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 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. 18 Table of Contents Overview We own, develop, operate and franchise the Chili’s ® Grill & Bar (“Chili’s”) and Maggiano’s Little Italy ® (“Maggiano’s”) restaurant brands. 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 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. Such events could also negatively affect consumer spending potentially reducing guest traffic and/or reducing the average amount guests spend in our restaurants. 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 allows guests to enjoy a non-alcoholic drink, an appetizer and certain entrées starting at just $10.99. We believe our value offerings will continue to be an important traffic driver in the current economic circumstances and we will continue to highlight this value in our marketing efforts. We have increased menu pricing in other areas in light of the inflationary challenges and we have also improved menu offerings and merchandising to incentivize our guests to purchase higher priced items. In addition, Chili’s has focused on a seamless digital experience as our guests’ preferences and expectations around dining convenience have evolved in recent years. Investments in our technology and off-premise options have enabled us to provide a faster, more convenient dine-in experience and to offer more To-Go and delivery options for our guests. 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. 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. In dining rooms, we use tabletop devices with functionality for guests to pay at the table, 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 and allows us to communicate and advertise to our guests through email and text. 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. 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 19 Table of Contents occasions. 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 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 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 Chili’s domestic — 5 1 5 7 1,110 1,130 Chili’s international — — — — — 4 4 Maggiano’s domestic — — — — — 50 50 Total Company-owned — 5 1 5 7 1,164 1,184 Franchise restaurants Chili’s domestic — — 2 — 2-4 99 100 Chili’s international 6 11 18 14 21-25 358 372 Maggiano’s domestic 1 — 1 — 1 3 2 Total franchise 7 11 21 14 24-30 460 474 Total restaurants Chili’s domestic — 5 3 5 9-11 1,209 1,230 Chili’s international 6 11 18 14 21-25 362 376 Maggiano’s domestic 1 — 1 — 1 53 52 Total 7 16 22 19 31-37 1,624 1,658 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. Revenues 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, 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. 20 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 December 27, 2023 $ 927.2 $ 146.9 $ 1,074.1 Change from: 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) 1.6 0.1 1.7 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 Change from: 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) Company sales 401.1 6.6 407.7 Franchise revenues (1) 2.8 0.1 2.9 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. 21 Table of Contents 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) Price Impact Mix-Shift Impact (2) Traffic Impact Restaurant Capacity (3) Company-owned 27.4 % 5.0 % 5.9 % 16.5 % 0.2 % Chili’s 31.4 % 4.9 % 6.6 % 19.9 % 0.2 % Maggiano’s 1.8 % 6.4 % 0.3 % (4.9) % — % Franchise (4) 6.8 % U.S. 21.1 % International (1.0) % Chili’s domestic (5) 30.8 % System-wide (6) 24.2 % 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) 6.7 % U.S. 17.9 % International 0.5 % Chili’s domestic (5) 22.6 % System-wide (6) 18.3 % (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. 22 Table of Contents Costs and Expenses 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 December 25, 2024 December 27, 2023 Dollars % of Company Sales Dollars % of Company Sales Dollars % of Company Sales Food and beverage costs $ 343.9 25.5 % $ 273.1 25.7 % $ (70.8) 0.2 % Restaurant labor 421.0 31.3 % 356.1 33.5 % (64.9) 2.2 % Restaurant expenses 324.4 24.1 % 294.7 27.7 % (29.7) 3.6 % Depreciation and amortization 47.7 41.3 (6.4) General and administrative 53.1 43.2 (9.9) Other (gains) and charges 12.1 3.3 (8.8) Interest expenses 14.7 16.7 2.0 Other income, net (0.4) (0.1) 0.3 As a percentage of Company sales: • 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 December 27, 2023 $ 41.3 Change from: Additions for new and existing restaurant assets 6.3 Finance leases (1) 4.3 Corporate assets 0.7 Retirements and fully depreciated restaurant assets (4.9) 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. 23 Table of Contents General and administrative expenses increased $9.9 million as follows: General and Administrative Thirteen Week Period Ended December 27, 2023 $ 43.2 Change from: Corporate technology initiatives (1) 2.7 Stock-based compensation (2) 2.7 Performance-based compensation 1.8 Defined contribution plan employer expenses and other benefits 1.0 Payroll expenses 0.7 Other 1.0 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 December 25, 2024 December 27, 2023 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) — Other — 0.6 $ 12.1 $ 3.3 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. 24 Table of Contents 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 Change from: Additions for new and existing restaurant assets 13.8 Finance leases (1) 6.7 Corporate assets 1.5 Retirements and fully depreciated restaurant assets (11.0) Other (0.2) 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. 25 Table of Contents General and administrative expenses increased $19.3 million as follows: General and Administrative Twenty-Six Week Period Ended December 27, 2023 $ 85.6 Change from: Performance-based compensation (1) 5.0 Stock-based compensation (2) 4.1 Corporate technology initiatives (3) 3.7 Payroll expenses 2.6 Professional fees 1.5 Defined contribution plan employer expenses and other benefits 1.5 Other 0.9 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. (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. (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): Twenty-Six Week Periods Ended December 25, 2024 December 27, 2023 Enterprise system implementation costs $ 9.6 $ 4.1 Litigation & claims, net 8.6 3.2 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 1.6 2.0 $ 21.0 $ 9.6 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. Income Taxes Thirteen Week Periods Ended Twenty-Six Week Periods Ended December 25, 2024 December 27, 2023 December 25, 2024 December 27, 2023 Effective income tax rate 16.4 % 8.1 % 14.7 % 7.0 % The federal statutory tax rate was 21.0% for the thirteen and twenty-six week periods ended December 25, 2024 and December 27, 2023. 26 Table of Contents 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 December 25, 2024 compared to December 27, 2023 Thirteen Week Periods Ended Favorable (Unfavorable) Variance Variance as percentage December 25, 2024 December 27, 2023 Company sales $ 1,196.9 $ 916.9 $ 280.0 30.5 % Franchise revenues 11.9 10.3 1.6 15.5 % Total revenues $ 1,208.8 $ 927.2 $ 281.6 30.4 % 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. The following is a summary of the changes in Chili’s operating costs and expenses: Thirteen 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 $ 310.1 25.9 % $ 239.2 26.1 % $ (70.9) 0.2 % Restaurant labor 378.4 31.6 % 313.0 34.1 % (65.4) 2.5 % Restaurant expenses 285.0 23.8 % 258.3 28.2 % (26.7) 4.4 % Depreciation and amortization 41.8 35.5 (6.3) General and administrative 12.2 10.2 (2.0) Other (gains) and charges 6.2 0.9 (5.3) As a percentage of Company sales: • 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. 27 Table of Contents Chili’s Depreciation and amortization increased $6.3 million as follows: Depreciation and Amortization Thirteen Week Period Ended December 27, 2023 $ 35.5 Change from: Additions for new and existing restaurant assets 5.8 Finance leases (1) 4.4 Retirements and fully depreciated restaurant assets (3.7) Other (0.2) 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 December 27, 2023 $ 10.2 Change from: Defined contribution plan employer expenses and other benefits 0.5 Performance-based compensation 0.4 Stock-based compensation 0.4 Other 0.7 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 December 25, 2024 December 27, 2023 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) — Other — 0.5 $ 6.2 $ 0.9 28 Table of Contents Twenty-Six Week Period Ended December 25, 2024 compared to December 27, 2023 Twenty-Six Week Periods Ended Favorable (Unfavorable) Variance Variance as percentage December 25, 2024 December 27, 2023 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 Change from: Additions for new and existing restaurant assets 12.6 Finance leases (1) 6.8 Retirements and fully depreciated restaurant assets (8.4) Other (0.4) 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. 29 Table of Contents Chili’s General and administrative increased $3.8 million as follows: General and Administrative Twenty-Six Week Period Ended December 27, 2023 $ 20.2 Change from: Performance-based compensation 1.2 Stock-based compensation 1.0 Defined contribution plan employer expenses and other benefits 0.9 Payroll expenses 0.6 Other 0.1 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 December 25, 2024 December 27, 2023 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 $ 9.1 $ 4.6 30 Table of Contents Maggiano’s Segment Thirteen Week Period Ended December 25, 2024 compared to December 27, 2023 Thirteen Week Periods Ended Favorable (Unfavorable) Variance Variance as a percentage December 25, 2024 December 27, 2023 Company sales $ 149.2 $ 146.8 $ 2.4 1.6 % Franchise revenues 0.2 0.1 0.1 100.0 % Total revenues $ 149.4 $ 146.9 $ 2.5 1.7 % 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. The following is a summary of the changes in Maggiano’s operating costs and expenses: Thirteen 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 $ 33.8 22.6 % $ 33.9 23.1 % $ 0.1 0.5 % Restaurant labor 42.6 28.6 % 43.1 29.3 % 0.5 0.7 % Restaurant expenses 39.0 26.1 % 36.2 24.7 % (2.8) (1.4) % Depreciation and amortization 3.4 3.2 (0.2) General and administrative 2.4 2.1 (0.3) Other (gains) and charges — 0.2 0.2 As a percentage of Company sales: • 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. 31 Table of Contents 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 December 25, 2024 December 27, 2023 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. 32 Table of Contents Liquidity and Capital Resources Cash Flows Cash Flows from Operating Activities Twenty-Six Week Periods Ended Favorable (Unfavorable) Variance December 25, 2024 December 27, 2023 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 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 Twenty-Six Week Periods Ended Favorable (Unfavorable) Variance December 25, 2024 December 27, 2023 Net cash used in investing activities $ (105.8) $ (86.8) $ (19.0) Net cash used in investing activities increased compared to the prior year. Increased spend on Chili’s capital maintenance and equipment were partially offset by decreased spend on new restaurant construction. Cash Flows from Financing Activities Twenty-Six Week Periods Ended Favorable (Unfavorable) Variance December 25, 2024 December 27, 2023 Net cash used in financing activities $ (225.0) $ (55.9) $ (169.1) 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. Debt 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 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. 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 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, 33 Table of Contents 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 December 25, 2024, approximately $107.0 million of share repurchase authorization remains under the current share repurchase program. Cash Flow Outlook 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. 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 26, 2024. 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.