• Denny’s Corporation Reports Results for Third Quarter 2023

    Источник: Nasdaq GlobeNewswire / 30 окт 2023 16:05:01   America/New_York

    SPARTANBURG, S.C., Oct. 30, 2023 (GLOBE NEWSWIRE) -- 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 27, 2023 and provided a business update on the Company’s operations.

    Kelli Valade, Chief Executive Officer, stated, "We were pleased to have generated a 1.8% increase in Denny’s domestic system-wide same-restaurant sales** and 15.5% growth in Adjusted EBITDA* during the third quarter. Despite a persistently challenging operating environment, we remain laser-focused on providing best-in-class breakfast, an unbeatable value proposition, and convenience through off-premises options.”

    Ms. Valade continued, “We are pleased to announce a meaningful number of Keke’s development agreements as we welcome Denny’s franchisees into the Keke’s system. Additionally, we are excited by the progress we are making with our CRAVE strategies and positive momentum with the Keke’s brand, which combined should translate into a long-term winning proposition for many years to come.”

    Third Quarter 2023 Highlights

    • Total operating revenue was $114.2 million compared to $117.5 million in the prior year quarter.
    • Denny's domestic system-wide same-restaurant sales** were 1.8% compared to the equivalent fiscal period in 2022, including 2.1% at domestic franchised restaurants and (1.4)% at company restaurants.
    • Opened eight franchised restaurants, including two international Denny's locations and one Keke's location.
    • Completed four Denny's franchised restaurant remodels.
    • Operating income was $14.0 million compared to $15.8 million in the prior year quarter.
    • Franchise Operating Margin* was $31.2 million, or 51.2% of franchise and license revenue, and Company Restaurant Operating Margin* was $7.3 million, or 13.7% of company restaurant sales.
    • Net income was $7.9 million, or $0.14 per diluted share.
    • Adjusted Net Income* and Adjusted Net Income Per Share* were $9.4 million and $0.17, respectively.
    • Adjusted EBITDA* was $22.2 million.
    • Cash provided by (used in) operating, investing, and financing activities was $15.1 million, ($1.9) million, and ($13.4) million, respectively.
    • Adjusted Free Cash Flow* was $12.0 million.
    • Repurchased $16.5 million of common stock.

    Third Quarter 2023 Results

    Total operating revenue was $114.2 million compared to $117.5 million in the prior year quarter.

    Franchise and license revenue was $61.0 million compared to $65.2 million in the prior year quarter. This change was primarily driven by a $4.4 million decrease in initial and other fees associated with the sale of kitchen equipment in the prior year quarter. These impacts were partially offset by Denny's franchised restaurants same-restaurant sales** growth and a full quarter of Keke's franchise revenue contribution in the current quarter compared to a partial contribution in the prior year quarter.

    Company restaurant sales were $53.2 million compared to $52.2 million in the prior year quarter. This growth was primarily due to an increase of $0.8 million at Keke's company restaurant sales in the current quarter compared to the prior year quarter.

    Franchise Operating Margin* was $31.2 million, or 51.2% of franchise and license revenue, compared to $30.7 million, or 47.0%, in the prior year quarter. Approximately 330 basis points of the favorable change in margin rate resulted from a lower kitchen modernization rollout impact in the current year quarter.

    Company Restaurant Operating Margin* was $7.3 million, or 13.7% of company restaurant sales, compared to $3.8 million, or 7.2%, in the prior year quarter. This margin change was primarily due to lower legal settlement expense, improvements in product costs, and more equivalent units compared to the prior year quarter.

    Total general and administrative expenses were $18.2 million, compared to $16.6 million in the prior year quarter. This change was primarily due to increases in share-based compensation expense and corporate administration expenses, partially offset by a reduction in performance-based incentive compensation.

    The provision for income taxes was $1.7 million, reflecting an effective tax rate of 17.6% for the quarter. Approximately $2.6 million in cash taxes were paid during the quarter.

    Net income was $7.9 million, or $0.14 per diluted share, compared to $17.1 million, or $0.29 per diluted share, in the prior year quarter. This change in net income was primarily due to $10.8 million of gains related to dedesignated interest rate swap valuation adjustments in the prior year quarter. Adjusted Net Income* per share was $0.17 compared to $0.12 in the prior year quarter.

    The Company ended the quarter with $258.6 million of total debt outstanding, including $248.1 million of borrowings under its credit facility.

    Adjusted Free Cash Flow* and Capital Allocation

    Adjusted Free Cash Flow* in the quarter was $12.0 million after investing $3.4 million in cash capital expenditures, including one company restaurant remodel and facilities maintenance.

    During the quarter, the Company allocated $16.5 million to share repurchases resulting in approximately $116.6 million remaining under its existing repurchase authorization.

    Business Outlook

    The Company updated its full year 2023 guidance reflecting management's expectations that the current consumer and economic environment will not change materially:

    • Denny's domestic system-wide same-restaurant sales** between 2.75% and 3.50% (vs. between 3% and 6%).
    • Consolidated restaurant openings of 35 to 45, including 4 to 6 new Keke's restaurants (vs. 8 to 12), with a consolidated net decline of 10 to 20 (vs. a consolidated net decline of 15 to 25).
    • Commodity inflation between 1% and 2% (vs. between 1% and 3%).
    • Labor inflation of approximately 4%.
    • Consolidated total general and administrative expenses between $75 million and $77 million (vs. between $78 million and $80 million), including approximately $11 million (vs. approximately $12 million) related to share-based compensation expense which does not impact Consolidated Adjusted EBITDA*.
    • Consolidated Adjusted EBITDA* between $85 million and $87 million (vs. between $86 million and $90 million).

    *
    		Please refer to the Reconciliation of Net Income and Net Cash Provided by Operating Activities 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 estimates set forth above to their 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 estimates are 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 27, 2023 on its quarterly investor conference call today, Monday, October 30, 2023 at 4:30 p.m. Eastern Time. Interested parties are invited to listen to a live broadcast of the conference call 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 27, 2023, the Company consisted of 1,644 restaurants, 1,570 of which were franchised and licensed restaurants and 74 of which were company operated.

    Denny's Corporation consists of the Denny’s brand and the Keke’s brand. As of September 27, 2023, the Denny's brand consisted of 1,588 global restaurants, 1,522 of which were franchised and licensed restaurants and 66 of which were company operated. As of September 27, 2023, the Keke's brand consisted of 56 restaurants, 48 of which were franchised restaurants and 8 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.

     

    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 28, 2022 (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)9/27/23 12/28/22
    Assets   
    Current assets   
    Cash and cash equivalents$        1,022  $        3,523 
    Investments         1,255           1,746 
    Receivables, net         16,950           25,576 
    Inventories         2,354           5,538 
    Assets held for sale         1,557           1,403 
    Prepaid and other current assets         11,816           12,529 
    Total current assets         34,954           50,315 
    Property, net         91,248           94,469 
    Finance lease right-of-use assets, net         5,988           6,499 
    Operating lease right-of-use assets, net         119,436           126,065 
    Goodwill         72,142           72,740 
    Intangible assets, net         93,845           95,034 
    Deferred financing costs, net         1,861           2,337 
    Other noncurrent assets         60,361           50,876 
    Total assets$        479,835  $        498,335 
        
    Liabilities   
    Current liabilities   
    Current finance lease liabilities$        1,393  $        1,683 
    Current operating lease liabilities         14,917           15,310 
    Accounts payable         15,560           19,896 
    Other current liabilities         59,071           56,762 
    Total current liabilities         90,941           93,651 
    Long-term liabilities   
    Long-term debt         248,100           261,500 
    Noncurrent finance lease liabilities         9,094           9,555 
    Noncurrent operating lease liabilities         117,027           123,404 
    Liability for insurance claims, less current portion         6,693           7,324 
    Deferred income taxes, net         12,867           7,419 
    Other noncurrent liabilities         30,911           32,598 
    Total long-term liabilities         424,692           441,800 
    Total liabilities         515,633           535,451 
        
    Shareholders' deficit   
    Common stock         657           650 
    Paid-in capital         147,393           142,136 
    Deficit         (24,686)          (41,729)
    Accumulated other comprehensive loss, net         (27,760)          (42,697)
    Treasury stock         (131,402)          (95,476)
    Total shareholders' deficit         (35,798)          (37,116)
    Total liabilities and shareholders' deficit$        479,835  $        498,335 
        
    Debt Balances
    Credit facility revolver due 2026$        248,100  $        261,500 
    Finance lease liabilities         10,487           11,238 
    Total debt$        258,587  $        272,738 


     
    DENNY’S CORPORATION
    Condensed Consolidated Statements of Operations
    (Unaudited)
        
     Quarter Ended
    ($ in thousands, except per share amounts)9/27/23 9/28/22
    Revenue:   
    Company restaurant sales$        53,153  $        52,211 
    Franchise and license revenue         61,030           65,245 
    Total operating revenue         114,183           117,456 
    Costs of company restaurant sales, excluding depreciation and amortization         45,893           48,451 
    Costs of franchise and license revenue, excluding depreciation and amortization         29,810           34,579 
    General and administrative expenses         18,237           16,607 
    Depreciation and amortization         3,605           3,914 
    Operating (gains), losses and other charges, net         2,620           (1,897)
    Total operating costs and expenses, net         100,165           101,654 
    Operating income         14,018           15,802 
    Interest expense, net         4,381           3,691 
    Other nonoperating expense (income), net         43           (10,461)
    Income before income taxes         9,594           22,572 
    Provision for income taxes         1,686           5,489 
    Net income$        7,908  $        17,083 
        
    Net income per share - basic$        0.14  $        0.29 
    Net income per share - diluted$        0.14  $        0.29 
        
    Basic weighted average shares outstanding         55,869           59,020 
    Diluted weighted average shares outstanding         56,082           59,040 
        
    Comprehensive income$        20,469  $        20,061 
        
    General and Administrative Expenses  
    Corporate administrative expenses$        14,580  $        13,758 
    Share-based compensation         2,864           1,947 
    Incentive compensation         1,049           1,187 
    Deferred compensation valuation adjustments         (256)          (285)
    Total general and administrative expenses$        18,237  $        16,607 


     
    DENNY’S CORPORATION
    Condensed Consolidated Statements of Operations
    (Unaudited)
        
     Three Quarters Ended
    ($ in thousands, except per share amounts)9/27/23 9/28/22
    Revenue:   
    Company restaurant sales$        161,486  $        145,354 
    Franchise and license revenue         187,083           190,226 
    Total operating revenue         348,569           335,580 
    Costs of company restaurant sales, excluding depreciation and amortization         138,953           131,904 
    Costs of franchise and license revenue, excluding depreciation and amortization         92,657           100,513 
    General and administrative expenses         58,515           50,188 
    Depreciation and amortization         10,878           11,052 
    Operating (gains), losses and other charges, net         2,467           (1,051)
    Total operating costs and expenses, net         303,470           292,606 
    Operating income         45,099           42,974 
    Interest expense, net         13,288           9,529 
    Other nonoperating expense (income), net         9,470           (49,871)
    Income before income taxes         22,341           83,316 
    Provision for income taxes         5,298           21,375 
    Net income$        17,043  $        61,941 
        
    Net income per share - basic$        0.30  $        1.01 
    Net income per share - diluted$        0.30  $        1.00 
        
    Basic weighted average shares outstanding         56,764           61,558 
    Diluted weighted average shares outstanding         56,973           61,686 
        
    Comprehensive income$        31,980  $        73,108 
        
    General and Administrative Expenses  
    Corporate administrative expenses$        43,919  $        38,303 
    Share-based compensation         8,477           9,467 
    Incentive compensation         5,335           4,945 
    Deferred compensation valuation adjustments         784           (2,527)
    Total general and administrative expenses$        58,515  $        50,188 


     
    DENNY’S CORPORATION
    Reconciliation of Net Income and Net Cash Provided by Operating Activities to Non-GAAP Financial Measures
    (Unaudited)

    The Company believes that, in addition to GAAP measures, certain non-GAAP financial measures are appropriate indicators to assist in the evaluation of operating performance and liquidity on a period-to-period basis. The Company uses Adjusted EBITDA, Adjusted Free Cash Flow, 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. Adjusted EBITDA is also used in the calculation of financial covenant ratios in accordance with the Company’s credit facility. Adjusted Free Cash Flow is also used as a non-GAAP liquidity measure by Management to assess the Company’s ability to generate cash and plan for future operating and capital actions. Management believes that the presentation of Adjusted EBITDA, Adjusted Net Income, Adjusted Net Income Per Share and Adjusted Free Cash Flow provide useful information to investors and analysts about the Company’s operating results, financial condition or cash flows. However, each of these non-GAAP financial measures should be considered as a supplement to, not a substitute for, operating income, net income, net income per share, net cash provided by operating activities, or other financial performance and liquidity measures prepared in accordance with GAAP.

     Quarter Ended Three Quarters Ended
    ($ in thousands)9/27/23 9/28/22 9/27/23 9/28/22
    Net income$        7,908  $        17,083  $        17,043  $        61,941 
    Provision for income taxes         1,686           5,489           5,298           21,375 
    Operating (gains), losses and other charges, net         2,620           (1,897)          2,467           (1,051)
    Other nonoperating expense (income), net         43           (10,461)          9,470           (49,871)
    Share-based compensation expense         2,864           1,947           8,477           9,467 
    Deferred compensation plan valuation adjustments         (256)          (285)          784           (2,527)
    Interest expense, net         4,381           3,691           13,288           9,529 
    Depreciation and amortization         3,605           3,914           10,878           11,052 
    Cash payments for restructuring charges and exit costs         (667)          (284)          (1,665)          (665)
    Cash payments for share-based compensation         (9)          —           (3,131)          (5,147)
    Adjusted EBITDA$        22,175  $        19,197  $        62,909  $        54,103 


     
    DENNY’S CORPORATION
    Reconciliation of Net Income and Net Cash Provided by Operating Activities
    to Non-GAAP Financial Measures (Continued)
    (Unaudited)
     Quarter Ended Three Quarters Ended
    ($ in thousands)9/27/23 9/28/22 9/27/23 9/28/22
    Net cash provided by operating activities$        15,117  $        15,341  $        50,768  $        24,950 
    Capital expenditures         (2,192)          (4,375)          (5,499)          (10,146)
    Acquisition of real estate and restaurant(1)          (1,227)          (750)          (1,227)          (750)
    Cash payments for restructuring charges and exit costs         (667)          (284)          (1,665)          (665)
    Cash payments for share-based compensation         (9)          —           (3,131)          (5,147)
    Deferred compensation plan valuation adjustments         (256)          (285)          784           (2,527)
    Other nonoperating expense (income), net         43           (10,461)          9,470           (49,871)
    Gains (losses) on investments         30           (66)          59           (289)
    Gains on early termination of debt and leases         —           53           —           29 
    Amortization of deferred financing costs         (159)          (158)          (476)          (475)
    Gains (losses) and amortization on interest rate swap derivatives, net         (94)          10,754           (10,838)          52,678 
    Interest expense, net         4,381           3,691           13,288           9,529 
    Cash interest expense, net (2)         (4,128)          (3,823)          (12,392)          (10,998)
    Deferred income tax expense         341           (4,903)          (369)          (15,669)
    Provision for income taxes         1,686           5,489           5,298           21,375 
    Income taxes paid, net         (2,621)          (1,517)          (6,531)          (6,161)
    Changes in operating assets and liabilities, excluding acquisitions and dispositions       
    Receivables         (1,475)          1,369           (8,235)          4,788 
    Inventories         (180)          (3,282)          (3,184)          3,866 
    Other current assets         1,776           1,880           (712)          (1,683)
    Other noncurrent assets         1,149           2,936           902           (3,189)
    Operating lease assets and liabilities         120           94           479           560 
    Accounts payable         (675)          1,574           7,079           3,115 
    Other accrued liabilities         (327)          (7,579)          1,319           3,483 
    Other noncurrent liabilities         1,374           3,034           2,073           9,245 
    Adjusted Free Cash Flow$        12,007  $        8,732  $        37,260  $        26,048 


    (1)For the quarter and year-to-date period ended September 27, 2023, amounts include cash paid for the acquisition of a piece of real estate. For the quarter and year-to-date period ended September 28, 2022, amounts include cash paid for the acquisition of a Denny's franchise restaurant and exclude capital paid for the acquisition of Keke's.
    (2)Includes cash interest income, net for the quarter and year-to-date period ended September 27, 2023, and cash receipts of approximately $0.2 million for dedesignated interest rate swap derivatives for the year-to-date period ended September 27, 2023. Includes cash interest expense, net and cash payments of approximately $0.3 and $2.0 million for dedesignated interest rate swap derivatives for the quarter and year-to-date period ended September 28, 2022, respectively.
      


    DENNY’S CORPORATION
    Reconciliation of Net Income and Net Cash Provided by Operating Activities
    to Non-GAAP Financial Measures (Continued)
    (Unaudited)
     Quarter Ended Three Quarters Ended
    ($ in thousands, except per share amounts)9/27/23 9/28/22 9/27/23 9/28/22
    Adjusted EBITDA$        22,175  $        19,197  $        62,909  $        54,103 
    Cash interest expense, net (1)         (4,128)          (3,823)          (12,392)          (10,998)
    Cash paid for income taxes, net         (2,621)          (1,517)          (6,531)          (6,161)
    Cash paid for capital expenditures (2)         (3,419)          (5,125)          (6,726)          (10,896)
    Adjusted Free Cash Flow$        12,007  $        8,732  $        37,260  $        26,048 
            
    Net income$        7,908  $        17,083  $        17,043  $        61,941 
    (Gains) losses and amortization on interest rate swap derivatives, net         94           (10,754)          10,838           (52,678)
    Gains on sales of assets and other charges, net         (88)          (3,066)          (2,132)          (3,311)
    Impairment charges         1,711           697           1,840           963 
    Tax effect (3)         (179)          3,163           (2,457)          14,142 
    Adjusted Net Income$        9,446  $        7,123  $        25,132  $        21,057 
            
    Diluted weighted average shares outstanding         56,082           59,040           56,973           61,686 
            
    Net Income Per Share - Diluted$        0.14  $        0.29  $        0.30  $        1.00 
    Adjustments Per Share         0.03           (0.17)          0.14           (0.66)
    Adjusted Net Income Per Share$        0.17  $        0.12  $        0.44  $        0.34 


    (1)Includes cash interest income, net for the quarter and year-to-date period ended September 27, 2023, and cash receipts of approximately $0.2 million for dedesignated interest rate swap derivatives for the year-to-date period ended September 27, 2023. Includes cash interest expense, net and cash payments of approximately $0.3 million and $2.0 million for dedesignated interest rate swap derivatives for the quarter and year-to-date period ended September 28, 2022, respectively.
    (2)For the quarter and year-to-date period ended September 27, 2023, amounts include cash paid for capital expenditures and the acquisition of a piece of real estate. For the quarter and year-to-date period ended September 28, 2022, amounts include cash paid for capital expenditures and the acquisition of a Denny's franchise restaurant, and exclude capital paid for the acquisition of Keke's.
    (3)Tax adjustments for the quarter and year-to-date period ended September 27, 2023 reflect effective tax rates of 10.4% and 23.3%, respectively. Tax adjustments for the quarter and year-to-date period ended September 28, 2022 reflect effective tax rates of 24.1% and 25.7%, 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 appropriate indicators to assist in the evaluation of restaurant-level operating efficiency and performance of ongoing restaurant-level operations. 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 these three non-GAAP measures are used to evaluate operating effectiveness.

    The Company defines Restaurant-level Operating Margin as operating income excluding the following three items: general and administrative expenses, depreciation and amortization, and operating (gains), losses and other charges, net. Restaurant-level Operating Margin is presented as a percent of total operating revenue. The Company excludes 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. The Company excludes 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. The Company excludes 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.

    Restaurant-level Operating Margin is the total of Company Restaurant Operating Margin and Franchise Operating Margin. The Company defines Company Restaurant Operating Margin 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. The Company defines Franchise Operating Margin 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.

    These non-GAAP financial measures provide a meaningful comparison between periods and enable investors to focus on the performance of restaurant-level operations by excluding revenues and costs unrelated to food and beverage sales in addition to corporate general and administrative expense, depreciation and amortization, and operating (gains), losses and other charges, net. However, each of these non-GAAP financial measures should be considered as a supplement to, not a substitute for, operating income, net income or other financial performance measures prepared in accordance with GAAP. Restaurant-level Operating Margin, Company Restaurant Operating Margin and Franchise Operating Margin do not accrue directly to the benefit of shareholders because of the aforementioned excluded items and are not indicative of the overall results for the Company.

     Quarter Ended Three Quarters Ended
    ($ in thousands)9/27/23 9/28/22 9/27/23 9/28/22
    Operating income$        14,018  $        15,802  $        45,099  $        42,974 
    General and administrative expenses         18,237           16,607           58,515           50,188 
    Depreciation and amortization         3,605           3,914           10,878           11,052 
    Operating (gains), losses and other charges, net         2,620           (1,897)          2,467           (1,051)
    Restaurant-level Operating Margin$        38,480  $        34,426  $        116,959  $        103,163 
            
    Restaurant-level Operating Margin consists of:       
    Company Restaurant Operating Margin (1)$        7,260  $        3,760  $        22,533  $        13,450 
    Franchise Operating Margin (2)         31,220           30,666           94,426           89,713 
    Restaurant-level Operating Margin$        38,480  $        34,426  $        116,959  $        103,163 


    (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.


     
    DENNY’S CORPORATION
    Operating Margins
    (Unaudited)
         
      Quarter Ended
    ($ in thousands)9/27/23 9/28/22
    Company restaurant operations: (1)     
    Company restaurant sales$        53,153         100.0 % $        52,211         100.0 %
    Costs of company restaurant sales, excluding depreciation and amortization:     
    Product costs         13,587         25.6 %          14,462         27.7 %
    Payroll and benefits         19,754         37.2 %          20,176         38.6 %
    Occupancy         4,182         7.9 %          4,294         8.2 %
    Other operating costs:     
    Utilities         2,120         4.0 %          1,984         3.8 %
    Repairs and maintenance         996         1.9 %          1,089         2.1 %
    Marketing         1,393         2.6 %          1,340         2.6 %
    Legal settlements         245         0.5 %          1,567         3.0 %
    Other direct costs         3,616         6.8 %          3,539         6.8 %
    Total costs of company restaurant sales, excluding depreciation and amortization$        45,893         86.3 % $        48,451         92.8 %
    Company restaurant operating margin (non-GAAP) (2)$        7,260         13.7 % $        3,760         7.2 %
           
    Franchise operations: (3)     
    Franchise and license revenue:     
    Royalties$        29,703         48.7 % $        28,992         44.4 %
    Advertising revenue         19,297         31.6 %          18,950         29.0 %
    Initial and other fees         3,388         5.6 %          7,749         11.9 %
    Occupancy revenue         8,642         14.2 %          9,554         14.6 %
    Total franchise and license revenue$        61,030         100.0 % $        65,245         100.0 %
           
    Costs of franchise and license revenue, excluding depreciation and amortization:     
    Advertising costs$        19,297         31.6 % $        18,950         29.0 %
    Occupancy costs         5,389         8.8 %          5,910         9.1 %
    Other direct costs         5,124         8.4 %          9,719         14.9 %
    Total costs of franchise and license revenue, excluding depreciation and amortization$        29,810         48.8 % $        34,579         53.0 %
    Franchise operating margin (non-GAAP) (2)$        31,220         51.2 % $        30,666         47.0 %
           
    Total operating revenue (4)$        114,183         100.0 % $        117,456         100.0 %
    Total costs of operating revenue (4)         75,703         66.3 %          83,030         70.7 %
    Restaurant-level operating margin (non-GAAP) (4)(2)$        38,480         33.7 % $        34,426         29.3 %
           
    Other operating expenses: (4)(2)     
    General and administrative expenses$        18,237         16.0 % $        16,607         14.1 %
    Depreciation and amortization         3,605         3.2 %          3,914         3.3 %
    Operating losses and other charges, net 2,620 2.3 %  (1,897)(1.6)%
    Total other operating expenses$        24,462         21.4 % $        18,624         15.9 %
           
    Operating income (4)$        14,018         12.3 % $        15,802         13.5 %


    (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 is considered a non-GAAP financial measure. Operating margins 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)As a percentage of franchise and license revenue.
    (4)As a percentage of total operating revenue.


     
    DENNY’S CORPORATION
    Operating Margins
    (Unaudited)
         
      Three Quarters Ended
    ($ in thousands)9/27/23 9/28/22
    Company restaurant operations: (1)     
    Company restaurant sales$        161,486         100.0 % $        145,354         100.0 %
    Costs of company restaurant sales, excluding depreciation and amortization:     
    Product costs         41,796         25.9 %          38,874         26.7 %
    Payroll and benefits         60,482         37.5 %          55,598         38.3 %
    Occupancy         12,381         7.7 %          11,316         7.8 %
    Other operating costs:     
    Utilities         6,037         3.7 %          5,211         3.6 %
    Repairs and maintenance         2,667         1.7 %          2,803         1.9 %
    Marketing         4,207         2.6 %          3,877         2.7 %
    Legal settlements         475         0.3 %          4,223         2.9 %
    Other direct costs         10,908         6.8 %          10,002         6.9 %
    Total costs of company restaurant sales, excluding depreciation and amortization$        138,953         86.0 % $        131,904         90.7 %
    Company restaurant operating margin (non-GAAP) (2)$        22,533         14.0 % $        13,450         9.3 %
           
    Franchise operations: (3)     
    Franchise and license revenue:     
    Royalties$        90,106         48.2 % $        84,276         44.3 %
    Advertising revenue         58,818         31.4 %          56,642         29.8 %
    Initial and other fees         10,994         5.9 %          20,035         10.5 %
    Occupancy revenue         27,165         14.5 %          29,273         15.4 %
    Total franchise and license revenue$        187,083         100.0 % $        190,226         100.0 %
           
    Costs of franchise and license revenue, excluding depreciation and amortization:     
    Advertising costs$        58,818         31.4 % $        56,642         29.8 %
    Occupancy costs         16,853         9.0 %          18,351         9.6 %
    Other direct costs         16,986         9.1 %          25,520         13.4 %
    Total costs of franchise and license revenue, excluding depreciation and amortization$        92,657         49.5 % $        100,513         52.8 %
    Franchise operating margin (non-GAAP) (2)$        94,426         50.5 % $        89,713         47.2 %
           
    Total operating revenue (4)$        348,569         100.0 % $        335,580         100.0 %
    Total costs of operating revenue (4)         231,610         66.4 %          232,417         69.3 %
    Restaurant-level operating margin (non-GAAP) (4)(2)$        116,959         33.6 % $        103,163         30.7 %
           
    Other operating expenses: (4)(2)     
    General and administrative expenses$        58,515         16.8 % $        50,188         15.0 %
    Depreciation and amortization         10,878         3.1 %          11,052         3.3 %
    Operating (gains), losses and other charges, net 2,467 0.7 %  (1,051)(0.3)%
    Total other operating expenses$        71,860         20.6 % $        60,189         17.9 %
           
    Operating income (4)$        45,099         12.9 % $        42,974         12.8 %


    (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 is considered a non-GAAP financial measure. Operating margin 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)As a percentage of franchise and license revenue.
    (4)As a percentage of total operating revenue.


     
    DENNY’S CORPORATION
    Statistical Data
    (Unaudited)
                     
      Denny's Keke's (2)
    Changes in Same-Restaurant Sales (1)Quarter Ended Three Quarters Ended Quarter Ended Three Quarters Ended
    (Increase vs. prior year)9/27/23 9/28/22 9/27/23 9/28/22 9/27/23 9/28/22 9/27/23 9/28/22
    Company Restaurants(1.4)% 7.1% 4.1% 12.1% (3.4)% N/A (3.4)% N/A
    Domestic Franchise Restaurants2.1% 1.1% 4.3% 7.6% (5.3)% N/A (5.3)% N/A
    Domestic System-wide Restaurants1.8% 1.5% 4.3% 7.9% (5.0)% N/A (5.0)% N/A
                     
    Average Unit Sales       
    ($ in thousands)               
    Company Restaurants$755 $766 $2,303 $2,209 $429 $334 $1,354 $334
    Franchised Restaurants$458 $435 $1,376 $1,281 $430 $349 $1,397 $349


    (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.
    (2)Effective July 20, 2022, the Company acquired Keke's, as such data for the quarter and year-to-date period ended September 28, 2022 only represent post-acquisition results.
      


    Restaurant Unit ActivityDenny's Keke's
        Franchised      Franchised   
     Company & Licensed Total Company & Licensed Total
    Ending Units June 28, 2023        66          1,525          1,591          8          47          55 
    Units Opened        —          7          7          —          1          1 
    Units Closed        —          (10)         (10)         —          —          — 
    Net Change        —          (3)         (3)         —          1          1 
    Ending Units September 27, 2023        66          1,522          1,588          8          48          56 
                    
    Equivalent Units               
    Third Quarter 2023        66          1,523          1,589          8          48          56 
    Third Quarter 2022        65          1,560          1,625          6          34          40 
    Net Change        1          (37)         (36)         2          14          16 
                    
     Denny's Keke's
        Franchised      Franchised    
    Restaurant Unit ActivityCompany  & Licensed Total Company  & Licensed  Total 
    Ending Units December 28, 202266  1,536  1,602  8  46  54 
    Units Opened—  21  21  —  2  2 
    Units Closed—  (35) (35) —  —  — 
    Net Change—  (14) (14) —  2  2 
    Ending Units September 27, 202366  1,522  1,588  8  48  56 
                    
    Equivalent Units               
    Year-to-Date 202365  1,525  1,590  8  47  55 
    Year-to-Date 202264  1,566  1,630  2  11  13 
    Net Change1  (41) (40) 6  36  42 
     

     


    Investor Contact: 877-784-7167

Media Contact: 864-597-8005

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