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Dine Brands Global, Inc. Reports Q1 Same Store Sales and Profit Growth

Refinanced $500 million of A-2 Long-Term-Debt at 7.824% Following Quarter’s End;

Resulting in $200 million Reduced Debt Balance

Re-Affirms 2023 Full-Year Guidance

Dine Brands Global, Inc. (NYSE: DIN), the parent company of Applebee’s Neighborhood Grill & Bar®, IHOP® and Fuzzy’s Taco Shop® restaurants, today announced financial results for the first quarter of fiscal 2023.

“Dine Brands has demonstrated resiliency in a challenging operating environment, which reflects the strength of our brands and strong execution,” said John Peyton, chief executive officer, Dine Brands Global. “Looking ahead, we will adapt with agility and a guest-first mindset. Dine remains committed to investing in growth, generating cash and creating value for our shareholders.”

Vance Chang, chief financial officer, added, “We are balancing our focus between current strategy execution and long-term investments. After the end of the first quarter, we were pleased to announce the completed refinancing of our Senior Secured Notes, further evidence of the strength of our steady and strong cash flow generating franchisor model in today’s lending environment.”

Domestic Restaurant Sales for the First Quarter of 2023

  • Applebee’s year-over-year comparable same-restaurant sales increased 6.1% for the first quarter of 2023. Off-premise sales accounted for 23.1% of sales mix, representing per restaurant average weekly sales of approximately $12,900.
  • IHOP’s year-over-year domestic comparable same-restaurant sales increased 8.7% for the first quarter of 2023. Off-premise sales accounted for 21.7% of sales mix, representing per restaurant average weekly sales of approximately $7,400.

First Quarter of 2023 Summary

  • Total revenues for the first quarter of 2023 were $214 million compared to $230 million for the first quarter of 2022. The decline was primarily due to the refranchising of the 69 company-operated Applebee’s units in October 2022, partially offset by the positive comparable same-restaurant sales growth at Applebee’s and IHOP. Total revenues for the first quarter of 2023, excluding the refranchised Applebee’s restaurants, increased $20 million, or 11%, from the comparable prior period.
  • General and Administrative (“G&A”) expenses for the first quarter of 2023 were $51.1 million compared to $41.5 million for the first quarter of 2022. The variance was primarily due to continued strategic growth investments, including the acquisition of Fuzzy’s Taco Shop and other non-recurring costs, as well as a return to normalized operations.
  • Net income for the first quarter of 2023 was $27.4 million compared to $24.9 million for the first quarter of 2022. The increase was primarily due to higher gross margin and a gain on extinguishment of debt, partially offset by higher G&A expenses.
  • GAAP net income available to common stockholders was $26.7 million, or earnings per diluted share of $1.74, for the first quarter of 2023 compared to net income available to common stockholders of $24.3 million, or earnings per diluted share of $1.45 for the first quarter of 2022. The increase was primarily due to higher gross margin, lower share count and a gain on debt extinguishment, offset by higher G&A expenses.
  • Adjusted net income available to common stockholders was $30.2 million, or adjusted earnings per diluted share of $1.97, for the first quarter of 2023 compared to adjusted net income available to common stockholders of $25.9 million, or adjusted earnings per diluted share of $1.54, for the first quarter of 2022. The increase was primarily due to higher gross margin and lower share count, offset by higher G&A expenses. (See “Non-GAAP Financial Measures” and reconciliation of GAAP net income available to common stockholders to adjusted net income available to common stockholders.)
  • Consolidated adjusted EBITDA for the first quarter of 2023 was $66.4 million compared to $65.2 million for the first quarter of 2022. The increase was primarily due to higher gross margin, offset by higher G&A expenses. (See “Non-GAAP Financial Measures” and reconciliation of GAAP net income to consolidated adjusted EBITDA.)
  • Development activity by Applebee’s and IHOP franchisees for the first quarter of 2023 resulted in 21 new restaurant openings and the closure of 17 restaurants.

Key Balance Sheet Metrics (as of March 31, 2023)

  • Total cash, cash equivalents and restricted cash of approximately $235 million, of which approximately $182 million was unrestricted cash.
  • Leverage ratio of approximately 4.5x compared to approximately 4.4x as of December 31, 2022.
  • Available borrowing capacity under the Variable Funding Senior Secured Notes is over $220 million.

GAAP Effective Tax Rate

The Company's effective tax rate was 24.2% for the three months ended March 31, 2023, as compared to 27.2% for the three months ended March 31, 2022. The effective tax rate for the three months ended March 31, 2023 was different than the rate of the prior comparable period primarily due to the recognition of higher excess tax benefits from stock-based compensation and lower non-deductible executive compensation.

Capital Returns to Debt and Equity Holders

On April 17, 2023, the Company completed the refinancing of its Senior Secured Notes and issued the Series 2023-1 7.824% Fixed Rate Senior Secured Notes, Class A-2 in an initial aggregate principal amount of $500 million, a reduction of $200 million from the Series 2019-1 Class A-2-I it replaced.

The Company repurchased $5 million of its common stock and paid quarterly cash dividends totaling approximately $16 million during the quarter ended March 31, 2023.

Financial Performance Guidance for 2023

The Company reiterated its fiscal 2023 guidance items:

  • Reiterated: Domestic development activity by Applebee’s franchisees of between 10 and 20 net fewer restaurants.
  • Reiterated: Domestic development activity by IHOP franchisees and area licensees is expected to be between 45 and 60 net new openings.
  • Reiterated: Consolidated adjusted EBITDA is expected in the range of between approximately $243 million and $255 million.
  • Reiterated: G&A expenses are expected to range between approximately $200 million and $210 million, due to some of our planned 2022 G&A investments extended into 2023 given the disruptions caused by the pandemic last year and other organic investments, including Fuzzy’s. This range includes non-cash stock-based compensation expense and depreciation of approximately $30 million.
  • Reiterated: Gross capital expenditures are expected to range between $33 million and $38 million.

First quarter of 2023 Earnings Conference Call Details

Dine Brands will host a conference call to discuss its results on May 3, 2023, at 9:00 a.m. Eastern time. To access the call, please click this conference call registration link, and you will be provided with dial in details. A live webcast of the call, along with a replay will be available for a limited time at https://investors.dinebrands.com. Participants should allow approximately ten minutes prior to the call’s start time to visit the site and download any streaming media software needed to listen to the webcast. An online archive of the webcast will also be available on Events and Presentations under the Investors section of the Company’s website.

About Dine Brands Global, Inc.

Based in Pasadena, California, Dine Brands Global, Inc. (NYSE: DIN), through its subsidiaries and franchisees, supports and operates restaurants under the Applebee's Neighborhood Grill + Bar®, IHOP®, and Fuzzy’s Taco Shop® brands. As of March 31, 2023, these three brands consisted of 3,600 restaurants across 17 international markets. Dine Brands is one of the largest full-service restaurant companies in the world and in 2022 expanded into the Fast Casual segment. For more information on Dine Brands, visit the Company’s website located at www.dinebrands.com.

Forward-Looking Statements

Statements contained in this press release may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. You can identify these forward-looking statements by words such as “may,” “will,” “would,” “should,” “could,” “expect,” “anticipate,” “believe,” “estimate,” “intend,” “plan,” “goal” and other similar expressions. These statements involve known and unknown risks, uncertainties and other factors, which may cause actual results to be materially different from those expressed or implied in such statements. These factors include, but are not limited to: uncertainty regarding the duration and severity of the ongoing COVID-19 pandemic and its ultimate impact on the Company; the effectiveness of related containment measures; general economic conditions, including the impact of inflation; our level of indebtedness; compliance with the terms of our securitized debt; our ability to refinance our current indebtedness or obtain additional financing; our dependence on information technology; potential cyber incidents; the implementation of restaurant development plans; our dependence on our franchisees; the concentration of our Applebee’s franchised restaurants in a limited number of franchisees; the financial health of our franchisees; our franchisees’ and other licensees’ compliance with our quality standards and trademark usage; general risks associated with the restaurant industry; potential harm to our brands’ reputation; possible future impairment charges; the effects of tax reform; trading volatility and fluctuations in the price of our stock; our ability to achieve the financial guidance we provide to investors; successful implementation of our business strategy; the availability of suitable locations for new restaurants; shortages or interruptions in the supply or delivery of products from third parties or availability of utilities; the management and forecasting of appropriate inventory levels; development and implementation of innovative marketing and use of social media; changing health or dietary preference of consumers; risks associated with doing business in international markets; the results of litigation and other legal proceedings; third-party claims with respect to intellectual property assets; our ability to attract and retain management and other key employees; compliance with federal, state and local governmental regulations; risks associated with our self-insurance; natural disasters, pandemics, epidemics, or other serious incidents; our success with development initiatives outside of our core business; the adequacy of our internal controls over financial reporting and future changes in accounting standards; and other factors discussed from time to time in the Corporation’s Annual and Quarterly Reports on Forms 10-K and 10-Q and in the Corporation’s other filings with the Securities and Exchange Commission. The forward-looking statements contained in this press release are made as of the date hereof and the Corporation does not intend to, nor does it assume any obligation to, update or supplement any forward-looking statements after the date hereof to reflect actual results or future events or circumstances.

Non-GAAP Financial Measures

This press release includes references to the Company's non-GAAP financial measure “adjusted net income available to common stockholders”, “adjusted earnings per diluted share (Adjusted EPS)”, “Adjusted EBITDA” and “Adjusted free cash flow.” Adjusted EPS is computed for a given period by deducting from net income or loss available to common stockholders for such period the effect of any closure and impairment charges, any gain or loss related to debt extinguishment, any intangible asset amortization, any non-cash interest expense, any gain or loss related to the disposition of assets, any merger and acquisition costs and other items deemed not reflective of current operations. This is presented on an aggregate basis and a per share (diluted) basis. Adjusted EBITDA is computed for a given period by deducting from net income or loss for such period the effect of any closure and impairment charges, any interest charges, any income tax provision or benefit, any non-cash stock-based compensation, any depreciation and amortization, any gain or loss related to the disposition of assets, any merger and acquisition costs and other items deemed not reflective of current operations. “Adjusted free cash flow” for a given period is defined as cash provided by operating activities, plus receipts from notes and equipment contracts receivable, less capital expenditures. Management may use certain of these non-GAAP financial measures along with the corresponding U.S. GAAP measures to evaluate the performance of the business and to make certain business decisions. Management uses adjusted free cash flow in its periodic assessments of, among other things, the amount of cash dividends per share of common stock and repurchases of common stock and we believe it is important for investors to have the same measure used by management for that purpose. Adjusted free cash flow does not represent residual cash flow available for discretionary purposes. Additionally, adjusted EPS is one of the metrics used in determining payouts under the Company’s annual cash incentive plan. Management believes that these non-GAAP financial measures provide additional meaningful information that should be considered when assessing the business and the Company’s performance compared to prior periods and the marketplace. Adjusted EPS and adjusted free cash flow are supplemental non-GAAP financial measures and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with U.S. GAAP.

Dine Brands Global, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

(In thousands, except per share amounts)

(Unaudited)

 

 

 

Three Months Ended

 

 

March 31,

 

 

2023

 

2022

 

 

 

 

 

Revenues:

 

 

 

 

Franchise revenues:

 

 

 

 

Royalties, franchise fees and other

 

$

102,925

 

 

$

90,349

 

Advertising revenues

 

 

77,037

 

 

 

70,883

 

Total franchise revenues

 

 

179,962

 

 

 

161,232

 

Company restaurant sales

 

 

1,057

 

 

 

39,416

 

Rental revenues

 

 

31,951

 

 

 

28,807

 

Financing revenues

 

 

797

 

 

 

968

 

Total revenues

 

 

213,767

 

 

 

230,423

 

Cost of revenues:

 

 

 

 

Franchise expenses:

 

 

 

 

Advertising expenses

 

 

77,037

 

 

 

70,883

 

Bad debt expense (credit)

 

 

923

 

 

 

(299

)

Other franchise expenses

 

 

9,406

 

 

 

7,448

 

Total franchise expenses

 

 

87,366

 

 

 

78,032

 

Company restaurant expenses

 

 

1,079

 

 

 

37,408

 

Rental expenses:

 

 

 

 

Interest expense from finance leases

 

 

709

 

 

 

768

 

Other rental expenses

 

 

20,899

 

 

 

21,355

 

Total rental expenses

 

 

21,608

 

 

 

22,123

 

Financing expenses

 

 

98

 

 

 

107

 

Total cost of revenues

 

 

110,151

 

 

 

137,670

 

Gross profit

 

 

103,616

 

 

 

92,753

 

General and administrative expenses

 

 

51,087

 

 

 

41,548

 

Interest expense, net

 

 

14,709

 

 

 

15,533

 

Closure and impairment charges

 

 

467

 

 

 

146

 

Amortization of intangible assets

 

 

2,774

 

 

 

2,665

 

Gain on extinguishment of debt

.

 

(1,661

)

 

 

 

Loss (gain) on disposition of assets

 

 

71

 

 

 

(1,296

)

Income before income taxes

 

 

36,169

 

 

 

34,157

 

Income tax provision

 

 

(8,759

)

 

 

(9,307

)

Net income

 

$

27,410

 

 

$

24,850

 

Net income available to common stockholders:

 

 

 

 

Net income

 

$

27,410

 

 

$

24,850

 

Less: Net income allocated to unvested participating restricted stock

 

 

(679

)

 

 

(598

)

Net income available to common stockholders

 

$

26,731

 

 

$

24,252

 

Net income available to common stockholders per share:

 

 

 

 

Basic

 

$

1.75

 

 

$

1.45

 

Diluted

 

$

1.74

 

 

$

1.45

 

Weighted average shares outstanding:

 

 

 

 

Basic

 

 

15,304

 

 

 

16,722

 

Diluted

 

 

15,339

 

 

 

16,758

 

 

 

 

 

 

Dividends declared per common share

 

$

0.51

 

 

$

0.46

 

Dividends paid per common share

 

$

1.02

 

 

$

0.86

 

Dine Brands Global, Inc. and Subsidiaries

Consolidated Balance Sheets

(In thousands, except share and per share amounts)

 

 

 

March 31, 2023

 

December 31, 2022

 

 

(Unaudited)

 

 

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

181,606

 

 

$

269,655

 

Receivables, net of allowance of $4,587 (2023) and $4,806 (2022)

 

 

93,119

 

 

 

119,981

 

Restricted cash

 

 

37,098

 

 

 

38,929

 

Prepaid gift card costs

 

 

23,717

 

 

 

30,235

 

Prepaid income taxes

 

 

 

 

 

3,063

 

Other current assets

 

 

12,831

 

 

 

17,901

 

Total current assets

 

 

348,371

 

 

 

479,764

 

Other intangible assets, net

 

 

594,333

 

 

 

597,028

 

Operating lease right-of-use assets

 

 

290,859

 

 

 

289,123

 

Goodwill

 

 

254,120

 

 

 

253,956

 

Property and equipment, net

 

 

158,715

 

 

 

145,277

 

Deferred rent receivable

 

 

39,772

 

 

 

42,329

 

Long-term receivables, net of allowance of $5,908 (2023) and $5,529 (2022)

 

 

37,831

 

 

 

39,697

 

Non-current restricted cash

 

 

16,400

 

 

 

16,400

 

Other non-current assets, net

 

 

17,668

 

 

 

17,917

 

Total assets

 

$

1,758,069

 

 

$

1,881,491

 

Liabilities and Stockholders’ Deficit

 

 

 

 

Current liabilities:

 

 

 

 

Current maturities of long-term debt

 

$

100,000

 

 

$

100,000

 

Accounts payable

 

 

39,085

 

 

 

52,067

 

Gift card liability

 

 

140,769

 

 

 

171,966

 

Current maturities of operating lease obligations

 

 

57,655

 

 

 

59,071

 

Current maturities of finance lease and financing obligations

 

 

7,265

 

 

 

7,542

 

Accrued employee compensation and benefits

 

 

13,862

 

 

 

23,456

 

Accrued advertising expenses

 

 

18,665

 

 

 

24,157

 

Dividends payable

 

 

 

 

 

8,017

 

Other accrued expenses

 

 

27,871

 

 

 

24,446

 

Total current liabilities

 

 

405,172

 

 

 

470,722

 

Long-term debt, net, less current maturities

 

 

1,174,564

 

 

 

1,241,914

 

Operating lease obligations, less current maturities

 

 

279,766

 

 

 

275,120

 

Finance lease obligations, less current maturities

 

 

33,256

 

 

 

30,377

 

Financing obligations, less current maturities

 

 

28,029

 

 

 

28,358

 

Deferred income taxes, net

 

 

67,351

 

 

 

74,651

 

Deferred franchise revenue, long-term

 

 

41,204

 

 

 

42,343

 

Other non-current liabilities

 

 

17,410

 

 

 

19,090

 

Total liabilities

 

 

2,046,752

 

 

 

2,182,575

 

Commitments and contingencies

 

 

 

 

Stockholders’ deficit:

 

 

 

 

Preferred stock, $1 par value, 10,000,000 shares authorized, no shares issued or outstanding

 

 

 

 

 

 

Common stock, $0.01 par value; shares: 40,000,000 authorized; March 31, 2023 - 24,915,372 issued, 15,674,739 outstanding; December 31, 2022 - 24,959,972 issued, 15,599,239 outstanding

 

 

249

 

 

 

250

 

Additional paid-in-capital

 

 

248,187

 

 

 

259,339

 

Retained earnings

 

 

103,931

 

 

 

84,538

 

Accumulated other comprehensive loss

 

 

(64

)

 

 

(65

)

Treasury stock, at cost; shares: March 31, 2023 - 9,240,633; December 31, 2022 - 9,360,733

 

 

(640,986

)

 

 

(645,146

)

Total stockholders’ deficit

 

 

(288,683

)

 

 

(301,084

)

Total liabilities and stockholders’ deficit

 

$

1,758,069

 

 

$

1,881,491

 

Dine Brands Global, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

Three Months Ended

 

 

March 31,

 

 

2023

 

2022

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

Net income

 

$

27,410

 

 

$

24,850

 

Adjustments to reconcile net income to cash flows provided by (used in) operating activities:

 

 

 

 

Depreciation and amortization

 

 

9,222

 

 

 

9,938

 

Non-cash stock-based compensation expense

 

 

1,718

 

 

 

4,341

 

Non-cash closure and impairment charges

 

 

459

 

 

 

45

 

Non-cash interest expense

 

 

1,171

 

 

 

714

 

Deferred income taxes

 

 

(2,901

)

 

 

(873

)

Gain on extinguishment of debt

 

 

(1,661

)

 

 

 

Deferred revenue

 

 

(1,193

)

 

 

(1,177

)

Loss (gain) on disposition of assets

 

 

71

 

 

 

(1,296

)

Other

 

 

(308

)

 

 

(1,766

)

Changes in operating assets and liabilities:

 

 

 

 

Accounts receivable, net

 

 

(2,369

)

 

 

(3,567

)

Deferred rent receivable

 

 

2,557

 

 

 

1,977

 

Current income tax receivables and payables

 

 

224

 

 

 

2,352

 

Gift card receivables and payables

 

 

(2,310

)

 

 

(2,180

)

Other current assets

 

 

5,024

 

 

 

(3,365

)

Accounts payable

 

 

(7,579

)

 

 

(11,683

)

Operating lease assets and liabilities

 

 

340

 

 

 

(2,909

)

Accrued employee compensation and benefits

 

 

(11,801

)

 

 

(26,646

)

Accrued advertising expenses

 

 

(5,067

)

 

 

6,929

 

Other current liabilities

 

 

3,069

 

 

 

(3,474

)

Cash flows provided by (used in) operating activities

 

 

16,076

 

 

 

(7,790

)

Cash flows from investing activities:

 

 

 

 

Principal receipts from notes, equipment contracts and other long-term receivables

 

 

3,345

 

 

 

4,848

 

Net additions to property and equipment

 

 

(16,030

)

 

 

(5,298

)

Proceeds from sale of property and equipment

 

 

 

 

 

2,862

 

Additions to long-term receivables

 

 

 

 

 

(669

)

Other

 

 

(54

)

 

 

(30

)

Cash flows (used in) provided by investing activities

 

 

(12,739

)

 

 

1,713

 

Cash flows from financing activities:

 

 

 

 

Repayment of long-term debt

 

 

(66,574

)

 

 

 

Dividends paid on common stock

 

 

(15,971

)

 

 

(14,588

)

Repurchase of common stock

 

 

(5,000

)

 

 

(41,585

)

Principal payments on finance lease obligations

 

 

(1,870

)

 

 

(2,340

)

Proceeds from stock options exercised

 

 

584

 

 

 

241

 

Repurchase of restricted stock for tax payments upon vesting

 

 

(3,527

)

 

 

(1,745

)

Tax payments for share settlement of restricted stock units

 

 

(859

)

 

 

(953

)

Cash flows used in financing activities

 

 

(93,217

)

 

 

(60,970

)

Net change in cash, cash equivalents and restricted cash

 

 

(89,880

)

 

 

(67,047

)

Cash, cash equivalents and restricted cash at beginning of period

 

 

324,984

 

 

 

425,353

 

Cash, cash equivalents and restricted cash at end of period

 

$

235,104

 

 

$

358,306

 

Dine Brands Global, Inc. and Subsidiaries

Non-GAAP Financial Measures

(In thousands, except per share amounts)

(Unaudited)

 

Reconciliation of net income available to common stockholders to net income available to common stockholders, as adjusted for the following items: Closure and impairment charges; amortization of intangible assets; non-cash interest expenses; gain on extinguishment of debt; gain or loss on disposition of assets; acquisition costs; other EBITDA adjustments; and the combined tax effect of the preceding adjustments, as well as related per share data:

 

 

 

Three Months Ended

 

 

March 31,

 

 

2023

 

2022

 

 

 

 

 

Net income available to common stockholders

 

$

26,731

 

 

$

24,252

 

Closure and impairment charges

 

 

467

 

 

 

146

 

Amortization of intangible assets

 

 

2,774

 

 

 

2,665

 

Non-cash interest expense

 

 

1,171

 

 

 

714

 

Loss (gain) on disposition of assets

 

 

71

 

 

 

(1,296

)

Gain on extinguishment of debt

 

 

(1,661

)

 

 

 

Acquisition costs

 

 

771

 

 

 

 

Other EBITDA adjustments

 

 

1,217

 

 

 

 

Net income tax provision for above adjustments

 

 

(1,251

)

 

 

(580

)

Net income allocated to unvested participating restricted stock

 

 

(89

)

 

 

(38

)

Net income available to common stockholders, as adjusted

 

$

30,201

 

 

$

25,863

 

 

 

 

 

 

Diluted net income available to common stockholders per share:

 

 

 

 

Net income available to common stockholders

 

$

1.74

 

 

$

1.45

 

Closure and impairment charges

 

 

0.03

 

 

 

0.01

 

Amortization of intangible assets

 

 

0.18

 

 

 

0.16

 

Non-cash interest expense

 

 

0.08

 

 

 

0.04

 

Loss (gain) on disposition of assets

 

 

 

 

 

(0.08

)

Gain on extinguishment of debt

 

 

(0.11

)

 

 

 

Acquisition costs

 

 

0.05

 

 

 

 

Other EBITDA adjustments

 

 

0.08

 

 

 

 

Income tax benefit - all other

 

 

(0.08

)

 

 

(0.03

)

Net income allocated to unvested participating restricted stock

 

 

(0.01

)

 

 

 

Rounding

 

 

0.01

 

 

 

(0.01

)

Diluted net income available to common stockholders per share, as adjusted

 

$

1.97

 

 

$

1.54

 

 

 

 

 

 

Numerator for basic EPS - net income available to common stockholders, as adjusted

 

$

30,201

 

 

$

25,863

 

Effect of unvested participating restricted stock using the two-class method

 

 

2

 

 

 

1

 

Numerator for diluted EPS - net income available to common stockholders, as adjusted

 

$

30,203

 

 

$

25,864

 

 

 

 

 

 

Denominator for basic EPS - weighted-average shares

 

 

15,304

 

 

 

16,722

 

Dilutive effect of stock options

 

 

35

 

 

 

36

 

Denominator for diluted EPS - weighted-average shares

 

 

15,339

 

 

 

16,758

 

Dine Brands Global, Inc. and Subsidiaries

Non-GAAP Financial Measures

(Unaudited)

 

Reconciliation of the Company's cash flows provided by operating activities to “adjusted free cash flow” (cash flows (used in) provided by operating activities, plus receipts from notes and equipment contracts receivable, less additions to property and equipment). Management uses this liquidity measure in its periodic assessments of, among other things, the amount of cash dividends per share of common stock and repurchases of common stock. We believe it is important for investors to have the same measure used by management for that purpose. Adjusted free cash flow does not represent residual cash flow available for discretionary purposes.

 

 

 

Three Months Ended

 

 

March 31,

 

 

2023

 

2022

 

 

(In millions)

Cash flows provided by (used in) operating activities

 

$

16.1

 

 

$

(7.8

)

Receipts from notes and equipment contracts receivable

 

 

2.2

 

 

 

3.0

 

Net additions to property and equipment

 

 

(16.0

)

 

 

(5.3

)

Adjusted free cash flow

 

 

2.3

 

 

 

(10.1

)

Repayment of long-term debt

 

 

(66.6

)

 

 

 

Dividends paid on common stock

 

 

(16.0

)

 

 

(14.6

)

Repurchase of common stock

 

 

(5.0

)

 

 

(41.6

)

 

 

$

(85.3

)

 

$

(66.3

)

Dine Brands Global, Inc. and Subsidiaries

Non-GAAP Financial Measures

(in thousands)

(Unaudited)

 

Reconciliation of the Company's net income to “adjusted EBITDA.” The Company defines adjusted EBITDA as net income or loss, adjusted for the effect of closure and impairment charges, interest charges, income tax provision or benefit, depreciation and amortization, non-cash stock-based compensation, gain or loss on disposition of assets, other non-income based taxes and other items deemed not reflective of current operations. Management may use certain non-GAAP measures along with the corresponding U.S. GAAP measures to evaluate the performance of the Company and to make certain business decisions.

 

 

 

Three Months Ended

 

 

March 31,

 

 

2023

 

2022

 

 

 

 

 

Net income, as reported

 

$

27,410

 

 

$

24,850

 

Closure and impairment charges

 

 

467

 

 

 

146

 

Interest charges on finance leases

 

 

709

 

 

 

1,251

 

All other interest charges

 

 

17,681

 

 

 

16,362

 

Income tax provision

 

 

8,759

 

 

 

9,307

 

Depreciation and amortization

 

 

9,213

 

 

 

9,930

 

Non-cash stock-based compensation

 

 

1,718

 

 

 

4,342

 

Gain on extinguishment of debt

 

 

(1,661

)

 

 

 

Loss (gain) on disposition of assets

 

 

71

 

 

 

(1,296

)

Merger and acquisition costs

 

 

771

 

 

 

 

Other

 

 

1,217

 

 

 

312

 

Adjusted EBITDA

 

$

66,355

 

 

$

65,204

 

Dine Brands Global, Inc. and Subsidiaries

Restaurant Data

(Unaudited)

 

The following table sets forth, for the three months ended March 31, 2023 and 2022, the number of “Effective Restaurants” in the Applebee’s and IHOP systems and information regarding the percentage change in sales at those restaurants compared to the same periods in the prior year and, as such, the percentage change in sales at Effective Restaurants is based on non-GAAP sales data. Sales at restaurants that are owned by franchisees and area licensees are not attributable to the Company. However, we believe that presentation of this information is useful in analyzing our revenues because franchisees and area licensees pay us royalties and advertising fees that are generally based on a percentage of their sales, and, where applicable, rental payments under leases that partially may be based on a percentage of their sales. Management also uses this information to make decisions about future plans for the development of additional restaurants as well as evaluation of current operations.

 

 

 

Three Months Ended

 

 

March 31,

 

 

2023

 

2022

 

 

 

Applebee's

 

 

 

 

Global Effective Restaurants(a)

 

 

 

 

Franchise

 

 

1,673

 

 

 

1,607

 

Company

 

 

 

 

 

69

 

Total

 

 

1,673

 

 

 

1,676

 

 

 

 

 

 

System-wide(b)

 

 

 

 

Domestic sales percentage change(c)

 

 

5.6

%

 

 

13.9

%

Domestic same-restaurant sales percentage change(d)

 

 

6.1

%

 

 

14.3

%

 

 

 

 

 

Franchise(b)

 

 

 

 

Domestic sales percentage change(c)

 

 

9.6

%

 

 

14.1

%

Domestic same-restaurant sales percentage change(d)

 

 

5.6

%

 

 

14.5

%

Average weekly domestic unit sales (in thousands)

 

$

56.8

 

 

$

53.9

 

IHOP

 

 

 

 

Global Effective Restaurants(a)

 

 

 

 

Franchise

 

 

1,617

 

 

 

1,586

 

Area license

 

 

156

 

 

 

155

 

Total

 

 

1,773

 

 

 

1,741

 

 

 

 

 

 

System-wide(b)

 

 

 

 

Sales percentage change(c)

 

 

11.4

%

 

 

19.9

%

Domestic same-restaurant sales percentage change, including area license restaurants(d)

 

 

8.7

%

 

 

18.1

%

 

 

 

 

 

Franchise(b)

 

 

 

 

Sales percentage change(c)

 

 

11.5

%

 

 

20.5

%

Domestic same-restaurant sales percentage change(d)

 

 

8.8

%

 

 

18.6

%

Average weekly unit sales (in thousands)

 

$

38.2

 

 

$

34.9

 

 

 

 

 

 

Area License(b)

 

 

 

 

Sales percentage change(c)

 

 

10.3

%

 

 

14.4

%

Dine Brands Global, Inc. and Subsidiaries

Restaurant Data

(Unaudited)

 

 

(a)

“Global Effective Restaurants” are the weighted average number of restaurants open in a given fiscal period, adjusted to account for restaurants open for only a portion of the period. Information is presented for all Effective Restaurants in the Applebee’s and IHOP systems, which includes restaurants owned by franchisees and area licensees as well as those owned by the Company. Effective Restaurants do not include units operated as ghost kitchens (small kitchens with no store-front presence, used to fill off-premise orders).

(b)

“System-wide” sales are retail sales at domestic Applebee’s restaurants operated by franchisees and IHOP restaurants operated by franchisees and area licensees, as reported to the Company, in addition to retail sales at company-operated restaurants. System-wide sales do not include retail sales of ghost kitchens. Sales at restaurants that are owned by franchisees and area licensees are not attributable to the Company. An increase or decrease in franchisees' reported sales will result in a corresponding increase or decrease in our royalty revenue. Unaudited reported sales for Applebee's domestic franchise restaurants, Applebee's company-operated restaurants, IHOP franchise restaurants and IHOP area license restaurants for the three months ended March 31, 2023 and 2022 were as follows:

 

 

Three Months Ended

 

 

March 31,

 

 

2023

 

2022

 

 

(In millions)

Reported sales

 

 

 

 

Applebee's domestic franchise restaurant sales

 

$

1,156.1

 

$

1,055.0

Applebee's company-operated restaurants

 

 

 

 

 

39.4

 

IHOP franchise restaurant sales

 

 

802.2

 

 

 

719.6

 

IHOP area license restaurant sales

 

 

77.8

 

 

 

70.5

 

Total

 

$

2,036.1

 

 

$

1,884.5

 

(c)

“Sales percentage change” reflects, for each category of restaurants, the percentage change in sales in any given fiscal period compared to the prior fiscal period for all restaurants in that category.

(d)

“Domestic same-restaurant sales percentage change” reflects the percentage change in sales, in any given fiscal period, compared to the same weeks in the prior year for domestic restaurants that have been operated during both fiscal periods that are being compared and have been open for at least 18 months. Because of new unit openings and restaurant closures, the domestic restaurants open during both fiscal periods being compared may be different from period to period.

Dine Brands Global, Inc. and Subsidiaries

Restaurant Data

(Unaudited)

 

 

 

Three Months Ended

 

 

March 31,

 

 

2023

 

2022

Applebee's Restaurant Development Activity

 

 

 

 

Summary - beginning of period:

 

 

 

 

Franchise

 

1,678

 

 

1,611

 

Company

 

 

 

69

 

Total Applebee's restaurants, beginning of period

 

1,678

 

 

1,680

 

Franchise restaurants opened:

 

 

 

 

Domestic

 

 

 

1

 

International

 

2

 

 

 

Total franchise restaurants opened

 

2

 

 

1

 

Franchise restaurants closed:

 

 

 

 

Domestic

 

(6

)

 

(4

)

International

 

(1

)

 

(2

)

Total franchise restaurants closed

 

(7

)

 

(6

)

Net franchise restaurant reduction

 

(5

)

 

(5

)

Summary - end of period:

 

 

 

 

Franchise

 

1,673

 

 

1,606

 

Company

 

 

 

69

 

Total Applebee's restaurants, end of period

 

1,673

 

 

1,675

 

Domestic

 

1,563

 

 

1,575

 

International

 

110

 

 

100

 

IHOP Restaurant Development Activity

 

 

 

 

Summary - beginning of period:

 

 

 

 

Franchise

 

1,625

 

 

1,595

 

Area license

 

156

 

 

156

 

Total IHOP restaurants, beginning of period

 

1,781

 

 

1,751

 

Franchise/area license restaurants opened:

 

 

 

 

Domestic franchise

 

13

 

 

7

 

Domestic area license

 

2

 

 

1

 

International franchise

 

4

 

 

2

 

Total franchise/area license restaurants opened

 

19

 

 

10

 

Franchise/area license restaurants closed:

 

 

 

 

Domestic franchise

 

(8

)

 

(3

)

Domestic area license

 

(1

)

 

(1

)

International franchise

 

(1

)

 

(1

)

Total franchise/area license restaurants closed

 

(10

)

 

(5

)

Net franchise/area license restaurant additions (reductions)

 

9

 

5

 

Franchise restaurants reacquired by the Company

 

 

 

 

Net franchise/area license restaurant increase (decrease)

 

9

 

 

5

 

Summary - end of period

 

 

 

 

Franchise

 

1,633

 

 

1,600

 

Area license

 

157

 

 

156

 

Total IHOP restaurants, end of period

 

1,790

 

 

1,756

 

Domestic

 

1,683

 

 

1,661

 

International

 

107

 

 

95

 

The restaurant counts and activity presented above do not include two domestic Applebee's ghost kitchens (small kitchens with no store-front presence, used to fill off-premise orders), 12 international Applebee's ghost kitchens and 42 international IHOP ghost kitchens at March 31, 2023 and three domestic Applebee's ghost kitchens and two IHOP international ghost kitchens at March 31, 2022. As of March 31, 2023, 49 franchise groups operated 134 Fuzzy's restaurants in 18 states within the United States and we had three company-owned restaurants in Texas.

FBN-R

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