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Item 2. Management’s Discussion and Analysis

2025-01-29 compared with 2024-10-30 · 230 added, 92 removed, 181 unchanged (64% of the section changed)

1 unchanged sentence

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 week periods ended September 25, 2024 and September 27, 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.

For an understanding of the significant factors that influenced our performance during the thirteen and twenty-six week periods ended December 25, 2024 and December 27, 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.

We own, develop, operate and franchise the Chili’s ® Grill & Bar (“Chili’s”) and Maggiano’s Little Italy ® (“Maggiano’s”) restaurant brands.

As of September 25, 2024 we owned, operated or franchised 1,625 restaurants, consisting of 1,170 Company-owned restaurants and 455 franchised restaurants, located in the United States, 28 other countries and two United States territories.

As of December 25, 2024, we owned, operated or franchised 1,624 restaurants, consisting of 1,164 Company-owned restaurants and 460 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.

Operating Environment

During the recent years, 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 recent years, our operating results were impacted by geopolitical and other macroeconomic events, leading to higher than usual inflation on wages and food and beverage costs.

Geopolitical and other macroeconomic events have led, and in the future may lead to, wage inflation, staffing challenges, product cost inflation and/or disruptions in the supply chain that impact our restaurants’ ability to obtain the products needed to support their operation.

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Our To-Go menu is available through the Chili’s mobile app, chilis.com, our delivery partners DoorDash, Uber Eats and Grubhub, Google Food Ordering or by calling the restaurant directly.

Our It’s Just

Wings ® offering is available through the website, itsjustwings.com.

Our It’s Just Wings® offering is available through the website, itsjustwings.com.

The operating results for this virtual brand are included in the results of our Chili’s brand, based on the restaurants that prepared and processed the food orders.

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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.

This warm and generous hospitality creates an environment where guests come together to celebrate birthdays, weddings and many more special

While our dining rooms support the majority of our business, we also offer carry-out and delivery options through partnerships with delivery service providers that have made our restaurants more accessible to guests.

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 - During the thirteen week period ended September 25, 2024, there were 14 new franchise restaurant openings.

Our restaurants also have banquet rooms to host large party events and we have a 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 - During the twenty-six week period ended December 25, 2024, there were 21 new franchise restaurant openings and two new development agreements.

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 week periods ended September 25, 2024 and September 27, 2023, respectively, total full year projected openings in fiscal 2025 and the total restaurants open at each period end:

Openings During the Full Year Projected Openings

Thirteen Week Periods Ended Total Open Restaurants at

September 25,

2024 September 27,

2023 Fiscal 2025 September 25,

2024 September 27,

Company Development - The following table details the number of restaurant openings during the thirteen and twenty-six week periods ended December 25, 2024 and December 27, 2023, respectively, total full year projected openings in fiscal 2025 and the total restaurants open at each period end:

Openings During the Openings During the Full Year Projected Openings

Thirteen Week Periods Ended Twenty-Six Week Periods Ended Total Open Restaurants at

December 25, 2024 December 27, 2023 December 25, 2024 December 27, 2023 Fiscal 2025 December 25, 2024 December 27, 2023

Company-owned restaurants

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Total 7 16 22 19 31-37 1,624 1,658

At September 25, 2024, we own property for 50 of the 1,170 Company-owned restaurants and one closed restaurant.

As of December 25, 2024, we own property for 50 of the 1,164 Company-owned restaurants and one closed restaurant.

The net book values associated with these restaurants included land of $41.7 million and buildings of $13.0 million.

Thirteen Week Period Ended September 25, 2024 compared to September 27, 2023

Thirteen and Twenty-Six Week Periods Ended December 25, 2024 compared to December 27, 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, Maggiano’s banquet service charge income, gift card breakage, delivery, digital entertainment revenues, merchandise income and are net of gift card discounts from third-party gift card sales.

• Company sales include revenues generated by the operation of Company-owned restaurants including food and beverage sales, net of discounts, Maggiano’s banquet service charge income, delivery service fee income, gift card breakage, 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.

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Chili’s Maggiano’s Total Revenues

Thirteen Week Period Ended September 27, 2023 $ 908.1 $ 104.4 $ 1,012.5

Thirteen Week Period Ended December 27, 2023 $ 927.2 $ 146.9 $ 1,074.1

Comparable restaurant sales 280.2 2.5 282.7

Restaurant openings 10.3 — 10.3

Digital entertainment revenues 0.6 — 0.6

Delivery service fee income 0.4 0.1 0.5

Gift card discounts 0.1 — 0.1

Merchandise income 0.1 — 0.1

Maggiano's banquet income — (0.1) (0.1)

Gift card breakage (1.2) (0.1) (1.3)

Restaurant closures (10.5) — (10.5)

Company sales 280.0 2.4 282.4

Franchise revenues (1)

Thirteen Week Period Ended December 25, 2024 $ 1,208.8 $ 149.4 $ 1,358.2

Total Revenues

Chili’s Maggiano’s Total Revenues

Twenty-Six Week Period Ended December 27, 2023 $ 1,835.3 $ 251.3 $ 2,086.6

Comparable restaurant sales 404.1 6.9 411.0

Restaurant openings 18.7 — 18.7

Digital entertainment revenues 0.9 — 0.9

Delivery service fee income 0.4 0.1 0.5

Gift card discounts 0.2 — 0.2

Merchandise income 0.1 — 0.1

Gift card breakage (1.3) (0.1) (1.4)

Maggiano's banquet income — (0.3) (0.3)

Restaurant closures (22.0) — (22.0)

(11.5) — (11.5)

Company sales 401.1 6.6 407.7

Franchise revenues (1)

Thirteen Week Period Ended September 25, 2024 $ 1,030.4 $ 108.6 $ 1,139.0

(1) Franchise revenues increased in the thirteen week periods ended September 25, 2024 compared to September 27, 2023 primarily due to higher royalties and franchise advertising revenues.

Our Chili’s and Maggiano’s franchisees generated sales of approximately $225.7 million and $3.2 million respectively, for the thirteen week period ended September 25, 2024 compared to $202.8 million and $2.4 million respectively, for the thirteen week period ended September 27, 2023.

The table below presents the percentage change in comparable restaurant sales and restaurant capacity for the thirteen week period ended September 25, 2024 compared to September 27, 2023:

Percentage Change in the Thirteen Week Period Ended September 25, 2024 versus September 27, 2023

Twenty-Six Week Period Ended December 25, 2024 $ 2,239.2 $ 258.0 $ 2,497.2

(1) Franchise revenues increased in the thirteen and twenty-six week periods ended December 25, 2024 compared to December 27, 2023 primarily because of higher royalties and franchise advertising fees.

Our Chili’s and Maggiano’s franchisees generated sales of approximately $232.3 million and $4.2 million and $458.0 million and $7.3 million respectively for the thirteen and twenty-six week periods ended December 25, 2024 compared to $216.9 million and $2.8 million and $426.2 million and $5.6 million respectively in sales for the thirteen and twenty-six week periods ended December 27, 2023.

The table below presents the percentage change in comparable restaurant sales and restaurant capacity for the thirteen and twenty-six week periods ended December 25, 2024 compared to December 27, 2023:

Percentage Change in the Thirteen Week Period Ended December 25, 2024 versus December 27, 2023

Comparable Restaurant Sales (1)

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System-wide (6)

Percentage Change in the Twenty-Six Week Period Ended December 25, 2024 versus December 27, 2023

Comparable Restaurant Sales (1)

Price Impact Mix-Shift Impact (2)

Traffic Impact Restaurant Capacity (3)

Company-owned 20.4 % 6.0 % 3.5 % 10.9 % (1.1) %

Chili’s 22.8 % 5.8 % 3.7 % 13.3 % (1.2) %

Maggiano’s 2.8 % 8.6 % 0.8 % (6.6) % — %

Franchise (4)

International 0.5 %

Chili’s domestic (5)

System-wide (6)

(1) Comparable Restaurant Sales include all restaurants that have been in operation for more than 18 full months.

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Costs and Expenses

Thirteen Week Period Ended September 25, 2024 compared to September 27, 2023

Thirteen Week Period Ended December 25, 2024 compared to December 27, 2023

The following is a summary of the changes in Costs and Expenses:

Thirteen Week Periods Ended Favorable (Unfavorable) Variance

September 25, 2024 September 27, 2023

December 25, 2024 December 27, 2023

Dollars % of Company Sales Dollars % of Company Sales Dollars % of Company Sales

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As a percentage of Company sales:

• Food and beverage costs were favorable 0.6% due to 1.7% from menu pricing, partially offset by 0.6% of unfavorable commodity costs primarily driven by poultry and produce and 0.5% of unfavorable menu item mix.

• Restaurant labor was favorable 1.3% due to 2.4% of sales leverage and 0.1% of lower other labor expenses, partially offset by 0.8% of higher hourly labor expenses driven by increased wage rates and staffing levels and 0.4% of higher manager salaries.

• Restaurant expenses were favorable 1.2% due to 2.5% of sales leverage and 0.3% of lower delivery fees, partially offset by 1.3% of higher repairs and maintenance and 0.3% of higher other restaurant expenses.

• Food and beverage costs were favorable 0.2%, due to 1.2% from menu pricing, partially offset by 0.5% of unfavorable menu item mix and 0.5% of unfavorable commodity costs primarily driven by produce and poultry.

• Restaurant labor was favorable 2.2%, due to 4.7% of sales leverage and 0.4% of lower other labor expenses, partially offset by 2.2% of higher hourly labor driven by increased staffing levels and wage rates, 0.4% of higher manager salaries, and 0.3% of higher manager bonus.

• Restaurant expenses were favorable 3.6%, due to 4.2% of sales leverage and 0.2% of lower delivery fees, partially offset by 0.4% of higher repairs and maintenance, 0.3% of higher workers’ compensation and general liability insurance, and 0.1% of higher other restaurant expenses.

Depreciation and amortization increased 6.4 million as follows:

Depreciation and Amortization

Thirteen Week Period Ended September 27, 2023 $ 41.9

Thirteen Week Period Ended December 27, 2023 $ 41.3

Additions for new and existing restaurant assets 6.3

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Retirements and fully depreciated restaurant assets (4.9)

Thirteen Week Period Ended September 25, 2024 $ 46.3

Thirteen Week Period Ended December 25, 2024 $ 47.7

(1) Finance leases increased primarily due to additional amortization for new tabletop devices and iPad equipment in our restaurants.

General and administrative expenses increased $9.9 million as follows:

General and Administrative

Thirteen Week Period Ended September 27, 2023 $ 42.4

Thirteen Week Period Ended December 27, 2023 $ 43.2

Corporate technology initiatives (1)

Stock-based compensation (2)

Performance-based compensation 1.8

Defined contribution plan employer expenses and other benefits 1.0

Payroll expenses 0.7

Thirteen Week Period Ended December 25, 2024 $ 53.1

(1) Corporate technology initiatives increased primarily due to ERP system subscription costs and amortization of software implementation costs.

(2) Stock-based compensation increased primarily due to higher overall equity compensation levels to our officers, a special performance share grant to certain executives during the current quarter, and higher expected payout on certain performance share grants compared to the prior year.

Other (gains) and charges consisted of the following (for further details, refer to Note 11 - Other Gains and Charges):

Thirteen Week Periods Ended

2024 December 27,

Litigation & claims, net $ 6.1 $ 1.0

Enterprise system implementation costs 5.2 2.1

Restaurant closure asset write-offs and charges 0.8 0.2

Loss from natural disasters, net (of insurance recoveries) 0.7 (0.6)

Lease modification gain, net (0.7) —

Interest expenses decreased $2.0 million primarily due to the maturity of our 5.000%, $350.0 million notes on October 1, 2024, partially offset by higher average revolver balance during the quarter.

Twenty-Six Week Period Ended December 25, 2024 compared to December 27, 2023

The following is a summary of the changes in Costs and Expenses:

Twenty-Six Week Periods Ended Favorable (Unfavorable) Variance

December 25, 2024 December 27, 2023

Dollars % of Company Sales Dollars % of Company Sales Dollars % of Company Sales

Food and beverage costs $ 628.2 25.4 % $ 531.9 25.8 % $ (96.3) 0.4 %

Restaurant labor 798.4 32.3 % 704.2 34.1 % (94.2) 1.8 %

Restaurant expenses 638.3 25.8 % 585.5 28.3 % (52.8) 2.5 %

Depreciation and amortization 94.0 83.2 (10.8)

General and administrative 104.9 85.6 (19.3)

Other (gains) and charges 21.0 9.6 (11.4)

Interest expenses 29.0 33.7 4.7

Other income, net (0.6) (0.1) 0.5

As a percentage of Company sales:

• Food and beverage costs were favorable 0.4%, due to 1.5% from menu pricing, partially offset by 0.6% of unfavorable commodity costs primarily driven by poultry and produce and 0.5% of unfavorable menu item mix.

• Restaurant labor was favorable 1.8%, due to 3.8% of sales leverage and 0.1% of lower other labor expenses, partially offset by 1.5% of higher hourly labor driven by increased staffing levels and wage rates, 0.4% of higher manager salaries, and 0.2% of higher manager bonus.

• Restaurant expenses were favorable 2.5%, due to 3.3% of sales leverage and 0.3% of lower delivery fees, partially offset by 0.9% of higher repairs and maintenance and 0.2% of higher rent.

Depreciation and amortization increased 10.8 million as follows:

Depreciation and Amortization

Twenty-Six Week Period Ended December 27, 2023 $ 83.2

Additions for new and existing restaurant assets 13.8

Finance leases (1)

Corporate assets 1.5

Retirements and fully depreciated restaurant assets (11.0)

Twenty-Six Week Period Ended December 25, 2024 $ 94.0

(1) Finance leases increased primarily due to additional amortization for new tabletop devices and iPad equipment in our restaurants.

General and administrative expenses increased $19.3 million as follows:

General and Administrative

Twenty-Six Week Period Ended December 27, 2023 $ 85.6

Performance-based compensation (1)

Stock-based compensation (2)

Corporate technology initiatives (3)

Payroll expenses 2.6

Professional fees 1.5

Thirteen Week Period Ended September 25, 2024 $ 51.8

(1) Performance-based compensation increased due to higher expected performance compared to target in the current year.

Defined contribution plan employer expenses and other benefits 1.5

Twenty-Six Week Period Ended December 25, 2024 $ 104.9

(1) Performance-based compensation increased primarily due to higher expected annual performance compared to target in the current year.

(3) Corporate technology initiatives increased primarily due to ERP system subscription costs and amortization of software implementation costs.

Other (gains) and charges consisted of the following (for further details, refer to Note 11 - Other Gains and Charges):

Thirteen Week Periods Ended

September 25,

2024 September 27,

Twenty-Six Week Periods Ended

2024 December 27,

Enterprise system implementation costs $ 9.6 $ 4.1

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Restaurant closure asset write-offs and charges 1.5 0.8

Lease contingencies — 0.5

Loss from natural disasters, net (of insurance recoveries) 0.7 (0.4)

Lease modification gain, net (1.0) (0.1)

Other 1.6 2.0

Interest expenses decreased $2.7 million primarily due to a lower average revolver balance during the current year.

Thirteen Week Periods Ended

September 25,

2024 September 27,

Interest expenses decreased $4.7 million primarily due to the maturity of our 5.000%, $350.0 million notes on October 1, 2024 and a lower average balance and lower average interest rate on our revolving credit facility compared to the prior year.

Thirteen Week Periods Ended Twenty-Six Week Periods Ended

2024 December 27,

2023 December 25,

2024 December 27,

Effective income tax rate 16.4 % 8.1 % 14.7 % 7.0 %

The federal statutory tax rate was 21.0% for the thirteen week periods ended September 25, 2024 and September 27, 2023.

The change in the effective income tax rate in the thirteen week period ended September 25, 2024 to the thirteen week period ended September 27, 2023 is primarily due to higher Income before income taxes and the resulting deleverage of the FICA tip tax credit.

The federal statutory tax rate was 21.0% for the thirteen and twenty-six week periods ended December 25, 2024 and December 27, 2023.

The change in the effective income tax rate in the thirteen and twenty-six week periods ended December 25, 2024 to the thirteen and twenty-six week periods ended December 27, 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 September 25, 2024 compared to September 27, 2023

Thirteen Week Period Ended December 25, 2024 compared to December 27, 2023

Thirteen Week Periods Ended Favorable (Unfavorable) Variance Variance as percentage

September 25,

2024 September 27,

2024 December 27,

Company sales $ 1,196.9 $ 916.9 $ 280.0 30.5 %

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Total revenues $ 1,208.8 $ 927.2 $ 281.6 30.4 %

Chili’s Total revenues increased by 13.5% primarily due to favorable comparable restaurant sales driven by menu pricing, higher traffic, and favorable menu item mix.

Chili’s Total revenues increased by 30.4% primarily due to favorable comparable restaurant sales driven by higher traffic, favorable menu item mix and menu pricing.

Refer to “Revenues” section above for further details about Chili’s revenues changes.

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Thirteen Week Periods Ended Favorable (Unfavorable) Variance

September 25, 2024 September 27, 2023

December 25, 2024 December 27, 2023

Dollars % of Company Sales Dollars % of Company Sales Dollars % of Company Sales

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As a percentage of Company sales:

• Chili’s Food and beverage costs were favorable 0.6% due to 1.8% from menu pricing partially offset by 0.6% of unfavorable commodity costs primarily driven by poultry and produce and 0.6% of unfavorable menu item mix.

• Chili’s Restaurant labor was favorable 1.1% due to 2.6% of sales leverage, partially offset by 1.1% of higher hourly labor driven by increased wage rates and staffing levels and 0.4% of increased manager salary.

• Chili’s Restaurant expenses were favorable 1.2% due to 2.7% of sales leverage and 0.4% lower delivery fees, partially offset by 1.5% of higher repairs and maintenance and 0.4% of higher other restaurant expenses.

• Chili’s Food and beverage costs were favorable 0.2%, due to 1.2% from menu pricing, partially offset by 0.6% of unfavorable commodity costs primarily driven by produce and poultry and 0.4% of unfavorable menu item mix.

• Chili’s Restaurant labor was favorable 2.5%, due to 5.7% of sales leverage and 0.3% of lower other labor expenses, partially offset by 2.7% of higher hourly labor driven by increased staffing levels and wage rates, 0.4% of higher manager salaries, and 0.4% of higher manager bonus.

• Chili’s Restaurant expenses were favorable 4.4%, due to 4.9% of sales leverage and 0.3% lower delivery fees, partially offset by 0.5% of higher repairs and maintenance and 0.3% of higher workers’ compensation and general liability insurance.

Chili’s Depreciation and amortization increased $6.3 million as follows:

Depreciation and Amortization

Thirteen Week Period Ended September 27, 2023 $ 36.2

Thirteen Week Period Ended December 27, 2023 $ 35.5

Additions for new and existing restaurant assets 5.8

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Retirements and fully depreciated restaurant assets (3.7)

Thirteen Week Period Ended September 25, 2024 $ 40.5

Thirteen Week Period Ended December 25, 2024 $ 41.8

(1) Finance leases increased primarily due to additional amortization for new tabletop devices and iPad equipment in our restaurants.

Chili’s General and administrative increased $2.0 million as follows:

General and Administrative

Thirteen Week Period Ended September 27, 2023 $ 10.0

Thirteen Week Period Ended December 27, 2023 $ 10.2

Defined contribution plan employer expenses and other benefits 0.5

Performance-based compensation 0.4

Stock-based compensation 0.4

Payroll expenses 0.5

Thirteen Week Period Ended September 25, 2024 $ 11.8

Thirteen Week Period Ended December 25, 2024 $ 12.2

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

September 25,

2024 September 27,

2024 December 27,

Litigation & claims, net $ 5.4 $ 0.8

Restaurant closure asset write-offs and charges 0.8 0.2

Loss from natural disasters, net (of insurance recoveries) 0.7 (0.6)

Lease modification gain, net (0.7) —

Twenty-Six Week Period Ended December 25, 2024 compared to December 27, 2023

Twenty-Six Week Periods Ended Favorable (Unfavorable) Variance Variance as percentage

2024 December 27,

Company sales $ 2,215.8 $ 1,814.7 $ 401.1 22.1 %

Franchise revenues 23.4 20.6 2.8 13.6 %

Total revenues $ 2,239.2 $ 1,835.3 $ 403.9 22.0 %

Chili’s Total revenues increased by 22.0% primarily due to favorable comparable sales driven by higher traffic, menu pricing and favorable 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:

Twenty-Six Week Periods Ended Favorable (Unfavorable) Variance

December 25, 2024 December 27, 2023

Dollars % of Company Sales Dollars % of Company Sales Dollars % of Company Sales

Food and beverage costs $ 569.2 25.7 % $ 472.3 26.0 % $ (96.9) 0.3 %

Restaurant labor 720.0 32.5 % 624.0 34.4 % (96.0) 1.9 %

Restaurant expenses 565.6 25.5 % 516.8 28.5 % (48.8) 3.0 %

Depreciation and amortization 82.3 71.7 (10.6)

General and administrative 24.0 20.2 (3.8)

Other (gains) and charges 9.1 4.6 (4.5)

As a percentage of Company sales:

• Chili’s Food and beverage costs were favorable 0.3%, due to 1.5% from menu pricing, partially offset by 0.7% of unfavorable commodity costs primarily driven by poultry and produce and 0.5% of unfavorable menu item mix.

• Chili’s Restaurant labor was favorable 1.9%, due to 4.2% of sales leverage and 0.2% of lower other labor expenses, partially offset by 1.9% of higher hourly labor driven by increased staffing levels and wage rates, 0.3% of higher manager salaries, and 0.3% of higher manager bonus.

• Chili’s Restaurant expenses were favorable 3.0%, due to 3.9% of sales leverage and 0.4% lower delivery fees, partially offset by 1.0% of higher repairs and maintenance, 0.2% of higher workers’ compensation and general liability insurance, and 0.1% of higher other restaurant expenses.

Chili’s Depreciation and amortization decreased $10.6 million as follows:

Depreciation and Amortization

Twenty-Six Week Period Ended December 27, 2023 $ 71.7

Additions for new and existing restaurant assets 12.6

Finance leases (1)

Retirements and fully depreciated restaurant assets (8.4)

Twenty-Six Week Period Ended December 25, 2024 $ 82.3

(1) Finance leases increased primarily due to additional amortization for new tabletop devices and iPad equipment in our restaurants.

Chili’s General and administrative increased $3.8 million as follows:

General and Administrative

Twenty-Six Week Period Ended December 27, 2023 $ 20.2

Performance-based compensation 1.2

Stock-based compensation 1.0

Defined contribution plan employer expenses and other benefits 0.9

Payroll expenses 0.6

Twenty-Six Week Period Ended December 25, 2024 $ 24.0

Chili’s Other (gains) and charges consisted of the following (for further details, refer to Note 11 - Other Gains and Charges):

Twenty-Six Week Periods Ended

2024 December 27,

Litigation & claims, net $ 6.6 $ 3.0

Restaurant closure asset write-offs and charges 1.5 0.8

Loss from natural disasters, net (of insurance recoveries) 0.7 (0.4)

Lease modification gain, net (1.0) (0.1)

Other 1.3 1.3

Maggiano’s Segment

Thirteen Week Period Ended September 25, 2024 compared to September 27, 2023

Thirteen Week Period Ended December 25, 2024 compared to December 27, 2023

Thirteen Week Periods Ended Favorable (Unfavorable) Variance Variance as a percentage

September 25,

2024 September 27,

2024 December 27,

Company sales $ 149.2 $ 146.8 $ 2.4 1.6 %

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Total revenues $ 149.4 $ 146.9 $ 2.5 1.7 %

Maggiano’s Total revenues increased 4.0% primarily due to favorable comparable restaurant sales driven by menu pricing and favorable menu item mix, partially offset by lower traffic.

Maggiano’s Total revenues increased 1.7% primarily due to favorable comparable restaurant sales driven by menu pricing, partially offset by lower traffic.

Refer to “Revenues” section above for further details about Maggiano’s revenues changes.

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Thirteen Week Periods Ended Favorable (Unfavorable) Variance

September 25, 2024 September 27, 2023

December 25, 2024 December 27, 2023

Dollars % of Company Sales Dollars % of Company Sales Dollars % of Company Sales

6 unchanged sentences

As a percentage of Company sales:

• Maggiano’s Food and beverage costs were favorable 1.4% due to 1.9% from menu pricing and 0.2% of favorable menu item mix, partially offset by 0.7% of unfavorable commodity costs primarily driven by dairy and poultry.

• Maggiano’s Restaurant labor was favorable 2.6% due to 1.7% of lower hourly labor, 0.8% of sales leverage, and 0.1% of lower other labor expenses.

• Maggiano’s Restaurant expenses were favorable 0.5% due to 0.9% of sales leverage and 0.5% of lower supervision, partially offset by 0.4% of higher repairs and maintenance and 0.5% of higher other restaurant expenses.

• Maggiano’s Food and beverage costs were favorable 0.5%, due to 1.0% from menu pricing, partially offset by 0.5% of unfavorable commodity costs primarily driven by poultry and dairy.

• Maggiano’s Restaurant labor was favorable 0.7%, due to 0.7% of lower hourly labor, 0.4% of sales leverage, and 0.3% of lower other labor expenses, partially offset by 0.7% of higher manager salaries.

• Maggiano’s Restaurant expenses were unfavorable 1.4%, due to 0.8% of higher advertising, 0.5% of higher repairs and maintenance, and 0.5% of higher other restaurant expenses, partially offset by 0.4% of sales leverage.

Twenty-Six Week Period Ended December 25, 2024 compared to December 27, 2023

Twenty-Six Week Periods Ended Favorable (Unfavorable) Variance Variance as a percentage

2024 December 27,

Company sales $ 257.6 $ 251.0 $ 6.6 2.6 %

Franchise revenues 0.4 0.3 0.1 33.3 %

Total revenues $ 258.0 $ 251.3 $ 6.7 2.7 %

Maggiano’s Total revenues increased 2.7% primarily due to favorable comparable restaurant sales driven by 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:

Twenty-Six Week Periods Ended Favorable (Unfavorable) Variance

December 25, 2024 December 27, 2023

Dollars % of Company Sales Dollars % of Company Sales Dollars % of Company Sales

Food and beverage costs $ 59.0 22.9 % $ 59.6 23.7 % $ 0.6 0.8 %

Restaurant labor 78.4 30.4 % 80.2 32.0 % 1.8 1.6 %

Restaurant expenses 72.0 28.0 % 68.4 27.2 % (3.6) (0.8) %

Depreciation and amortization 6.8 6.4 (0.4)

General and administrative 5.4 4.5 (0.9)

Other (gains) and charges 0.4 0.4 —

As a percentage of Company sales:

• Maggiano’s Food and beverage costs were favorable 0.8%, due to 1.4% from menu pricing partially offset by 0.5% of unfavorable commodity costs primarily driven by dairy and poultry and 0.1% of unfavorable menu item mix.

• Maggiano’s Restaurant labor was favorable 1.6%, due to 1.1% of lower hourly labor, 0.6% of sales leverage, and 0.3% of lower other labor expenses, partially offset by 0.4% of higher manager salaries.

• Maggiano’s Restaurant expenses were unfavorable 0.8%, due to 0.6% of higher advertising, 0.4% of higher repairs and maintenance, 0.3% of higher rent, and 0.3% of higher other restaurant expenses, partially offset by 0.4% lower supervision and 0.4% of sales leverage.

Liquidity and Capital Resources

Cash Flows from Operating Activities

Thirteen Week Periods Ended Favorable (Unfavorable) Variance

September 25,

2024 September 27,

Twenty-Six Week Periods Ended Favorable (Unfavorable) Variance

2024 December 27,

Net cash provided by operating activities $ 281.0 $ 150.3 $ 130.7

Net cash provided by operating activities increased due to an increase in operating income, partially offset by an increase in payments of performance-based compensation and interest on the 8.250% notes in the current year, and the timing of other operational receipts and payments.

Net cash provided by operating activities increased due to an increase in operating income partially offset by an increase in payments of interest on the 8.250% notes and income taxes in the current year, and the timing of other operational receipts and payments.

Cash Flows from Investing Activities

Thirteen Week Periods Ended Favorable (Unfavorable) Variance

September 25,

2024 September 27,

Twenty-Six Week Periods Ended Favorable (Unfavorable) Variance

2024 December 27,

Net cash used in investing activities $ (105.8) $ (86.8) $ (19.0)

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Cash Flows from Financing Activities

Thirteen Week Periods Ended Favorable (Unfavorable) Variance

September 25,

2024 September 27,

Twenty-Six Week Periods Ended Favorable (Unfavorable) Variance

2024 December 27,

Net cash used in financing activities $ (225.0) $ (55.9) $ (169.1)

Net cash used in financing activities increased primarily due to an increase in share repurchase activity in fiscal 2025 of $50.1 million, partially offset by an increase of $11.0 million in net borrowing activity on the revolving credit facility.

During the thirteen week period ended September 25, 2024, net borrowings of $25.0 million were drawn on the revolving credit facility.

As of September 25, 2024, $875.0 million of credit was available under the revolving credit facility.

Net cash used in financing activities increased primarily due to increases in net repayments of long-term debt and share repurchase activity in fiscal 2025 compared to fiscal 2024.

We refinanced our $350.0 million 5.000% notes, which matured in October 2024, through our existing revolving credit facility.

During the twenty-six week period ended December 25, 2024, net borrowings of $215.0 million were drawn on the revolving credit facility.

As of December 25, 2024, $685.0 million of credit was available under the revolving credit facility.

Our $900.0 million revolving credit facility, as amended, matures on August 18, 2026 and bears interest at a rate of SOFR plus an applicable margin of 1.60% to 2.35% 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 September 25, 2024, our interest rate was 6.46% consisting of SOFR of 4.86% plus the applicable margin and spread adjustment of 1.60%.

As of September 25, 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.

As of December 25, 2024, our interest rate was 5.94% consisting of SOFR of 4.34% plus the applicable margin and spread adjustment of 1.60%.

As of December 25, 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 8.250% notes.

We expect to remain in compliance with our covenants during the remainder of fiscal 2025.

Subsequent to the end of the first quarter, on October 1, 2024, our $350.0 million of 5.000% senior notes matured and were repaid using available capacity under our existing revolving credit facility.

Refer to Note 6 - Debt for further information about our notes and revolving credit facility.

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 thirteen week period ended September 25, 2024, we repurchased 1.1 million shares of our common stock for $74.8 million, including 0.9 million shares purchased for $66.0 million as part of our share repurchase program and 0.2 million shares purchased from team members to satisfy tax withholding obligations on the vesting of restricted shares.

Our share repurchase program is used to return capital to shareholders and to minimize the dilution to our shares outstanding that results from equity compensation grants.

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.

Repurchased shares are reflected as an increase in Treasury stock within Shareholder’s equity in the Consolidated Balance Sheets (Unaudited).

In the twenty-six week period ended December 25, 2024, we repurchased 1.2 million shares of our common stock for $85.2 million, including 1.0 million shares purchased for $76.0 million as part of our share repurchase program and 0.2 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 September 25, 2024, approximately $117.0 million of share repurchase authorization remains under the current share repurchase program.

As of December 25, 2024, approximately $107.0 million of share repurchase authorization remains under the current share repurchase program.

Cash Flow Outlook

As a result of uncertainties in the near-term macro environment, including supply chain challenges, and commodity and labor inflation, we continue to focus on cash flow generation and maintaining a solid and flexible financial position to execute our long-term strategy of investing in our business.

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.

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, including the repayment of the $350.0 million senior notes which occurred on October 1, 2024.

Critical Accounting Estimates

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What changed 10-Q

Item 2. Management’s Discussion and Analysis