BRINKER INTERNATIONAL, INC 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help you understand our Company, our operations and our current operating environment. For an understanding of the significant factors that influenced our performance during the thirteen and thirty-nine week periods ended March 27, 2024 and March 29, 2023, the MD&A should be read in conjunction with the Consolidated Financial Statements (Unaudited) and related Notes to Consolidated Financial Statements (Unaudited) included in this quarterly report. All amounts within the MD&A are presented in millions unless otherwise specified. Overview The Company is principally engaged in the ownership, operation, development and franchising of the Chili’s ® Grill & Bar (“Chili’s”) and Maggiano’s Little Italy ® (“Maggiano’s”) restaurant brands. As of March 27, 2024, we owned, operated or franchised 1,618 restaurants, consisting of 1,176 Company-owned restaurants and 442 franchised restaurants, located in the United States, 27 other countries and two United States territories. Our restaurant brands, Chili’s and Maggiano’s, are both operating segments and reporting units. External Impacts to Our Operating Environment Our operating results were impacted by geopolitical and other macroeconomic events, leading to higher than usual inflation on wages and food and beverage costs during fiscal 2023 and to a lesser extent during fiscal 2024. Operations Strategy We are committed to strategies and a Company culture that we believe will grow sales, increase profits, bring back guests and engage team members. Our strategies and culture are intended to strengthen our position in casual dining and grow our core business over time. Our primary brand strategy is to make our guests feel special through great food and quality service so that they return to our restaurants. Chili’s - Our strategy is to make everyone feel special through a fun atmosphere, delicious food and drinks and our Chili’s hospitality. We are making work at Chili’s easier, more fun and more rewarding for our team members so that they are more engaged and provide a better experience for our guests. One way we have done this is by eliminating tasks that were unnecessary and did not add value to our guests. We have also simplified our menu to focus on core equities we believe can help grow sales—burgers, fajitas, Chicken Crispers ® , and margaritas, as well as other classic favorites. Our team members can make our core menu items better and more consistently because we have fewer menu items that need to be perfected. We have a flexible platform of value offerings at both lunch and dinner that we believe is compelling to our guests. Our “3 for Me” platform, a flexible value bundle, provides our guests an unbeatable everyday value. Additionally, we have continued our Margarita of the Month promotion that features a premium-liquor margarita every month at an every-day value price. Most of our value propositions are available for guests to enjoy in our dining rooms or off-premise. In dining rooms, we use tabletop devices to engage our guests at the table. These devices provide functionality for guests to pay at the table, order or re-order, engage in digital entertainment, to provide guest feedback and interact with our My Chili’s Rewards program. Our My Chili’s Rewards loyalty program offers free chips and salsa or a non-alcoholic beverage to members based on their visit frequency. We customize offerings for these guests based on their purchase behavior. Our servers use handheld tablets to place orders for our guests, increasing the efficiency of our team members and allowing orders to reach our kitchen quicker for better service to our guests. Third-party delivery orders for our restaurants are sent directly into our point of sale system, creating efficiencies and a system that allows us to better serve our guests. The operating results for our virtual brand, It’s Just Wings ® , are included in the results of our Chili’s brand. 20 Table of Contents Maggiano’s - At Maggiano’s, we are focused on making our guests feel special. This warm and generous hospitality creates an environment where guests come together to celebrate birthdays, weddings and many more special occasions. We have focused on increasing our carry-out and delivery business in recent years by creating partnerships with delivery service providers that have made our restaurants more accessible to guests and helped create an additional significant revenue channel. Our restaurants also have banquet rooms to host large party events and we have begun to renovate these banquet rooms in certain restaurants to provide a better experience for this profitable revenue channel, particularly during the holiday season in the second and third quarters of the fiscal year. Franchise Partnerships - Our franchisees continue to grow our brands around the world, with 16 new restaurant openings and two new development agreements during the thirty-nine week period ended March 27, 2024. We plan to strategically pursue expansion of Chili’s internationally through development agreements with new and existing franchise partners. Company Development - The following table details the number of restaurant openings during the thirteen and thirty-nine week periods ended March 27, 2024 and March 29, 2023, respectively, total full year projected openings in fiscal 2024 and the total restaurants open at each period end: Openings During the Openings During the Full Year Projected Openings Thirteen Week Periods Ended Thirty-Nine Week Periods Ended Total Open Restaurants at March 27, 2024 March 29, 2023 March 27, 2024 March 29, 2023 Fiscal 2024 March 27, 2024 March 29, 2023 Company-owned restaurants Chili’s domestic 2 3 7 7 9 1,122 1,129 Chili’s international — — — — — 4 5 Maggiano’s domestic — — — — — 50 50 Total Company-owned 2 3 7 7 9 1,176 1,184 Franchise restaurants Chili’s domestic — 1 — 2 0-1 99 102 Chili’s international 2 6 16 14 19-24 341 366 Maggiano’s domestic — — — — — 2 2 Total franchise 2 7 16 16 19-25 442 470 Total restaurants Chili’s domestic 2 4 7 9 9-10 1,221 1,231 Chili’s international 2 6 16 14 19-24 345 371 Maggiano’s domestic — — — — — 52 52 Total 4 10 23 23 28-34 1,618 1,654 At March 27, 2024, we own property for 50 of the 1,176 Company-owned restaurants and one closed restaurant. The net book values associated with these restaurants included land of $42.4 million and buildings of $12.8 million. Revenues Thirteen and Thirty-Nine Week Periods Ended March 27, 2024 compared to March 29, 2023 Revenues are presented in two separate captions in the Consolidated Statements of Comprehensive Income (Unaudited) to provide more clarity around Company-owned restaurant revenues and operating expenses trends: • Company sales include revenues generated by the operation of Company-owned restaurants including food and beverage sales, net of discounts, gift card breakage, Maggiano’s banquet service charge income, delivery, digital entertainment revenues, merchandise income and are net of gift card discounts from third-party gift card sales. • Franchise revenues include royalties, franchise advertising fees, franchise and development fees and gift card equalization. 21 Table of Contents The following is a summary of the change in Total revenues: Total Revenues Chili’s Maggiano’s Total Revenues Thirteen Week Period Ended March 29, 2023 $ 963.4 $ 119.8 $ 1,083.2 Change from: Comparable restaurant sales 33.4 1.9 35.3 Restaurant openings 11.3 — 11.3 Gift card discounts 0.4 — 0.4 Maggiano's banquet income — 0.2 0.2 Merchandise Income — (0.1) (0.1) Delivery service fee income (0.1) 0.1 — Gift card breakage 0.1 — 0.1 Digital entertainment revenues (0.4) — (0.4) Restaurant closures (9.5) (1.3) (10.8) Company sales 35.2 0.8 36.0 Franchise revenues (1) 1.0 0.1 1.1 Thirteen Week Period Ended March 27, 2024 $ 999.6 $ 120.7 $ 1,120.3 Total Revenues Chili’s Maggiano’s Total Revenues Thirty-Nine Week Period Ended March 29, 2023 $ 2,692.0 $ 365.7 $ 3,057.7 Change from: Comparable restaurant sales 127.6 13.5 141.1 Restaurant openings 36.7 — 36.7 Restaurant acquisitions 0.6 — 0.6 Maggiano's banquet income — 0.3 0.3 Gift card discounts 0.4 0.1 0.5 Gift card breakage 0.3 (0.1) 0.2 Merchandise income — (0.1) (0.1) Digital entertainment revenues (0.6) — (0.6) Delivery service fee income (0.5) 0.3 (0.2) Restaurant closures (24.5) (7.8) (32.3) Company sales 140.0 6.2 146.2 Franchise revenues (1) 2.9 0.1 3.0 Thirty-Nine Week Period Ended March 27, 2024 $ 2,834.9 $ 372.0 $ 3,206.9 (1) Franchise revenues increased in the thirteen and thirty-nine week periods ended March 27, 2024 compared to March 29, 2023 primarily due to higher franchise advertising fees. Our Chili’s and Maggiano’s franchisees generated sales of approximately $216.2 million and $2.9 million and $644.3 million and $8.5 million, respectively, for the thirteen and thirty-nine week periods ended March 27, 2024 compared to $213.6 million and $2.5 million and $639.9 million and $7.5 million, respectively, in for the thirteen and thirty-nine week periods ended March 29, 2023. 22 Table of Contents The table below presents the percentage change in comparable restaurant sales and restaurant capacity for the thirteen and thirty-nine week periods ended March 27, 2024 compared to March 29, 2023: Percentage Change in the Thirteen Week Period Ended March 27, 2024 versus March 29, 2023 Comparable Restaurant Sales (1) Price Impact Mix-Shift Impact (2) Traffic Impact Restaurant Capacity (3) Company-owned 3.3 % 6.4 % (0.7) % (2.4) % (0.5) % Chili’s 3.5 % 6.1 % (0.8) % (1.8) % (0.5) % Maggiano’s 1.7 % 8.2 % 1.0 % (7.5) % (1.2) % Franchise (4) 1.2 % U.S. 4.9 % International (0.8) % Chili’s domestic (5) 3.6 % System-wide (6) 3.0 % Percentage Change in the Thirty-Nine Week Period Ended March 27, 2024 versus March 29, 2023 Comparable Restaurant Sales (1) Price Impact Mix-Shift Impact (2) Traffic Impact Restaurant Capacity (3) Company-owned 4.7 % 7.4 % 0.4 % (3.1) % (0.4) % Chili’s 4.8 % 7.1 % 0.5 % (2.8) % (0.3) % Maggiano’s 3.9 % 9.4 % 0.2 % (5.7) % (2.4) % Franchise (4) 1.8 % U.S. 5.7 % International (0.3) % Chili’s domestic (5) 4.8 % System-wide (6) 4.2 % (1) Comparable Restaurant Sales include all restaurants that have been in operation for more than 18 full months. Restaurants temporarily closed 14 days or more are excluded from Comparable Restaurant Sales. Percentage amounts are calculated based on the comparable periods year-over-year. (2) Mix-Shift is calculated as the year-over-year percentage change in Company sales resulting from the change in menu items ordered by guests. (3) Restaurant Capacity is measured by sales weeks and is calculated based on comparable periods year-over-year. (4) Franchise sales generated by franchisees are not included in Total revenues in the Consolidated Statements of Comprehensive Income (Unaudited); however, we generate royalty revenues and advertising fees based on franchisee revenues, where applicable. We believe presenting Franchise Comparable Restaurant Sales provides investors relevant information regarding total brand performance. (5) Chili’s domestic Comparable Restaurant Sales percentages are derived from sales generated by Company-owned and franchise-operated Chili’s restaurants in the United States. (6) System-wide Comparable Restaurant Sales are derived from sales generated by Chili’s and Maggiano’s Company-owned and franchise-operated restaurants. 23 Table of Contents Costs and Expenses Thirteen Week Period Ended March 27, 2024 compared to March 29, 2023 The following is a summary of the changes in Costs and Expenses: Thirteen Week Periods Ended Favorable (Unfavorable) Variance March 27, 2024 March 29, 2023 Dollars % of Company Sales Dollars % of Company Sales Dollars % of Company Sales Food and beverage costs $ 277.8 25.1 % $ 287.5 26.8 % $ 9.7 1.7 % Restaurant labor 370.6 33.4 % 361.2 33.6 % (9.4) 0.2 % Restaurant expenses 303.4 27.4 % 280.9 26.2 % (22.5) (1.2) % Depreciation and amortization 42.6 42.5 (0.1) General and administrative 46.1 40.6 (5.5) Other (gains) and charges 9.9 6.3 (3.6) Interest expenses 16.2 14.2 (2.0) Other income, net (0.2) (0.6) (0.4) As a percentage of Company sales: • Food and beverage costs were favorable 1.7% due to 1.6% from increased menu pricing and 0.1% of favorable menu item mix. • Restaurant labor was favorable 0.2% due to 1.0% of sales leverage, partially offset by 0.4% of higher hourly labor expenses driven by wage rates, 0.3% of higher manager salaries, and 0.1% of higher other labor expenses. • Restaurant expenses were unfavorable 1.2% due to 1.5% of higher advertising, 0.4% of higher repairs and maintenance, and 0.3% of higher other restaurant expenses, partially offset by 0.5% of sales leverage and 0.5% of lower delivery fees and to-go supplies. Depreciation and amortization increased $0.1 million as follows: Depreciation and Amortization Thirteen Week Period Ended March 29, 2023 $ 42.5 Change from: Additions for new and existing restaurant assets 6.8 Corporate assets 0.6 Finance leases (1.8) Retirements and fully depreciated restaurant assets (5.5) Thirteen Week Period Ended March 27, 2024 $ 42.6 24 Table of Contents General and administrative expenses increased $5.5 million as follows: General and Administrative Thirteen Week Period Ended March 29, 2023 $ 40.6 Change from: Performance-based compensation (1) 3.5 Stock-based compensation (2) 2.0 Payroll expenses 0.7 Recruiting (0.5) Professional fees (1.0) Other 0.8 Thirteen Week Period Ended March 27, 2024 $ 46.1 (1) Performance-based compensation increased due to higher expected performance compared to target in the current year. (2) Stock-based compensation increased primarily due to an increase in expense related to the fiscal 2023 performance share grant, which is expected to pay out above target due to better expected performance compared to plan. Other (gains) and charges consisted of the following (for further details, refer to Note 11 - Other Gains and Charges): Thirteen Week Periods Ended March 27, 2024 March 29, 2023 Restaurant closure asset write-offs and charges $ 4.0 $ 1.8 Enterprise system implementation costs 3.3 1.3 Litigation & claims, net 2.0 0.4 Severance 0.4 1.0 Lease contingencies 0.3 2.0 Remodel-related asset write-offs 0.1 0.1 Other (0.2) (0.3) $ 9.9 $ 6.3 Interest expenses increased $2.0 million due to higher interest rates on the 8.250% notes, offset by lower average revolver balance during the current year. 25 Table of Contents Thirty-Nine Week Period Ended March 27, 2024 compared to March 29, 2023 The following is a summary of the changes in Costs and Expenses: Thirty-Nine Week Periods Ended Favorable (Unfavorable) Variance March 27, 2024 March 29, 2023 Dollars % of Company Sales Dollars % of Company Sales Dollars % of Company Sales Food and beverage costs $ 809.7 25.5 % $ 866.4 28.6 % $ 56.7 3.1 % Restaurant labor 1,074.8 33.9 % 1,026.4 33.9 % (48.4) — % Restaurant expenses 888.9 28.0 % 818.1 27.0 % (70.8) (1.0) % Depreciation and amortization 125.8 126.2 0.4 General and administrative 131.7 115.7 (16.0) Other (gains) and charges 19.5 19.8 0.3 Interest expenses 49.9 40.4 (9.5) Other income, net (0.3) (1.3) (1.0) As a percentage of Company sales: • Food and beverage costs were favorable 3.1% due to 2.0% from increased menu pricing, 0.6% of favorable commodity costs driven primarily by lower poultry costs, partially offset by higher beverage costs, and 0.5% of favorable menu item mix. • Restaurant labor was flat due to 1.4% of sales leverage, offset by 1.0% of higher hourly labor expenses driven by both wage rates and staffing levels, and 0.4% of higher manager salaries. • Restaurant expenses were unfavorable 1.0% due to 1.9% of higher advertising, 0.4% of higher repairs and maintenance expenses, and 0.5% of higher other restaurant expenses, partially offset by 0.9% of sales leverage and 0.9% of lower delivery fees and to-go supplies. Depreciation and amortization increased $0.4 million as follows: Depreciation and Amortization Thirty-Nine Week Period Ended March 29, 2023 $ 126.2 Change from: Additions for existing and new restaurant assets 19.6 Corporate assets 2.0 Finance leases (6.0) Retirements and fully depreciated restaurant assets (15.9) Other (0.1) Thirty-Nine Week Period Ended March 27, 2024 $ 125.8 26 Table of Contents General and administrative expenses increased $16.0 million as follows: General and Administrative Thirty-Nine Week Period Ended March 29, 2023 $ 115.7 Change from: Performance-based compensation (1) 6.8 Stock-based compensation (2) 6.3 Corporate technology initiatives 1.5 Payroll expenses 0.9 Professional fees (1.1) Recruiting (1.2) Other 2.8 Thirty-Nine Week Period Ended March 27, 2024 $ 131.7 (1) Performance-based compensation increased due to higher expected performance compared to target in the current year. (2) Stock-based compensation increased primarily due to an increase in expense in third quarter of fiscal 2024 related to the fiscal 2023 performance share grant, which is expected to pay above target due to better expected performance compared to plan and the impact of reversing expense in the prior year related to the fiscal 2022 performance share grant, when we determined the performance target was unlikely to be achieved. Other (gains) and charges consisted of the following (for further details, refer to Note 11 - Other Gains and Charges): Thirty-Nine Week Periods Ended March 27, 2024 March 29, 2023 Enterprise system implementation costs $ 7.4 $ 3.3 Litigation & claims, net 5.2 1.2 Restaurant closure asset write-offs and charges 4.8 6.6 Lease contingencies 0.8 2.0 Severance 0.5 3.9 Remodel-related asset write-offs 0.4 1.1 Other 0.4 1.7 $ 19.5 $ 19.8 Interest expenses increased $9.5 million due to higher interest rates on the 8.250% notes, slightly offset by lower average revolver balance during the current year. 27 Table of Contents Income Taxes Thirteen Week Periods Ended Thirty-Nine Week Periods Ended March 27, 2024 March 29, 2023 March 27, 2024 March 29, 2023 Effective income tax rate 9.6 % (0.2) % 8.3 % (5.2) % The federal statutory tax rate was 21.0% for the thirteen and thirty-nine week periods ended March 27, 2024 and March 29, 2023. The change in the effective income tax rate in the thirteen and thirty-nine week periods ended March 27, 2024 to the thirteen and thirty-nine week periods ended March 29, 2023 is primarily due to higher Income before income taxes and the resulting deleverage of the FICA tip tax credit. Segment Results Chili’s Segment Thirteen Week Period Ended March 27, 2024 compared to March 29, 2023 Thirteen Week Periods Ended Favorable (Unfavorable) Variance Variance as percentage March 27, 2024 March 29, 2023 Company sales $ 988.4 $ 953.2 $ 35.2 3.7 % Franchise revenues 11.2 10.2 1.0 9.8 % Total revenues $ 999.6 $ 963.4 $ 36.2 3.8 % Chili’s Total revenues increased by 3.8% primarily due to favorable comparable restaurant sales driven by menu price increases, partially offset by lower traffic and unfavorable menu item mix. Refer to “Revenues” section above for further details about Chili’s revenues changes. The following is a summary of the changes in Chili’s operating costs and expenses: Thirteen Week Periods Ended Favorable (Unfavorable) Variance March 27, 2024 March 29, 2023 Dollars % of Company Sales Dollars % of Company Sales Dollars % of Company Sales Food and beverage costs $ 249.3 25.2 % $ 257.9 27.0 % $ 8.6 1.8 % Restaurant labor 331.3 33.5 % 322.0 33.8 % (9.3) 0.3 % Restaurant expenses 268.7 27.2 % 247.5 26.0 % (21.2) (1.2) % Depreciation and amortization 36.6 36.7 0.1 General and administrative 10.8 8.8 (2.0) Other (gains) and charges 5.7 2.2 (3.5) As a percentage of Company sales: • Chili’s Food and beverage costs were favorable 1.8% due to 1.7% from increased menu pricing and 0.1% of favorable commodity costs. • Chili’s Restaurant labor was favorable 0.3% due to 1.0% of sales leverage, partially offset by 0.4% of higher hourly labor driven by wage rates, and 0.3% of increased manager salary. • Chili’s Restaurant expenses were unfavorable 1.2% due to 1.8% of higher advertising, 0.3% of higher repairs and maintenance, and 0.3% of higher other restaurant expenses, partially offset by 0.7% of sales leverage and 0.5% lower delivery fees and to-go supplies. 28 Table of Contents Chili’s Depreciation and amortization decreased $0.1 million as follows: Depreciation and Amortization Thirteen Week Period Ended March 29, 2023 $ 36.7 Change from: Additions for new and existing restaurant assets 6.0 Finance leases (1.8) Retirements and fully depreciated restaurant assets (4.1) Other (0.2) Thirteen Week Period Ended March 27, 2024 $ 36.6 Chili’s General and administrative increased $2.0 million as follows: General and Administrative Thirteen Week Period Ended March 29, 2023 $ 8.8 Change from: Performance-based compensation 0.9 Defined contribution plan employer expenses and other benefits 0.3 Stock-based compensation 0.4 Other 0.4 Thirteen Week Period Ended March 27, 2024 $ 10.8 Chili’s Other (gains) and charges consisted of the following (for further details, refer to Note 11 - Other Gains and Charges): Thirteen Week Periods Ended March 27, 2024 March 29, 2023 Restaurant closure asset write-offs and charges $ 4.0 $ 1.5 Litigation & claims, net 1.9 0.3 Other (0.2) 0.4 $ 5.7 $ 2.2 Thirty-Nine Week Period Ended March 27, 2024 compared to March 29, 2023 Thirty-Nine Week Periods Ended Favorable (Unfavorable) Variance Variance as percentage March 27, 2024 March 29, 2023 Company sales $ 2,803.1 $ 2,663.1 $ 140.0 5.3 % Franchise revenues 31.8 28.9 2.9 10.0 % Total revenues $ 2,834.9 $ 2,692.0 $ 142.9 5.3 % Chili’s Total revenues increased 5.3% primarily due to favorable comparable restaurant sales driven by menu price increases partially offset by lower traffic. Refer to “Revenues” section above for further details about Chili’s revenues changes. 29 Table of Contents The following is a summary of the changes in Chili’s operating costs and expenses: Thirty-Nine Week Periods Ended Favorable (Unfavorable) Variance March 27, 2024 March 29, 2023 Dollars % of Company Sales Dollars % of Company Sales Dollars % of Company Sales Food and beverage costs $ 721.6 25.7 % $ 772.5 29.0 % $ 50.9 3.3 % Restaurant labor 955.3 34.1 % 908.7 34.1 % (46.6) — % Restaurant expenses 785.5 28.0 % 718.5 27.0 % (67.0) (1.0) % Depreciation and amortization 108.3 108.7 0.4 General and administrative 31.0 26.8 (4.2) Other (gains) and charges 10.3 10.9 0.6 As a percentage of Company sales: • Chili’s Food and beverage costs were favorable 3.3% due to 2.1% from increased menu pricing, 0.6% of favorable menu item mix, and 0.6% of favorable commodity costs driven primarily by lower poultry costs, partially offset by higher beverage costs. • Chili’s Restaurant labor was flat due to 1.5% of sales leverage, offset by 1.0% of higher hourly labor expenses driven by both wage rates and staffing levels and 0.5% of increased manager salaries. • Chili’s Restaurant expenses were unfavorable 1.0% due to 2.1% of higher advertising, 0.4% of higher repairs and maintenance expenses, and 0.5% of higher other restaurant expenses, partially offset by 1.0% of sales leverage and 1.0% of lower delivery fees and to-go supplies. Chili’s Depreciation and amortization decreased $0.4 million as follows: Depreciation and Amortization Thirty-Nine Week Period Ended March 29, 2023 $ 108.7 Change from: Additions for existing and new restaurant assets 17.4 Finance leases (6.0) Retirements and fully depreciated restaurant assets (11.7) Other (0.1) Thirty-Nine Week Period Ended March 27, 2024 $ 108.3 Chili’s General and administrative increased $4.2 million as follows: General and Administrative Thirty-Nine Week Period Ended March 29, 2023 $ 26.8 Change from: Performance-based compensation 1.9 Defined contribution plan employer expenses and other benefits 1.3 Stock-based compensation 0.9 Recruiting (0.8) Other 0.9 Thirty-Nine Week Period Ended March 27, 2024 $ 31.0 30 Table of Contents Chili’s Other (gains) and charges consisted of the following (for further details, refer to Note 11 - Other Gains and Charges): Thirty-Nine Week Periods Ended March 27, 2024 March 29, 2023 Litigation & claims, net $ 4.9 $ 0.7 Restaurant closure asset write-offs and charges 4.8 5.7 Severance 0.1 1.9 Remodel-related asset write-offs — 1.1 Loss (gain) on disposition of restaurants (0.4) — Loss from natural disasters, net of (insurance recoveries) (0.4) 0.8 Other 1.3 0.7 $ 10.3 $ 10.9 Maggiano’s Segment Thirteen Week Period Ended March 27, 2024 compared to March 29, 2023 Thirteen Week Periods Ended Favorable (Unfavorable) Variance Variance as a percentage March 27, 2024 March 29, 2023 Company sales $ 120.5 $ 119.7 $ 0.8 0.7 % Franchise revenues 0.2 0.1 0.1 100.0 % Total revenues $ 120.7 $ 119.8 $ 0.9 0.8 % Maggiano’s Total revenues increased 0.8% primarily due to favorable comparable restaurant sales driven by increased menu pricing, partially offset by lower traffic. Refer to “Revenues” section above for further details about Maggiano’s revenues changes. The following is a summary of the changes in Maggiano’s operating costs and expenses: Thirteen Week Periods Ended Favorable (Unfavorable) Variance March 27, 2024 March 29, 2023 Dollars % of Company Sales Dollars % of Company Sales Dollars % of Company Sales Food and beverage costs $ 28.5 23.7 % $ 29.6 24.7 % $ 1.1 1.0 % Restaurant labor 39.3 32.6 % 39.2 32.7 % (0.1) 0.1 % Restaurant expenses 34.6 28.7 % 33.1 27.7 % (1.5) (1.0) % Depreciation and amortization 3.4 3.3 (0.1) General and administrative 2.4 2.0 (0.4) Other (gains) and charges 0.2 0.4 0.2 As a percentage of Company sales: • Maggiano’s Food and beverage costs were favorable 1.0% due to 1.5% from increased menu pricing, partially offset by 0.3% of unfavorable commodity costs and 0.2% of unfavorable menu item mix. • Maggiano’s Restaurant labor was favorable 0.1% due to sales leverage. • Maggiano’s Restaurant expenses were unfavorable 1.0% due to 0.7% of higher repairs and maintenance and 0.4% of higher worker’s compensation and general liability insurance, partially offset by 0.1% of sales leverage. 31 Table of Contents Thirty-Nine Week Period Ended March 27, 2024 compared to March 29, 2023 Thirty-Nine Week Periods Ended Favorable (Unfavorable) Variance Variance as a percentage March 27, 2024 March 29, 2023 Company sales $ 371.5 $ 365.3 $ 6.2 1.7 % Franchise revenues 0.5 0.4 0.1 25.0 % Total revenues $ 372.0 $ 365.7 $ 6.3 1.7 % Maggiano’s Total revenues increased 1.7% primarily due to favorable comparable restaurant sales driven by increased menu pricing, partially offset by lower traffic. Refer to “Revenues” section above for further details about Maggiano’s revenues changes. The following is a summary of the changes in Maggiano’s operating costs and expenses: Thirty-Nine Week Periods Ended Favorable (Unfavorable) Variance March 27, 2024 March 29, 2023 Dollars % of Company Sales Dollars % of Company Sales Dollars % of Company Sales Food and beverage costs $ 88.1 23.7 % $ 93.9 25.7 % $ 5.8 2.0 % Restaurant labor 119.5 32.2 % 117.7 32.2 % (1.8) — % Restaurant expenses 103.0 27.7 % 99.0 27.1 % (4.0) (0.6) % Depreciation and amortization 9.8 9.8 — General and administrative 6.9 6.0 (0.9) Other (gains) and charges 0.6 1.2 0.6 As a percentage of Company sales: • Maggiano’s Food and beverage costs were favorable 2.0% due to 1.7% from increased menu pricing and 0.4% of favorable commodity costs driven primarily by lower poultry costs, and 0.1% of unfavorable menu item mix. • Maggiano’s Restaurant labor was flat due to 0.5% of sales leverage offset by 0.2% of higher hourly labor costs, 0.2% of increased manager salaries and 0.1% of higher other labor costs. • Maggiano’s Restaurant expenses were unfavorable 0.6% due to 0.6% of higher repairs and maintenance, 0.2% of higher worker’s compensation and general liability insurance, 0.2% of higher supervision, 0.2% of higher rent, and 0.2% of higher supplies, partially offset by 0.4% of sales leverage and 0.4% of lower delivery fees and to-go supplies. 32 Table of Contents Liquidity and Capital Resources Cash Flows Cash Flows from Operating Activities Thirty-Nine Week Periods Ended Favorable (Unfavorable) Variance March 27, 2024 March 29, 2023 Net cash provided by operating activities $ 280.4 $ 200.8 $ 79.6 Net cash provided by operating activities increased due to an increase in operating income and the timing of other operational receipts and payments, partially offset by an increase in the payment of income taxes in the current year. Cash Flows from Investing Activities Thirty-Nine Week Periods Ended Favorable (Unfavorable) Variance March 27, 2024 March 29, 2023 Net cash used in investing activities $ (138.0) $ (133.3) $ (4.7) Net cash used in investing activities increased compared to the prior year. Increased spend on Chili’s capital maintenance, equipment and Maggiano’s remodels were partially offset by decreased spend on Chili’s remodels and new restaurant construction. Cash Flows from Financing Activities Thirty-Nine Week Periods Ended Favorable (Unfavorable) Variance March 27, 2024 March 29, 2023 Net cash used in financing activities $ (142.0) $ (67.2) $ (74.8) Net cash used in financing activities increased primarily due to $110.0 million of net repayment activity in fiscal 2024 compared to $50.0 million of net payment activity in fiscal 2023 on the revolving credit facility and an increase in share repurchases in fiscal 2024 of $23.4 million. Debt Net repayments of $110.0 million were made during the thirty-nine week period ended March 27, 2024 on the revolving credit facility. As of March 27, 2024, $848.7 million of credit was available under the revolving credit facility. The $900.0 million revolving credit facility matures on August 18, 2026 and bears interest of SOFR plus an applicable margin of 1.50% to 2.25% and an undrawn commitment fee of 0.25% to 0.35%, both based on a function of our debt-to-cash-flow ratio. As of March 27, 2024, our interest rate was 7.20% consisting of SOFR of 5.32% plus the applicable margin and spread adjustment of 1.88%. As of March 27, 2024, we were in compliance with our covenants pursuant to the $900.0 million revolving credit facility and under the terms of the indentures governing our 5.000% and 8.250% notes. We expect to remain in compliance with our covenants during the remainder of fiscal 2024. We intend to refinance our 5.000% notes, which will mature in October 2024, through our existing revolving credit facility. Refer to Note 6 - Debt for further information about our notes and revolving credit facility. 33 Table of Contents Share Repurchase Program Our Board of Directors approved a $300.0 million share repurchase program during fiscal 2022. Our share repurchase program is used to return capital to shareholders and to minimize the dilutive impact of stock options and other share-based awards. We evaluate potential share repurchases under our plan based on several factors, including our cash position, share price, operational liquidity, proceeds from divestitures, borrowings and planned investment and financing needs. In the thirty-nine week period ended March 27, 2024, we repurchased 0.8 million shares of our common stock for $25.6 million, including 0.7 million shares purchased for $21.0 million as part of our share repurchase program and 0.1 million shares purchased from team members to satisfy tax withholding obligations on the vesting of restricted shares. These withheld shares of common stock are not considered common stock repurchases under our authorized common stock repurchase plan. As of March 27, 2024, approximately $183.0 million of share repurchase authorization remains under the current share repurchase program. Cash Flow Outlook Cash flow from operations typically provides the company with a significant source of liquidity. Additionally, during fiscal 2023, we increased the capacity under our revolving credit facility by $100.0 million and issued new $350.0 million senior notes that mature in 2030. Based on the current level of operations, we believe that our current cash and cash equivalents, coupled with cash generated from operations and availability under our existing revolving credit facility will be adequate to meet our capital expenditure and working capital needs for at least the next twelve months. We continue to monitor the macro environment and will adjust our overall approach to capital allocation, including share repurchases, as events and macroeconomic trends unfold. Critical Accounting Estimates The preparation of the financial statements in conformity with GAAP requires us to make estimates and assumptions for the reporting periods covered by the financial statements. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent liabilities. Actual results could differ from these estimates. Our critical accounting estimates have not changed materially from those previously reported in our Annual Report on Form 10-K for the fiscal year ended June 28, 2023. Recent Accounting Pronouncements The impact of recent accounting pronouncements can be found at Note 1 - Basis of Presentation in the Notes to Consolidated Financial Statements (Unaudited) set forth in Part I, Item 1 of this Form 10-Q report.