• Denny’s Corporation Reports Results For Second Quarter 2023

    Source: Nasdaq GlobeNewswire / 01 Aug 2023 16:05:01   America/New_York

    SPARTANBURG, S.C., Aug. 01, 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 second quarter ended June 28, 2023 and provided a business update on the Company’s operations.

    Kelli Valade, Chief Executive Officer, stated, "We were pleased to report 3.0% Denny's domestic system-wide same-restaurant sales**, expansion of restaurant-level margins, and even higher growth in adjusted EBITDA for the quarter. We also nearly doubled adjusted free cash flow compared to the year-ago period, supporting our ability to repurchase shares under our authorization. As we continue to gain rich insights about our guests, we are excited about the opportunities to execute focused, long-term brand revitalization strategies at Denny's while also expanding the reach of Keke's."

    Second Quarter 2023 Highlights

    • Total operating revenue grew 1.7% to $116.9 million compared to the prior year quarter.
    • Denny's domestic system-wide same-restaurant sales** grew 3.0% compared to the equivalent fiscal period in 2022, including increases of 3.0% at domestic franchised restaurants and 3.0% at company restaurants.
    • Opened 10 franchised restaurants, including 4 international Denny's locations and 1 Keke's location.
    • Completed four Denny's remodels, including three franchised restaurant remodels.
    • Operating income was $14.9 million compared to $13.9 million in the prior year quarter.
    • Franchise Operating Margin* was $31.6 million, or 50.9% of franchise and license revenue, and Company Restaurant Operating Margin* was $8.3 million, or 15.1% of company restaurant sales.
    • Net income was $8.5 million, or $0.15 per diluted share.
    • Adjusted Net Income* and Adjusted Net Income Per Share* were $8.2 million and $0.14, respectively.
    • Adjusted EBITDA* was $22.3 million.
    • Cash provided by (used in) operating, investing, and financing activities was $19.5 million, ($0.6) million, and ($26.7) million, respectively.
    • Adjusted Free Cash Flow* was $12.7 million.
    • Repurchased $10.4 million of common stock.

    Second Quarter 2023 Results

    Total operating revenue increased 1.7% to $116.9 million compared to $115.0 million in the prior year quarter.

    Franchise and license revenue was $62.0 million compared to $65.9 million in the prior year quarter. This change was primarily driven by a $5.2 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 $1.7 million of Keke's franchise revenue in the current quarter.

    Company restaurant sales were $54.9 million compared to $49.2 million in the prior year quarter. This growth was primarily due to $3.7 million of Keke's company restaurant sales in the current quarter and benefits from Denny's price increases compared to the prior year quarter.

    Franchise Operating Margin* was $31.6 million, or 50.9% of franchise and license revenue, compared to $30.6 million, or 46.4%, in the prior year quarter. Approximately 440 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 $8.3 million, or 15.1% of company restaurant sales, compared to $4.3 million, or 8.8%, in the prior year quarter. This margin change was primarily due to approximately $2.3 million of unfavorable legal reserve adjustments in the prior year quarter, as well as the improvement in sales performance at company restaurants in the current year quarter.

    Total general and administrative expenses were $20.2 million, compared to $16.6 million in the prior year quarter. This change was primarily due to increases in deferred compensation valuation adjustments, corporate administration expenses, and performance-based incentive compensation, partially offset by a reduction in share-based compensation expense.

    The provision for income taxes was $2.7 million, reflecting an effective tax rate of 23.8% for the quarter. Approximately $3.4 million in cash taxes were paid during the quarter.

    Net income was $8.5 million, or $0.15 per diluted share, compared to $23.0 million, or $0.37 per diluted share, in the prior year quarter. This change in net income was primarily due to $21.7 million of gains related to dedesignated interest rate swap valuation adjustments in the prior year quarter. Adjusted Net Income* per share was $0.14 compared to $0.11 in the prior year quarter.

    The Company ended the quarter with $257.8 million of total debt outstanding, including $247.0 million of borrowings under its credit facility.

    Adjusted Free Cash Flow* and Capital Allocation

    Adjusted Free Cash Flow* in the quarter was $12.7 million after investing $2.0 million in cash capital expenditures, including one company restaurant remodel and facilities maintenance.

    During the quarter, the Company allocated $10.4 million to share repurchases resulting in approximately $133.1 million remaining under its existing repurchase authorization.

    Business Outlook

    The following full year 2023 guidance reflects management's expectations that the current consumer and economic environment will not change materially:

    • Denny's domestic system-wide same-restaurant sales** between 3% and 6%.
    • Consolidated restaurant openings of 35 to 45, including 8 to 12 new Keke's restaurants, with a consolidated net decline of 15 to 25.
    • Commodity inflation between 1% and 3% (vs. between 4% and 6%).
    • Labor inflation of approximately 4% (vs. approximately 5%).
    • Consolidated total general and administrative expenses between $78 million and $80 million (vs. between $79 million and $82 million), including approximately $12 million (vs. approximately $14 million) related to share-based compensation expense which does not impact Consolidated Adjusted EBITDA*.
    • Consolidated Adjusted EBITDA* 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 second quarter ended June 28, 2023 on its quarterly investor conference call today, Tuesday, August 1, 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 June 28, 2023, the Company consisted of 1,646 restaurants, 1,572 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 June 28, 2023, the Denny's brand consisted of 1,591 global restaurants, 1,525 of which were franchised and licensed restaurants and 66 of which were company operated. As of June 28, 2023, the Keke's brand consisted of 55 restaurants, 47 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; 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)6/28/23 12/28/22
    Assets   
     Current assets   
      Cash and cash equivalents$1,130  $3,523 
      Investments 3,075   1,746 
      Receivables, net 18,469   25,576 
      Inventories 2,534   5,538 
      Assets held for sale 1,551   1,403 
      Prepaid and other current assets 10,043   12,529 
       Total current assets 36,802   50,315 
     Property, net 91,407   94,469 
     Finance lease right-of-use assets, net 6,239   6,499 
     Operating lease right-of-use assets, net 120,136   126,065 
     Goodwill 72,142   72,740 
     Intangible assets, net 94,220   95,034 
     Deferred financing costs, net 2,020   2,337 
     Other noncurrent assets 42,659   50,876 
       Total assets$465,625  $498,335 
           
    Liabilities   
     Current liabilities   
      Current finance lease liabilities$1,449  $1,683 
      Current operating lease liabilities 15,179   15,310 
      Accounts payable 13,079   19,896 
      Other current liabilities 56,968   56,762 
       Total current liabilities 86,675   93,651 
     Long-term liabilities   
      Long-term debt 247,000   261,500 
      Noncurrent finance lease liabilities 9,355   9,555 
      Noncurrent operating lease liabilities 117,218   123,404 
      Liability for insurance claims, less current portion 7,020   7,324 
      Deferred income taxes, net 8,937   7,419 
      Other noncurrent liabilities 32,038   32,598 
       Total long-term liabilities 421,568   441,800 
       Total liabilities 508,243   535,451 
           
    Shareholders' deficit   
      Common stock 657   650 
      Paid-in capital 144,506   142,136 
      Deficit (32,594)  (41,729)
      Accumulated other comprehensive loss, net (40,321)  (42,697)
      Treasury stock (114,866)  (95,476)
       Total shareholders' deficit (42,618)  (37,116)
       Total liabilities and shareholders' deficit$465,625  $498,335 
           
    Debt Balances
     Credit facility revolver due 2026$247,000  $261,500 
     Finance lease liabilities 10,804   11,238 
      Total debt$257,804  $272,738 


    DENNY’S CORPORATION
    Condensed Consolidated Statements of Operations
    (Unaudited)
          
       Quarter Ended
    ($ in thousands, except per share amounts)6/28/23 6/29/22
    Revenue:   
     Company restaurant sales$54,881  $49,167 
     Franchise and license revenue 62,034   65,850 
      Total operating revenue 116,915   115,017 
    Costs of company restaurant sales, excluding depreciation and amortization 46,568   44,828 
    Costs of franchise and license revenue, excluding depreciation and amortization 30,460   35,265 
    General and administrative expenses 20,160   16,623 
    Depreciation and amortization 3,617   3,590 
    Operating (gains), losses and other charges, net 1,176   846 
      Total operating costs and expenses, net 101,981   101,152 
    Operating income 14,934   13,865 
    Interest expense, net 4,402   2,878 
    Other nonoperating income, net (666)  (19,795)
    Income before income taxes 11,198   30,782 
    Provision for income taxes 2,660   7,779 
    Net income$8,538  $23,003 
          
    Net income per share - basic$0.15  $0.37 
    Net income per share - diluted$0.15  $0.37 
          
    Basic weighted average shares outstanding 56,787   62,306 
    Diluted weighted average shares outstanding 57,051   62,430 
          
    Comprehensive income$10,557  $25,411 
        
    General and Administrative Expenses 
     Corporate administrative expenses$15,160  $13,162 
     Share-based compensation 2,519   3,505 
     Incentive compensation 1,899   1,639 
     Deferred compensation valuation adjustments 582   (1,683)
      Total general and administrative expenses$20,160  $16,623 


    DENNY’S CORPORATION
    Condensed Consolidated Statements of Operations
    (Unaudited)
          
       Two Quarters Ended
    ($ in thousands, except per share amounts)6/28/23 6/29/22
    Revenue:   
     Company restaurant sales$108,333  $93,143 
     Franchise and license revenue 126,053   124,981 
      Total operating revenue 234,386   218,124 
    Costs of company restaurant sales, excluding depreciation and amortization 93,060   83,453 
    Costs of franchise and license revenue, excluding depreciation and amortization 62,847   65,934 
    General and administrative expenses 40,278   33,581 
    Depreciation and amortization 7,273   7,138 
    Operating (gains), losses and other charges, net (153)  846 
      Total operating costs and expenses, net 203,305   190,952 
    Operating income 31,081   27,172 
    Interest expense, net 8,907   5,838 
    Other nonoperating expense (income), net 9,427   (39,410)
    Income before income taxes 12,747   60,744 
    Provision for income taxes 3,612   15,886 
    Net income$9,135  $44,858 
          
    Net income per share - basic$0.16  $0.71 
    Net income per share - diluted$0.16  $0.71 
          
    Basic weighted average shares outstanding 57,212   62,822 
    Diluted weighted average shares outstanding 57,423   63,003 
          
    Comprehensive income$11,511  $53,047 
        
    General and Administrative Expenses 
     Corporate administrative expenses$29,339  $24,545 
     Share-based compensation 5,613   7,520 
     Incentive compensation 4,286   3,758 
     Deferred compensation valuation adjustments 1,040   (2,242)
      Total general and administrative expenses$40,278  $33,581 


    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 Two Quarters Ended
    ($ in thousands)6/28/23 6/29/22 6/28/23 6/29/22
    Net income$8,538  $23,003  $9,135  $44,858 
    Provision for income taxes 2,660   7,779   3,612   15,886 
    Operating (gains), losses and other charges, net 1,176   846   (153)  846 
    Other nonoperating expense (income), net (666)  (19,795)  9,427   (39,410)
    Share-based compensation expense 2,519   3,505   5,613   7,520 
    Deferred compensation plan valuation adjustments 582   (1,683)  1,040   (2,242)
    Interest expense, net 4,402   2,878   8,907   5,838 
    Depreciation and amortization 3,617   3,590   7,273   7,138 
    Cash payments for restructuring charges and exit costs (408)  (208)  (998)  (381)
    Cash payments for share-based compensation (159)  (2,693)  (3,122)  (5,147)
    Adjusted EBITDA$22,261  $17,222  $40,734  $34,906 
            


    DENNY’S CORPORATION
    Reconciliation of Net Income and Net Cash Provided by Operating Activities
    to Non-GAAP Financial Measures (Continued)
    (Unaudited)
     Quarter Ended Two Quarters Ended
    ($ in thousands)6/28/23 6/29/22 6/28/23 6/29/22
    Net cash provided by operating activities$19,498  $16,673  $35,651  $9,609 
    Capital expenditures (2,003)  (2,993)  (3,307)  (5,771)
    Cash payments for restructuring charges and exit costs (408)  (208)  (998)  (381)
    Cash payments for share-based compensation (159)  (2,693)  (3,122)  (5,147)
    Deferred compensation plan valuation adjustments 582   (1,683)  1,040   (2,242)
    Other nonoperating expense (income), net (666)  (19,795)  9,427   (39,410)
    Gains (losses) on investments 24   (158)  29   (223)
    Losses on early termination of debt and leases —   —   —   (24)
    Amortization of deferred financing costs (158)  (159)  (317)  (317)
    Gains (losses) and amortization on interest rate swap derivatives, net (82)  21,671   (10,744)  41,924 
    Interest expense, net 4,402   2,878   8,907   5,838 
    Cash interest expense, net(1) (4,161)  (3,449)  (8,264)  (7,175)
    Deferred income tax expense (577)  (6,330)  (710)  (10,766)
    Provision for income taxes 2,660   7,779   3,612   15,886 
    Income taxes paid, net (3,421)  (4,195)  (3,910)  (4,644)
    Changes in operating assets and liabilities, excluding acquisitions and dispositions       
    Receivables (4,946)  (148)  (6,760)  3,419 
    Inventories (720)  2,380   (3,004)  7,148 
    Other current assets 164   (112)  (2,488)  (3,563)
    Other noncurrent assets 872   (2,040)  (247)  (6,125)
    Operating lease assets and liabilities 113   222   359   466 
    Accounts payable 6,623   (864)  7,754   1,541 
    Other accrued liabilities (4,888)  (3,902)  1,646   11,062 
    Other noncurrent liabilities (73)  3,711   699   6,211 
    Adjusted Free Cash Flow$12,676  $6,585  $25,253  $17,316 
            


    (1)Includes cash interest income, net and cash receipts of approximately $0.2 million for dedesignated interest rate swap derivatives for the year-to-date period ended June 28, 2023. Includes cash interest expense, net and cash payments of approximately $0.7 and $1.7 million for dedesignated interest rate swap derivatives for the quarter and year-to-date period ended June 29, 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 Two Quarters Ended
    ($ in thousands, except per share amounts)6/28/23 6/29/22 6/28/23 6/29/22
    Adjusted EBITDA$22,261  $17,222  $40,734  $34,906 
    Cash interest expense, net(1) (4,161)  (3,449)  (8,264)  (7,175)
    Cash paid for income taxes, net (3,421)  (4,195)  (3,910)  (4,644)
    Cash paid for capital expenditures (2,003)  (2,993)  (3,307)  (5,771)
    Adjusted Free Cash Flow$12,676  $6,585  $25,253  $17,316 
            
    Net income$8,538  $23,003  $9,135  $44,858 
    (Gains) losses and amortization on interest rate swap derivatives, net 82   (21,671)  10,744   (41,924)
    Gains on sales of assets and other charges, net (522)  (99)  (2,044)  (245)
    Impairment charges —   266   129   266 
    Tax effect(2) 132   5,451   (2,278)  10,979 
    Adjusted Net Income$8,230  $6,950  $15,686  $13,934 
            
    Diluted weighted average shares outstanding 57,051   62,430   57,423   63,003 
            
    Net Income Per Share - Diluted$0.15  $0.37  $0.16  $0.71 
    Adjustments Per Share (0.01)  (0.26)  0.11   (0.49)
    Adjusted Net Income Per Share$0.14  $0.11  $0.27  $0.22 
            


    (1)Includes cash interest income, net and cash receipts of approximately $0.2 million for dedesignated interest rate swap derivatives for the year-to-date period ended June 28, 2023. Includes cash interest expense, net and cash payments of approximately $0.7 million and $1.7 million for dedesignated interest rate swap derivatives for the quarter and year-to-date period ended June 29, 2022, respectively.
    (2)Tax adjustments for the quarter and year-to-date period ended June 28, 2023 reflect effective tax rates of 30.0% and 25.8%, respectively. Tax adjustments for the quarter and year-to-date period ended June 29, 2022 reflect effective tax rates of 25.3% and 26.2%, 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 Two Quarters Ended
    ($ in thousands)6/28/23 6/29/22 6/28/23 6/29/22
    Operating income$14,934 $13,865 $31,081  $27,172
    General and administrative expenses 20,160  16,623  40,278   33,581
    Depreciation and amortization 3,617  3,590  7,273   7,138
    Operating (gains), losses and other charges, net 1,176  846  (153)  846
    Restaurant-level Operating Margin$39,887 $34,924 $78,479  $68,737
            
    Restaurant-level Operating Margin consists of:       
    Company Restaurant Operating Margin (1)$8,313 $4,339 $15,273  $9,690
    Franchise Operating Margin (2) 31,574  30,585  63,206   59,047
    Restaurant-level Operating Margin$39,887 $34,924 $78,479  $68,737


    (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)6/28/23 6/29/22
    Company restaurant operations: (1)     
     Company restaurant sales$54,881100.0% $49,167100.0%
     Costs of company restaurant sales, excluding depreciation and amortization:     
      Product costs 14,17025.8%  13,16826.8%
      Payroll and benefits 20,48837.3%  18,33637.3%
      Occupancy 4,1057.5%  3,7827.7%
      Other operating costs:     
       Utilities 1,8603.4%  1,6503.4%
       Repairs and maintenance 7821.4%  8891.8%
       Marketing 1,4192.6%  1,3302.7%
       Legal settlements 1210.2%  2,3794.8%
       Other direct costs 3,6236.6%  3,2946.7%
     Total costs of company restaurant sales, excluding depreciation and amortization$46,56884.9% $44,82891.2%
     Company restaurant operating margin (non-GAAP) (2)$8,31315.1% $4,3398.8%
             
    Franchise operations: (3)     
     Franchise and license revenue:     
     Royalties$30,37649.0% $28,75943.7%
     Advertising revenue 19,85332.0%  19,48629.6%
     Initial and other fees 2,6164.2%  7,77911.8%
     Occupancy revenue 9,18914.8%  9,82614.9%
     Total franchise and license revenue$62,034100.0% $65,850100.0%
             
     Costs of franchise and license revenue, excluding depreciation and amortization:     
     Advertising costs$19,85332.0% $19,48629.6%
     Occupancy costs 5,7929.3%  6,0649.2%
     Other direct costs 4,8157.8%  9,71514.8%
     Total costs of franchise and license revenue, excluding depreciation and amortization$30,46049.1% $35,26553.6%
     Franchise operating margin (non-GAAP) (2)$31,57450.9% $30,58546.4%
             
    Total operating revenue (4)$116,915100.0% $115,017100.0%
    Total costs of operating revenue (4) 77,02865.9%  80,09369.6%
    Restaurant-level operating margin (non-GAAP) (4)(2)$39,88734.1% $34,92430.4%
             
    Other operating expenses: (4)(2)     
     General and administrative expenses$20,16017.2% $16,62314.5%
     Depreciation and amortization 3,6173.1%  3,5903.1%
     Operating losses and other charges, net 1,1761.0%  8460.7%
     Total other operating expenses$24,95321.3% $21,05918.3%
             
    Operating income (4)$14,93412.8% $13,86512.1%
             
    (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)
           
        Two Quarters Ended
    ($ in thousands)6/28/23 6/29/22
    Company restaurant operations: (1)     
     Company restaurant sales$108,333 100.0% $93,143100.0%
     Costs of company restaurant sales, excluding depreciation and amortization:     
      Product costs 28,209 26.0%  24,41226.2%
      Payroll and benefits 40,728 37.6%  35,42238.0%
      Occupancy 8,199 7.6%  7,0227.5%
      Other operating costs:     
       Utilities 3,917 3.6%  3,2273.5%
       Repairs and maintenance 1,671 1.5%  1,7141.8%
       Marketing 2,814 2.6%  2,5372.7%
       Legal settlements 230 0.2%  2,6562.9%
       Other direct costs 7,292 6.7%  6,4636.9%
     Total costs of company restaurant sales, excluding depreciation and amortization$93,060 85.9% $83,45389.6%
     Company restaurant operating margin (non-GAAP)(2)$15,273 14.1% $9,69010.4%
             
    Franchise operations:(3)     
     Franchise and license revenue:     
     Royalties$60,403 47.9% $55,28444.2%
     Advertising revenue 39,521 31.4%  37,69230.2%
     Initial and other fees 7,606 6.0%  12,2869.8%
     Occupancy revenue 18,523 14.7%  19,71915.8%
     Total franchise and license revenue$126,053 100.0% $124,981100.0%
             
     Costs of franchise and license revenue, excluding depreciation and amortization:     
     Advertising costs$39,521 31.4% $37,69230.2%
     Occupancy costs 11,464 9.1%  12,44110.0%
     Other direct costs 11,862 9.4%  15,80112.6%
     Total costs of franchise and license revenue, excluding depreciation and amortization$62,847 49.9% $65,93452.8%
     Franchise operating margin (non-GAAP)(2)$63,206 50.1% $59,04747.2%
             
    Total operating revenue(4)$234,386 100.0% $218,124100.0%
    Total costs of operating revenue(4) 155,907 66.5%  149,38768.5%
    Restaurant-level operating margin (non-GAAP)(4)(2)$78,479 33.5% $68,73731.5%
             
    Other operating expenses:(4)(2)     
     General and administrative expenses$40,278 17.2% $33,58115.4%
     Depreciation and amortization 7,273 3.1%  7,1383.3%
     Operating (gains), losses and other charges, net (153)(0.1)        %  8460.4%
     Total other operating expenses$47,398 20.2% $41,56519.1%
             
    Operating income(4)$31,081 13.3% $27,17212.5%
             
    (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 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 Two Quarters Ended Quarter Ended Two Quarters Ended
    (Increase vs. prior year)6/28/23 6/29/22 6/28/23 6/29/22 6/28/23 6/29/22 6/28/23 6/29/22
     Company Restaurants 3.0%  3.8%  7.0%  14.9% N/A N/A N/A N/A
     Domestic Franchise Restaurants 3.0%  2.4%  5.5%  11.2% N/A N/A N/A N/A
     Domestic System-wide Restaurants 3.0%  2.5%  5.6%  11.5% N/A N/A N/A N/A
                      
    Average Unit Sales       
    ($ in thousands)               
     Company Restaurants$786  $761  $1,548  $1,443  $459 N/A $925 N/A
     Franchised Restaurants$466  $442  $918  $846  $476 N/A $967 N/A
                      
    (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.
    Keke's comparable same-restaurant sales will not be reported for the first year following the acquisition.
    (2) Effective July 20, 2022, the Company acquired Keke's, as such the data represents post-acquisition results.


    Restaurant Unit ActivityDenny's Keke's
         Franchised     Franchised  
       Company & Licensed Total Company & Licensed Total
    Ending Units March 29, 202366 1,528 1,594 8 46 54
     Units Opened— 9 9 — 1 1
     Units Closed— (12) (12) — — —
      Net Change— (3) (3) — 1 1
    Ending Units June 28, 202366 1,525 1,591 8 47 55
                  
    Equivalent Units           
     Second Quarter 202365 1,525 1,590 8 47 55
     Second Quarter 202264 1,567 1,631 — — —
      Net Change1 (42) (41) 8 47 55
                  
       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— 14 14 — 1 1
     Units Closed— (25) (25) — — —
      Net Change— (11) (11) — 1 1
    Ending Units June 28, 202366 1,525 1,591 8 47 55
                  
    Equivalent Units           
     Year-to-Date 202365 1,527 1,592 8 46 54
     Year-to-Date 202264 1,570 1,634 — — —
      Net Change1 (43) (42) 8 46 54
      


    Investor Contact:
Curt Nichols
877-784-7167

Media Contact:
Hadas Streit, Allison+Partners
646-428-0629

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