Denny’s Corporation (the "Company") (NASDAQ: DENN), owner and
operator of Denny's Inc. ("Denny's") and Keke's Inc. ("Keke's")
today reported results for its third quarter ended
September 25, 2024 and provided a business update on the
Company’s operations.
Kelli Valade, Chief Executive Officer, stated, “Our third
quarter sales results directly reflect ongoing brand investments
and dedicated focus on value that resulted in outpacing the
category. Denny’s domestic system-wide same-restaurant sales**
outperformed the BBI Family Dining index for the third consecutive
quarter driven by the relaunch of our fan favorite $2-$4-$6-$8
value menu and the continued expansion of off-premises with our
third virtual brand, Banda Burrito. Keke’s also experienced
significant sequential improvement in same-restaurant sales** as
our initiatives to enact foundational marketing strategies and
expand the alcohol program continued our efforts to close the gap
to the competitive set. We are also very excited to be hosting an
Investor Day today.”
Beginning at 9:00am EST this morning, the Company will be
hosting an Investor Day in New York, as well as a live webcast, to
detail strategic initiatives to build on its third quarter progress
and ensure long-term financial opportunities for its brands. The
investor day will highlight the Company’s plan to grow average unit
volume sales, margins and the portfolio, while balancing capital
allocations to maximize shareholder returns.
Third Quarter
2024
Highlights(1)
- Total operating
revenue was $111.8 million compared to $114.2 million for the prior
year quarter.
- Denny's domestic
system-wide same-restaurant sales** were (0.1%) compared to the
equivalent fiscal period in 2023, including (0.1%) at domestic
franchised restaurants and (0.4%) at company restaurants.
- Opened two Denny's
domestic franchised restaurants.
- Completed six
Denny's remodels, including three company remodels.
- Operating income was
$11.7 million compared to $14.0 million for the prior year
quarter.
- Adjusted franchise
operating margin* was $30.1 million, or 51.0% of franchise and
license revenue, and Adjusted company restaurant operating margin*
was $6.2 million, or 11.8% of company restaurant sales.
- Net income was $6.5
million, or $0.12 per diluted share.
- Adjusted net income*
and adjusted net income per share* were $7.2 million and $0.14,
respectively.
- Adjusted EBITDA* was
$20.0 million.
(1) Beginning fiscal 2024, the Company has evolved its
definition of non-GAAP measures. Please see the definitions,
explanations, and reconciliations further in this release.
Third Quarter 2024 Results
Total operating revenue was $111.8 million compared to $114.2
million for the prior year quarter.
Franchise and license revenue was $59.1 million compared to
$61.0 million for the prior year quarter. This change was primarily
driven by a decrease in initial and other fees associated with the
sale of kitchen equipment in the prior year quarter, and decreases
in equivalent units and franchise occupancy revenue, partially
offset by an increase in franchise advertising revenue primarily
related to higher local advertising co-op contributions for the
current quarter.
Company restaurant sales were $52.7 million compared to $53.2
million for the prior year quarter primarily driven by four fewer
Denny's equivalent units, including three refranchised units,
partially offset by three additional Keke's equivalent units for
the current quarter.
Adjusted franchise operating margin* was $30.1 million, or 51.0%
of franchise and license revenue, compared to $31.1 million, or
51.0% for the prior year quarter. This margin change was primarily
driven by the impact of fewer equivalent units on royalty revenues
and lease terminations.
Adjusted company restaurant operating margin* was $6.2 million,
or 11.8% of company restaurant sales, compared to $7.6 million, or
14.3% for the prior year quarter. This margin change was primarily
due to investments in marketing and higher occupancy costs,
including general liability insurance costs, for the current
quarter.
Total general and administrative expenses were $19.8 million
compared to $18.2 million in the prior year quarter. This change
was primarily due to an increase in corporate administration
expense.
The provision for income taxes was $1.5 million, reflecting an
effective tax rate of 18.5% for the current quarter.
Net income was $6.5 million, or $0.12 per diluted share.
Adjusted net income* per share was $0.14.
The Company ended the quarter with $272.0 million of total debt
outstanding, including $261.0 million of borrowings under its
credit facility.
Capital Allocation
The Company invested $7.8 million in cash capital expenditures,
which included Keke's new development and Denny's company
remodels.
During the quarter, the Company allocated $1.8 million to share
repurchases resulting in approximately $89.2 million remaining
under its existing repurchase authorization.
Business Outlook
The following full year 2024 expectations reflect management's
expectations that the current consumer and economic environment
will not change materially, as well as the Company's strategic
initiative to accelerate the closure of lower volume Denny's
restaurants.
- Denny's domestic
system-wide same-restaurant sales** between (1%) and 0% (vs.
between (1%) and 1%).
- Consolidated
restaurant openings of 30 to 40, including 12 to 16 new Keke's
restaurants, with a consolidated net decline of 45 to 55 (vs. 20 to
30).
- Commodity inflation
of approximately 2% (vs. between 0% and 2%).
- Labor inflation
between 3% and 4%.
- Total general and
administrative expenses between $82 million and $85 million,
including approximately $11 million related to share-based
compensation expense which does not impact Adjusted EBITDA*.
- Adjusted EBITDA*
between $81 million and $84 million (vs. between $83 million and
$87 million).
* |
Please refer to the Reconciliation of Net Income to Non-GAAP
Financial Measures, as well as the Reconciliation of Operating
Income to Non-GAAP Financial Measures included in the tables below.
The Company is not able to reconcile the forward-looking non-GAAP
estimate set forth above to its most directly comparable U.S.
generally accepted accounting principles (GAAP) estimates without
unreasonable efforts because it is unable to predict, forecast or
determine the probable significance of the items impacting these
estimates, including gains, losses and other charges, with a
reasonable degree of accuracy. Accordingly, the most directly
comparable forward-looking GAAP estimate is not provided. |
|
|
** |
Same-restaurant sales include sales at company restaurants and
non-consolidated franchised and licensed restaurants that were open
during the comparable periods noted. Total operating revenue is
limited to company restaurant sales and royalties, advertising
revenue, initial and other fees and occupancy revenue from
non-consolidated franchised and licensed restaurants. Accordingly,
domestic franchise same-restaurant sales and domestic system-wide
same-restaurant sales should be considered as a supplement to, not
a substitute for, the Company's results as reported under
GAAP. |
|
|
Conference Call and Webcast Information
The Company will provide further commentary on the results for
the third quarter ended September 25, 2024 and its investor
day on a webcast today, Tuesday, October 22, 2024 at 9:00 a.m.
Eastern Time. Interested parties are invited to listen to the
webcast accessible through the Company's investor relations website
at investor.dennys.com.
About Denny's Corporation
Denny’s Corporation is one of America’s largest full-service
restaurant chains based on number of restaurants. As of
September 25, 2024, the Company consisted of 1,586
restaurants, 1,514 of which were franchised and licensed
restaurants and 72 of which were company operated.
The Company consists of the Denny’s brand and the Keke’s brand.
As of September 25, 2024, the Denny's brand consisted of 1,525
global restaurants, 1,464 of which were franchised and licensed
restaurants and 61 of which were company operated. As of
September 25, 2024, the Keke's brand consisted of 61
restaurants, 50 of which were franchised restaurants and 11 of
which were company operated.
For further information on Denny's Corporation, including news
releases, links to SEC filings, and other financial information,
please visit investor.dennys.com.
Non-GAAP Definition Changes
The Company has evolved its definition of non-GAAP financial
measures starting in fiscal 2024 to provide more clarity and
comparability relative to peers. Denny's Corporation management
uses certain non-GAAP measures in analyzing operating performance
and believes that the presentation of these measures provides
investors and analysts with information that is beneficial to
gaining an understanding of the Company's financial results.
Non-GAAP disclosures should not be viewed as a substitute for
financial results determined in accordance with GAAP.
The Company excludes legal settlement expenses, pre-opening
expenses, and other items management does not consider in the
evaluation of its ongoing core operating performance from adjusted
operating margin*, adjusted net income*, adjusted net income per
share*, and adjusted EBITDA*. In addition, the Company no longer
deducts cash payments for restructuring and exit costs, or cash
payments for share-based compensation from Adjusted EBITDA*.
Lastly, the Company has transitioned to utilizing GAAP cash flows
included in its SEC filed documents in lieu of a non-GAAP financial
measure.
Reconciliations of these non-GAAP measures are included in the
tables of this press release and a recast of historical non-GAAP
financial measures can be found on the Company's website, or its
most recent investor presentation.
Cautionary Language Regarding Forward-Looking
Statements
The Company urges caution in considering its current trends and
any outlook on earnings disclosed in this press release. In
addition, certain matters discussed in this release may constitute
forward-looking statements. These forward-looking statements, which
reflect management's best judgment based on factors currently
known, are intended to speak only as of the date such statements
are made and involve risks, uncertainties, and other factors that
may cause the actual performance of Denny’s Corporation, its
subsidiaries, and underlying restaurants to be materially different
from the performance indicated or implied by such statements. Words
such as “expect”, “anticipate”, “believe”, “intend”, “plan”,
“hope”, "will", and variations of such words and similar
expressions are intended to identify such forward-looking
statements. Except as may be required by law, the Company expressly
disclaims any obligation to update these forward-looking statements
to reflect events or circumstances after the date of this release
or to reflect the occurrence of unanticipated events. Factors that
could cause actual performance to differ materially from the
performance indicated by these forward-looking statements include,
among others: economic, public health and political conditions that
impact consumer confidence and spending, commodity and labor
inflation; the ability to effectively staff restaurants and support
personnel; the Company's ability to maintain adequate levels of
liquidity for its cash needs, including debt obligations, payment
of dividends, planned share repurchases and capital expenditures as
well as the ability of its customers, suppliers, franchisees and
lenders to access sources of liquidity to provide for their own
cash needs; competitive pressures from within the restaurant
industry; the Company's ability to integrate and derive the
expected benefits from its acquisition of Keke's Breakfast Cafe;
the level of success of the Company’s operating initiatives and
advertising and promotional efforts; adverse publicity; health
concerns arising from food-related pandemics, outbreaks of flu
viruses or other diseases; changes in business strategy or
development plans; terms and availability of capital; regional
weather conditions; overall changes in the general economy
(including with regard to energy costs), particularly at the retail
level; political environment and geopolitical events (including
acts of war and terrorism); and other factors from time to time set
forth in the Company’s SEC reports and other filings, including but
not limited to the discussion in Management’s Discussion and
Analysis and the risks identified in Item 1A. Risk Factors
contained in the Company’s Annual Report on Form 10-K for the year
ended December 27, 2023 (and in the Company’s subsequent Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K).
|
DENNY’S CORPORATION |
Consolidated Balance Sheets |
(Unaudited) |
|
|
|
|
|
|
|
($ in
thousands) |
9/25/24 |
|
12/27/23 |
Assets |
|
|
|
|
Current
assets |
|
|
|
|
|
Cash and cash
equivalents |
$ |
1,466 |
|
|
$ |
4,893 |
|
|
|
Investments |
|
2,902 |
|
|
|
1,281 |
|
|
|
Receivables,
net |
|
17,038 |
|
|
|
21,391 |
|
|
|
Inventories |
|
1,835 |
|
|
|
2,175 |
|
|
|
Assets held for
sale |
|
— |
|
|
|
1,455 |
|
|
|
Prepaid and other
current assets |
|
10,610 |
|
|
|
12,855 |
|
|
|
|
Total current assets |
|
33,851 |
|
|
|
44,050 |
|
|
Property, net |
|
101,532 |
|
|
|
93,494 |
|
|
Finance lease
right-of-use assets, net |
|
6,411 |
|
|
|
6,098 |
|
|
Operating lease
right-of-use assets, net |
|
121,169 |
|
|
|
116,795 |
|
|
Goodwill |
|
66,357 |
|
|
|
65,908 |
|
|
Intangible assets,
net |
|
92,112 |
|
|
|
93,428 |
|
|
Deferred financing
costs, net |
|
1,225 |
|
|
|
1,702 |
|
|
Other noncurrent
assets |
|
38,966 |
|
|
|
43,343 |
|
|
|
|
Total assets |
$ |
461,623 |
|
|
$ |
464,818 |
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
Current
liabilities |
|
|
|
|
|
Current finance
lease liabilities |
$ |
1,457 |
|
|
$ |
1,383 |
|
|
|
Current operating
lease liabilities |
|
15,076 |
|
|
|
14,779 |
|
|
|
Accounts
payable |
|
14,685 |
|
|
|
24,070 |
|
|
|
Other current
liabilities |
|
56,474 |
|
|
|
63,068 |
|
|
|
|
Total current liabilities |
|
87,692 |
|
|
|
103,300 |
|
|
Long-term
liabilities |
|
|
|
|
|
Long-term
debt |
|
261,000 |
|
|
|
255,500 |
|
|
|
Noncurrent finance
lease liabilities |
|
9,540 |
|
|
|
9,150 |
|
|
|
Noncurrent
operating lease liabilities |
|
117,390 |
|
|
|
114,451 |
|
|
|
Liability for
insurance claims, less current portion |
|
7,160 |
|
|
|
6,929 |
|
|
|
Deferred income
taxes, net |
|
4,619 |
|
|
|
6,582 |
|
|
|
Other noncurrent
liabilities |
|
28,705 |
|
|
|
31,592 |
|
|
|
|
Total long-term
liabilities |
|
428,414 |
|
|
|
424,204 |
|
|
|
|
Total liabilities |
|
516,106 |
|
|
|
527,504 |
|
|
|
|
|
|
|
|
Shareholders' deficit |
|
|
|
|
|
Common stock |
|
533 |
|
|
|
529 |
|
|
|
Paid-in
capital |
|
13,129 |
|
|
|
6,688 |
|
|
|
Deficit |
|
(7,009 |
) |
|
|
(21,784 |
) |
|
|
Accumulated other
comprehensive loss, net |
|
(43,445 |
) |
|
|
(41,659 |
) |
|
|
Treasury
stock |
|
(17,691 |
) |
|
|
(6,460 |
) |
|
|
|
Total shareholders'
deficit |
|
(54,483 |
) |
|
|
(62,686 |
) |
|
|
|
Total liabilities and
shareholders' deficit |
$ |
461,623 |
|
|
$ |
464,818 |
|
|
|
|
|
|
|
|
Debt
Balances |
|
Credit facility
revolver due 2026 |
$ |
261,000 |
|
|
$ |
255,500 |
|
|
Finance lease
liabilities |
|
10,997 |
|
|
|
10,533 |
|
|
|
Total debt |
$ |
271,997 |
|
|
$ |
266,033 |
|
|
|
|
|
|
|
|
|
|
|
|
DENNY’S CORPORATION |
Condensed Consolidated Statements of Income |
(Unaudited) |
|
|
|
|
|
|
|
|
|
Quarter Ended |
($ in thousands,
except per share amounts) |
9/25/24 |
|
9/27/23 |
Revenue: |
|
|
|
|
Company restaurant
sales |
$ |
52,701 |
|
|
$ |
53,153 |
|
|
Franchise and
license revenue |
|
59,058 |
|
|
|
61,030 |
|
|
|
Total operating revenue |
|
111,759 |
|
|
|
114,183 |
|
Costs of company
restaurant sales, excluding depreciation and amortization |
|
46,820 |
|
|
|
45,893 |
|
Costs of franchise
and license revenue, excluding depreciation and amortization |
|
28,999 |
|
|
|
29,810 |
|
General and
administrative expenses |
|
19,831 |
|
|
|
18,237 |
|
Depreciation and
amortization |
|
3,622 |
|
|
|
3,605 |
|
Operating (gains),
losses and other charges, net |
|
746 |
|
|
|
2,620 |
|
|
|
Total operating costs and
expenses, net |
|
100,018 |
|
|
|
100,165 |
|
Operating
income |
|
11,741 |
|
|
|
14,018 |
|
Interest expense,
net |
|
4,571 |
|
|
|
4,381 |
|
Other nonoperating
(income) expense, net |
|
(824 |
) |
|
|
43 |
|
Income before
income taxes |
|
7,994 |
|
|
|
9,594 |
|
Provision for
income taxes |
|
1,478 |
|
|
|
1,686 |
|
Net income |
$ |
6,516 |
|
|
$ |
7,908 |
|
|
|
|
|
|
|
Net income per
share - basic |
$ |
0.12 |
|
|
$ |
0.14 |
|
Net income per
share - diluted |
$ |
0.12 |
|
|
$ |
0.14 |
|
|
|
|
|
|
|
Basic weighted
average shares outstanding |
|
52,148 |
|
|
|
55,869 |
|
Diluted weighted
average shares outstanding |
|
52,207 |
|
|
|
56,082 |
|
|
|
|
|
|
|
Comprehensive
(loss) income |
$ |
(2,468 |
) |
|
$ |
20,469 |
|
|
|
|
|
General
and Administrative Expenses |
|
|
Corporate
administrative expenses |
$ |
15,875 |
|
|
$ |
14,580 |
|
|
Share-based
compensation |
|
3,006 |
|
|
|
2,864 |
|
|
Incentive
compensation |
|
447 |
|
|
|
1,049 |
|
|
Deferred
compensation valuation adjustments |
|
503 |
|
|
|
(256 |
) |
|
|
Total general and
administrative expenses |
$ |
19,831 |
|
|
$ |
18,237 |
|
|
|
|
|
|
|
|
|
|
|
|
DENNY’S CORPORATION |
Condensed Consolidated Statements of Income |
(Unaudited) |
|
|
|
|
|
|
|
|
|
Three Quarters Ended |
($ in thousands,
except per share amounts) |
9/25/24 |
|
9/27/23 |
Revenue: |
|
|
|
|
Company restaurant
sales |
$ |
159,391 |
|
|
$ |
161,486 |
|
|
Franchise and
license revenue |
|
178,269 |
|
|
|
187,083 |
|
|
|
Total operating revenue |
|
337,660 |
|
|
|
348,569 |
|
Costs of company
restaurant sales, excluding depreciation and amortization |
|
142,516 |
|
|
|
138,953 |
|
Costs of franchise
and license revenue, excluding depreciation and amortization |
|
89,801 |
|
|
|
92,657 |
|
General and
administrative expenses |
|
61,539 |
|
|
|
58,515 |
|
Depreciation and
amortization |
|
10,938 |
|
|
|
10,878 |
|
Goodwill
impairment charges |
|
20 |
|
|
|
— |
|
Operating (gains),
losses and other charges, net |
|
1,984 |
|
|
|
2,467 |
|
|
|
Total operating costs and
expenses, net |
|
306,798 |
|
|
|
303,470 |
|
Operating
income |
|
30,862 |
|
|
|
45,099 |
|
Interest expense,
net |
|
13,564 |
|
|
|
13,288 |
|
Other nonoperating
(income) expense, net |
|
(1,685 |
) |
|
|
9,470 |
|
Income before
income taxes |
|
18,983 |
|
|
|
22,341 |
|
Provision for
income taxes |
|
4,208 |
|
|
|
5,298 |
|
Net income |
$ |
14,775 |
|
|
$ |
17,043 |
|
|
|
|
|
|
|
Net income per
share - basic |
$ |
0.28 |
|
|
$ |
0.30 |
|
Net income per
share - diluted |
$ |
0.28 |
|
|
$ |
0.30 |
|
|
|
|
|
|
|
Basic weighted
average shares outstanding |
|
52,635 |
|
|
|
56,764 |
|
Diluted weighted
average shares outstanding |
|
52,739 |
|
|
|
56,973 |
|
|
|
|
|
|
|
Comprehensive
income |
$ |
12,989 |
|
|
$ |
31,980 |
|
|
|
|
|
General
and Administrative Expenses |
|
|
Corporate
administrative expenses |
$ |
46,843 |
|
|
$ |
43,919 |
|
|
Share-based
compensation |
|
8,406 |
|
|
|
8,477 |
|
|
Incentive
compensation |
|
4,868 |
|
|
|
5,335 |
|
|
Deferred
compensation valuation adjustments |
|
1,422 |
|
|
|
784 |
|
|
|
Total general and
administrative expenses |
$ |
61,539 |
|
|
$ |
58,515 |
|
|
|
|
|
|
|
|
|
|
|
|
DENNY’S CORPORATION |
Reconciliation of Net Income to Non-GAAP Financial
Measures |
(Unaudited) |
The Company believes that, in addition to GAAP measures, certain
non-GAAP financial measures are useful information to investors and
analysts to assist in the evaluation of operating performance on a
period-to-period basis. However, non-GAAP measures should be
considered as a supplement to, not a substitute for, operating
income, net income, and net income per share, or other financial
performance measures prepared in accordance with GAAP. The Company
uses adjusted EBITDA, adjusted net income and adjusted net income
per share internally as performance measures for planning purposes,
including the preparation of annual operating budgets, and for
compensation purposes, including incentive compensation for certain
employees. These non-GAAP measures are adjusted for certain items
the Company does not consider in the evaluation of its ongoing core
operating performance. These adjustments are either non-recurring
in nature or vary from period to period without correlation to the
Company's ongoing core operating performance.
|
Quarter Ended |
|
Three Quarters Ended |
($ in thousands, except per
share amounts) |
9/25/24 |
|
9/27/23 |
|
9/25/24 |
|
9/27/23 |
Net income |
$ |
6,516 |
|
|
$ |
7,908 |
|
|
$ |
14,775 |
|
|
$ |
17,043 |
|
Provision for income
taxes |
|
1,478 |
|
|
|
1,686 |
|
|
|
4,208 |
|
|
|
5,298 |
|
Goodwill impairment
charges |
|
— |
|
|
|
— |
|
|
|
20 |
|
|
|
— |
|
Operating (gains), losses and
other charges, net |
|
746 |
|
|
|
2,620 |
|
|
|
1,984 |
|
|
|
2,467 |
|
Other nonoperating (income)
expense, net |
|
(824 |
) |
|
|
43 |
|
|
|
(1,685 |
) |
|
|
9,470 |
|
Share-based compensation
expense |
|
3,006 |
|
|
|
2,864 |
|
|
|
8,406 |
|
|
|
8,477 |
|
Deferred compensation plan
valuation adjustments |
|
503 |
|
|
|
(256 |
) |
|
|
1,422 |
|
|
|
784 |
|
Interest expense, net |
|
4,571 |
|
|
|
4,381 |
|
|
|
13,564 |
|
|
|
13,288 |
|
Depreciation and
amortization |
|
3,622 |
|
|
|
3,605 |
|
|
|
10,938 |
|
|
|
10,878 |
|
Legal settlement expenses |
|
152 |
|
|
|
245 |
|
|
|
1,809 |
|
|
|
475 |
|
Pre-opening expenses |
|
209 |
|
|
|
105 |
|
|
|
766 |
|
|
|
130 |
|
Other adjustments |
|
40 |
|
|
|
(78 |
) |
|
|
2,532 |
|
|
|
(75 |
) |
Adjusted EBITDA |
$ |
20,019 |
|
|
$ |
23,123 |
|
|
$ |
58,739 |
|
|
$ |
68,235 |
|
|
|
|
|
|
|
|
|
Net income |
$ |
6,516 |
|
|
$ |
7,908 |
|
|
$ |
14,775 |
|
|
$ |
17,043 |
|
Losses and amortization on
interest rate swap derivatives, net |
|
194 |
|
|
|
94 |
|
|
|
502 |
|
|
|
10,838 |
|
Losses (gains) on sales of
assets and other charges, net |
|
6 |
|
|
|
(88 |
) |
|
|
(88 |
) |
|
|
(2,132 |
) |
Impairment charges (1) |
|
78 |
|
|
|
1,711 |
|
|
|
812 |
|
|
|
1,840 |
|
Legal settlement expenses |
|
152 |
|
|
|
245 |
|
|
|
1,809 |
|
|
|
475 |
|
Pre-opening expenses |
|
209 |
|
|
|
105 |
|
|
|
766 |
|
|
|
130 |
|
Other adjustments |
|
40 |
|
|
|
(78 |
) |
|
|
2,532 |
|
|
|
(75 |
) |
Tax effect (2) |
|
(4 |
) |
|
|
(237 |
) |
|
|
(1,406 |
) |
|
|
(2,581 |
) |
Adjusted net income |
$ |
7,191 |
|
|
$ |
9,660 |
|
|
$ |
19,702 |
|
|
$ |
25,538 |
|
|
|
|
|
|
|
|
|
Diluted weighted average
shares outstanding |
|
52,207 |
|
|
|
56,082 |
|
|
|
52,739 |
|
|
|
56,973 |
|
|
|
|
|
|
|
|
|
Net income per share -
diluted |
$ |
0.12 |
|
|
$ |
0.14 |
|
|
$ |
0.28 |
|
|
$ |
0.30 |
|
Adjustments per share |
|
0.02 |
|
|
|
0.03 |
|
|
|
0.09 |
|
|
|
0.15 |
|
Adjusted net income per
share |
$ |
0.14 |
|
|
$ |
0.17 |
|
|
$ |
0.37 |
|
|
$ |
0.45 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1 |
) |
Impairment charges include goodwill impairment charges of less than
$0.1 million for the year-to-date period ended September 25,
2024. |
(2 |
) |
Tax adjustments for the quarter and year-to-date period ended
September 25, 2024 reflect effective tax rates of 0.6% and 22.2%,
respectively. Tax adjustments for the quarter and year-to-date
period ended September 27, 2023 reflect effective tax rates of
11.9% and 23.3%, respectively. |
|
|
|
|
DENNY’S CORPORATION |
Reconciliation of Operating Income to Non-GAAP Financial
Measures |
(Unaudited) |
The Company believes that, in addition to GAAP measures, certain
other non-GAAP financial measures are useful information to
investors and analysts to assist in the evaluation of
restaurant-level operating efficiency and performance of ongoing
restaurant-level operations. However, non-GAAP measures should be
considered as a supplement to, not a substitute for, operating
income, net income, and net income per share, or other financial
performance measures prepared in accordance with GAAP. The Company
uses restaurant-level operating margin, company restaurant
operating margin and franchise operating margin internally as
performance measures for planning purposes, including the
preparation of annual operating budgets, and for compensation
purposes, including incentive compensation for certain
employees.
Restaurant-level operating margin is the total of company
restaurant operating margin and franchise operating margin and
excludes: (i) general and administrative expenses, which include
primarily non-restaurant-level costs associated with support of
company and franchised restaurants and other activities at their
corporate office; (ii) depreciation and amortization expense,
substantially all of which is related to company restaurant-level
assets, because such expenses represent historical sunk costs which
do not reflect current cash outlays for the restaurants; (iii)
special items, included within operating (gains), losses and other
charges, net, to provide investors with a clearer perspective of
its ongoing operating performance and a more relevant comparison to
prior period results.
Company restaurant operating margin is defined as company
restaurant sales less costs of company restaurant sales (which
include product costs, company restaurant level payroll and
benefits, occupancy costs, and other operating costs including
utilities, repairs and maintenance, marketing and other expenses)
and presents it as a percent of company restaurant sales. Adjusted
company operating restaurant margin is defined as company
restaurant operating margin less certain items such as legal
settlement expenses, pre-opening expenses, and other items the
Company does not consider in the evaluation of its ongoing core
operating performance.
Franchise operating margin is defined as franchise and license
revenue (which includes franchise royalties and other non-food and
beverage revenue streams such as initial franchise and other fees,
advertising revenue and occupancy revenue) less costs of franchise
and license revenue and presents it as a percent of franchise and
license revenue. Adjusted franchise operating margin is defined as
franchise operating margin less certain items the Company does not
consider in the evaluation of its ongoing core operating
performance.
Adjusted restaurant-level operating margin is the total of
adjusted company restaurant operating margin and adjusted franchise
operating margin and is defined as restaurant-level operating
margin adjusted for certain items the Company does not consider in
the evaluation of its ongoing core operating performance. These
adjustments are either non-recurring in nature or vary from period
to period without correlation to the Company's ongoing core
operating performance.
|
Quarter Ended |
|
Three Quarters Ended |
($ in thousands) |
9/25/24 |
|
9/27/23 |
|
9/25/24 |
|
9/27/23 |
Operating income |
$ |
11,741 |
|
$ |
14,018 |
|
$ |
30,862 |
|
$ |
45,099 |
|
General and administrative
expenses |
|
19,831 |
|
|
18,237 |
|
|
61,539 |
|
|
58,515 |
|
Depreciation and
amortization |
|
3,622 |
|
|
3,605 |
|
|
10,938 |
|
|
10,878 |
|
Goodwill impairment
charges |
|
— |
|
|
— |
|
|
20 |
|
|
— |
|
Operating (gains), losses and
other charges, net |
|
746 |
|
|
2,620 |
|
|
1,984 |
|
|
2,467 |
|
Restaurant-level operating margin |
$ |
35,940 |
|
$ |
38,480 |
|
$ |
105,343 |
|
$ |
116,959 |
|
|
|
|
|
|
|
|
|
Restaurant-level operating
margin consists of: |
|
|
|
|
|
|
|
Company restaurant operating margin (1) |
$ |
5,881 |
|
$ |
7,260 |
|
$ |
16,875 |
|
$ |
22,533 |
|
Franchise operating margin (2) |
|
30,059 |
|
|
31,220 |
|
|
88,468 |
|
|
94,426 |
|
Restaurant-level operating margin |
$ |
35,940 |
|
$ |
38,480 |
|
$ |
105,343 |
|
$ |
116,959 |
|
Adjustments (3) |
|
401 |
|
|
272 |
|
|
5,107 |
|
|
530 |
|
Adjusted restaurant-level operating margin |
$ |
36,341 |
|
$ |
38,752 |
|
$ |
110,450 |
|
$ |
117,489 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1 |
) |
Company restaurant operating margin is calculated as operating
income plus general and administrative expenses; depreciation and
amortization; operating (gains), losses and other charges, net; and
costs of franchise and license revenue, excluding depreciation and
amortization; less franchise and license revenue. |
(2 |
) |
Franchise operating margin is calculated as operating income plus
general and administrative expenses; depreciation and amortization;
operating (gains), losses and other charges, net; and costs of
company restaurant sales, excluding depreciation and amortization;
less company restaurant sales. |
(3 |
) |
Adjustments include legal settlement expenses, pre-opening costs,
and other adjustments the Company does not consider in the
evaluation of its ongoing core operating performance. Adjustments
for the year-to-date period ended September 25, 2024 include a $2.6
million distribution to franchisees related to a review of
advertising costs. |
|
|
|
|
DENNY’S CORPORATION |
Operating Margins |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended |
($ in
thousands) |
9/25/24 |
|
9/27/23 |
Company restaurant
operations: (1) |
|
|
|
|
|
|
Company restaurant
sales |
$ |
52,701 |
100.0 |
% |
|
$ |
53,153 |
|
100.0 |
% |
|
Costs of company
restaurant sales, excluding depreciation and amortization: |
|
|
|
|
|
|
|
Product costs |
|
13,611 |
25.8 |
% |
|
|
13,587 |
|
25.6 |
% |
|
|
Payroll and
benefits |
|
19,838 |
37.6 |
% |
|
|
19,754 |
|
37.2 |
% |
|
|
Occupancy |
|
4,443 |
8.4 |
% |
|
|
4,085 |
|
7.7 |
% |
|
|
Other operating
costs: |
|
|
|
|
|
|
|
|
Utilities |
|
1,959 |
3.7 |
% |
|
|
2,120 |
|
4.0 |
% |
|
|
|
Repairs and maintenance |
|
964 |
1.8 |
% |
|
|
996 |
|
1.9 |
% |
|
|
|
Marketing |
|
1,859 |
3.5 |
% |
|
|
1,393 |
|
2.6 |
% |
|
|
|
Legal settlements |
|
152 |
0.3 |
% |
|
|
245 |
|
0.5 |
% |
|
|
|
Pre-opening costs |
|
209 |
0.4 |
% |
|
|
105 |
|
0.2 |
% |
|
|
|
Other direct costs |
|
3,785 |
7.2 |
% |
|
|
3,608 |
|
6.8 |
% |
|
Total costs of
company restaurant sales, excluding depreciation and
amortization |
$ |
46,820 |
88.8 |
% |
|
$ |
45,893 |
|
86.3 |
% |
|
Company restaurant
operating margin (non-GAAP) (2) |
$ |
5,881 |
11.2 |
% |
|
$ |
7,260 |
|
13.7 |
% |
|
|
|
Adjustments (3) |
|
361 |
0.7 |
% |
|
|
350 |
|
0.7 |
% |
|
Adjusted company
restaurant operating margin (non-GAAP) (2) |
$ |
6,242 |
11.8 |
% |
|
$ |
7,610 |
|
14.3 |
% |
|
|
|
|
|
|
|
|
|
Franchise
operations: (4) |
|
|
|
|
|
|
Franchise and
license revenue: |
|
|
|
|
|
|
Royalties |
$ |
29,101 |
49.3 |
% |
|
$ |
29,703 |
|
48.7 |
% |
|
Advertising revenue |
|
20,172 |
34.2 |
% |
|
|
19,297 |
|
31.6 |
% |
|
Initial and other fees |
|
1,639 |
2.8 |
% |
|
|
3,388 |
|
5.6 |
% |
|
Occupancy revenue |
|
8,146 |
13.8 |
% |
|
|
8,642 |
|
14.2 |
% |
|
Total franchise
and license revenue |
$ |
59,058 |
100.0 |
% |
|
$ |
61,030 |
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
Costs of franchise
and license revenue, excluding depreciation and amortization: |
|
|
|
|
|
|
Advertising costs |
$ |
20,172 |
34.2 |
% |
|
$ |
19,297 |
|
31.6 |
% |
|
Occupancy costs |
|
5,256 |
8.9 |
% |
|
|
5,389 |
|
8.8 |
% |
|
Other direct costs |
|
3,571 |
6.0 |
% |
|
|
5,124 |
|
8.4 |
% |
|
Total costs of
franchise and license revenue, excluding depreciation and
amortization |
$ |
28,999 |
49.1 |
% |
|
$ |
29,810 |
|
48.8 |
% |
|
Franchise
operating margin (non-GAAP) (2) |
$ |
30,059 |
50.9 |
% |
|
$ |
31,220 |
|
51.2 |
% |
|
|
Adjustments
(3) |
|
40 |
0.1 |
% |
|
|
(78 |
) |
(0.1) % |
|
Adjusted franchise
operating margin (non-GAAP) (2) |
$ |
30,099 |
51.0 |
% |
|
$ |
31,142 |
|
51.0 |
% |
|
|
|
|
|
|
|
|
|
Total operating
revenue (5) |
$ |
111,759 |
100.0 |
% |
|
$ |
114,183 |
|
100.0 |
% |
Total costs of
operating revenue (5) |
|
75,819 |
67.8 |
% |
|
|
75,703 |
|
66.3 |
% |
Restaurant-level
operating margin (non-GAAP) (5) |
$ |
35,940 |
32.2 |
% |
|
$ |
38,480 |
|
33.7 |
% |
|
|
|
|
|
|
|
|
|
(1 |
) |
As a percentage of company restaurant sales. |
(2 |
) |
Other operating expenses such as general and administrative
expenses and depreciation and amortization relate to both company
and franchise operations and are not allocated to costs of company
restaurant sales and costs of franchise and license revenue. As
such, operating margin and adjusted operating margin are considered
non-GAAP financial measures and should be considered as a
supplement to, not as a substitute for, operating income, net
income or other financial measures prepared in accordance with
GAAP. |
(3 |
) |
Adjustments include legal settlement expenses, pre-opening costs,
and other adjustments the Company does not consider in the
evaluation of its ongoing core operating performance. |
(4 |
) |
As a percentage of franchise and license revenue. |
(5 |
) |
As a percentage of total operating revenue. |
|
|
|
|
DENNY’S CORPORATION |
Operating Margins |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
Three Quarters Ended |
($ in
thousands) |
9/25/24 |
|
9/27/23 |
Company restaurant
operations: (1) |
|
|
|
|
|
|
Company restaurant
sales |
$ |
159,391 |
100.0 |
% |
|
$ |
161,486 |
|
100.0 |
% |
|
Costs of company
restaurant sales, excluding depreciation and amortization: |
|
|
|
|
|
|
|
Product costs |
|
40,554 |
25.4 |
% |
|
|
41,796 |
|
25.9 |
% |
|
|
Payroll and
benefits |
|
60,805 |
38.1 |
% |
|
|
60,482 |
|
37.5 |
% |
|
|
Occupancy |
|
13,687 |
8.6 |
% |
|
|
12,259 |
|
7.6 |
% |
|
|
Other operating
costs: |
|
|
|
|
|
|
|
|
Utilities |
|
5,309 |
3.3 |
% |
|
|
6,037 |
|
3.7 |
% |
|
|
|
Repairs and maintenance |
|
2,977 |
1.9 |
% |
|
|
2,667 |
|
1.7 |
% |
|
|
|
Marketing |
|
5,339 |
3.3 |
% |
|
|
4,207 |
|
2.6 |
% |
|
|
|
Legal settlements |
|
1,809 |
1.1 |
% |
|
|
475 |
|
0.3 |
% |
|
|
|
Pre-opening costs |
|
766 |
0.5 |
% |
|
|
130 |
|
0.1 |
% |
|
|
|
Other direct costs |
|
11,270 |
7.1 |
% |
|
|
10,900 |
|
6.7 |
% |
|
Total costs of
company restaurant sales, excluding depreciation and
amortization |
$ |
142,516 |
89.4 |
% |
|
$ |
138,953 |
|
86.0 |
% |
|
Company restaurant
operating margin (non-GAAP) (2) |
$ |
16,875 |
10.6 |
% |
|
$ |
22,533 |
|
14.0 |
% |
|
|
Adjustments
(3) |
|
2,575 |
1.6 |
% |
|
|
605 |
|
0.4 |
% |
|
Adjusted company
restaurant operating margin (non-GAAP) (2) |
$ |
19,450 |
12.2 |
% |
|
$ |
23,138 |
|
14.3 |
% |
|
|
|
|
|
|
|
|
|
Franchise
operations: (4) |
|
|
|
|
|
|
Franchise and
license revenue: |
|
|
|
|
|
|
Royalties |
$ |
88,421 |
49.6 |
% |
|
$ |
90,106 |
|
48.2 |
% |
|
Advertising revenue |
|
59,098 |
33.2 |
% |
|
|
58,818 |
|
31.4 |
% |
|
Initial and other fees |
|
5,903 |
3.3 |
% |
|
|
10,994 |
|
5.9 |
% |
|
Occupancy revenue |
|
24,847 |
13.9 |
% |
|
|
27,165 |
|
14.5 |
% |
|
Total franchise
and license revenue |
$ |
178,269 |
100.0 |
% |
|
$ |
187,083 |
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
Costs of franchise
and license revenue, excluding depreciation and amortization: |
|
|
|
|
|
|
Advertising costs |
$ |
59,098 |
33.2 |
% |
|
$ |
58,818 |
|
31.4 |
% |
|
Occupancy costs |
|
15,482 |
8.7 |
% |
|
|
16,853 |
|
9.0 |
% |
|
Other direct costs |
|
15,221 |
8.5 |
% |
|
|
16,986 |
|
9.1 |
% |
|
Total costs of
franchise and license revenue, excluding depreciation and
amortization |
$ |
89,801 |
50.4 |
% |
|
$ |
92,657 |
|
49.5 |
% |
|
Franchise
operating margin (non-GAAP) (2) |
$ |
88,468 |
49.6 |
% |
|
$ |
94,426 |
|
50.5 |
% |
|
Adjustments (3) |
|
2,532 |
1.4 |
% |
|
|
(75 |
) |
0.0 |
% |
|
Adjusted franchise
operating margin (non-GAAP) (2) |
$ |
91,000 |
51.0 |
% |
|
$ |
94,351 |
|
50.4 |
% |
|
|
|
|
|
|
|
|
|
Total operating
revenue (5) |
$ |
337,660 |
100.0 |
% |
|
$ |
348,569 |
|
100.0 |
% |
Total costs of
operating revenue (5) |
|
232,317 |
68.8 |
% |
|
|
231,610 |
|
66.4 |
% |
Restaurant-level
operating margin (non-GAAP) (5) |
$ |
105,343 |
31.2 |
% |
|
$ |
116,959 |
|
33.6 |
% |
|
|
|
|
|
|
|
|
|
(1 |
) |
As a percentage of company restaurant sales. |
(2 |
) |
Other operating expenses such as general and administrative
expenses and depreciation and amortization relate to both company
and franchise operations and are not allocated to costs of company
restaurant sales and costs of franchise and license revenue. As
such, operating margin and adjusted operating margin are considered
non-GAAP financial measures and should be considered as a
supplement to, not as a substitute for, operating income, net
income or other financial measures prepared in accordance with
GAAP. |
(3 |
) |
Adjustments include legal settlement expenses, pre-opening costs,
and other adjustments the Company does not consider in the
evaluation of its ongoing core operating performance. Adjustments
for the year-to-date period ended September 25, 2024 include a $2.6
million distribution to franchisees related to a review of
advertising costs. |
(4 |
) |
As a percentage of franchise and license revenue. |
(5 |
) |
As a percentage of total operating revenue. |
|
|
|
|
DENNY’S CORPORATION |
Statistical Data |
(Unaudited) |
|
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|
Denny's |
|
Keke's |
Changes in
Same-Restaurant Sales (1) |
Quarter Ended |
|
Three Quarters Ended |
|
Quarter Ended |
|
Three Quarters Ended |
(Increase
(decrease) vs. prior year) |
9/25/24 |
|
9/27/23 |
|
9/25/24 |
|
9/27/23 |
|
9/25/24 |
|
9/27/23 |
|
9/25/24 |
|
9/27/23 |
|
Company
Restaurants |
(0.4)% |
|
(1.4)% |
|
(2.0%) |
|
4.1% |
|
(1.7)% |
|
(3.4)% |
|
(2.4%) |
|
(3.4)% |
|
Domestic Franchise
Restaurants |
(0.1)% |
|
2.1% |
|
(0.6%) |
|
4.3% |
|
(0.9)% |
|
(5.3)% |
|
(3.2%) |
|
(5.3)% |
|
Domestic
System-wide Restaurants |
(0.1)% |
|
1.8% |
|
(0.7%) |
|
4.3% |
|
(1.0)% |
|
(5.0)% |
|
(3.1%) |
|
(5.0)% |
|
|
|
|
|
|
|
|
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|
Average
Unit Sales |
|
|
|
|
|
|
|
($ in
thousands) |
|
|
|
|
|
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|
|
|
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|
|
|
|
|
|
Company
Restaurants |
$771 |
|
$755 |
|
$2,288 |
|
$2,303 |
|
$423 |
|
$429 |
|
$1,323 |
|
$1,354 |
|
Franchised
Restaurants |
$465 |
|
$458 |
|
$1,395 |
|
$1,376 |
|
$439 |
|
$430 |
|
$1,368 |
|
$1,397 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Same-restaurant sales include sales at company restaurants and
non-consolidated franchised and licensed restaurants that were open
during the comparable periods noted. Total operating revenue is
limited to company restaurant sales and royalties, advertising
revenue, initial and other fees and occupancy revenue from
non-consolidated franchised and licensed restaurants. Accordingly,
domestic franchise same-restaurant sales and domestic system-wide
same-restaurant sales should be considered as a supplement to, not
a substitute for, the Company's results as reported under
GAAP. |
Restaurant
Unit Activity |
Denny's |
|
Keke's |
|
|
|
|
|
Franchised |
|
|
|
|
|
Franchised |
|
|
|
|
|
Company |
|
& Licensed |
|
Total |
|
Company |
|
& Licensed |
|
Total |
Ending Units June
26, 2024 |
64 |
|
|
1,477 |
|
|
1,541 |
|
|
11 |
|
|
51 |
|
|
62 |
|
|
Units Opened |
— |
|
|
2 |
|
|
2 |
|
|
— |
|
|
— |
|
|
— |
|
|
Units
Refranchised |
(3 |
) |
|
3 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Units Closed |
— |
|
|
(18 |
) |
|
(18 |
) |
|
— |
|
|
(1 |
) |
|
(1 |
) |
|
|
Net Change |
(3 |
) |
|
(13 |
) |
|
(16 |
) |
|
— |
|
|
(1 |
) |
|
(1 |
) |
Ending Units
September 25, 2024 |
61 |
|
|
1,464 |
|
|
1,525 |
|
|
11 |
|
|
50 |
|
|
61 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equivalent
Units |
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter
2024 |
62 |
|
|
1,470 |
|
|
1,532 |
|
|
11 |
|
|
50 |
|
|
61 |
|
|
Third Quarter
2023 |
66 |
|
|
1,523 |
|
|
1,589 |
|
|
8 |
|
|
48 |
|
|
56 |
|
|
|
Net Change |
(4 |
) |
|
(53 |
) |
|
(57 |
) |
|
3 |
|
|
2 |
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Units
December 27, 2023 |
65 |
|
|
1,508 |
|
|
1,573 |
|
|
8 |
|
|
50 |
|
|
58 |
|
|
Units Opened |
— |
|
|
10 |
|
|
10 |
|
|
4 |
|
|
— |
|
|
4 |
|
|
Units
Refranchised |
(3 |
) |
|
3 |
|
|
— |
|
|
(1 |
) |
|
1 |
|
|
— |
|
|
Units Closed |
(1 |
) |
|
(57 |
) |
|
(58 |
) |
|
— |
|
|
(1 |
) |
|
(1 |
) |
|
|
Net Change |
(4 |
) |
|
(44 |
) |
|
(48 |
) |
|
3 |
|
|
— |
|
|
3 |
|
Ending Units
September 25, 2024 |
61 |
|
|
1,464 |
|
|
1,525 |
|
|
11 |
|
|
50 |
|
|
61 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equivalent
Units |
|
|
|
|
|
|
|
|
|
|
|
|
Year-to-Date
2024 |
63 |
|
|
1,485 |
|
|
1,548 |
|
|
10 |
|
|
50 |
|
|
60 |
|
|
Year-to-Date
2023 |
65 |
|
|
1,525 |
|
|
1,590 |
|
|
8 |
|
|
47 |
|
|
55 |
|
|
|
Net Change |
(2 |
) |
|
(40 |
) |
|
(42 |
) |
|
2 |
|
|
3 |
|
|
5 |
|
|
|
Investor Contact: 877-784-7167
Media Contact: 864-597-8005
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