Income Taxes of the Notes to Consolidated Financial Statements. 31 Table of Contents BLOOMIN’ BRANDS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued Comparable Restaurant Sales, Traffic and Average Check Per Person (Decreases) Increases - Following is a summary of comparable restaurant sales, traffic and average check per person (decreases) increases for the periods indicated: THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED SEPTEMBER 29, 2024 (1) SEPTEMBER 24, 2023 SEPTEMBER 29, 2024 (1) SEPTEMBER 24, 2023 Year over year percentage change: Comparable restaurant sales (restaurants open 18 months or more): U.S. (2) Outback Steakhouse (1.3) % (1.1) % (0.9) % 1.6 % Carrabba’s Italian Grill (1.5) % 3.0 % 0.4 % 4.4 % Bonefish Grill (4.1) % (0.5) % (3.7) % 2.2 % Fleming’s Prime Steakhouse & Wine Bar 1.2 % (4.1) % (0.8) % (0.9) % Combined U.S. (1.5) % (0.5) % (1.1) % 1.9 % International Outback Steakhouse - Brazil (3)(4) (3.6) % 4.1 % (1.9) % 7.3 % Traffic: U.S. Outback Steakhouse (3.9) % (6.1) % (4.0) % (4.3) % Carrabba’s Italian Grill (3.4) % (0.1) % (2.7) % 0.3 % Bonefish Grill (8.5) % (5.7) % (6.7) % (3.1) % Fleming’s Prime Steakhouse & Wine Bar (7.3) % (4.4) % (6.7) % (2.1) % Combined U.S. (4.4) % (4.7) % (4.2) % (3.1) % International Outback Steakhouse - Brazil (3) (7.7) % (1.0) % (4.9) % (1.0) % Average check per person (5): U.S. Outback Steakhouse 2.6 % 5.0 % 3.1 % 5.9 % Carrabba’s Italian Grill 1.9 % 3.1 % 3.1 % 4.1 % Bonefish Grill 4.4 % 5.2 % 3.0 % 5.3 % Fleming’s Prime Steakhouse & Wine Bar 8.5 % 0.3 % 5.9 % 1.2 % Combined U.S. 2.9 % 4.2 % 3.1 % 5.0 % International Outback Steakhouse - Brazil (3) 3.4 % 5.1 % 2.4 % 8.3 % ____________________ (1) For Q3 2024, U.S. comparable restaurant sales, traffic and average check per person compare the thirteen weeks from July 1, 2024 through September 29, 2024 to the thirteen weeks from July 3, 2023 through October 1, 2023, and for the thirty-nine weeks from January 1, 2024 through September 29, 2024 to the thirty-nine weeks from January 2, 2023 through October 1, 2023. (2) Relocated restaurants closed more than 60 days are excluded from comparable restaurant sales until at least 18 months after reopening. (3) Excludes the effect of fluctuations in foreign currency rates and the benefit of the Brazil value added tax exemptions discussed in Note 12 - Income Taxes of the Notes to Consolidated Financial Statements. (4) Includes trading day impact from calendar period reporting. (5) Includes the impact of menu pricing changes, product mix and discounts. 32 Table of Contents BLOOMIN’ BRANDS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued COSTS AND EXPENSES The following table sets forth the percentages of certain items in our Consolidated Statements of Operations in relation to Restaurant sales or Total revenues for the periods indicated: THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED SEPTEMBER 29, 2024 SEPTEMBER 24, 2023 SEPTEMBER 29, 2024 SEPTEMBER 24, 2023 Revenues Restaurant sales 98.7 % 98.6 % 98.7 % 98.6 % Franchise and other revenues 1.3 1.4 1.3 1.4 Total revenues 100.0 100.0 100.0 100.0 Costs and expenses Food and beverage (1) 29.7 30.2 30.2 30.8 Labor and other related (1) 30.5 29.5 29.8 28.6 Other restaurant operating (1) 27.3 26.4 25.7 24.4 Depreciation and amortization 4.8 4.4 4.4 4.1 General and administrative 6.6 5.8 5.9 5.5 Provision for impaired assets and restaurant closings 0.5 (0.6) 1.0 (*) Total costs and expenses 98.3 94.6 95.8 92.3 Income from operations 1.7 5.4 4.2 7.7 Loss on extinguishment of debt (*) — (4.1) — Interest expense, net (1.6) (1.2) (1.3) (1.1) Income (loss) before (benefit) provision for income taxes 0.1 4.2 (1.2) 6.6 (Benefit) provision for income taxes (0.6) (*) 0.1 0.6 Net income (loss) 0.7 4.2 (1.3) 6.0 Less: net income attributable to noncontrolling interests * 0.1 0.1 0.1 Net income (loss) attributable to Bloomin’ Brands 0.7 % 4.1 % (1.4) % 5.9 % ____________________ (1) As a percentage of Restaurant sales. * Less than 1/10th of one percent of Total revenues. Thirteen weeks ended September 29, 2024 as compared to thirteen weeks ended September 24, 2023 Food and beverage cost decreased as a percentage of Restaurant sales primarily due to 1.1% from increases in average check per person driven by an increase in menu pricing and 0.2% from cost-saving and productivity initiatives. These decreases were partially offset by an increase as a percentage of Restaurant sales of 0.6% from commodity inflation. Labor and other related expense increased as a percentage of Restaurant sales primarily due to 1.7% from higher hourly and field management labor costs, primarily due to wage rate inflation, partially offset by a decrease of 0.6% from an increase in average check per person. Other restaurant operating expense increased as a percentage of Restaurant sales primarily due to 0.7% from higher restaurant-level operating and supply expenses, primarily due to inflation, and 0.2% from higher pre-opening expense. These increases were partially offset by decreases as a percentage of Restaurant sales of 0.2% from an increase in average check per person and 0.2% from certain cost-saving and productivity initiatives. Depreciation and amortization expense increased primarily due to restaurant development and technology projects. 33 Table of Contents BLOOMIN’ BRANDS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued General and administrative expense increased as a percentage of Total revenues primarily due to increases in professional fees and executive transition costs. Provision for impaired assets and restaurant closings increased primarily due to impairment and closure charges in connection with the Q2 2024 decision to close nine restaurants in Hong Kong and a net gain in Q3 2023 of $6.7 million in connection with the lease termination and closure of one U.S. restaurant. Interest expense, net increased primarily due to higher balances and interest rates on the unhedged portion of our revolving credit facility partially offset by a decrease in interest expense from the 2025 Notes Partial Repurchase. Benefit for income taxes for the thirteen weeks ended September 29, 2024 includes: (i) the impact of changes to the estimate of forecasted annual pre-tax book income relative to the prior quarter in 2024, (ii) the benefit of FICA tax credits on certain tipped wages and (iii) the temporary reduction in the Brazilian income tax rate from 34% to 0% under the new Brazil tax legislation. Thirty-nine weeks ended September 29, 2024 as compared to thirty-nine weeks ended September 24, 2023 Food and beverage cost decreased as a percentage of Restaurant sales primarily due to 1.3% from increases in average check per person driven by an increase in menu pricing and 0.4% from cost-saving and productivity initiatives. These decreases were partially offset by increases as a percentage of Restaurant sales of 0.4% from unfavorable product mix and 0.4% from commodity inflation. Labor and other related expense increased as a percentage of Restaurant sales primarily due to 1.8% from higher hourly and field management labor costs, primarily due to wage rate inflation, partially offset by a decrease of 0.6% from an increase in average check per person. Other restaurant operating expense increased as a percentage of Restaurant sales primarily due to: (i) 1.0% from higher restaurant-level operating and supply expenses, primarily due to inflation, (ii) 0.4% from higher advertising expense and (iii) 0.2% from higher pre-opening expense. These increases were partially offset by decreases as a percentage of Restaurant sales of 0.3% from an increase in average check per person and 0.2% from certain cost-saving and productivity initiatives. Depreciation and amortization expense increased primarily due to restaurant development and technology projects. General and administrative expense increased as a percentage of Total revenues primarily due to increases in professional fees and executive transition costs. Provision for impaired assets and restaurant closings increased primarily due to impairment and closure charges in connection with the Q2 2024 decision to close nine restaurants in Hong Kong and the Q4 2023 decision to close 36 older, predominately underperforming restaurants within the U.S. segment. Loss on extinguishment of debt during the thirty-nine weeks ended September 29, 2024 was in connection with the 2025 Notes Partial Repurchase, which is described in further detail within Note 7 - Convertible Senior Notes of the Notes to Consolidated Financial Statements. Interest expense, net increased primarily due to higher balances and interest rates on the unhedged portion of our revolving credit facility partially offset by a decrease in interest expense from the 2025 Notes Partial Repurchase and interest income in connection with the Brazil judicial deposit. 34 Table of Contents BLOOMIN’ BRANDS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued Provision for income taxes for the thirty-nine weeks ended September 29, 2024 includes the impact of nondeductible losses associated with the 2025 Notes Partial Repurchase which, relative to a pre-tax book loss during the period, resulted in a negative effective income tax rate. SEGMENT PERFORMANCE The following is a summary of reporting segments: REPORTABLE SEGMENT (1) CONCEPT GEOGRAPHIC LOCATION U.S. Outback Steakhouse United States of America Carrabba’s Italian Grill Bonefish Grill Fleming’s Prime Steakhouse & Wine Bar International Outback Steakhouse Brazil, Hong Kong/China Carrabba’s Italian Grill (Abbraccio) Brazil _________________ (1) Includes franchise locations. Revenues for both segments include only transactions with customers and exclude intersegment revenues. Excluded from Income from operations for U.S. and international are certain legal and corporate costs not directly related to the performance of the segments, most stock-based compensation expenses, a portion of insurance expenses and certain bonus expenses. Refer to Note 14 - Segment Reporting of the Notes to Consolidated Financial Statements for reconciliations of segment income from operations to the consolidated operating results. Restaurant-level operating margin is widely regarded in the industry as a useful non-GAAP measure to evaluate restaurant-level operating efficiency and performance of ongoing restaurant-level operations, and we use it for these purposes, overall and particularly within our two segments. See the Overview-Key Financial Performance Indicators and Non-GAAP Financial Measures sections of Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional details regarding the calculation of restaurant-level operating margin. Summary financial data - Following is a summary of financial data by segment for the periods indicated: U.S. INTERNATIONAL THIRTEEN WEEKS ENDED THIRTEEN WEEKS ENDED (dollars in thousands) SEPTEMBER 29, 2024 SEPTEMBER 24, 2023 SEPTEMBER 29, 2024 SEPTEMBER 24, 2023 Revenues Restaurant sales $ 877,052 $ 901,138 $ 148,038 $ 163,275 Franchise and other revenues 10,273 11,834 3,408 3,586 Total revenues $ 887,325 $ 912,972 $ 151,446 $ 166,861 Income from operations $ 38,853 $ 68,014 $ 15,608 $ 22,034 Operating income margin 4.4 % 7.4 % 10.3 % 13.2 % Restaurant-level operating income $ 100,315 $ 114,869 $ 31,210 $ 32,404 Restaurant-level operating margin 11.4 % 12.7 % 21.1 % 19.8 % 35 Table of Contents BLOOMIN’ BRANDS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued U.S. INTERNATIONAL THIRTY-NINE WEEKS ENDED THIRTY-NINE WEEKS ENDED (dollars in thousands) SEPTEMBER 29, 2024 SEPTEMBER 24, 2023 SEPTEMBER 29, 2024 SEPTEMBER 24, 2023 Revenues Restaurant sales $ 2,870,036 $ 2,975,145 $ 438,106 $ 454,832 Franchise and other revenues 34,566 36,052 10,256 11,244 Total revenues $ 2,904,602 $ 3,011,197 $ 448,362 $ 466,076 Income from operations $ 216,014 $ 304,265 $ 30,496 $ 67,028 Operating income margin 7.4 % 10.1 % 6.8 % 14.4 % Restaurant-level operating income $ 398,746 $ 457,533 $ 80,411 $ 96,092 Restaurant-level operating margin 13.9 % 15.4 % 18.4 % 21.1 % Restaurant sales - Following is a summary of the change in segment Restaurant sales for the periods indicated: U.S. INTERNATIONAL THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED (dollars in millions) (dollars in millions) For the periods ended September 24, 2023 $ 901.1 $ 2,975.1 For the periods ended September 24, 2023 $ 163.3 $ 454.9 Change from: Change from: Restaurant closures (1) (26.2) (83.8) Effect of foreign currency translation (16.5) (9.5) Comparable restaurant sales (2) (13.5) (57.2) Restaurant closures (1) (5.4) (9.0) Restaurant openings (3) 15.7 35.9 Comparable restaurant sales (4.6) (8.3) For the periods ended September 29, 2024 $ 877.1 $ 2,870.0 Restaurant openings (3) 10.8 28.9 Brazil value added tax exemptions (4) 0.4 (18.9) For the periods ended September 29, 2024 $ 148.0 $ 438.1 ____________________ (1) The thirteen weeks ended September 29, 2024 includes the restaurant sales impact from the closure of 47 U.S. and 11 international restaurants since June 25, 2023. The thirty-nine weeks ended September 29, 2024 includes the restaurant sales impact from the closure of 56 U.S. and 11 international restaurants since December 25, 2022. (2) U.S. comparable restaurant sales for the thirty-nine weeks ended September 29, 2024 includes an estimated $16.5 million negative impact from a one-week shift in the fiscal calendar. (3) The thirteen weeks ended September 29, 2024 includes restaurant sales from 18 U.S. and 38 international new restaurants not included in our comparable restaurant sales base. The thirty-nine weeks ended September 29, 2024 includes restaurant sales from 24 U.S. and 51 international new restaurants not included in our comparable restaurant sales base. (4) During 2023, we were eligible for certain value added tax exemptions under the Brazil tax legislation until August 2023. Beginning on May 23, 2024, we are eligible for certain value added tax exemptions under the new Brazil tax legislation. See Note 12 - Income Taxes of the Notes to Consolidated Financial Statements for details regarding value added tax exemptions in connection with Brazil tax legislation. Income from operations U.S. - The decrease in U.S. Income from operations generated during the thirteen weeks ended September 29, 2024 as compared to the thirteen weeks ended September 24, 2023 was primarily due to: (i) lower restaurant sales, as discussed above, (ii) higher labor, operating and commodity costs, primarily due to inflation, (iii) a lease termination gain in Q3 2023, (iv) higher advertising expense and professional fees and (v) unfavorable product mix. These decreases were partially offset by increases from an increase in average check per person and the impact of certain cost-saving and productivity initiatives. 36 Table of Contents BLOOMIN’ BRANDS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued The decrease in U.S. Income from operations generated during the thirty-nine weeks ended September 29, 2024 as compared to the thirty-nine weeks ended September 24, 2023 was primarily due to: (i) lower restaurant sales, as discussed above, (ii) higher labor, operating and commodity costs, primarily due to inflation, (iii) higher impairment, closure costs and severance, including a lease termination gain in Q3 2023, (iv) unfavorable product mix and (v) higher advertising expense. These decreases were partially offset by increases from an increase in average check per person and the impact of certain cost-saving and productivity initiatives. International - The decrease in international Income from operations generated during the thirteen weeks ended September 29, 2024 as compared to the thirteen weeks ended September 24, 2023 was primarily due to: (i) lower restaurant sales, as discussed above, (ii) higher closure costs and severance and (iii) higher operating, labor and commodity costs, primarily due to inflation. These decreases were partially offset by: (i) favorable product mix, (ii) an increase in average check per person and (iii) lower advertising expense. The decrease in international Income from operations generated during the thirty-nine weeks ended September 29, 2024 as compared to the thirty-nine weeks ended September 24, 2023 was primarily due to: (i) higher impairment and closure costs, (ii) lower restaurant sales, as discussed above, (iii) higher operating, labor and commodity costs, primarily due to inflation and (iv) a lower benefit from value added tax exemptions in Brazil. These decreases were partially offset by: (i) an increase in average check per person, (ii) favorable product mix and (iii) lower advertising expense. Non-GAAP Financial Measures Consolidated Restaurant-level Operating Income and Adjusted Restaurant-level Operating Income and Corresponding Margins Non-GAAP Reconciliations - The following table reconciles consolidated Income from operations and the corresponding margin to restaurant-level operating income and adjusted restaurant-level operating income and the corresponding margins for the periods indicated: Consolidated THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED (dollars in thousands) SEPTEMBER 29, 2024 SEPTEMBER 24, 2023 SEPTEMBER 29, 2024 SEPTEMBER 24, 2023 Income from operations $ 17,210 $ 58,216 $ 140,434 $ 268,295 Operating income margin 1.7 % 5.4 % 4.2 % 7.7 % Less: Franchise and other revenues 13,681 15,420 44,822 47,296 Plus: Depreciation and amortization 50,208 47,998 149,015 141,865 General and administrative 68,485 62,246 196,413 191,408 Provision for impaired assets and restaurant closings 5,597 (6,008) 32,731 (857) Restaurant-level operating income $ 127,819 $ 147,032 $ 473,771 $ 553,415 Restaurant-level operating margin 12.5 % 13.8 % 14.3 % 16.1 % Adjustments: Asset impairments and closure-related charges — — 434 — Partner compensation (1) — 1,894 — 1,894 Total restaurant-level operating income adjustments — 1,894 434 1,894 Adjusted restaurant-level operating income $ 127,819 $ 148,926 $ 474,205 $ 555,309 Adjusted restaurant-level operating margin 12.5 % 14.0 % 14.3 % 16.2 % ____________________ (1) Costs incurred in connection with the transition to a new partner compensation program. 37 Table of Contents BLOOMIN’ BRANDS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued Segment Restaurant-level and Adjusted Restaurant-level Operating Income and Corresponding Margins Non-GAAP Reconciliations - The following tables reconcile segment Income from operations and the corresponding margin to segment restaurant-level operating income and adjusted restaurant-level operating income and the corresponding margins for the periods indicated: U.S. THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED (dollars in thousands) SEPTEMBER 29, 2024 SEPTEMBER 24, 2023 SEPTEMBER 29, 2024 SEPTEMBER 24, 2023 Income from operations $ 38,853 $ 68,014 $ 216,014 $ 304,265 Operating income margin 4.4 % 7.4 % 7.4 % 10.1 % Less: Franchise and other revenues 10,273 11,834 34,566 36,052 Plus: Depreciation and amortization 41,922 39,829 122,506 117,368 General and administrative 27,945 24,868 79,853 72,809 Provision for impaired assets and restaurant closings 1,868 (6,008) 14,939 (857) Restaurant-level operating income $ 100,315 $ 114,869 $ 398,746 $ 457,533 Restaurant-level operating margin 11.4 % 12.7 % 13.9 % 15.4 % Adjustments: Asset impairments and closure-related charges — — 434 — Partner compensation (1) — 1,894 — 1,894 Total restaurant-level operating income adjustments — 1,894 434 1,894 Adjusted restaurant-level operating income $ 100,315 $ 116,763 $ 399,180 $ 459,427 Adjusted restaurant-level operating margin 11.4 % 13.0 % 13.9 % 15.4 % ____________________ (1) Costs incurred in connection with the transition to a new partner compensation program. International THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED (dollars in thousands) SEPTEMBER 29, 2024 SEPTEMBER 24, 2023 SEPTEMBER 29, 2024 SEPTEMBER 24, 2023 Income from operations $ 15,608 $ 22,034 $ 30,496 $ 67,028 Operating income margin 10.3 % 13.2 % 6.8 % 14.4 % Less: Franchise and other revenues 3,408 3,586 10,256 11,244 Plus: Depreciation and amortization 6,184 6,231 20,140 18,275 General and administrative 9,098 7,725 22,240 22,033 Provision for impaired assets and restaurant closings 3,728 — 17,791 — Restaurant-level operating income $ 31,210 $ 32,404 $ 80,411 $ 96,092 Restaurant-level operating margin 21.1 % 19.8 % 18.4 % 21.1 % 38 Table of Contents BLOOMIN’ BRANDS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued Adjusted Restaurant-level Operating Margin Non-GAAP Reconciliations (continued) - The following tables present the percentages of certain operating cost financial statement line items in relation to Restaurant sales for the periods indicated: THIRTEEN WEEKS ENDED SEPTEMBER 29, 2024 SEPTEMBER 24, 2023 REPORTED ADJUSTED REPORTED ADJUSTED (1) Restaurant sales 100.0 % 100.0 % 100.0 % 100.0 % Food and beverage 29.7 % 29.7 % 30.2 % 30.2 % Labor and other related 30.5 % 30.5 % 29.5 % 29.4 % Other restaurant operating 27.3 % 27.3 % 26.4 % 26.4 % Restaurant-level operating margin 12.5 % 12.5 % 13.8 % 14.0 % THIRTY-NINE WEEKS ENDED SEPTEMBER 29, 2024 SEPTEMBER 24, 2023 REPORTED ADJUSTED (1) REPORTED ADJUSTED (1) Restaurant sales 100.0 % 100.0 % 100.0 % 100.0 % Food and beverage 30.2 % 30.2 % 30.8 % 30.8 % Labor and other related 29.8 % 29.8 % 28.6 % 28.6 % Other restaurant operating 25.7 % 25.7 % 24.4 % 24.4 % Restaurant-level operating margin 14.3 % 14.3 % 16.1 % 16.2 % _________________ (1) See the Consolidated Restaurant-level Operating Income and Adjusted Restaurant-level Operating Income and Corresponding Margins Non-GAAP Reconciliations table above for details regarding restaurant-level operating margin adjustments. All restaurant-level operating margin adjustments for the periods presented were recorded within Labor and other related expense. 39 Table of Contents BLOOMIN’ BRANDS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued Adjusted Income from Operations Non-GAAP Reconciliations - The following table reconciles Income from operations and the corresponding margin to adjusted income from operations and the corresponding margin for the periods indicated: THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED (dollars in thousands) SEPTEMBER 29, 2024 SEPTEMBER 24, 2023 SEPTEMBER 29, 2024 SEPTEMBER 24, 2023 Income from operations $ 17,210 $ 58,216 $ 140,434 $ 268,295 Operating income margin 1.7 % 5.4 % 4.2 % 7.7 % Adjustments: Total restaurant-level operating income adjustments (1) — 1,894 434 1,894 Asset impairments and closure-related charges (2) 5,127 (6,586) 33,873 (6,586) Executive transition costs (3) 4,121 — 4,121 — Strategic initiative fees (4) 3,000 — 4,000 — Transaction-related expenses (5) 1,490 — 1,490 — Other (6) — 3,436 — 3,436 Total income from operations adjustments 13,738 (1,256) 43,918 (1,256) Adjusted income from operations $ 30,948 $ 56,960 $ 184,352 $ 267,039 Adjusted operating income margin 3.0 % 5.3 % 5.5 % 7.7 % _________________ (1) See the Consolidated Restaurant-level Operating Income and Adjusted Restaurant-level Operating Income and Corresponding Margins Non-GAAP Reconciliations table above for details regarding restaurant-level operating income adjustments. (2) The thirteen and thirty-nine weeks ended September 29, 2024 include asset impairment, closure costs and severance primarily in connection with the Q2 2024 decision to close nine restaurants in Hong Kong. The thirty-nine weeks ended September 29, 2024 also includes asset impairment, closure costs and severance in connection with the Q4 2023 decision to close 36 older, predominately underperforming U.S. restaurants. The thirteen and thirty-nine weeks ended September 24, 2023 include a lease termination gain and related restaurant closure costs. (3) Compensation costs and professional fees related to our CEO transition and severance related to other executive level changes. (4) Represents fees incurred in connection with a project-based strategic initiative. The costs incurred represent third-party consulting fees related to a strategic initiative to develop revenue growth management capabilities for Outback Steakhouse and are included in General and administrative expense. We expect to incur additional fees for this project for the remainder of 2024. Given the magnitude and scope of this initiative and that it is not expected to recur in the foreseeable future after 2024, we consider these incremental expenses to be distinct from other consulting fees that we incur in the ordinary course of business and not reflective of the ongoing costs to operate our business or operating performance in the period. (5) Costs incurred in connection with the strategic review and agreement to sell the majority ownership of our Brazil operations and pending franchise partnership transaction. (6) Primarily includes professional fees, severance and other costs not correlated to our core operating performance during the period. 40 Table of Contents BLOOMIN’ BRANDS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued Adjusted Net Income and Adjusted Diluted Earnings Per Share Non-GAAP Reconciliations - The following table reconciles Net income (loss) attributable to Bloomin’ Brands to adjusted net income and adjusted diluted earnings per share for the periods indicated: THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED (in thousands, except per share data) SEPTEMBER 29, 2024 SEPTEMBER 24, 2023 SEPTEMBER 29, 2024 SEPTEMBER 24, 2023 Net income (loss) attributable to Bloomin’ Brands $ 6,912 $ 44,528 $ (48,557) $ 204,116 Adjustments: Income from operations adjustments (1) 13,738 (1,256) 43,918 (1,256) Loss on extinguishment of debt (2) — — 135,797 — Total adjustments, before income taxes 13,738 (1,256) 179,715 (1,256) Adjustment to provision for income taxes (3) (2,498) (2,650) (4,466) (2,650) Net adjustments 11,240 (3,906) 175,249 (3,906) Adjusted net income $ 18,152 $ 40,622 $ 126,692 $ 200,210 Diluted earnings (loss) per share $ 0.08 $ 0.45 $ (0.56) $ 2.08 Adjusted diluted earnings per share (4)(5) $ 0.21 $ 0.41 $ 1.41 $ 2.04 Diluted weighted average common shares outstanding (5) 86,164 98,548 86,258 97,987 Adjusted diluted weighted average common shares outstanding (4)(5) 86,164 98,548 90,057 97,987 _________________ (1) See the Adjusted Income from Operations Non-GAAP Reconciliations table above for details regarding Income from operations adjustments. (2) Includes losses in connection with the 2025 Notes Partial Repurchase. See Note 7 - Convertible Senior Notes of the Notes to Consolidated Financial Statements for additional details. (3) Includes the tax effects of non-GAAP adjustments determined based on the nature of the underlying non-GAAP adjustments and their relevant jurisdictional tax rates for all periods presented. The difference between GAAP and adjusted effective income tax rates during the thirty-nine weeks ended September 29, 2024 primarily relates to nondeductible losses and other tax costs associated with the 2025 Notes Partial Repurchase. The thirteen and thirty-nine weeks ended September 24, 2023 include a $2.9 million adjustment related to a Brazil federal income tax exemption on certain state VAT benefits. (4) Adjusted diluted weighted average common shares outstanding for the thirteen weeks ended September 29, 2024 and September 24, 2023 and the thirty-nine weeks ended September 29, 2024 and September 24, 2023 were calculated including the effect of 0.7 million, 5.4 million, 2.0 million and 5.1 million dilutive securities, respectively, for outstanding 2025 Notes and the effect of 0.3 million, 3.8 million, 1.4 million and 3.4 million dilutive securities, respectively, for the Warrant Transactions, as defined below. In connection with the offering of the 2025 Notes, we entered into convertible note hedge transactions (the “Convertible Note Hedge Transactions”) and concurrently entered into warrant transactions relating to the same number of shares of our common stock (the “Warrant Transactions”). If our stock price is in excess of the conversion price of the 2025 Notes ($10.79 and $11.26 as of September 29, 2024 and September 24, 2023, respectively), the Convertible Note Hedge Transactions deliver shares to offset dilution from the 2025 Notes, which, in combination with the Warrant Transactions, effectively offset dilution from the 2025 Notes up to the strike price of the Warrant Transactions ($15.11 and $15.77 as of September 29, 2024 and September 24, 2023, respectively). Adjusted diluted earnings per share and adjusted diluted weighted average common shares outstanding for the thirteen and thirty-nine weeks ended September 24, 2023 have been recast to remove the 5.4 million and 5.1 million share benefit, respectively, of the Convertible Note Hedge Transactions which was previously included as a non-GAAP share adjustment. (5) Due to a GAAP net loss, antidilutive securities are excluded from diluted weighted average common shares outstanding for the thirty-nine weeks ended September 29, 2024. However, considering the adjusted net income position, adjusted diluted weighted average common shares outstanding incorporates securities that would have been dilutive for GAAP. System-Wide Sales - System-wide sales is a non-GAAP financial measure that includes sales of all restaurants operating under our brand names, whether we own them or not. Management uses this information to make decisions about future plans for the development of additional restaurants and new concepts, as well as evaluation of current operations. System-wide sales comprise sales of Company-owned and franchised restaurants. For a summary of sales of Company-owned restaurants, refer to Note 2 - Revenue Recognition of the Notes to Consolidated Financial Statements. 41 Table of Contents BLOOMIN’ BRANDS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued The following table provides a summary of sales of franchised restaurants for the periods indicated, which are not included in our consolidated financial results. Franchise sales within this table do not represent our sales and are presented only as an indicator of changes in the restaurant system, which management believes is important information regarding the health of our restaurant concepts and in determining our royalties and/or service fees. THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED (dollars in millions) SEPTEMBER 29, 2024 SEPTEMBER 24, 2023 SEPTEMBER 29, 2024 SEPTEMBER 24, 2023 U.S. Outback Steakhouse $ 120 $ 119 $ 381 $ 386 Carrabba’s Italian Grill 10 11 33 36 Bonefish Grill 2 2 7 7 Aussie Grill — — 1 — U.S. total 132 132 422 429 International Outback Steakhouse - South Korea 76 84 228 254 Other 25 26 73 78 International total 101 110 301 332 Total franchise sales $ 233 $ 242 $ 723 $ 761 Liquidity and Capital Resources Cash and Cash Equivalents As of September 29, 2024, we had $83.6 million in cash and cash equivalents, of which $18.9 million was held by foreign affiliates. The international jurisdictions in which we have significant cash do not have any known restrictions that would prohibit repatriation. As of September 29, 2024, we had aggregate undistributed foreign earnings of approximately $35.7 million that may be repatriated to the U.S. without additional material U.S. federal income tax. These amounts are not considered indefinitely reinvested in our foreign subsidiaries. Borrowing Capacity and Debt Service Credit Facilities - Following is a summary of our outstanding credit facilities as of the dates indicated and principal payments and debt issuance during the period indicated: REVOLVING CREDIT FACILITY TOTAL CREDIT FACILITIES (dollars in thousands) SENIOR SECURED CREDIT FACILITY FORMER CREDIT FACILITY 2025 NOTES 2029 NOTES Balance as of December 31, 2023 $ — $ 381,000 $ 104,786 $ 300,000 $ 785,786 2024 new debt 845,000 1,195,000 — — 2,040,000 2024 payments (70,000) (1,576,000) — — (1,646,000) 2024 repurchases and conversions — — (84,062) — (84,062) Balance as of September 29, 2024 $ 775,000 $ — $ 20,724 $ 300,000 $ 1,095,724 Interest rates, as of September 29, 2024 (1) 6.86 % 5.00 % 5.13 % Principal maturity date September 2029 May 2025 April 2029 ____________________ (1) The revolving credit facility interest rate represents the weighted average interest rate as of September 29, 2024. 42 Table of Contents BLOOMIN’ BRANDS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued As of September 29, 2024, we had $407.2 million in available unused borrowing capacity under our revolving credit facility, net of letters of credit of $17.8 million. Third Amended and Restated Credit Agreement - On September 19, 2024, we and OSI, as co-borrowers, entered into the Third Amended and Restated Credit Agreement which provides for senior secured financing of up to $1.2 billion consisting of the Senior Secured Credit Facility. The Senior Secured Credit Facility matures on September 19, 2029 and replaced our Former Credit Facility financing of up to $1.0 billion. Our total indebtedness and the interest rate applied to our borrowings remained unchanged as a result of the Third Amended and Restated Credit Agreement. See Note 6 - Supplemental Balance Sheet Information - Long-term debt, net of the Notes to Consolidated Financial Statements for additional details regarding the Third Amended and Restated Credit Agreement. Our credit agreement, as amended, contains various financial and non-financial covenants. A violation of these covenants could negatively impact our liquidity by restricting our ability to borrow under the revolving credit facility and cause an acceleration of the amounts due under the credit facilities. As of September 29, 2024 and December 31, 2023, we were in compliance with our debt covenants. We believe that we will remain in compliance with our debt covenants during the next 12 months and beyond. 2025 Notes Partial Repurchase - On February 29, 2024, we and the Noteholders entered into the Exchange Agreements in which the Noteholders agreed to exchange $83.6 million in aggregate principal amount of our outstanding 2025 Notes for approximately 7.5 million shares of our common stock and $3.3 million in cash, including accrued interest. Convertible Note Hedge and Warrant Transactions - In connection with the 2025 Notes Partial Repurchase, we entered into the Early Termination Agreements with the Derivative Counterparties. Upon settlement, we received approximately $118.2 million in cash and 0.3 million shares of our common stock from the Derivative Counterparties and paid $102.2 million in cash to the Derivative Counterparties during the thirty-nine weeks ended September 29, 2024. See Note 7 - Convertible Senior Notes of the Notes to Consolidated Financial Statements for additional details regarding the 2025 Notes Partial Repurchase and related Early Termination Agreements. Use of Cash Cash flows generated from operating activities and availability under our revolving credit facility are our principal sources of liquidity, which we use for operating expenses, development of new restaurants, remodeling or relocating older restaurants, investments in technology, dividend payments and share repurchases. We believe that our expected liquidity sources are adequate to fund debt service requirements, lease obligations, capital expenditures and working capital obligations during the 12 months following this filing. However, our ability to continue to meet these requirements and obligations will depend on, among other things, our ability to achieve anticipated levels of revenue and cash flow and our ability to manage costs and working capital successfully. Capital Expenditures - We estimate that our capital expenditures will total approximately $260 million to $270 million in 2024. The amount of actual capital expenditures may be affected by general economic, financial, competitive, legislative and regulatory factors, among other things, including raw material constraints. 43 Table of Contents BLOOMIN’ BRANDS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued Brazil Judicial Deposit - In July 2024, we made a judicial deposit of $42.9 million, inclusive of principal, interest and potential penalties, in connection with our appeal of an unfavorable court ruling regarding our eligibility for tax exemptions under the Brazil tax legislation. The judicial deposit includes the disputed amounts through December 31, 2023 and was recorded in Other assets, net, on our Consolidated Balance Sheet. The judicial deposit accumulates interest income until final resolution of the judicial proceedings. We believe that we will more likely than not prevail in this appeal and, accordingly, have not recorded any expense or liability for the disputed amounts. Dividends and Share Repurchases - In October 2024, our Board declared a quarterly cash dividend of $0.24 per share, payable on December 11, 2024. Future dividend payments are dependent on our earnings, financial condition, capital expenditure requirements, surplus and other factors that our Board considers relevant, as well as continued compliance with the financial covenants in our debt agreements. In February 2024, our Board canceled the remaining $57.5 million under our former share repurchase authorization and approved a new $350.0 million share repurchase authorization. The 2024 Share Repurchase Program includes capacity above our normal share repurchases activity to provide flexibility in retiring our 2025 Notes at or prior to their May 2025 maturity. The 2024 Share Repurchase Program will expire on August 13, 2025. On March 1, 2024, we entered into the ASR Agreement, in connection with our previously announced 2024 Share Repurchase Program, with Wells Fargo to repurchase $220.0 million of our common stock. Under the ASR Agreement, we made an aggregate payment of $220.0 million to Wells Fargo and received an aggregate 7.9 million shares of our common stock during the thirty-nine weeks ended September 29, 2024. See Note 8 - Stockholders’ Equity of the Notes to Consolidated Financial Statements for additional details regarding the ASR Agreement. As of September 29, 2024, $96.8 million remained available for repurchase under the 2024 Share Repurchase Program. Following is a summary of dividends and share repurchases from fiscal year 2023 through September 29, 2024: (dollars in thousands) DIVIDENDS PAID SHARE REPURCHASES TOTAL Fiscal year 2023 $ 83,742 $ 70,000 $ 153,742 First fiscal quarter 2024 (1) 21,075 188,500 209,575 Second fiscal quarter 2024 (2) 20,762 59,000 79,762 Third fiscal quarter 2024 20,375 18,195 38,570 Total $ 145,954 $ 335,695 $ 481,649 ________________ (1) Share repurchases amount excludes $0.4 million of fees recorded in Accumulated deficit related to repurchases under the ASR Agreement. (2) Includes $44.0 million of share repurchases in connection with the ASR Agreement that settled during the thirteen weeks ended June 30, 2024. 44 Table of Contents BLOOMIN’ BRANDS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued Summary of Cash Flows and Financial Condition Cash Flows - The following chart presents a summary of our cash flows provided by (used in) operating, investing and financing activities for the periods indicated: Operating Activities - The decrease in net cash provided by operating activities during the thirty-nine weeks ended September 29, 2024 as compared to the thirty-nine weeks ended September 24, 2023 was primarily due to changes in working capital, lower net earnings and a judicial deposit in connection with tax exemptions under the Brazil tax legislation. Investing Activities - The decrease in net cash used in investing activities during the thirty-nine weeks ended September 29, 2024 as compared to the thirty-nine weeks ended September 24, 2023 was primarily due to lower capital expenditures. Financing Activities - Net cash provided by financing activities during the thirty-nine weeks ended September 29, 2024 was due to net draws on the revolving credit facility exceeding cash used to repurchase common stock and pay dividends on our common stock, and net cash received from the Early Termination Agreements. Net cash used in financing activities during thirty-nine weeks ended September 24, 2023 was primarily due to cash dividends on our common stock, repurchases of our common stock and net repayments on our revolving credit facility partially offset by proceeds from stock-based compensation. Financial Condition - Following is a summary of our current assets, current liabilities and working capital (deficit) as of the periods indicated: (dollars in thousands) SEPTEMBER 29, 2024 DECEMBER 31, 2023 Current assets $ 261,058 $ 343,314 Current liabilities 848,970 1,002,335 Working capital (deficit) $ (587,912) $ (659,021) Working capital (deficit) includes: (i) Unearned revenue primarily from unredeemed gift cards of $293.5 million and $381.9 million as of September 29, 2024 and December 31, 2023, respectively, and (ii) current operating lease liabilities of $169.4 million and $175.4 million as of September 29, 2024 and December 31, 2023, respectively, with the corresponding operating right-of-use assets recorded as non-current on our Consolidated Balance Sheets. We have, and in the future may continue to have, negative working capital balances (as is common for many restaurant 45 Table of Contents BLOOMIN’ BRANDS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued companies). We operate successfully with negative working capital because cash collected on restaurant sales is typically received before payment is due on our current liabilities, and our inventory turnover rates require relatively low investment in inventories. Additionally, ongoing cash flows from restaurant operations and gift card sales are typically used to service debt obligations and to make capital ex penditures. Recently Issued Financial Accounting Standards For a description of recently issued Financial Accounting Standards that we adopted during the thirteen weeks ended September 29, 2024 and, that are applicable to us and likely to have material effect on our consolidated financial statements, but have not yet been adopted, see Note 1 - Description of the Business and Basis of Presentation of the Notes to Consolidated Financial Statements of this Quarterly Report on Form 10-Q. 46 Table of Contents BLOOMIN’ BRANDS, INC.