Dine Brands Global, Inc. Reports Third Quarter 2022 Results

Applebee’s and IHOP Post Seventh & Sixth Consecutive Positive Comparable Restaurants Sales Quarters, Respectively

GLENDALE, Calif.–(BUSINESS WIRE)–Dine Brands Global, Inc. (NYSE: DIN), the parent company of Applebee’s Neighborhood Grill + Bar^® and IHOP^® restaurants, today announced financial results for the third quarter of fiscal 2022.

“The third quarter reflected Dine’s collective strength and resiliency. Despite persistent economic headwinds, our performance demonstrated outstanding execution of our plan and our deep commitment to deliver on our strategy and create shareholder value,” said John Peyton, chief executive officer of Dine Brands Global, Inc.

Vance Chang, chief financial officer, added, “Our results continued to display the strength of our asset-light business model. With less than one quarter remaining in 2022, we have narrowed our EBITDA and G&A guidance to better incorporate our year-to-date progress and our prospects for the remainder of the year.”

Domestic Restaurant Sales for the Third Quarter of 2022

• Applebee’s year-over-year comparable same-restaurant sales increased 3.8% for the third quarter of 2022. Off-premise sales accounted for 24.2% of sales mix, representing per restaurant average weekly sales of approximately $12,800.
• IHOP’s year-over-year comparable same-restaurant sales increased 1.9% for the third quarter of 2022. Off-premise sales accounted for 20.4% of sales mix, representing per restaurant average weekly sales of approximately $7,700.

Third Quarter of 2022 Summary

• Total revenues for the third quarter of 2022 were $233.2 million compared to $228.7 million for the third quarter of 2021. The increase was primarily due to positive comparable same restaurant sales growth at both brands.
• Consolidated adjusted EBITDA for the third quarter of 2022 was $63.6 million, slightly ahead of the $63.3 million for the third quarter of 2021. The increase in revenues was offset by ongoing inflation across our company restaurants and higher franchise-level expenses. (See “Non-GAAP Financial Measures” and reconciliation of GAAP net income to consolidated adjusted EBITDA.)
• General and Administrative (“G&A”) expenses for the third quarter of 2022 were $46.3 million compared to $43.7 million for the third quarter of 2021. The variance was primarily due to continued strategic growth investments and a return to normalized operations, including higher professional services expenses and travel-related costs to support franchisees.
• GAAP earnings per diluted share of $1.32 for the third quarter of 2022 compared to earnings per diluted share of $1.33 for the third quarter of 2021. The variance was primarily due to higher franchise, company restaurant and G&A expenses, offset by increased revenues and lower share count.
• Adjusted earnings per diluted share of $1.66 for the third quarter of 2022 compared to adjusted earnings per diluted share of $1.55 for the third quarter of 2021. The variance was primarily due to lower share count. (See “Non-GAAP Financial Measures” and reconciliation of GAAP earnings per diluted share to adjusted earnings per diluted share.)
• Development activity by Applebee’s and IHOP franchisees for the third quarter of 2022 resulted in the opening of 10 new restaurants and the closure of 11 restaurants.

First Nine Months of 2022 Summary

• Total revenues for the first nine months of 2022 were $701.4 million compared to $666.5 million for the first nine months of 2021. The increase was primarily due to strong comparable same restaurant sales growth at both brands.
• Consolidated adjusted EBITDA for the first nine months of 2022 was $194.9 million. This compares to $193.2 million for the first nine months of 2021. The increase was primarily due to strong comparable same restaurant sales growth at both brands offset by strategic growth investments as well as higher expenses associated with a return to normal operations. (See “Non-GAAP Financial Measures” and reconciliation of GAAP net income to consolidated adjusted EBITDA.)
• G&A expenses for the first nine months of 2022 were $131.9 million compared to $122.9 million for the first nine months of 2021. The variance was primarily due to continued strategic growth investments and a return to normalized operations, including higher travel-related costs and professional services expenses to support franchisees.
• GAAP earnings per diluted share of $4.22 for the first nine months of 2022 compared to earnings per diluted share of $4.52 for the first nine months of 2021. The variance was primarily due to higher income tax expense and an increase in G&A expenses, partially offset by an increase in gross profit and a decrease in closure and impairment charges.
• Adjusted earnings per diluted share of $4.85 for the first nine months of 2022 compared to adjusted earnings per diluted share of $5.22 for the first nine months of 2021. The variance was primarily due to higher income tax expense and an increase in G&A expenses, partially offset by an increase in gross profit and lower share count. (See “Non-GAAP Financial Measures” and reconciliation of GAAP earnings per diluted share to adjusted earnings per diluted share.)
• Cash flows from operating activities for the first nine months of 2022 were $63.5 million. This compares to cash provided from operating activities of $145.6 million for the first nine months of 2021. The decline was primarily due to the change in working capital, resulting from payments related to higher incentive compensation earned in 2021 but paid in the first quarter of 2022, one-time collection of franchisee deferrals in the first nine months of 2021 (that did not recur in 2022) and the timing of marketing disbursements.
• The Company had adjusted free cash flow of $52.4 million for the first nine months of 2022. This compares to adjusted free cash flow of $146.1 million for the first nine months of 2021. (See “Non-GAAP Financial Measures” and reconciliation of the Company’s cash provided by operating activities to adjusted free cash flow.)
• Development activity by Applebee’s and IHOP franchisees for the first nine months of 2022 resulted in the opening of 35 new restaurants and the closure of 30 restaurants.

Key Balance Sheet Metrics (as of September 30, 2022)

• Total cash, cash equivalents and restricted cash of $424.2 million, of which $355.3 million was unrestricted cash.
• Leverage ratio of 3.90x compared to 4.27x as of June 30, 2022.
• Debt service coverage ratio was 4.15x compared to 4.31x as of June 30, 2022.
• Capacity under the revolving credit facility of $221.6 million available, with a $100 million draw down in August 2022 and $3.4 million pledged.

GAAP Effective Tax Rate

The Company’s effective tax rate was 26.9% for the nine months ended September 30, 2022, as compared to 16.4% for the nine months ended September 30, 2021. The effective tax rate for the nine months ended September 30, 2022 was higher than the rate of the prior comparable period primarily due to the recognition of excess tax benefits on stock-based compensation related to the departure of the Company’s previous chief executive officer in the first quarter of 2021.

Capital Return to Shareholders

The Company repurchased 140,997 shares of its common stock in the third quarter of 2022 for a total of approximately $9.5 million, with $113.6 million repurchased through the first nine months of 2022.

On September 9, 2022, the Company announced that its Board of Directors declared and approved a quarterly cash dividend of $0.51 per share of common stock. The dividend was paid on September 30, 2022, to the Company’s stockholders of record at the close of business on September 20, 2022.

Financial Performance Guidance for 2022

The Company adjusted a number of its fiscal 2022 guidance items:

• Domestic development activity by Applebee’s franchisees of between 5 and 15 net fewer restaurants is reaffirmed.
• Domestic development activity by IHOP franchisees and area licensees is now expected to be between 35 and 45 net new openings (compared with between 50 and 65 restaurants as was previously guided). The change is primarily due to new openings being moved to 2023 as a result of permitting delays and supply chain issues.
• Consolidated adjusted EBITDA range is narrowed to between approximately $243 million and $248 million, versus the previous $235 million and $250 million range. This new guidance reflects our third quarter performance and our planned strategic investments in the fourth quarter, along with the impact from refranchising our company-owned restaurants.
• G&A expenses are now expected to be reduced to a range of between approximately $185 million and $190 million versus the $188 million and $198 million range provided earlier in the year. This total includes non-cash stock-based compensation expense and depreciation of approximately $30 million. This range reflects incremental investments in technology and operational initiatives as well as unit development and is inclusive of G&A expenses related to the company restaurants segment.
• Capital expenditures is left unchanged in a range between $33 million and $38 million, reflecting incremental investments in the business to support sustainable growth.

Third Quarter of 2022 Earnings Conference Call Details

Dine Brands will host a conference call to discuss its results on November 2, 2022 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/investor-overview.

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 Glendale, California, Dine Brands Global, Inc. (NYSE: DIN), through its subsidiaries, franchises restaurants under both Applebee’s Neighborhood Grill + Bar^® and IHOP^® brands. With over 3,400 restaurants combined in 16 countries and 338 franchisees as of December 31, 2021, Dine Brands is one of the largest full-service restaurant companies in the world. 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, 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 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								Nine Months Ended
		September 30,								September 30,
		2022				2021				2022				2021
Revenues:
Franchise revenues:
Royalties, franchise fees and other		$	93,215			$	90,417			$	277,712			$	265,138
Advertising revenues			71,692				70,709				216,686				203,918
Total franchise revenues			164,907				161,126				494,398				469,056
Company restaurant sales			38,248				35,275				117,175				109,418
Rental revenues			29,207				31,273				87,080				84,797
Financing revenues			858				1,045				2,784				3,266
Total revenues			233,220				228,719				701,437				666,537
Cost of revenues:
Franchise expenses:
Advertising expenses			71,692				70,709				216,686				203,918
Bad debt credit			(77	)			(1,962	)			(523	)			(4,246	)
Other franchise expenses			8,649				6,922				24,402				20,197
Total franchise expenses			80,264				75,669				240,565				219,869
Company restaurant expenses			36,513				33,867				111,802				101,510
Rental expenses:
Interest expense from finance leases			740				822				2,254				2,677
Other rental expenses			21,268				23,645				63,720				63,359
Total rental expenses			22,008				24,467				65,974				66,036
Financing expenses			104				113				317				356
Total cost of revenues			138,889				134,116				418,658				387,771
Gross profit			94,331				94,603				282,779				278,766
General and administrative expenses			46,335				43,704				131,946				122,891
Interest expense, net			15,300				15,712				46,192				47,956
Closure and impairment charges			1,636				443				3,093				5,024
Amortization of intangible assets			2,664				2,664				7,994				8,015
Loss on extinguishment of debt			1,161				9				1,161				34
(Gain) loss on disposition of assets			(1,502	)			1,299				(3,032	)			1,436
Income before income taxes			28,737				30,772				95,425				93,444
Income tax provision			(7,789	)			(7,661	)			(25,665	)			(15,368	)
Net income		$	20,948			$	23,111			$	69,760			$	78,076
Net income available to common stockholders:
Net income		$	20,948			$	23,111			$	69,760			$	78,076
Less: Net income allocated to unvested participating restricted stock			(575	)			(502	)			(1,852	)			(1,920	)
Net income available to common stockholders		$	20,373			$	22,609			$	67,908			$	76,156
Net income available to common stockholders per share:
Basic		$	1.32			$	1.34			$	4.23			$	4.55
Diluted		$	1.32			$	1.33			$	4.22			$	4.52
Weighted average shares outstanding:
Basic			15,377				16,911				16,049				16,752
Diluted			15,403				16,971				16,079				16,858
Dividends declared per common share		$	0.51			$	—			$	1.48			$	—
Dividends paid per common share		$	1.02			$	—			$	1.88			$	—

Dine Brands Global, Inc. and Subsidiaries Consolidated Balance Sheets (In thousands, except share and per share amounts)
		September 30, 2022				December 31, 2021
Assets		(Unaudited)
Current assets:
Cash and cash equivalents		$	355,288			$	361,412
Receivables, net of allowance of $4,205 (2022) and $4,959 (2021)			89,529				119,968
Restricted cash			52,517				47,541
Prepaid gift card costs			24,595				28,175
Prepaid income taxes			3,502				10,529
Other current assets			11,075				6,728
Assets held for sale			109,280				—
Total current assets			645,786				574,353
Other intangible assets, net			526,989				539,390
Operating lease right-of-use assets			298,102				335,428
Goodwill			247,002				251,628
Property and equipment, net			135,368				179,411
Deferred rent receivable			44,306				50,257
Long-term receivables, net of allowance of $5,498 (2022) and $6,897 (2021)			43,245				42,493
Non-current restricted cash			16,400				16,400
Other non-current assets, net			14,823				10,006
Total assets		$	1,972,021			$	1,999,366
Liabilities and Stockholders’ Deficit
Current liabilities:
Current maturities of long-term debt		$	100,000			$	—
Accounts payable			40,781				55,956
Gift card liability			126,161				165,530
Current maturities of operating lease obligations			65,174				72,079
Current maturities of finance lease and financing obligations			8,402				10,693
Accrued employee compensation and benefits			20,786				40,785
Accrued advertising			38,804				33,752
Dividends payable			—				6,919
Other accrued expenses			22,975				25,016
Liabilities held for sale			96,023				—
Total current liabilities			519,106				410,730
Long-term debt, net, less current maturities			1,281,318				1,279,623
Operating lease obligations, less current maturities			279,620				320,848
Finance lease obligations, less current maturities			31,439				59,625
Financing obligations, less current maturities			28,572				31,967
Deferred income taxes, net			74,681				76,228
Deferred franchise revenue, long-term			42,616				46,100
Other non-current liabilities			16,263				17,052
Total liabilities			2,273,615				2,242,173
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; September 30, 2022 – 24,966,452 issued, 15,682,061 outstanding; December 31, 2021 – 24,992,275 issued, 17,163,946 outstanding			250				250
Additional paid-in-capital			256,508				256,189
Retained earnings			81,179				35,415
Accumulated other comprehensive loss			(68	)			(59	)
Treasury stock, at cost; shares: September 30, 2022 – 9,284,391; December 31, 2021 – 7,828,329			(639,463	)			(534,602	)
Total stockholders’ deficit			(301,594	)			(242,807	)
Total liabilities and stockholders’ deficit		$	1,972,021			$	1,999,366

Dine Brands Global, Inc. and Subsidiaries Consolidated Statements of Cash Flows (In thousands) (Unaudited)
		Nine Months Ended
		September 30,
		2022				2021
Cash flows from operating activities:
Net income		$	69,760			$	78,076
Adjustments to reconcile net income to cash flows provided by operating activities:
Depreciation and amortization			28,870				29,995
Non-cash stock-based compensation expense			12,128				8,572
Non-cash closure and impairment charges			2,975				4,949
Non-cash interest expense			2,210				2,146
Deferred income taxes			(1,376	)			(9,156	)
Deferred revenue			(3,773	)			(5,808	)
Loss on extinguishment of debt			1,161				34
(Gain) loss on disposition of assets			(3,032	)			1,436
Other			(3,816	)			947
Changes in operating assets and liabilities:
Accounts receivable, net			(734	)			8,398
Deferred rent receivable			5,951				4,629
Current income tax receivables and payables			7,361				4,544
Gift card receivables and payables			(16,752	)			(9,215	)
Other current assets			(5,948	)			(2,645	)
Accounts payable			(6,855	)			9,678
Operating lease assets and liabilities			(8,286	)			(13,994	)
Accrued employee compensation and benefits			(18,738	)			9,569
Accrued advertising expenses			5,052				32,232
Other current liabilities			(2,668	)			(8,791	)
Cash flows provided by operating activities			63,490				145,562
Cash flows from investing activities:
Principal receipts from notes, equipment contracts and other long-term receivables			13,502				14,795
Net additions to property and equipment			(19,495	)			(7,923	)
Proceeds from sale of property and equipment			3,908				946
Additions to long-term receivables			(1,069	)			—
Other .			(255	)			(357	)
Cash flows (used in) provided by investing activities			(3,409	)			7,461
Cash flows from financing activities:
Repayment of long-term debt			—				(9,750	)
Borrowing from revolving credit facility			100,000				—
Repayment of revolving credit facility			—				(220,000	)
Payment of debt issuance costs			(6,286	)			—
Dividends paid on common stock			(30,765	)			—
Repurchase of common stock			(113,862	)			—
Principal payments on finance lease obligations			(7,001	)			(7,772	)
Proceeds from stock options exercised			241				25,016
Repurchase of restricted stock for tax payments upon vesting			(2,601	)			(1,543	)
Tax payments for share settlement of restricted stock units			(955	)			(9,783	)
Cash flows used in financing activities			(61,229	)			(223,832	)
Net change in cash, cash equivalents and restricted cash			(1,148	)			(70,809	)
Cash, cash equivalents and restricted cash at beginning of period			425,353				456,053
Cash, cash equivalents and restricted cash at end of period		$	424,205			$	385,244

Contacts

Investor Contact
Brett Levy

Vice President, Investor Relations

Dine Brands Global, Inc.

(818) 637-3632

Brett.Levy@dinebrands.com

Media Contact
Susan Nelson

Sr. Vice President, Global Communications

Dine Brands Global, Inc.

Susan.Nelson@dinebrands.com

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