Bloomin’ Brands, Inc. — Q3 2022 Form 10-Q
Reporting period: Thirteen weeks ended September 25, 2022; year-to-date figures cover 39 weeks. Bloomin’ Brands operates Outback Steakhouse, Carrabba’s Italian Grill, Bonefish Grill and Fleming’s Prime Steakhouse & Wine Bar. At quarter-end, it reported 1,176 company-operated restaurants and kitchens and 332 franchised restaurants and kitchens.
Financial performance
| Metric | Q3 2022 | Q3 2021 | 39 weeks 2022 | 39 weeks 2021 |
|---|---|---|---|---|
| Total revenue | $1,055.8m | $1,010.5m | $3,321.5m | $3,075.3m |
| Operating income | $51.3m | $14.8m | $246.3m | $230.5m |
| Operating margin | 4.9% | 1.5% | 7.4% | 7.5% |
| Net income attributable to Bloomin’ Brands | $32.0m | $3.4m | $43.9m | $154.9m |
| Diluted EPS | $0.34 | $0.03 | $0.44 | $1.42 |
Q3 restaurant-level operating margin, a non-GAAP measure, was 13.1%, up from 10.3%; the year-to-date margin was 15.3%, down from 16.5%. Adjusted diluted EPS was $0.35 for Q3 versus $0.57, and $1.84 year to date versus $2.10.
Q3 U.S. comparable sales increased 1.4%, while U.S. traffic fell 7.2% and average check rose 8.6%. Brazil Outback comparable sales increased 30.1%. For the 39 weeks, U.S. comparable sales rose 4.8% and Brazil Outback comparable sales rose 48.7%.
Cash flow, debt and liquidity
- Operating cash flow was $292.6m for the 39 weeks, versus $304.2m. Capital expenditures were $137.3m, versus $85.3m; investing cash outflow was $121.5m.
- Cash and cash equivalents were $90.7m at September 25, 2022. Debt net of discounts and finance lease interest was $821.7m; principal debt outstanding was $825.0m. The revolving facility had $560.0m of available capacity, net of letters of credit.
- Current liabilities exceeded current assets by $635.6m. The filing notes that negative working capital is common in the restaurant business and reflects, in part, unredeemed gift cards and current lease liabilities.
- Management said expected liquidity sources should cover debt service, lease obligations, capital expenditures and working capital needs for the next 12 months, subject to revenue, cash flow, cost and working-capital performance. The company reported covenant compliance.
Material changes, outlook and risks
- Q3 revenue increased 4.5% year over year; Q3 operating income improved substantially. Management attributed the improvement mainly to higher average checks, recovery in Brazil, and comparison with the prior-year $61.9m Carrabba’s royalty termination payment. Commodity, wage, utility and advertising inflation offset some gains.
- Year-to-date GAAP earnings were reduced by $107.6m of debt extinguishment and modification losses and $17.7m of derivative fair-value losses, primarily related to the partial repurchase of the 2025 convertible notes. The repurchase exchanged $125m principal for $196.9m cash, accrued interest and approximately 2.3m shares. Remaining 2025 Notes principal was $105m.
- Menu price increases had trailed commodity inflation. The filing identifies risks including inflation and labor availability, consumer spending and traffic, supply-chain concentration, foreign currency and international conditions, leverage and covenants, litigation, cybersecurity and public-health events.
- Management estimated 2022 capital expenditures of $200m–$210m. Hurricane Ian was expected to reduce Q4 U.S. comparable sales by approximately 0.3% and diluted EPS by about $0.03, including storm-related costs. No broader earnings or sales guidance is provided in the filing text.
- A Brazilian subsidiary obtained a preliminary injunction concerning potential five-year tax exemptions; no financial impact was recognized as the company evaluated eligibility and implications. Legal reserves were $8.6m; additional losses were considered reasonably possible, but the company could not estimate an additional range. Lease guarantees had $22.4m of undiscounted potential payments, with a $7.5m recorded liability.
Key facts for investors to verify
- Whether pricing can keep pace with food, labor and utility inflation, and whether traffic declines persist.
- Cash generation and capital spending against the $200m–$210m full-year estimate, alongside buybacks and dividends.
- Revolver borrowings, interest costs, covenant headroom and remaining 2025 Notes conversion/dilution exposure.
- Impact and status of the Brazil tax injunction, legal contingencies and Hurricane Ian costs.