# Bloomin' Brands, Inc. (BLMN) FY 2023 MD&A

Verbatim Item 7 Management's Discussion and Analysis from Bloomin' Brands, Inc.'s 10-K for fiscal year 2023.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1546417/000154641724000037/blmn-20231231.htm
Accession: 0001546417-24-000037
Filing date: 2024-02-28
Report date: 2023-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/BLMN/
All MD&A years: /company/BLMN/mda/
Previous year: /company/BLMN/mda/fy2022/ (FY 2022)
Next year: /company/BLMN/mda/fy2024/ (FY 2024)

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s discussion and analysis of financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes. For discussion of our consolidated and segment-level results of operations, non-GAAP measures, and liquidity and capital resources for fiscal year 2021, see our Annual Report on Form 10-K for the year ended December 25, 2022, filed with the SEC on February 22, 2023.

Overview

We are one of the largest casual dining restaurant companies in the world with a portfolio of leading, differentiated restaurant concepts. As of December 31, 2023, we owned and operated 1,189 restaurants and franchised 291 restaurants across 47 states, Guam and 13 countries. We have four founder-inspired concepts: Outback Steakhouse, Carrabba’s Italian Grill, Bonefish Grill and Fleming’s Prime Steakhouse & Wine Bar.

Financial Overview - Our financial overview for 2023 includes the following:

•U.S. combined and Outback Steakhouse comparable restaurant sales of 1.4% and 1.1%, respectively;

•Increase in Total revenues of 5.8% as compared to 2022;

•Operating income and restaurant-level operating margins of 7.0% and 16.2%, respectively, as compared to 7.5% and 15.6%, respectively for 2022;

•Operating income of $325.1 million as compared to $330.4 million in 2022; and

•Diluted earnings per share of $2.56 as compared to $1.03 in 2022.

Business Strategies - In 2024, our key business strategies include:

•Enhance the Customer Experience to Drive Sustainable Healthy Sales Growth. We plan to continue to make investments to enhance our core guest experience, upgrade kitchen equipment and technology, increase off-premises dining occasions, remodel and relocate restaurants, invest in digital marketing and data personalization and utilize the Dine Rewards loyalty program and multimedia marketing campaigns to drive sales.

•Drive Long-Term Shareholder Value. We plan to drive long-term shareholder value by reinvesting operational cash flow into our business, improving our credit profile and returning excess cash to shareholders through dividends and share repurchases.

•Enrich Engagement Among Stakeholders. We take the responsibility to our people, customers and communities seriously and continue to invest in programs that support the well-being of those engaged with us.

•Accelerate Growth Opportunities. We believe a substantial development opportunity remains for our concepts in the U.S. and internationally through existing geography fill-in and market expansion. We will continue to pursue U.S. fill-in opportunities for Outback Steakhouse, Fleming’s Prime Steakhouse & Wine Bar and Carrabba’s Italian Grill across key southern states such as North Carolina, Florida and Texas as well as California. We will also focus on strategic expansion in Brazil and pursue global franchise opportunities.

We intend to fund our business strategies, drive revenue growth and margin improvement, in part by reinvesting savings generated by cost savings and productivity initiatives across our businesses.

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BLOOMIN’ BRANDS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Macroeconomic Conditions - The combination of macroeconomic and other factors have put considerable pressure on the casual dining industry. The ongoing impacts of inflation, rising interest rates, reduced disposable consumer income, access to credit, other national, regional and local regulatory and economic conditions and consumer confidence have had a negative effect on discretionary consumer spending.

Should the macroeconomic and other conditions persist, we will continue to face increased pressure with respect to our pricing, traffic levels and commodity costs. We believe that in this environment, we need to maintain our focus on value and innovation as well as refreshing our restaurant base through remodels and new restaurant development to continue to drive sales.

Key Financial Performance Indicators - Key measures that we use in evaluating our restaurants and assessing our business include the following:

•Average restaurant unit volumes—average sales (excluding gift card breakage and the benefit of value added tax exemptions in Brazil) per restaurant to measure changes in customer traffic, pricing and development of the brand.

•Comparable restaurant sales—year-over-year comparison of the change in sales volumes (excluding gift card breakage and the benefit of value added tax exemptions in Brazil) for Company-owned restaurants that are open 18 months or more in order to remove the impact of new restaurant openings in comparing the operations of existing restaurants.

•System-wide sales—total restaurant sales volume for all Company-owned and franchise restaurants, regardless of ownership, to interpret the overall health of our brands.

•Restaurant-level operating margin, Income from operations, Net income and Diluted earnings per share—financial measures utilized to evaluate our operating performance.

Restaurant-level operating margin is a non-GAAP financial measure widely regarded in the industry as a useful metric to evaluate restaurant-level operating efficiency and performance of ongoing restaurant-level operations, and we use it for these purposes, overall and particularly within our two segments. Our restaurant-level operating margin is expressed as the percentage of our Restaurant sales that Food and beverage costs, Labor and other related expense and Other restaurant operating expense (including advertising expenses) represent, in each case as such items are reflected in our Consolidated Statements of Operations and Comprehensive Income. The following categories of revenue and operating expenses are not included in restaurant-level operating income and the corresponding margin because we do not consider them reflective of operating performance at the restaurant-level within a period:

(i)Franchise and other revenues, which are earned primarily from franchise royalties and other non-food and beverage revenue streams, such as rental and sublease income;

(ii)Depreciation and amortization, which, although substantially all of which is related to restaurant-level assets, represent historical sunk costs rather than cash outlays for the restaurants;

(iii)General and administrative expense, which includes primarily non-restaurant-level costs associated with support of the restaurants and other activities at our corporate offices; and

(iv)Asset impairment charges and restaurant closing costs, which are not reflective of ongoing restaurant performance in a period.

Restaurant-level operating margin excludes various expenses, as discussed above, that are essential to support the operations of our restaurants and may materially impact our Consolidated Statements of Operations and Comprehensive Income. As a result, restaurant-level operating margin is not indicative of our consolidated results of operations and is presented exclusively as a supplement to, and not a substitute

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for, Net income or Income from operations. In addition, our presentation of restaurant-level operating margin may not be comparable to similarly titled measures used by other companies in our industry.

•Adjusted restaurant-level operating margin, Adjusted income from operations, Adjusted net income and Adjusted diluted earnings per share—non-GAAP financial measures utilized to evaluate our operating performance, which definitions, usefulness and reconciliations are described in more detail in the “Non-GAAP Financial Measures” section below.

Selected Operating Data - The table below presents the number of our restaurants in operation as of the periods indicated:

[[GREPCENT_TABLE]]
[["Number of restaurants (at end of the period):","DECEMBER 31, 2023","","DECEMBER 25, 2022"],["U.S."],["Outback Steakhouse"],["Company-owned","562","","","566"],["Franchised","126","","","127"],["Total","688","","","693"],["Carrabba\u2019s Italian Grill"],["Company-owned","198","","","199"],["Franchised","19","","","19"],["Total","217","","","218"],["Bonefish Grill"],["Company-owned","170","","","173"],["Franchised","6","","","7"],["Total","176","","","180"],["Fleming\u2019s Prime Steakhouse & Wine Bar"],["Company-owned","64","","","65"],["Aussie Grill"],["Company-owned","4","","","7"],["Franchised","1","","","\u2014"],["Total","5","","","7"],["U.S. total (1)","1,150","","","1,163"],["International"],["Company-owned"],["Outback Steakhouse - Brazil (2)","155","","","139"],["Other (2)(3)","36","","","36"],["Franchised"],["Outback Steakhouse - South Korea (1)","92","","","86"],["Other (3)","47","","","47"],["International total","330","","","308"],["System-wide total","1,480","","","1,471"],["System-wide total - Company-owned","1,189","","","1,185"],["System-wide total - Franchised","291","","","286"]]
[[/GREPCENT_TABLE]]

____________________

(1)Excludes five and 36 off-premises only kitchens as of December 31, 2023 and December 25, 2022, respectively. One location was Company-owned in the U.S and all others were franchised in South Korea as of December 31, 2023 and December 25, 2022.

(2)The restaurant counts for Brazil, including Abbraccio and Aussie Grill restaurants within International Company-owned Other, are reported as of November 30, 2023 and 2022, respectively, to correspond with the balance sheet dates of this subsidiary.

(3)International Company-owned Other included two and four Aussie Grill locations as of December 31, 2023 and December 25, 2022, respectively. International Franchised Other included four Aussie Grill locations as of December 31, 2023 and December 25, 2022.

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BLOOMIN’ BRANDS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Results of Operations

REVENUES

Restaurant Sales - Following is a summary of the change in Restaurant sales for the period indicated:

[[GREPCENT_TABLE]]
[["","FISCAL YEAR"],["(dollars in millions)","2023"],["For fiscal year 2022","$","4,352.7"],["Change from:"],["Comparable restaurant sales","81.8"],["Restaurant openings","64.9"],["Effect of foreign currency translation","34.3"],["Brazil value added tax exemptions (1)","22.5"],["Restaurant closures","(31.5)"],["For fiscal year 2023 (comparable 52-week presentation) (2)","4,524.7"],["53rd week restaurant sales (3)","82.7"],["For fiscal year 2023 (as reported)","$","4,607.4"]]
[[/GREPCENT_TABLE]]

____________________

(1)Fiscal years 2023 and 2022, include $30.2 million and $7.7 million, respectively, of value added tax exemptions resulting from the Brazil tax legislation. Beginning in the fourth quarter of 2023, we are once again subject to the value added taxes for which we were previously exempt. See Note 20 - Income Taxes of the Notes to Consolidated Financial Statements for details regarding value added tax exemptions in connection with Brazil tax legislation.

(2)Includes $101.9 million of restaurant sales generated by restaurants closed, primarily in February 2024, in connection with the 2023 Closure Initiative, as defined below. See Note 4 - Impairments and Exit Costs of the Notes to Consolidated Financial Statements for additional details regarding the 2023 Closure Initiative.

(3)Includes restaurant sales from December 25, 2023 through December 31, 2023, which represents the 53rd week of fiscal year 2023.

The increase in Restaurant sales in 2023 as compared to 2022 was primarily due to: (i) restaurant sales during the 53rd week of 2023, (ii) higher comparable restaurant sales, (iii) the opening of 66 new restaurants not included in our comparable restaurant sales base, (iv) the effect of foreign currency translation of the Brazilian Real relative to the U.S. dollar and (v) value added tax exemptions in Brazil. The increase in Restaurant sales was partially offset by the closure of 35 restaurants since December 26, 2021.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Average Restaurant Unit Volumes and Operating Weeks

Following is a summary of the average restaurant unit volumes and operating weeks for the periods indicated:

[[GREPCENT_TABLE]]
[["","FISCAL YEAR"],["(dollars in thousands)","2023","","2022"],["Average restaurant unit volumes:"],["U.S."],["Outback Steakhouse","$","4,094","","","$","3,949"],["Carrabba\u2019s Italian Grill","$","3,631","","","$","3,406"],["Bonefish Grill","$","3,339","","","$","3,213"],["Fleming\u2019s Prime Steakhouse & Wine Bar","$","5,935","","","$","5,845"],["International"],["Outback Steakhouse - Brazil (1)","$","3,213","","","$","3,067"],["Operating weeks:"],["U.S."],["Outback Steakhouse","29,771","","","29,308"],["Carrabba\u2019s Italian Grill","10,537","","","10,328"],["Bonefish Grill","9,056","","","9,056"],["Fleming\u2019s Prime Steakhouse & Wine Bar","3,418","","","3,331"],["International"],["Outback Steakhouse - Brazil","7,670","","","6,775"]]
[[/GREPCENT_TABLE]]

____________________

(1)Translated at average exchange rates of 5.02 and 5.19 for 2023 and 2022, respectively. Excludes the benefit of the Brazil value added tax exemptions discussed in Note 20 - Income Taxes of the Notes to Consolidated Financial Statements.

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BLOOMIN’ BRANDS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Comparable Restaurant Sales, Traffic and Average Check Per Person Increases (Decreases)

Following is a summary of comparable restaurant sales, traffic and average check per person increases (decreases) for the periods indicated:

[[GREPCENT_TABLE]]
[["","","","FISCAL YEAR"],["","","","2023 (1)","","2022"],["Year over year percentage change:"],["Comparable restaurant sales (restaurants open 18 months or more):"],["U.S. (2)"],["Outback Steakhouse","","","1.1","%","","2.8","%"],["Carrabba\u2019s Italian Grill","","","3.9","%","","3.4","%"],["Bonefish Grill","","","0.8","%","","4.5","%"],["Fleming\u2019s Prime Steakhouse & Wine Bar","","","(0.7)","%","","12.0","%"],["Combined U.S.","","","1.4","%","","4.0","%"],["International"],["Outback Steakhouse - Brazil (3)","","","5.5","%","","38.3","%"],["Traffic:"],["U.S."],["Outback Steakhouse","","","(4.3)","%","","(6.3)","%"],["Carrabba\u2019s Italian Grill","","","0.3","%","","(4.3)","%"],["Bonefish Grill","","","(3.3)","%","","(4.2)","%"],["Fleming\u2019s Prime Steakhouse & Wine Bar","","","(2.0)","%","","3.0","%"],["Combined U.S.","","","(3.1)","%","","(5.3)","%"],["International"],["Outback Steakhouse - Brazil (3)","","","(1.1)","%","","23.6","%"],["Average check per person (4):"],["U.S."],["Outback Steakhouse","","","5.4","%","","9.1","%"],["Carrabba\u2019s Italian Grill","","","3.6","%","","7.7","%"],["Bonefish Grill","","","4.1","%","","8.7","%"],["Fleming\u2019s Prime Steakhouse & Wine Bar","","","1.3","%","","9.0","%"],["Combined U.S.","","","4.5","%","","9.3","%"],["International"],["Outback Steakhouse - Brazil (3)","","","6.5","%","","14.6","%"]]
[[/GREPCENT_TABLE]]

____________________

(1)For 2023, comparable restaurant sales, traffic and average check per person compare the 53 weeks from December 26, 2022 through December 31, 2023 to the 53 weeks from December 27, 2021 through January 1, 2023.

(2)Relocated restaurants closed more than 60 days are excluded from comparable restaurant sales until at least 18 months after reopening.

(3)Excludes the effect of fluctuations in foreign currency rates and the benefit of the Brazil value added tax exemptions discussed in Note 20 - Income Taxes of the Notes to Consolidated Financial Statements. Includes trading day impact from calendar period reporting.

(4)Includes the impact of menu pricing changes, product mix and discounts.

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BLOOMIN’ BRANDS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

COSTS AND EXPENSES

The following table sets forth the percentages of certain items in our Consolidated Statements of Operations in relation to Restaurant sales or Total revenues for the periods indicated:

[[GREPCENT_TABLE]]
[["","FISCAL YEAR"],["","2023","","2022"],["Revenues"],["Restaurant sales","98.6","%","","98.6","%"],["Franchise and other revenues","1.4","","","1.4"],["Total revenues","100.0","","","100.0"],["Costs and expenses"],["Food and beverage (1)","30.6","","","31.8"],["Labor and other related (1)","28.8","","","28.2"],["Other restaurant operating (1)","24.4","","","24.5"],["Depreciation and amortization","4.1","","","3.8"],["General and administrative","5.6","","","5.3"],["Provision for impaired assets and restaurant closings","0.7","","","0.1"],["Total costs and expenses","93.0","","","92.5"],["Income from operations","7.0","","","7.5"],["Loss on extinguishment and modification of debt","\u2014","","","(2.5)"],["Loss on fair value adjustment of derivatives, net","\u2014","","","(0.4)"],["Interest expense, net","(1.2)","","","(1.2)"],["Income before provision for income taxes","5.8","","","3.4"],["Provision for income taxes","0.4","","","0.9"],["Net income","5.4","","","2.5"],["Less: net income attributable to noncontrolling interests","0.1","","","0.2"],["Net income attributable to Bloomin\u2019 Brands","5.3","%","","2.3","%"]]
[[/GREPCENT_TABLE]]

____________________

(1)As a percentage of Restaurant sales.

Fiscal year 2023 as compared to fiscal year 2022

Food and beverage cost decreased as a percentage of Restaurant sales due to 2.0% from increases in average check per person, primarily driven by an increase in menu pricing, and 0.6% from certain cost saving and productivity initiatives, partially offset by an increase of 1.3% from commodity inflation. See Item 7A. Quantitative and Qualitative Disclosures about Market Risk for discussion of our commodity inflation expectations for 2024.

Labor and other related expense increased as a percentage of Restaurant sales primarily due to 1.6% from higher hourly and field management labor costs, primarily due to wage rate inflation, partially offset by decreases of 0.9% from an increase in average check per person and 0.2% from certain cost saving and productivity initiatives.

Other restaurant operating expense decreased as a percentage of Restaurant sales primarily due to: (i) 0.7% from an increase in average check per person, (ii) 0.3% from certain cost saving and productivity initiatives and (iii) 0.2% from the favorable settlement of certain collective action wage and hour lawsuits. These decreases were partially offset by increases of 0.9% from higher operating expenses, including utilities, primarily due to inflation, and 0.4% from higher advertising expense.

Depreciation and amortization expense increased primarily due to technology projects and restaurant development.

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FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

General and administrative expense increased primarily due to: (i) legal and professional fees, (ii) compensation and related expenses, (iii) travel expenses and (iv) incentive compensation, partially offset by a decrease in employee stock-based compensation.

Provision for impaired assets and restaurant closings increased primarily due to asset impairment and closure charges during the fourteen weeks ended December 31, 2023 of $33.3 million and $0.9 million within the U.S. and international segments, respectively, in connection with the closure of three U.S. and two international Aussie Grill restaurants and the decision to close 36 predominantly older, underperforming U.S. restaurants (the “2023 Closure Initiative”). See Note 4 - Impairments and Exit Costs for additional details regarding the 2023 Closure Initiative. We expect to incur an additional $8 million to $11 million of severance and closure costs in connection with the 2023 Closure Initiative during the thirteen weeks ended March 31, 2024.

Income from operations during 2023 includes a net operating margin increase of approximately 0.2% attributable to Brazil value added tax exemptions (PIS and COFINS) provided by Brazil tax legislation. See Note 20 - Income Taxes of the Notes to Consolidated Financial Statements for further discussion regarding Brazil tax legislation.

Loss on extinguishment and modification of debt and Loss on fair value adjustment of derivatives, net during 2022 were in connection with the repurchase of $125.0 million of the outstanding convertible senior notes due in 2025 (the “2025 Notes”) (the “2025 Notes Partial Repurchase”), which is described in further detail within Note 13 - Convertible Senior Notes of the Notes to Consolidated Financial Statements.

Interest expense, net was flat primarily due to: (i) the lapping of terminated interest rate swap amortization during 2022, (ii) the 2025 Notes Partial Repurchase in May 2022 and (iii) the repayment of Term Loan A in April 2022. These decreases were offset by an increase in interest expense from higher balances and interest rates on our revolving credit facility.

Provision for income taxes includes a decrease in the effective income tax rate primarily due to the non-deductible losses associated with the 2025 Notes Partial Repurchase recorded during 2022 and the 2023 benefits of Brazil tax legislation, which includes a temporary reduction in the Brazilian income tax rate from 34% to 0%.

We have a blended federal and state statutory rate of approximately 26%. The effective income tax rate in 2023 was lower than the blended federal and state statutory rate primarily due to the benefit of FICA tax credits on certain tipped wages and benefits of Brazil tax legislation, which includes a temporary reduction in the Brazilian income tax rate from 34% to 0%. The effective income tax rate in 2022 was higher than the blended federal and state statutory rate primarily due to the non-deductible losses associated with the 2025 Notes Partial Repurchase recorded during 2022, partially offset by the benefit of FICA tax credits on certain tipped wages.

In the U.S., a restaurant company employer may claim a credit against its federal income taxes for FICA taxes paid on certain tipped wages (the “FICA tax credit”). The level of FICA tax credits is primarily driven by U.S. Restaurant sales and is not impacted by costs incurred that may reduce Income before provision for income taxes.

See Note 20 - Income Taxes of the Notes to Consolidated Financial Statements for further discussion regarding Brazil tax legislation.

Segments

We consider each of our restaurant concepts and international markets as operating segments, which reflects how we manage our business, review operating performance and allocate resources. Resources are allocated and performance is assessed by our Chief Executive Officer, whom we have determined to be our Chief Operating Decision Maker. We aggregate our operating segments into two reportable segments, U.S. and international. The

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FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

U.S. segment includes all restaurants operating in the U.S. while restaurants operating outside the U.S. are included in the international segment.

Revenues for both segments include only transactions with customers and exclude intersegment revenues. Excluded from Income from operations for U.S. and international are certain legal and corporate costs not directly related to the performance of the segments, most stock-based compensation expenses, a portion of insurance expenses and certain bonus expenses.

Refer to Note 22 - Segment Reporting of the Notes to Consolidated Financial Statements for reconciliations of segment income from operations to the consolidated operating results.

Summary financial data - Following is a summary of financial data by segment for the periods indicated:

[[GREPCENT_TABLE]]
[["","U.S.","","INTERNATIONAL"],["","FISCAL YEAR","","FISCAL YEAR"],["(dollars in thousands)","2023","","2022","","2023","","2022"],["Revenues"],["Restaurant sales","$","4,005,053","","","$","3,863,016","","","$","602,355","","","$","489,679"],["Franchise and other revenues","48,546","","","48,854","","","15,516","","","14,959"],["Total revenues","$","4,053,599","","","$","3,911,870","","","$","617,871","","","$","504,638"],["Income from operations","$","377,534","","","$","407,860","","","$","83,948","","","$","57,333"],["Operating income margin","9.3","%","","10.4","%","","13.6","%","","11.4","%"],["Restaurant-level operating income","$","618,434","","","$","595,997","","","$","123,583","","","$","90,663"],["Restaurant-level operating margin","15.4","%","","15.4","%","","20.5","%","","18.5","%"]]
[[/GREPCENT_TABLE]]

Restaurant sales - Following is a summary of the change in segment Restaurant sales for the period indicated:

[[GREPCENT_TABLE]]
[["U.S.","","INTERNATIONAL"],["","FISCAL YEAR","","","FISCAL YEAR"],["(dollars in millions)","2023","","(dollars in millions)","2023"],["For fiscal year 2022","$","3,863.0","","","For fiscal year 2022","$","489.7"],["Change from:","","","Change from:"],["Comparable restaurant sales","63.1","","","Restaurant openings (1)","37.7"],["Restaurant openings (1)","27.2","","","Effect of foreign currency translation","34.3"],["Restaurant closures (2)","(31.0)","","","Brazil value added tax exemptions (3)","22.5"],["For fiscal year 2023 (comparable 52-week presentation) (4)","3,922.3","","","Comparable restaurant sales","18.7"],["53rd week restaurant sales (5)","82.7","","","Restaurant closures (2)","(0.5)"],["For fiscal year 2023 (as reported)","$","4,005.0","","","For fiscal year 2023","$","602.4"]]
[[/GREPCENT_TABLE]]

____________________

(1)Includes restaurant sales from 19 and 47 new U.S. and international restaurants, respectively, not included in our comparable restaurant sales base.

(2)Includes the restaurant sales impact from the closure of 32 and three U.S. and international restaurants, respectively, since December 26, 2021.

(3)Fiscal years 2023 and 2022 include $30.2 million and $7.7 million, respectively, of value added tax exemptions resulting from the Brazil tax legislation. Beginning in the fourth quarter of 2023, we are once again subject to the value added taxes for which we were previously exempt under the Brazil tax legislation. See Note 20 - Income Taxes of the Notes to Consolidated Financial Statements for details regarding value added tax exemptions in connection with the Brazil tax legislation.

(4)Includes $99.2 million of restaurant sales generated by restaurants closed, primarily in February 2024, in connection with the 2023 Closure Initiative. See Note 4 - Impairments and Exit Costs of the Notes to Consolidated Financial Statements for additional details regarding the 2023 Closure Initiative.

(5)Includes restaurant sales from December 25, 2023 through December 31, 2023, which represents the 53rd week of fiscal year 2023.

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Income from operations

U.S. - The decrease in U.S. Income from operations generated during 2023 as compared to 2022 was primarily due to: (i) higher labor costs, primarily due to wage rate inflation, (ii) commodity inflation, (iii) higher operating expenses, including utilities, primarily due to inflation, (iv) higher impairment charges and restaurant closure costs and (v) higher depreciation and advertising expense. These decreases were partially offset by an increase in average check per person and certain cost saving and productivity initiatives.

International - The increase in international Income from operations generated during 2023 as compared to 2022 was primarily due to value added tax exemptions in Brazil and an increase in restaurant sales, primarily driven by an increase in average check per person and the recovery of in-restaurant dining. These increases were partially offset by decreases primarily due to higher operating and labor costs, primarily due to inflation, and higher advertising expense.

Non-GAAP Financial Measures

In addition to the results provided in accordance with generally accepted accounting principles (“U.S. GAAP”), we provide certain non-GAAP measures, which present operating results on an adjusted basis. These are supplemental measures of performance that are not required by or presented in accordance with U.S. GAAP and include the following: (i) Restaurant-level operating income, adjusted restaurant-level operating income and their corresponding margins, (ii) Adjusted income from operations and the corresponding margin, (iii) Adjusted net income, (iv) Adjusted diluted earnings per share and (v) system-wide sales.

We believe that our use of non-GAAP financial measures permits investors to assess the operating performance of our business relative to our performance based on U.S. GAAP results and relative to other companies within the restaurant industry by isolating the effects of certain items that may vary from period to period without correlation to core operating performance or that vary widely among similar companies. However, our inclusion of these adjusted measures should not be construed as an indication that our future results will be unaffected by unusual or infrequent items or that the items for which we have made adjustments are unusual or infrequent or will not recur. We believe that the disclosure of these non-GAAP measures is useful to investors as they form part of the basis for how our management team and our Board evaluate our operating performance, allocate resources and establish employee incentive plans.

These non-GAAP financial measures are not intended to replace U.S. GAAP financial measures, and they are not necessarily standardized or comparable to similarly titled measures used by other companies. We maintain internal guidelines with respect to the types of adjustments we include in our non-GAAP measures. These guidelines endeavor to differentiate between types of gains and expenses that are reflective of our core operations in a period, and those that may vary from period to period without correlation to our core performance in that period. However, implementation of these guidelines involves the application of judgment, and the treatment of any items not directly addressed by, or changes to, our guidelines will be considered by our disclosure committee. Refer to the reconciliations of non-GAAP measures for descriptions of the actual adjustments made in the current period and the corresponding prior period.

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BLOOMIN’ BRANDS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Consolidated Restaurant-level Operating Income and Adjusted Restaurant-level Operating Income and Corresponding Margins Non-GAAP Reconciliations - Restaurant-level operating margin is calculated as Restaurant sales after deduction of the main restaurant-level operating costs, which includes Food and beverage cost, Labor and other related expense and Other restaurant operating expense. Adjusted restaurant-level operating margin is Restaurant-level operating margin adjusted for certain items. The following table reconciles consolidated Income from operations and the corresponding margin to restaurant-level operating income and adjusted restaurant-level operating income and the corresponding margins for the periods indicated:

[[GREPCENT_TABLE]]
[["Consolidated","FISCAL YEAR"],["(dollars in thousands)","2023","","2022"],["Income from operations","$","325,144","","","$","330,421"],["Operating income margin","7.0","%","","7.5","%"],["Less:"],["Franchise and other revenues","64,062","","","63,813"],["Plus:"],["Depreciation and amortization","191,171","","","169,617"],["General and administrative","260,470","","","234,752"],["Provision for impaired assets and restaurant closings","33,574","","","5,964"],["Restaurant-level operating income","$","746,297","","","$","676,941"],["Restaurant-level operating margin","16.2","%","","15.6","%"],["Adjustments:"],["Legal and other matters (1)","(3,650)","","","5,900"],["Asset impairments and closing costs (2)","(2,450)","","","\u2014"],["Partner compensation (3)","1,894","","","\u2014"],["Total restaurant-level operating income adjustments","(4,206)","","","5,900"],["Adjusted restaurant-level operating income","$","742,091","","","$","682,841"],["Adjusted restaurant-level operating margin","16.1","%","","15.7","%"]]
[[/GREPCENT_TABLE]]
_________________

(1)Reflects changes in legal reserves in connection with certain collective action wage and hour lawsuits.

(2)Lease remeasurement gains in connection with the 2023 Closure Initiative. See Note 4 - Impairments and Exit Costs of the Notes to Consolidated Financial Statements for additional details regarding the 2023 Closure Initiative.

(3)Costs incurred in connection with the transition to a new partner compensation program.

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BLOOMIN’ BRANDS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Segment Restaurant-level and Adjusted Restaurant-level Operating Income and Corresponding Margins Non-GAAP Reconciliations - The following tables reconcile segment Income from operations and the corresponding margin to segment restaurant-level operating income and adjusted restaurant-level operating income and the corresponding margins for the periods indicated:

[[GREPCENT_TABLE]]
[["U.S.","FISCAL YEAR"],["(dollars in thousands)","2023","","2022"],["Income from operations","$","377,534","","","$","407,860"],["Operating income margin","9.3","%","","10.4","%"],["Less:"],["Franchise and other revenues","48,546","","","48,854"],["Plus:"],["Depreciation and amortization","157,878","","","139,170"],["General and administrative","98,899","","","93,401"],["Provision for impaired assets and restaurant closings","32,669","","","4,420"],["Restaurant-level operating income","$","618,434","","","$","595,997"],["Restaurant-level operating margin","15.4","%","","15.4","%"],["Adjustments:"],["Asset impairments and closing costs (1)","(2,450)","","","\u2014"],["Partner compensation (2)","1,894","","","\u2014"],["Total restaurant-level operating income adjustments","(556)","","","\u2014"],["Adjusted restaurant-level operating income","$","617,878","","","$","595,997"],["Adjusted restaurant-level operating margin","15.4","%","","15.4","%"]]
[[/GREPCENT_TABLE]]
_________________

(1)Lease remeasurement gains in connection with the 2023 Closure Initiative.

(2)Costs incurred in connection with the transition to a new partner compensation program.

[[GREPCENT_TABLE]]
[["International","FISCAL YEAR"],["(dollars in thousands)","2023","","2022"],["Income from operations","$","83,948","","","$","57,333"],["Operating income margin","13.6","%","","11.4","%"],["Less:"],["Franchise and other revenues","15,516","","","14,959"],["Plus:"],["Depreciation and amortization","25,430","","","23,397"],["General and administrative","28,816","","","23,355"],["Provision for impaired assets and restaurant closings","905","","","1,537"],["Restaurant-level operating income","$","123,583","","","$","90,663"],["Restaurant-level operating margin","20.5","%","","18.5","%"],["Total restaurant-level operating income adjustments","\u2014","","","\u2014"],["Adjusted restaurant-level operating income","$","123,583","","","$","90,663"],["Adjusted restaurant-level operating margin","20.5","%","","18.5","%"]]
[[/GREPCENT_TABLE]]

46

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BLOOMIN’ BRANDS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Adjusted Restaurant-level Operating Margin Non-GAAP Reconciliations (continued) - The following table presents the percentages of certain operating cost financial statement line items in relation to Restaurant sales for the periods indicated:

[[GREPCENT_TABLE]]
[["","FISCAL YEAR"],["","2023","","2022"],["","REPORTED","","ADJUSTED (1)","","REPORTED","","ADJUSTED (1)"],["Restaurant sales","100.0","%","","100.0","%","","100.0","%","","100.0","%"],["Food and beverage","30.6","%","","30.6","%","","31.8","%","","31.8","%"],["Labor and other related","28.8","%","","28.7","%","","28.2","%","","28.2","%"],["Other restaurant operating","24.4","%","","24.6","%","","24.5","%","","24.3","%"],["Restaurant-level operating margin","16.2","%","","16.1","%","","15.6","%","","15.7","%"]]
[[/GREPCENT_TABLE]]

_________________

(1)See the Consolidated Restaurant-level Operating Income and Adjusted Restaurant-level Operating Income and Corresponding Margins Non-GAAP Reconciliations table above for details regarding restaurant-level operating margin adjustments. For 2023, restaurant-level operating margin adjustments of $1.9 million and ($6.1) million were recorded within Labor and other related expense and Other restaurant operating expense, respectively. For 2022, all restaurant-level operating margin adjustments were recorded within Other restaurant operating expense.

Adjusted Income from Operations Non-GAAP Reconciliations - The following table reconciles Income from operations and the corresponding margin to adjusted income from operations and the corresponding margin for the periods indicated:

[[GREPCENT_TABLE]]
[["","FISCAL YEAR"],["(dollars in thousands)","2023","","2022"],["Income from operations","$","325,144","","","$","330,421"],["Operating income margin","7.0","%","","7.5","%"],["Adjustments:"],["Total restaurant-level operating income adjustments (1)","(4,206)","","","5,900"],["Asset impairments and closing costs (2)","28,236","","","\u2014"],["Other (3)","7,546","","","\u2014"],["Total income from operations adjustments","31,576","","","5,900"],["Adjusted income from operations","$","356,720","","","$","336,321"],["Adjusted operating income margin","7.6","%","","7.6","%"]]
[[/GREPCENT_TABLE]]

_________________

(1)See the Consolidated Restaurant-level Operating Income and Adjusted Restaurant-level Operating Income and Corresponding Margins Non-GAAP Reconciliations table above for details regarding restaurant-level operating income adjustments.

(2)Includes asset impairment, closure costs and severance in connection with the 2023 Closure Initiative. Also includes a lease termination gain, net of related asset impairment charges, of $6.7 million related to the closure of one restaurant.

(3)Primarily includes professional fees, severance and other costs not correlated to our core operating performance during the period.

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BLOOMIN’ BRANDS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Adjusted Net Income and Adjusted Diluted Earnings Per Share Non-GAAP Reconciliations - The following table reconciles Net income attributable to Bloomin’ Brands to adjusted net income and adjusted diluted earnings per share for the periods indicated:

[[GREPCENT_TABLE]]
[["","FISCAL YEAR"],["(in thousands, except per share data)","2023","","2022"],["Net income attributable to Bloomin\u2019 Brands","$","247,386","","","$","101,907"],["Adjustments:"],["Income from operations adjustments (1)","31,576","","","5,900"],["Loss on extinguishment and modification of debt (2)","\u2014","","","107,630"],["Loss on fair value adjustment of derivatives, net (2)","\u2014","","","17,685"],["Total adjustments, before income taxes","31,576","","","131,215"],["Adjustment to provision for income taxes (3)","(10,801)","","","(263)"],["Net adjustments","20,775","","","130,952"],["Adjusted net income","$","268,161","","","$","232,859"],["Diluted earnings per share","$","2.56","","","$","1.03"],["Adjusted diluted earnings per share (4)","$","2.93","","","$","2.52"],["Diluted weighted average common shares outstanding","96,453","","","98,512"],["Adjusted diluted weighted average common shares outstanding (4)","91,386","","","92,423"]]
[[/GREPCENT_TABLE]]

_________________

(1)See the Adjusted Income from Operations Non-GAAP Reconciliations table above for details regarding Income from operations adjustments.

(2)Includes losses primarily in connection with the 2025 Notes Partial Repurchase, including settlements of the related convertible senior note hedges and warrants. See Note 13 - Convertible Senior Notes of the Notes to Consolidated Financial Statements for additional details.

(3)Includes the tax effects of non-GAAP adjustments determined based on the nature of the underlying non-GAAP adjustments and their relevant jurisdictional tax rates for all periods presented. For 2023, also includes a $2.9 million adjustment related to a Brazil federal income tax exemption on certain state value added tax benefits. For 2022, the primary difference between GAAP and adjusted effective income tax rates relates to certain non-deductible losses and other tax costs associated with the 2025 Notes Partial Repurchase.

(4)Adjusted diluted weighted average common shares outstanding was calculated excluding the dilutive effect of 5,067 and 6,089 shares for 2023 and 2022, respectively, to be issued upon conversion of the 2025 Notes to satisfy the amount in excess of the principal since our convertible note hedge offsets the dilutive impact of the shares underlying the 2025 Notes.

System-Wide Sales - System-wide sales is a non-GAAP financial measure that includes sales of all restaurants operating under our brand names, whether we own them or not. Management uses this information to make decisions about future plans for the development of additional restaurants and new concepts, as well as evaluation of current operations. System-wide sales comprise sales of Company-owned and franchised restaurants. For a summary of sales of Company-owned restaurants, refer to Note 3 - Revenue Recognition of the Notes to Consolidated Financial Statements.

The following table provides a summary of sales of franchised restaurants for the periods indicated, which are not included in our consolidated financial results. Franchise sales within this table do not represent our sales and are

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BLOOMIN’ BRANDS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

presented only as an indicator of changes in the restaurant system, which management believes is important information regarding the health of our restaurant concepts and in determining our royalties and/or service fees.

[[GREPCENT_TABLE]]
[["","FISCAL YEAR"],["(dollars in millions)","2023","","2022"],["U.S."],["Outback Steakhouse","$","514","","","$","494"],["Carrabba\u2019s Italian Grill","48","","","49"],["Bonefish Grill","10","","","11"],["U.S. total","572","","","554"],["International"],["Outback Steakhouse - South Korea","354","","","296"],["Other (1)","104","","","114"],["International total","458","","","410"],["Total franchise sales","$","1,030","","","$","964"]]
[[/GREPCENT_TABLE]]

____________________

(1)Includes franchise sales for off-premises only kitchens in South Korea.

Liquidity and Capital Resources

Cash and Cash Equivalents

As of December 31, 2023, we had $111.5 million in cash and cash equivalents, of which $36.3 million was held by foreign affiliates. The international jurisdictions in which we have significant cash do not have any known restrictions that would prohibit repatriation.

As of December 31, 2023, we had aggregate undistributed foreign earnings of approximately $42.6 million that may be repatriated to the U.S. without additional material U.S. federal income tax. These amounts are not considered indefinitely reinvested in our foreign subsidiaries.

Borrowing Capacity and Debt Service

Credit Facilities - Following is a summary of our outstanding credit facilities as of the dates indicated and principal payments and debt issuance during the periods indicated:

[[GREPCENT_TABLE]]
[["","SENIOR SECURED CREDIT FACILITY","","","","","","","","TOTAL CREDIT FACILITIES"],["","TERM LOAN A","","REVOLVING FACILITY","","","","","","2025 NOTES","","2029 NOTES"],["(dollars in thousands)"],["Balance as of December 26, 2021","$","195,000","","","$","80,000","","","","","","","$","230,000","","","$","300,000","","","$","805,000"],["2022 new debt","\u2014","","","1,239,500","","","","","","","\u2014","","","\u2014","","","1,239,500"],["2022 payments","(195,000)","","","(889,500)","","","","","","","(125,000)","","","\u2014","","","(1,209,500)"],["Balance as of December 25, 2022","\u2014","","","430,000","","","","","","","105,000","","","300,000","","","835,000"],["2023 new debt","\u2014","","","1,079,000","","","","","","","\u2014","","","\u2014","","","1,079,000"],["2023 payments","\u2014","","","(1,128,000)","","","","","","","(214)","","","\u2014","","","(1,128,214)"],["Balance as of December 31, 2023","$","\u2014","","","$","381,000","","","","","","","$","104,786","","","$","300,000","","","$","785,786"],["Interest rates, as of December 31, 2023 (1)","","","6.96","%","","","","","","5.00","%","","5.13","%"],["Principal maturity date","","","April 2026","","","","","","May 2025","","April 2029"]]
[[/GREPCENT_TABLE]]

____________________

(1)Interest rate for revolving credit facility represents the weighted average interest rate as of December 31, 2023.

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BLOOMIN’ BRANDS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

As of December 31, 2023, we had $599.2 million in available unused borrowing capacity under our revolving credit facility, net of letters of credit of $19.8 million.

Credit Agreement - On April 26, 2022, we and OSI entered into the First Amendment to the Second Amended and Restated Credit Agreement and Incremental Amendment (the “Amended Credit Agreement”), which included an increase of our existing revolving credit facility from $800.0 million to $1.0 billion and a transition from the one-month London Inter-Bank Offered Rate (“LIBOR”) rate to the Secured Overnight Financing Rate (“SOFR”) as the benchmark rate for purposes of calculating interest under the Senior Secured Credit Facility. At closing, an incremental $192.5 million was drawn on the revolving credit facility to fully repay the outstanding balance of Term loan A. Our total indebtedness remained unchanged as a result of the Amended Credit Agreement. The transition to SOFR did not materially impact the interest rate applied to our borrowings.

Our Amended Credit Agreement contains various financial and non-financial covenants. A violation of these covenants could negatively impact our liquidity by restricting our ability to borrow under the revolving credit facility and cause an acceleration of the amounts due under the credit facilities.

See Note 12 - Long-term Debt, Net of the notes to Consolidated Financial Statements for additional details regarding the Amended Credit Agreement.

As of December 31, 2023 and December 25, 2022, we were in compliance with our debt covenants. We believe that we will remain in compliance with our debt covenants during the next 12 months and beyond.

2025 Notes Partial Repurchase - On May 25, 2022, we and certain holders (the “Noteholders”) entered into exchange agreements in which the Noteholders agreed to exchange $125.0 million in aggregate principal amount of the 2025 Notes for $196.9 million in cash, plus accrued interest, and approximately 2.3 million shares of our common stock. In connection with the 2025 Notes Partial Repurchase, we entered into partial unwind agreements with certain financial institutions relating to a portion of the convertible note hedge transactions (the “Note Hedge Early Termination Agreements”) and a portion of the Warrant Transactions (the “Warrant Early Termination Agreements”) that were previously entered into by the Company in connection with the issuance of the 2025 Notes. Upon settlement, we received $131.9 million for the Note Hedge Early Termination Agreements and paid $114.8 million for the Warrant Early Termination Agreements.

See Note 13 - Convertible Senior Notes of the Notes to Consolidated Financial Statements for additional details regarding the 2025 Notes Partial Repurchase and related Note Hedge Early Termination Agreements and Warrant Early Termination Agreements.

Use of Cash

Cash flows generated from operating activities and availability under our revolving credit facility are our principal sources of liquidity, which we use for operating expenses, development of new restaurants, relocating or remodeling older restaurants, investments in technology, dividend payments and share repurchases.

We believe that our expected liquidity sources are adequate to fund debt service requirements, lease obligations, capital expenditures and working capital obligations during the 12 months following this filing. However, our ability to continue to meet these requirements and obligations will depend on, among other things, our ability to achieve anticipated levels of revenue and cash flow and our ability to manage costs and working capital successfully.

Capital Expenditures - We estimate that our capital expenditures will total approximately $270 million to $290 million in 2024. The amount of actual capital expenditures may be affected by general economic, financial, competitive, legislative and regulatory factors, among other things, including raw material constraints.

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BLOOMIN’ BRANDS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Brazil Judicial Deposit - During the first half of 2024, we anticipate making a judicial deposit of approximately $45.0 million to $50.0 million in connection with our appeal of an unfavorable court ruling related to our ongoing litigation regarding our eligibility for tax exemptions under the Brazil tax legislation. The judicial deposit includes the disputed amounts through December 31, 2023 and will be recorded in Other assets, net, on our Consolidated Balance Sheet. We believe that we will more likely than not prevail in this appeal and accordingly, have not recorded any expense or liability for the disputed amounts.

See Note 20 - Income Taxes of the Notes to Consolidated Financial Statements for further information regarding the Brazil tax legislation and related litigation.

Dividends and Share Repurchases - During 2023 and 2022, we declared and paid quarterly cash dividends of $0.24 and $0.14 per share, respectively.

In February 2024, our Board declared a quarterly cash dividend of $0.24 per share, payable on March 20, 2024. Future dividend payments are dependent on our earnings, financial condition, capital expenditure requirements, surplus and other factors that our Board considers relevant, as well as continued compliance with the financial covenants in our debt agreements.

Following is a summary of our share repurchase programs active during the periods presented as of December 31, 2023 (dollars in thousands):

[[GREPCENT_TABLE]]
[["SHARE REPURCHASE PROGRAM","","BOARD APPROVAL DATE","","AUTHORIZED","","REPURCHASED","","CANCELLED OR EXPIRED","","REMAINING"],["2022","","February 8, 2022","","$","125,000","","","$","125,000","","","$","\u2014","","","$","\u2014"],["2023 (1)","","February 7, 2023","","$","125,000","","","54,999","","","$","\u2014","","","$","70,001"],["Total share repurchase programs","","","","$","179,999"]]
[[/GREPCENT_TABLE]]
________________

(1)Subsequent to December 31, 2023, we repurchased $12.5 million of our common stock authorized under the 2023 Share Repurchase Program under a Rule 10b5-1 plan.

In February 2024, our Board canceled the remaining $57.5 million of authorization under the 2023 Share Repurchase Program and approved a new $350.0 million authorization. The 2024 Share Repurchase Program includes capacity above our normal share repurchases activity to provide flexibility in retiring our 2025 Notes at or prior to their May 2025 maturity. The 2024 Share Repurchase Program will expire on August 13, 2025.

The following table presents our dividends and share repurchases for the periods indicated:

[[GREPCENT_TABLE]]
[["(dollars in thousands)","DIVIDENDS PAID","","SHARE REPURCHASES (1)","","TOTAL"],["Fiscal year 2023","$","83,742","","","$","70,000","","","$","153,742"],["Fiscal year 2022","49,736","","","109,999","","","159,735"],["Total","$","133,478","","","$","179,999","","","$","313,477"]]
[[/GREPCENT_TABLE]]

________________

(1)Excludes $0.1 million of excise tax on share repurchases for fiscal year 2023.

Our ability to pay dividends and make share repurchases is dependent on our ability to obtain funds from our subsidiaries, continued compliance with the financial covenants in our debt agreements and the existence of surplus, as well as our earnings, financial condition, capital expenditure requirements and other factors that our Board deems relevant.

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BLOOMIN’ BRANDS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Material Cash Requirements - The following table presents current and long-term material cash requirements as of December 31, 2023:

[[GREPCENT_TABLE]]
[["","PAYMENTS DUE BY PERIOD"],["","","","LESS THAN","","1-3","","3-5","","MORE THAN"],["(dollars in thousands)","TOTAL","","1 YEAR","","YEARS","","YEARS","","5 YEARS"],["Operating leases (1)","$","1,343,420","","","$","183,370","","","$","341,252","","","$","259,118","","","$","559,680"],["Long-term debt:"],["Principal (2)","785,786","","","\u2014","","","485,786","","","\u2014","","","300,000"],["Interest (3)","151,624","","","47,735","","","68,655","","","30,750","","","4,484"],["Purchase obligations (4)","196,809","","","186,992","","","9,488","","","329","","","\u2014"],["Other obligations (5)","57,111","","","9,595","","","7,091","","","3,611","","","36,814"],["Total","$","2,534,750","","","$","427,692","","","$","912,272","","","$","293,808","","","$","900,978"]]
[[/GREPCENT_TABLE]]

____________________

(1)Amounts represent undiscounted future minimum rental commitments under non-cancelable operating leases. Excludes $945.4 million related to operating lease renewal options that are reasonably certain of exercise.

(2)Includes Senior Secured Credit Facility, 2029 Notes and 2025 Notes. Amounts are not reduced by unamortized debt issuance costs totaling $5.1 million.

(3)Projected future interest payments on long-term debt are based on interest rates in effect as of December 31, 2023.

(4)Purchase obligations include agreements to purchase goods or services that are enforceable, legally binding and specify all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. We have purchase obligations with various vendors that consist primarily of inventory, fixtures and equipment and technology.

(5)Includes other long-term liabilities, primarily consisting of deferred compensation obligations, deposits, undiscounted finance leases and other accrued obligations. Unrecognized tax benefits are excluded from this table since it is not possible to estimate when these future payments may occur.

Summary of Cash Flows and Financial Condition

Cash Flows - The following table presents a summary of our cash flows provided by (used in) operating, investing and financing activities for the periods indicated:

[[GREPCENT_TABLE]]
[["","FISCAL YEAR"],["(dollars in thousands)","2023","","2022"],["Net cash provided by operating activities","$","532,421","","","$","390,922"],["Net cash used in investing activities","(317,106)","","","(201,138)"],["Net cash used in financing activities","(187,125)","","","(195,501)"],["Effect of exchange rate changes on cash and cash equivalents","1,448","","","1,395"],["Net increase (decrease) in cash, cash equivalents and restricted cash","$","29,638","","","$","(4,322)"]]
[[/GREPCENT_TABLE]]

Operating activities - The increase in net cash provided by operating activities during 2023 as compared to 2022 was primarily due to: (i) higher operational receipts, net of payments, (ii) decreased employee compensation payments and (iii) lower tax payments. These increases were partially offset by higher rent and interest payments.

Investing activities - The increase in net cash used in investing activities during 2023 as compared to 2022 was primarily due to higher capital expenditures and a decrease in cash withdrawn from Company-owned life insurance policies.

Financing activities - The decrease in net cash used in financing activities during 2023 as compared to 2022 was primarily due to: (i) a decrease in repurchases of common stock, (ii) higher net proceeds from share-based compensation and (iii) partner equity plan payments during 2022. These decreases were partially offset by higher payments of cash dividends on our common stock and increased repayments on our debt.

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BLOOMIN’ BRANDS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Financial Condition - Following is a summary of our current assets, current liabilities and working capital (deficit) as of the periods indicated:

[[GREPCENT_TABLE]]
[["(dollars in thousands)","DECEMBER 31, 2023","","DECEMBER 25, 2022"],["Current assets","$","343,314","","","$","346,577"],["Current liabilities","1,002,335","","","978,867"],["Working capital (deficit)","$","(659,021)","","","$","(632,290)"]]
[[/GREPCENT_TABLE]]

Working capital (deficit) includes: (i) Unearned revenue primarily from unredeemed gift cards of $381.9 million and $394.2 million as of December 31, 2023 and December 25, 2022, respectively, and (ii) current operating lease liabilities of $175.4 million and $183.5 million as of December 31, 2023 and December 25, 2022, respectively, with the corresponding operating right-of-use assets recorded as non-current on our Consolidated Balance Sheets. We have, and in the future may continue to have, negative working capital balances (as is common for many restaurant companies). We operate successfully with negative working capital because cash collected on restaurant sales is typically received before payment is due on our current liabilities, and our inventory turnover rates require relatively low investment in inventories. Additionally, ongoing cash flows from restaurant operations and gift card sales are typically used to service debt obligations and to make capital expenditures.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these accompanying consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities during the reporting period. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We consider an accounting estimate to be critical if it requires assumptions to be made and changes in these assumptions could have a material impact on our consolidated financial condition or results of operations.

Impairment or Disposal of Long-Lived Assets - Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The evaluation is performed at the lowest level of identifiable cash flows independent of other assets. For long-lived assets deployed at our restaurants, we review for impairment at the individual restaurant level.

When evaluating for impairment, the total future undiscounted cash flows expected to be generated by the assets are compared to the carrying amount. If the total future undiscounted cash flows expected to be generated by the assets are less than the carrying amount, this may be an indicator of impairment. An impairment loss is recognized in earnings when the asset’s carrying value exceeds its estimated fair value. Fair value is generally estimated using a discounted cash flow model. The key estimates and assumptions used in this model are future cash flow estimates, with material changes generally driven by changes in expected use, and the discount rate. These estimates are subjective and our ability to realize future cash flows and asset fair values is affected by factors such as ongoing maintenance and improvement of the assets, changes in economic conditions and changes in our operating performance. Historically, the change in useful lives of our assets as a result of planned closures or the decision not to renew leases has been a key factor in the impairment we have recognized.

Based on a review of operating results for each of our restaurants, given the current operating environment, the amount of net book value associated with lower performing restaurants that would be deemed at risk for impairment is not material to our consolidated financial statements.

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BLOOMIN’ BRANDS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Goodwill and Indefinite-Lived Intangible Assets - Goodwill and indefinite-lived intangible assets are not subject to amortization and are tested for impairment annually in the second fiscal quarter, or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

We may elect to perform a qualitative assessment to determine whether it is more likely than not that a reporting unit is impaired. In considering the qualitative approach, we evaluate factors including, but not limited to, macroeconomic conditions, market and industry conditions, commodity cost fluctuations, competitive environment, share price performance, results of prior impairment tests, operational stability and the overall financial performance of the reporting units. Any adverse change in these factors could have a significant impact on the recoverability of assets and could have a material impact on our consolidated financial statements.

If the qualitative assessment is not performed or if we determine that it is not more likely than not that the fair value of the reporting unit exceeds the carrying value, a quantitative approach, using the fair value of the reporting unit, is calculated. Fair value of a reporting unit is the price a willing buyer would pay for the reporting unit and is estimated by utilizing a weighted average of the income approach, using a discounted cash flow model, and, when appropriate, the market approach including the guideline public company method and guideline transaction method. The key estimates and assumptions used in this assessment are future cash flow estimates, which are heavily influenced by revenue growth rates, operating margins and capital expenditures. These estimates are subjective, and our ability to achieve the forecasted cash flows used in our fair value calculations is affected by factors such as the success of strategic initiatives, changes in economic conditions and discount rates, changes in our operating performance and changes in our business strategies.

We estimate the fair value of trade names using the relief-from-royalty method, which requires assumptions related to projected sales for each reporting unit, assumed market royalty rates applicable to the trade names, and discount rates.

The carrying value of the reporting unit or trade name is compared to its estimated fair value, with any excess of carrying value over fair value deemed to be an impairment.

The carrying value of goodwill and trade names as of December 31, 2023 was $276.3 million and $414.7 million, respectively. We performed our annual impairment test in the second quarter of 2023 by utilizing the quantitative approach and determined that the excess of fair value over carrying value of our reporting units was substantial.

Sales declines at our restaurants, unplanned increases in commodity or labor costs, deterioration in overall economic conditions and challenges in the restaurant industry may result in future impairment charges. It is possible that changes in circumstances or changes in our judgments, assumptions and estimates could result in impairment of a portion or all of our goodwill or other intangible assets.

Leases - We use judgment at lease inception to determine the reasonably certain lease term, which in turn, impacts the applicable incremental borrowing rate (“IBR”) used to calculate the initial lease liability for each portfolio of leases. Other assumptions used in determining our incremental borrowing rate include our implied credit rating and an estimate of secured borrowing rates based on comparable market data. We determined the present value of the lease liabilities by using a country specific IBR and applying a single rate to the respective portfolio of leases based on term, regardless of the underlying asset type.

The reasonably certain lease term used in the evaluation of new leases includes renewal option periods only in instances in which the exercise of the renewal option is reasonably certain because failure to exercise such an option would result in an economic penalty. Such an economic penalty would typically result from having to abandon a building or equipment with remaining economic value upon vacating a property.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

At the inception of each lease, we evaluate the property and the lease to determine whether the lease is an operating lease or a finance lease. This lease accounting evaluation may require significant judgment in determining the fair value and useful life of the leased property and the appropriate reasonably certain lease term. Determination of the reasonably certain lease term impacts the period in which buildings are depreciated. These judgments may produce materially different amounts of rent and depreciation expense in a given reporting period than would be reported if different assumed lease terms were used.

Insurance Reserves - We carry insurance programs with specific retention levels or high per-claim deductibles for a significant portion of expected losses under our workers’ compensation, general or liquor liability, health, property and management liability insurance programs. For some programs, we maintain stop-loss coverage to limit the exposure relating to certain risks.

We record a liability for all unresolved and incurred but not reported claims at the anticipated cost below our specified retention levels or per-claim deductible amounts. Our liability for insurance claims was $45.9 million and $49.1 million as of December 31, 2023 and December 25, 2022, respectively. In establishing our reserves, we consider certain actuarial assumptions and judgments regarding economic conditions, and the frequency and severity of claims. The establishment of the reserves utilizing such estimates and assumptions is in part based on the premise that historical claims experience is indicative of current or future expected activity, which could differ significantly. Reserves recorded for workers’ compensation and general or liquor liability claims are discounted using the average of the one-year and five-year risk-free rate of monetary assets that have comparable maturities.

If actual results are not consistent with our estimates or assumptions, we may be exposed to losses or gains that could be material. A 50 basis point change in the discount rate in our insurance claim liabilities as of December 31, 2023, would have affected net earnings by $0.5 million in 2023.

Income Taxes - Deferred tax assets and liabilities are recognized based on the differences between the financial statement carrying amounts of assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using the tax rates, based on certain judgments regarding enacted tax laws and published guidance, in effect in the years in which we expect those temporary differences to reverse. As of December 31, 2023, tax loss carryforwards and credit carryforwards that do not have a valuation allowance are expected to be recoverable within the applicable statutory expiration periods. We currently expect to utilize general business tax credit carryforwards within a 10-year period. However, our ability to utilize these tax credits could be adversely impacted by, among other items, a future “ownership change” as defined under Section 382 of the Internal Revenue Code. A valuation allowance is established against the deferred tax assets when it is more likely than not that some portion or all of the deferred taxes may not be realized. Changes in assumptions regarding our level and composition of earnings, tax laws or the deferred tax valuation allowance and the results of tax audits and litigation, may materially impact the effective income tax rate.

While we consider all of our tax positions to be fully supportable, our income tax returns, like those of most companies, are periodically audited by U.S. and foreign tax authorities. In determining taxable income, income or loss before taxes is adjusted for differences between local tax laws and generally accepted accounting principles. A tax benefit from an uncertain position is recognized only if it is more likely than not that the position is sustainable based on its technical merits. For uncertain tax positions that do not meet this threshold, we recognize a liability. The liability for unrecognized tax benefits requires significant management judgment regarding exposures about our various tax positions. These assumptions and probabilities are reviewed and updated based upon new information. An unfavorable tax settlement could require the use of cash and an increase in the amount of income tax expense we recognize. As of December 31, 2023, we had $16.7 million of unrecognized tax benefits, including accrued interest and penalties, that if recognized, would impact our effective income tax rate.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Recently Issued Financial Accounting Standards

For a description of recently issued Financial Accounting Standards that we adopted in 2023 and, that are applicable to us and likely to have material effect on our consolidated financial statements, but have not yet been adopted, see Note 2 - Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements.

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