Core Insights - The recent stock rally of Dine Brands is driven by speculation regarding potential private equity interest rather than operational improvements [5][23] - The real catalyst for Dine Brands' future lies in addressing long-standing issues and aligning with franchisees who are essential to the business [3][10] - There is a significant disconnect between management and franchisees, leading to operational stagnation and declining performance [9][10] Company Performance - Applebee's is experiencing declining traffic, while IHOP's growth has stalled due to rising operational costs and limited new store openings [6][9] - Dine Brands has accumulated a heavy debt load, which restricts financial flexibility and increases refinancing risks amid elevated interest rates [6][11] Franchisee Relations - Franchisees are the backbone of Dine Brands, yet they feel neglected by management, which has focused more on optics and compensation than on performance [8][9] - The current management has failed to restore traffic and align with franchisees, resulting in a 70% decline in stock price since 2021 [9][15] Strategic Recommendations - A leadership change is necessary to reconnect the brand with franchisees and customers, with a proposed nominee who has relevant experience [15][19] - Operational improvements at the unit level are essential, including the implementation of tools that enhance competitiveness and profitability for franchisees [16][19] - A disciplined approach to capital allocation is required to refinance debt and support franchise operations, moving away from short-term financial engineering [17][19] Future Outlook - The choice between private equity control and activist-led restructuring will significantly impact the future of Dine Brands, with the latter offering a path to sustainable growth [20][21] - Activist pressure is seen as the only viable method to restore accountability and align interests among shareholders, franchisees, and management [23][24]

Core Insights - Casual dining has experienced a significant turnaround in performance, becoming the best-performing segment in the restaurant industry as of August, after years of underperformance [3][4] - Major casual dining chains like Chili's and Applebee's have reported positive same-store sales growth, with Applebee's achieving a 4.9% increase in Q2 [2][6] - The shift in casual dining's success is attributed to value-driven strategies that have put it in direct competition with fast food and fast casual segments [2][3] Industry Performance - Casual dining has moved from being the second-worst performer in the restaurant industry to the best-performing segment, as indicated by Black Box Intelligence data [3] - The industry's success is not merely due to easy comparisons, as casual dining has shown consistent performance improvements over a two-year basis [4] Consumer Trends - Casual dining chains are focusing on affordability and smaller portion sizes to attract a diverse consumer base across different income levels [4] - Olive Garden's strategy of testing smaller menu items at reduced prices has resulted in traffic growth among consumers from all income brackets during its fiscal Q1 [4] Company Strategies - Applebee's has successfully returned to traffic growth by enhancing its value perception, primarily through its 2-for-$25 promotion [6] - The 2-for-$25 offering serves not only as a value proposition but also as a platform for menu innovation, with new entrees introduced to drive sales growth [7]

Group 1: Market Trends - During turbulent market times, investors often seek dividend-yielding stocks, which typically have high free cash flows and offer substantial dividend payouts [1] - The consumer discretionary sector features several high-yielding stocks that analysts are closely monitoring [2] Group 2: Company Analysis - **Dine Brands Global, Inc. (NYSE: DIN)**: - Dividend Yield: 8.10% - Keybanc analyst Eric Gonzalez maintained an Overweight rating but reduced the price target from $30 to $26 on Aug. 7, 2025, with an accuracy rate of 66% [7] - Barclays analyst Jeff Kessler maintained an Equal-Weight rating and cut the price target from $24 to $22 on Aug. 7, 2025, with an accuracy rate of 75% [7] - Reported mixed second-quarter financial results on Aug. 6 [7] - **The Wendy's Company (NASDAQ: WEN)**: - Dividend Yield: 6.03% - Argus Research analyst John Staszak downgraded the stock from Buy to Hold on Sept. 23, 2025, with an accuracy rate of 65% [7] - BTIG analyst Peter Saleh reiterated a Neutral rating on Sept. 15, 2025, with an accuracy rate of 66% [7] - Reported second-quarter adjusted earnings per share of 29 cents, exceeding the analyst consensus estimate of 26 cents on Aug. 8 [7] - **Oxford Industries, Inc. (NYSE: OXM)**: - Dividend Yield: 6.46% - Telsey Advisory Group analyst Dana Telsey maintained a Market Perform rating with a price target of $52 on Sept. 11, 2025, with an accuracy rate of 64% [7] - Citigroup analyst Paul Lejuez maintained a Sell rating and reduced the price target from $47 to $44 on June 12, 2025, with an accuracy rate of 65% [7] - Reported better-than-expected second-quarter adjusted EPS results and raised FY25 EPS guidance on Sept. 10 [7]

Core Points - Applebee's is celebrating National Cheeseburger Day on September 18 by offering a "classic burger deal" for one day only, featuring three handcrafted burgers with fries for $8.99 [2][4] - The available burger options include the Classic Burger, Classic Cheeseburger, and Classic Bacon Cheeseburger, all served with Classic Fries [3][4] - The promotion is available for dine-in and online orders through the Applebee's website and mobile app, but not valid on third-party delivery sites [5] Company Overview - Applebee's is one of the largest casual dining brands in the world, operating 1,514 restaurants in the U.S., two U.S. territories, and 15 countries as of June 29, 2025 [6] - The brand focuses on providing a lively dining experience with simple, craveable American fare and aims to connect families and friends [6] - Applebee's is franchised by subsidiaries of Dine Brands Global Inc., a major player in the full-service restaurant industry [6]

Core Insights - Dine Brands, the operator and franchisor of full-service restaurants such as Applebee's and IHOP, has released its financial results, which were anticipated based on prior earnings previews [1] Company Overview - Dine Brands operates and franchises well-known restaurant brands, including Applebee's, IHOP, and Fuzzy's [1]

Group 1 - The articles express that the opinions shared are personal and do not constitute investment advice [1][2][3] - There is a disclosure of a beneficial long position in the shares of a specific company, indicating a vested interest [2] - The content emphasizes the importance of conducting independent research and analysis before making investment decisions [1][3][4] Group 2 - The articles clarify that past performance does not guarantee future results, highlighting the inherent uncertainty in investment outcomes [4] - It is noted that the views expressed may not reflect those of the platform as a whole, indicating a diversity of opinions among contributors [4] - The articles mention that the analysts may not be licensed or certified, which could affect the credibility of the investment insights provided [4]

Group 1 - Avnet, Inc. (AVT) has been added to the Zacks Rank 5 (Strong Sell) List due to a 7.5% downward revision in the consensus estimate for its current year earnings over the last 60 days [1] - Banco do Brasil S.A. (BDORY) is also on the Zacks Rank 5 (Strong Sell) List, with a 16.9% downward revision in the consensus estimate for its current year earnings over the last 60 days [1] - Dine Brands Global, Inc. (DIN) has seen a 5.3% downward revision in the consensus estimate for its current year earnings over the last 60 days, leading to its inclusion in the Zacks Rank 5 List [2]

Group 1 - Dine Brands Global held its Second Quarter 2025 Earnings Conference Call, featuring remarks from key executives including John Peyton, CEO of Applebee's, and Vance Chang, CFO [1][3] - The call included a Q&A session with Lawrence Kim, President of IHOP, along with other executives to address inquiries from the investment community [3] Group 2 - The conference call was recorded, indicating a formal structure for sharing financial results and insights with stakeholders [1] - Management will discuss forward-looking information that may involve risks and uncertainties, which could lead to actual results differing from expectations [4]

Financial Data and Key Metrics Changes - Consolidated total revenues increased by 11.9% to $230.8 million in Q2 compared to $206.3 million in the prior year, primarily driven by an increase in company restaurant sales [25] - Adjusted EBITDA decreased to $56.2 million from $67 million in the previous year [26] - Adjusted diluted EPS for 2025 was $1.17 compared to $1.71 for 2024 [26] - Adjusted free cash flow was $48.7 million compared to $52.9 million for the same period last year [27] Business Line Data and Key Metrics Changes - Applebee's reported a 4.9% increase in comparable sales, while IHOP posted a negative 2.3% in comparable sales [7][29] - Average weekly sales for Applebee's were $58,000, including approximately $12,800 from off-premise sales, which accounted for 22% of total sales [29] - IHOP's average weekly sales were $37,800, with $7,600 from off-premise sales, representing 20% of total sales [29] Market Data and Key Metrics Changes - Applebee's value mix was approximately 30% in Q2, while IHOP's value mix was about 19% [7] - Off-premise sales for Applebee's saw a positive lift of 7.6% in Q2 [29] - IHOP's House Faves menu drove incremental traffic and dollar margin for franchisees, leading to a sequential improvement in comparable sales [14] Company Strategy and Development Direction - The company is focused on enhancing menu and value platforms, improving marketing communication, and elevating guest experience [6] - Strategic investments are being made to modernize the brand and improve operations, including remodeling efforts and dual brand conversions [20][21] - The company plans to open at least a dozen dual brand restaurants by year-end, leveraging the complementary nature of Applebee's and IHOP [23] Management's Comments on Operating Environment and Future Outlook - Management noted that consumers are still feeling macroeconomic pressure, leading to changes in ordering behavior [6] - The company remains confident in its strategy to drive traffic, sales, and unit growth, with updated guidance reflecting positive trends [34] - Management expressed optimism about the potential for international expansion and new restaurant formats [19] Other Important Information - The company completed a refinancing transaction with new senior secured notes of $600 million at a fixed rate of 6.72% [28] - G&A expenses increased to $50.8 million due to higher compensation and professional services fees [26] - The company added 12 Applebee's to its portfolio, now operating a total of 70 company-operated restaurants [19] Q&A Session Summary Question: Performance at Applebee's and sustaining operations with frequent menu changes - Management confirmed strong performance driven by the two for 25 platform and emphasized effective training and processes to manage complexity [39][41] Question: Impact of the House Faves platform on franchisee profitability - Management indicated positive results from the House Faves program, leading to an expansion to seven days a week [47][49] Question: Path forward with corporate-owned stores and timeline for profitability - Management expects a timeline of approximately three years to improve operations and refranchise the restaurants for appropriate valuation [53][56]

PART I. FINANCIAL INFORMATION [Item 1—Financial Statements](index=4&type=section&id=Item%201—Financial%20Statements) This section presents the unaudited consolidated financial statements and comprehensive notes for Dine Brands Global, Inc. and its subsidiaries [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) This section provides a snapshot of the Company's financial position, detailing assets, liabilities, and stockholders' deficit at specific points in time | Metric | June 30, 2025 (Unaudited) (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :--------------------------------------- | :------------------------------- | | Total Assets | $1,789,947 | $1,790,584 | | Total Liabilities | $2,002,492 | $2,006,603 | | Total Stockholders' Deficit | $(212,545) | $(216,019) | - Total assets slightly decreased from **$1,790,584 thousand** at December 31, 2024, to **$1,789,947 thousand** at June 30, 2025. Total liabilities also saw a minor decrease from **$2,006,603 thousand** to **$2,002,492 thousand**. The stockholders' deficit improved from **$(216,019) thousand** to **$(212,545) thousand**[11](index=11&type=chunk) [Consolidated Statements of Comprehensive Income](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) This section details the Company's financial performance over specific periods, including revenues, costs, net income, and diluted earnings per share | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total Revenues | $230,784 | $206,267 | $445,564 | $412,502 | | Total Cost of Revenues | $138,555 | $106,996 | $263,025 | $215,807 | | Gross Profit | $92,229 | $99,271 | $182,539 | $196,695 | | Income Before Income Taxes | $18,931 | $31,224 | $31,726 | $55,270 | | Net Income | $13,814 | $23,182 | $22,011 | $40,655 | | Diluted EPS | $0.89 | $1.50 | $1.41 | $2.64 | - For the three months ended June 30, 2025, total revenues increased by **$24.5 million (11.9%)** year-over-year, while net income decreased by **$9.4 million (40.6%)**. Diluted EPS also saw a significant decline from **$1.50** to **$0.89**. For the six months ended June 30, 2025, total revenues increased by **$33.1 million (8.0%)** year-over-year, but net income decreased by **$18.6 million (45.8%)**, and diluted EPS fell from **$2.64** to **$1.41**[14](index=14&type=chunk)[155](index=155&type=chunk) [Consolidated Statements of Stockholders' Deficit](index=7&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Deficit) This section outlines changes in the Company's equity, including common stock, retained earnings, and treasury stock, over specific periods | Metric (in thousands) | Balance at Dec 31, 2024 | Balance at Jun 30, 2025 | | :-------------------------------- | :---------------------- | :---------------------- | | Common Stock Amount | $248 | $247 | | Additional Paid-in Capital | $254,814 | $236,117 | | Retained Earnings | $183,614 | $189,849 | | Accumulated Other Comprehensive Loss | $(76) | $(73) | | Treasury Stock Cost | $(654,619) | $(638,685) | | Total Stockholders' Deficit | $(216,019) | $(212,545) | - The total stockholders' deficit improved from **$(216,019) thousand** at December 31, 2024, to **$(212,545) thousand** at June 30, 2025, primarily driven by net income of **$22,011 thousand** and a decrease in treasury stock cost, partially offset by dividends paid and a decrease in additional paid-in capital[16](index=16&type=chunk) [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section details the cash inflows and outflows from operating, investing, and financing activities over specific periods | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | | Cash flows from operating activities | $53,105 | $52,179 | | Cash flows used in investing activities | $(5,185) | $(1,072) | | Cash flows used in financing activities | $(33,314) | $(33,308) | | Net change in cash, cash equivalents and restricted cash | $14,606 | $17,799 | | Cash, cash equivalents and restricted cash at end of period | $263,204 | $218,391 | - Cash flows from operating activities slightly increased by **$0.9 million** year-over-year. However, cash used in investing activities significantly increased by **$4.1 million**, primarily due to higher additions to property and equipment and long-term receivables. Net change in cash, cash equivalents, and restricted cash decreased by **$3.2 million**[20](index=20&type=chunk)[237](index=237&type=chunk)[238](index=238&type=chunk) [Notes to Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the consolidated financial statements, clarifying accounting policies and significant estimates [1. General](index=11&type=section&id=1.%20General) This section confirms the unaudited financial statements adhere to U.S. GAAP for interim reporting, with management affirming fair presentation - The unaudited consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial information and do not include all information required for complete annual statements. Management's opinion is that all necessary adjustments have been included for fair presentation[22](index=22&type=chunk) [2. Basis of Presentation](index=11&type=section&id=2.%20Basis%20of%20Presentation) This section outlines the Company's fiscal quarter end dates and the significant estimates used in preparing the financial statements - The Company's fiscal quarters end on the Sunday closest to the last day of each calendar quarter. Significant estimates are made in areas such as asset impairment, income taxes, doubtful accounts, lease accounting, contingencies, and stock-based compensation, which are evaluated based on historical experience and current conditions[24](index=24&type=chunk)[26](index=26&type=chunk) [3. Recent Accounting Pronouncements](index=11&type=section&id=3.%20Recent%20Accounting%20Pronouncements) This section discusses the adoption of new accounting standards and the evaluation of their potential impact on future financial disclosures - The Company adopted ASU No. 2023-07, "Segment Reporting," effective January 1, 2025, which did not impact the consolidated financial statements. The Company is currently evaluating ASU No. 2023-09, "Income Taxes," and ASU No. 2024-03, "Disaggregation of Income Statement Expenses," for their potential impact on future disclosures[27](index=27&type=chunk)[28](index=28&type=chunk)[30](index=30&type=chunk) [4. Revenues](index=12&type=section&id=4.%20Revenues) This section details the Company's revenue recognition policies for franchise fees, royalties, advertising fees, and company restaurant sales - Franchise revenues are recognized over the term of the franchise agreement for fees, and when franchisee sales occur for royalties and advertising fees. Company restaurant sales are recognized when food and beverage items are sold[32](index=32&type=chunk)[36](index=36&type=chunk)[38](index=38&type=chunk) Franchise Revenue by Type (in millions) | Franchise Revenue Type (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Royalties | $82.1 | $80.6 | $158.4 | $160.7 | | Advertising revenues | $73.5 | $74.5 | $144.0 | $149.8 | | Proprietary product sales and other | $16.4 | $18.9 | $33.4 | $36.9 | | Franchise and development fees | $2.7 | $2.5 | $5.1 | $5.0 | | Total franchise revenues | $174.7 | $176.5 | $340.9 | $352.4 | - Total franchise revenues decreased by **$1.8 million (1.0%)** for the three months ended June 30, 2025, and by **$11.5 million (3.3%)** for the six months ended June 30, 2025, compared to the prior year periods[39](index=39&type=chunk) [5. Receivables and Current Expected Credit Losses ("CECL")](index=13&type=section&id=5.%20Receivables%20and%20Current%20Expected%20Credit%20Losses%20(%22CECL%22)) This section explains the Company's methodology for measuring expected credit losses on financial instruments and details various receivable types - The Company applies the CECL methodology to measure expected credit losses on financial instruments, establishing specific reserves for at-risk franchisee accounts and an allowance for others based on historical losses, current conditions, and forecasts[40](index=40&type=chunk) Receivable Type (in millions) | Receivable Type (in millions) | June 30, 2025 | December 31, 2024 | | :---------------------------- | :------------ | :---------------- | | Accounts receivable | $79.1 | $72.0 | | Gift card receivable | $7.0 | $34.7 | | Notes receivable | $16.9 | $14.7 | | Equipment leases receivable | $9.5 | $13.2 | | Real estate leases receivable | $17.6 | $18.3 | | Other receivables | $1.1 | $2.9 | | Less: allowance for credit losses and notes receivable | $(6.4) | $(4.7) | | Total Long-term receivables | $33.5 | $35.9 | - The allowance for credit losses increased from **$4.7 million** at December 31, 2024, to **$6.4 million** at June 30, 2025, primarily due to bad debt expense of **$3.2 million**, partially offset by write-offs of **$1.3 million**[49](index=49&type=chunk) [6. Leases](index=15&type=section&id=6.%20Leases) This section details the Company's lease arrangements as both a lessee and lessor, primarily for restaurant properties - The Company acts as both a lessee and lessor, primarily leasing real property for IHOP and Applebee's restaurants. As of June 30, 2025, the Company leases **488 IHOP franchisee-operated restaurants** and **70 company-owned restaurants**[51](index=51&type=chunk) Lease Cost (in millions) | Lease Cost (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Finance lease cost | $1.4 | $1.4 | $2.8 | $2.8 | | Operating lease cost | $20.5 | $18.3 | $40.4 | $36.5 | | Variable lease cost | $2.0 | $2.0 | $4.0 | $4.0 | | Sublease income | $(25.4) | $(26.6) | $(49.9) | $(53.8) | | Total Lease income (cost) | $(1.5) | $(4.9) | $(2.6) | $(10.5) | - Total lease income (net of costs) decreased from **$(4.9) million** to **$(1.5) million** for the three months ended June 30, 2025, and from **$(10.5) million** to **$(2.6) million** for the six months ended June 30, 2025, primarily due to decreased sublease income and increased operating lease costs[54](index=54&type=chunk) [7. Long-Term Debt](index=18&type=section&id=7.%20Long-Term%20Debt) This section details the Company's long-term debt structure, including fixed-rate senior secured notes and variable funding notes, and recent refinancing activities Long-Term Debt Component (in millions) | Long-Term Debt Component (in millions) | June 30, 2025 | December 31, 2024 | | :------------------------------------- | :------------ | :---------------- | | Series 2019-1 4.723% Fixed Rate Senior Secured Notes, Class A-2-II | $— | $594.0 | | Series 2022-1 Variable Funding Senior Notes, Class A-1 | $— | $100.0 | | Series 2023-1 7.824% Fixed Rate Senior Secured Notes, Class A-2 | $500.0 | $500.0 | | Series 2025-1 6.720% Fixed Rate Senior Secured Notes, Class A-2 | $600.0 | $— | | Series 2025-1 Variable Funding Senior Notes, Class A-1 | $100.0 | $— | | Unamortized debt issuance costs | $(13.0) | $(7.4) | | Long-term debt, net of debt issuance costs | $1,187.0 | $1,186.6 | | Less: current portion of long-term debt | $(100.0) | $(100.0) | | Total Long-term debt | $1,087.0 | $1,086.6 | - In June 2025, the Company refinanced its debt, issuing **$600 million** of Series 2025-1 6.720% Fixed Rate Senior Secured Notes and establishing a new **$325 million** revolving Credit Facility (2025 Class A-1 Notes). The proceeds were used to repay the **$594.0 million** outstanding balance of the 2019 Class A-2-II Notes. The Company's leverage ratio was approximately **4.25x** as of June 30, 2025, suspending quarterly principal payments on Class A-2 Notes[62](index=62&type=chunk)[61](index=61&type=chunk)[68](index=68&type=chunk)[72](index=72&type=chunk) - The Company recognized a **$0.9 million** loss on extinguishment of debt related to the write-off of unamortized debt issuance costs from the repaid 2019 Class A-2-II Notes[87](index=87&type=chunk)[88](index=88&type=chunk) [8. Stockholders' Deficit](index=22&type=section&id=8.%20Stockholders'%20Deficit) This section details changes in stockholders' deficit, including dividends declared and paid, and share repurchase activities Dividend Metric | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Dividends declared per common share | $0.51 | $0.51 | $1.02 | $1.02 | | Dividends paid per common share | $0.51 | $0.51 | $1.02 | $1.02 | | Total dividends paid (in millions) | N/A | N/A | $15.8 | $15.7 | - The Board of Directors declared a cash dividend of **$0.51 per share** for both the first and second quarters of 2025. Under the 2022 Repurchase Program, the Company repurchased **309,778 shares** of common stock for **$7.6 million** during the six months ended June 30, 2025, with **$125.7 million** remaining authorization[94](index=94&type=chunk)[97](index=97&type=chunk) [9. Income Taxes](index=22&type=section&id=9.%20Income%20Taxes) This section provides details on the Company's effective tax rate and unrecognized tax benefits - The effective tax rate for the six months ended June 30, 2025, was **30.6%**, higher than the **26.4%** for the same period in 2024, primarily due to a lower tax deduction related to stock-based compensation[99](index=99&type=chunk) - The total gross unrecognized tax benefit was **$2.8 million** as of June 30, 2025, with an estimated decrease of **$0.1 million** over the next 12 months due to settlements and statute of limitations expirations[100](index=100&type=chunk) [10. Stock-Based Compensation](index=23&type=section&id=10.%20Stock-Based%20Compensation) This section details the Company's stock-based compensation expense and unrecognized compensation for various awards Stock-Based Compensation Expense (in millions) | Stock-Based Compensation Expense (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Equity classified awards expense | $3.3 | $3.9 | $6.7 | $8.8 | | Liability classified awards expense | $(0.5) | $(0.6) | $(0.2) | $0.1 | | Total stock-based compensation expense | $2.8 | $3.3 | $6.5 | $8.9 | - Total stock-based compensation expense decreased for both the three and six months ended June 30, 2025, compared to the prior year periods. Unrecognized compensation expense totaled **$20.9 million** for restricted stock/units and **$1.6 million** for stock options as of June 30, 2025[105](index=105&type=chunk) [11. Net Income per Share](index=25&type=section&id=11.%20Net%20Income%20per%20Share) This section presents the basic and diluted net income per common share and related weighted average outstanding shares Net Income per Share (in thousands, except per share data) | Net Income per Share (in thousands, except per share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income available to common stockholders - basic | $13,213 | $22,479 | $21,092 | $39,449 | | Weighted average outstanding shares of common stock - basic | 14,879 | 14,943 | 14,907 | 14,962 | | Basic EPS | $0.89 | $1.50 | $1.41 | $2.64 | | Diluted EPS | $0.89 | $1.50 | $1.41 | $2.64 | - Basic and diluted net income per common share decreased significantly for both the three-month (**$0.89 vs. $1.50**) and six-month (**$1.41 vs. $2.64**) periods ended June 30, 2025, compared to the prior year[113](index=113&type=chunk) [12. Segments](index=25&type=section&id=12.%20Segments) This section outlines the Company's four reportable segments and their respective operating performance - The Company operates with four reportable segments: franchise operations (Applebee's, IHOP, Fuzzy's), company-owned restaurant operations, rental operations, and financing operations. The CODM uses revenue and operating profit to assess segment performance and allocate resources[116](index=116&type=chunk) Segment Operating Profit (in millions) | Segment Operating Profit (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Franchise | $55.3 | $60.3 | $108.1 | $117.7 | | Company Restaurants | $(4.6) | $0.0 | $(6.4) | $0.0 | | Rental | $6.4 | $7.4 | $11.8 | $14.9 | | Financing | $0.2 | $0.4 | $0.5 | $0.8 | | Total Segment Operating Profit | $57.3 | $68.0 | $114.1 | $133.4 | - Total segment operating profit decreased by **$10.7 million (15.7%)** for the three months and **$19.3 million (14.5%)** for the six months ended June 30, 2025, primarily due to declines in franchise, company restaurant, and rental operations[120](index=120&type=chunk)[123](index=123&type=chunk)[126](index=126&type=chunk)[128](index=128&type=chunk) [13. Closure and Impairment Charges](index=29&type=section&id=13.%20Closure%20and%20Impairment%20Charges) This section details the charges incurred from restaurant closures and asset impairments, including strategic realignment activities Closure and Impairment Charges (in millions) | Charge Type (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Closure charges | $1.0 | $0.4 | $3.8 | $1.1 | | Other asset impairment charges | $0.2 | $— | $3.2 | $— | | Total | $1.2 | $0.4 | $7.0 | $1.1 | - Total closure and impairment charges significantly increased to **$7.0 million** for the six months ended June 30, 2025, from **$1.1 million** in the prior year, primarily due to the acquisition and closure of certain IHOP restaurants in the Cincinnati market as part of a strategic realignment[130](index=130&type=chunk)[132](index=132&type=chunk)[133](index=133&type=chunk) [14. Fair Value Measurements](index=30&type=section&id=14.%20Fair%20Value%20Measurements) This section discusses the fair value of the Company's financial instruments, particularly long-term debt, and the inputs used for their measurement - The Company does not have material financial assets or liabilities measured at fair value on a recurring basis, nor material derivative financial instruments. The fair values of long-term debt (excluding the Credit Facility) were **$1,104.9 million** at June 30, 2025, and **$1,095.5 million** at December 31, 2024, determined using Level 2 inputs[134](index=134&type=chunk)[135](index=135&type=chunk) [15. Commitments and Contingencies](index=30&type=section&id=15.%20Commitments%20and%20Contingencies) This section outlines the Company's involvement in legal proceedings and potential liabilities from lease guarantees related to refranchised restaurants - The Company is involved in various lawsuits and administrative proceedings in the ordinary course of business. In connection with refranchising Applebee's restaurants, the Company has guaranteed or has potential continuing liability for lease payments totaling **$331.8 million** as of June 30, 2025, with a potential liability of **$85.1 million** excluding unexercised option periods[136](index=136&type=chunk)[137](index=137&type=chunk) [16. Cash, Cash Equivalents and Restricted Cash](index=30&type=section&id=16.%20Cash,%20Cash%20Equivalents%20and%20Restricted%20Cash) This section provides a breakdown of the Company's cash, cash equivalents, and restricted cash balances, including their primary components Cash Component (in millions) | Cash Component (in millions) | June 30, 2025 | December 31, 2024 | | :--------------------------- | :------------ | :---------------- | | Total cash and cash equivalents | $194.2 | $186.7 | | Total current restricted cash | $47.0 | $42.4 | | Non-current restricted cash | $22.0 | $19.5 | | Total cash, cash equivalents and restricted cash | $263.2 | $248.6 | - Total cash, cash equivalents, and restricted cash increased from **$248.6 million** at December 31, 2024, to **$263.2 million** at June 30, 2025. Current restricted cash primarily consists of securitized debt reserves and Applebee's advertising funds, while non-current restricted cash represents interest reserves for securitized debt[140](index=140&type=chunk)[141](index=141&type=chunk)[142](index=142&type=chunk) [17. Business Acquisition](index=31&type=section&id=17.%20Business%20Acquisition) This section details the Company's recent acquisitions of IHOP and Applebee's restaurants, including the resulting bargain purchase gain and goodwill - In March 2025, the Company acquired **10 IHOP restaurants** for **$0.2 million**, resulting in a **$0.2 million** bargain purchase gain. In May 2025, it acquired **12 Applebee's restaurants** for **$1.3 million**, resulting in **$1.6 million** in goodwill. These acquisitions are part of a strategy to invest in the system, improve operations, and create a blueprint for franchisee success[143](index=143&type=chunk)[144](index=144&type=chunk)[145](index=145&type=chunk)[147](index=147&type=chunk) [18. Subsequent Event](index=32&type=section&id=18.%20Subsequent%20Event) This section reports on the enactment of the One Big Beautiful Bill Act (OBBBA) subsequent to the quarter end and its potential impact - Subsequent to the quarter end, on July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was enacted, amending U.S. tax law. The Company is currently evaluating the impact of OBBBA on its consolidated financial statements[150](index=150&type=chunk) [Item 2—Management's Discussion and Analysis of Financial Condition and Results of Operations](index=33&type=section&id=Item%202—Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section offers management's analysis of the Company's financial condition and operational results, covering key performance indicators, consolidated revenues, gross profit, segment performance, and liquidity [Overview](index=33&type=section&id=Overview) This section introduces Dine Brands Global as a major full-service restaurant company, detailing its brands and reportable segments - Dine Brands Global operates as one of the largest full-service restaurant companies globally, owning and franchising Applebee's, IHOP, and Fuzzy's Taco Shop concepts. The Company has four reportable segments: franchise operations, rental operations, financing operations, and company-owned restaurant operations[153](index=153&type=chunk) [Key Financial Results](index=33&type=section&id=Key%20Financial%20Results) This section highlights the Company's core financial outcomes, including income before taxes, net income, effective tax rate, and diluted earnings per share Key Financial Results (in millions, except per share data) | Metric (in millions, except per share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Variance (Unfavorable) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Variance (Unfavorable) | | :------------------------------------------ | :------------------------------- | :------------------------------- | :--------------------- | :----------------------------- | :----------------------------- | :--------------------- | | Income before income taxes | $18.9 | $31.2 | $(12.3) | $31.7 | $55.3 | $(23.5) | | Net income | $13.8 | $23.2 | $(9.4) | $22.0 | $40.7 | $(18.6) | | Effective tax rate | 27.0% | 25.8% | (1.3)% | 30.6% | 26.4% | (4.2)% | | Net income per diluted share | $0.89 | $1.50 | $(0.61) | $1.41 | $2.64 | $(1.23) | - Income before income taxes decreased by **$12.3 million** for the three months and **$23.5 million** for the six months ended June 30, 2025, primarily due to decreased gross profit, increased G&A expenses, and a loss on extinguishment of debt. The effective tax rate increased due to a lower tax deduction related to stock-based compensation[155](index=155&type=chunk)[156](index=156&type=chunk)[157](index=157&type=chunk) [Key Performance Indicators](index=34&type=section&id=Key%20Performance%20Indicators) This section presents crucial metrics such as system-wide sales, same-restaurant sales, and restaurant development for each brand - Key performance indicators include system-wide sales percentage change, domestic system-wide same-restaurant sales, net franchise restaurant development, and change in effective restaurants, which directly impact royalty and advertising revenues[160](index=160&type=chunk) Key Performance Indicators by Brand | Metric | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :------------------------------------------------ | :------------------------------- | :----------------------------- | | **Applebee's** | | | | Sales percentage increase (decrease) in reported retail sales | 2.8% | (0.5)% | | % Increase (decrease) in domestic system wide same-restaurant sales | 4.9% | 1.3% | | Net franchise restaurant reduction | (21) | (41) | | Net decrease in total effective restaurants | (50) | (44) | | **IHOP** | | | | Sales percentage increase (decrease) in reported retail sales | (2.3)% | (2.6)% | | % Increase (decrease) in domestic system wide same-restaurant sales | (2.3)% | (2.5)% | | Net franchise restaurant reduction | (18) | (28) | | Net decrease in total effective restaurants | (11) | (6) | | **Fuzzy's** | | | | Sales percentage increase (decrease) in reported retail sales | (17.0)% | (16.9)% | | % Increase (decrease) in domestic system wide same-restaurant sales | (11.8)% | (12.0)% | | Net franchise restaurant reduction | (1) | (4) | | Net decrease in total effective restaurants | (14) | (14) | - Applebee's domestic same-restaurant sales increased by **4.9%** for the three months and **1.3%** for the six months ended June 30, 2025, outperforming the casual dining segment for the three-month period. IHOP's domestic same-restaurant sales decreased by **2.3%** and **2.5%** for the respective periods, underperforming the family dining segment. Fuzzy's domestic same-restaurant sales significantly decreased by **11.8%** and **12.0%** for the respective periods[164](index=164&type=chunk)[165](index=165&type=chunk)[168](index=168&type=chunk)[169](index=169&type=chunk)[171](index=171&type=chunk) [CONSOLIDATED RESULTS OF OPERATIONS](index=40&type=section&id=CONSOLIDATED%20RESULTS%20OF%20OPERATIONS) This section provides a detailed analysis of the Company's consolidated financial performance, including revenue, gross profit, and segment-specific results [Events Impacting Comparability of Financial Information](index=40&type=section&id=Events%20Impacting%20Comparability%20of%20Financial%20Information) This section highlights the impact of recent restaurant acquisitions on the comparability of the Company's financial results - The Company's financial results for the three and six months ended June 30, 2025, were impacted by the acquisition and operation of **47 Applebee's restaurants** in November 2024, **10 IHOP restaurants** in March 2025, and **12 Applebee's restaurants** in May 2025, which are now reported as company-owned[182](index=182&type=chunk) [Financial Results](index=41&type=section&id=Financial%20Results) This section presents a breakdown of total revenue by operating segment and analyzes the changes year-over-year Revenue (in millions) | Revenue (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Variance (Unfavorable) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Variance (Unfavorable) | | :-------------------- | :------------------------------- | :------------------------------- | :--------------------- | :----------------------------- | :----------------------------- | :--------------------- | | Franchise operations | $174.7 | $176.5 | $(1.8) | $340.9 | $352.4 | $(11.5) | | Rental operations | $27.5 | $29.0 | $(1.5) | $54.2 | $58.5 | $(4.3) | | Company restaurant operations | $28.2 | $0.3 | $27.9 | $49.8 | $0.6 | $49.2 | | Financing operations | $0.3 | $0.5 | $(0.2) | $0.6 | $1.0 | $(0.4) | | Total revenue | $230.8 | $206.3 | $24.5 | $445.6 | $412.5 | $33.1 | - Total revenue increased by **$24.5 million (11.9%)** for the three months and **$33.1 million (8.0%)** for the six months ended June 30, 2025, primarily due to the newly acquired company-owned restaurants, partially offset by decreases in franchise and rental operations revenue[185](index=185&type=chunk)[187](index=187&type=chunk) [Gross Profit](index=41&type=section&id=Gross%20Profit) This section analyzes the Company's gross profit performance across its operating segments and the factors influencing changes Gross Profit (in millions) | Gross Profit (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Variance (Unfavorable) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Variance (Unfavorable) | | :------------------------- | :------------------------------- | :------------------------------- | :--------------------- | :----------------------------- | :----------------------------- | :--------------------- | | Franchise operations | $88.3 | $91.5 | $(3.2) | $173.3 | $180.9 | $(7.6) | | Rental operations | $6.4 | $7.4 | $(1.0) | $11.8 | $15.0 | $(3.2) | | Company restaurant operations | $(2.7) | $0.0 | $(2.7) | $(3.1) | $0.0 | $(3.1) | | Financing operations | $0.2 | $0.4 | $(0.2) | $0.5 | $0.8 | $(0.3) | | Total gross profit | $92.2 | $99.3 | $(7.1) | $182.5 | $196.7 | $(14.2) | - Total gross profit decreased by **$7.1 million (7.1%)** for the three months and **$14.2 million (7.2%)** for the six months ended June 30, 2025, primarily due to decreased gross profit from franchise, rental, and company restaurant operations. Company restaurant gross profit turned negative due to investments in newly acquired restaurants[188](index=188&type=chunk)[189](index=189&type=chunk) [Franchise Operations](index=42&type=section&id=Franchise%20Operations) This section details the performance of the Company's franchise segment, including effective restaurant counts, revenues, and gross profit by brand Franchise Metric (in millions, except restaurants) | Franchise Metric (in millions, except restaurants) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Variance (Unfavorable) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Variance (Unfavorable) | | :------------------------------------------------- | :------------------------------- | :------------------------------- | :--------------------- | :----------------------------- | :----------------------------- | :--------------------- | | **Effective Franchise Restaurants:** | | | | | | | | Applebee's | 1,525 | 1,627 | (102) | 1,537 | 1,631 | (94) | | IHOP | 1,781 | 1,802 | (21) | 1,789 | 1,801 | (12) | | Fuzzy's | 110 | 124 | (14) | 112 | 126 | (14) | | **Franchise Revenues:** | | | | | | | | Applebee's franchise fees | $45.7 | $43.0 | $2.7 | $86.7 | $86.4 | $0.3 | | IHOP franchise fees | $52.6 | $55.3 | $(2.7) | $105.1 | $109.7 | $(4.6) | | Fuzzy's franchise fees | $2.9 | $3.6 | $(0.7) | $5.2 | $6.5 | $(1.3) | | **Franchise Gross Profit:** | | | | | | | | Applebee's | $41.6 | $43.7 | $(2.1) | $80.7 | $86.4 | $(5.7) | | IHOP | $44.2 | $46.0 | $(1.8) | $88.0 | $91.0 | $(3.0) | | Fuzzy's | $2.6 | $1.9 | $0.7 | $4.6 | $3.5 | $1.1 | - Applebee's franchise fee revenue increased due to higher domestic same-restaurant sales and termination fees, despite a decrease in effective franchise restaurants. IHOP and Fuzzy's franchise fee revenues decreased due to lower domestic same-restaurant sales and fewer effective franchise restaurants. Applebee's franchise expenses increased due to higher bad debt expense and refranchising costs, while IHOP and Fuzzy's expenses decreased due to lower advertising contributions and bad debt[191](index=191&type=chunk)[192](index=192&type=chunk)[193](index=193&type=chunk)[195](index=195&type=chunk)[196](index=196&type=chunk)[197](index=197&type=chunk)[198](index=198&type=chunk)[199](index=199&type=chunk)[200](index=200&type=chunk) [Advertising Revenues and Expenses](index=43&type=section&id=Advertising%20Revenues%20and%20Expenses) This section analyzes the trends in advertising revenues and expenses, highlighting the impact of restaurant counts and same-restaurant sales Advertising (in millions) | Advertising (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Increase (Decrease) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Increase (Decrease) | | :------------------------ | :------------------------------- | :------------------------------- | :------------------ | :----------------------------- | :----------------------------- | :------------------ | | Applebee's | $44.2 | $44.3 | $(0.1) | $85.9 | $89.5 | $(3.6) | | IHOP | $28.5 | $29.2 | $(0.7) | $56.5 | $58.3 | $(1.8) | | Fuzzy's | $0.8 | $1.0 | $(0.2) | $1.6 | $2.0 | $(0.4) | | Total | $73.5 | $74.5 | $(1.0) | $144.0 | $149.8 | $(5.8) | - Total advertising revenues and expenses decreased for both the three and six months ended June 30, 2025, primarily due to fewer effective franchise restaurants (partially offset by company restaurant acquisitions) and decreases in IHOP and Fuzzy's domestic franchise same-restaurant sales, despite an increase in Applebee's[201](index=201&type=chunk) [Rental Operations](index=43&type=section&id=Rental%20Operations) This section details the revenues, expenses, and gross profit from the Company's rental operations, including factors affecting performance Rental Operations (in millions) | Rental Operations (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Variance (Unfavorable) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Variance (Unfavorable) | | :------------------------------ | :------------------------------- | :------------------------------- | :--------------------- | :----------------------------- | :----------------------------- | :--------------------- | | Rental revenues | $27.5 | $29.0 | $(1.5) | $54.2 | $58.6 | $(4.4) | | Rental expenses | $21.1 | $21.7 | $0.5 | $42.4 | $43.6 | $1.2 | | Rental operations gross profit | $6.4 | $7.4 | $(1.0) | $11.8 | $15.0 | $(3.2) | - Rental operations gross profit decreased by **$1.0 million** for the three months and **$3.2 million** for the six months ended June 30, 2025, primarily due to operating lease terminations and a decrease in percentage rent from lower system sales[204](index=204&type=chunk)[205](index=205&type=chunk) [Company Restaurant and Financing Operations](index=44&type=section&id=Company%20Restaurant%20and%20Financing%20Operations) This section analyzes the performance of company-owned restaurant operations and financing operations, including revenues, expenses, and gross profit Company Restaurant and Financing Operations (in millions) | Metric (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Variance (Unfavorable) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Variance (Unfavorable) | | :-------------------------------- | :------------------------------- | :------------------------------- | :--------------------- | :----------------------------- | :----------------------------- | :--------------------- | | **Company Restaurant Operations:** | | | | | | | | Company restaurant sales | $28.2 | $0.3 | $27.9 | $49.8 | $0.6 | $49.2 | | Company restaurant expenses | $30.9 | $0.3 | $(30.6) | $52.9 | $0.6 | $(52.3) | | Total company restaurants operations | $(2.7) | $0.0 | $(2.7) | $(3.1) | $0.0 | $(3.1) | | **Financing Operations:** | | | | | | | | Financing revenues | $0.3 | $0.5 | $(0.2) | $0.6 | $1.0 | $(0.4) | | Financing expenses | $0.1 | $0.1 | $0.0 | $0.1 | $0.2 | $0.1 | | Total financing operations | $0.2 | $0.4 | $(0.2) | $0.5 | $0.8 | $(0.3) | - Company restaurant operations generated negative gross profit due to expenses associated with newly acquired Applebee's and IHOP restaurants. Financing revenues and gross profit declined due to a progressive decrease in interest income as note balances are repaid[206](index=206&type=chunk)[207](index=207&type=chunk) [G&A Expenses](index=44&type=section&id=G%26A%20Expenses) This section details the changes in general and administrative expenses, identifying key drivers such as compensation and professional fees G&A Expenses (in millions) | G&A Expenses (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Variance (Unfavorable) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Variance (Unfavorable) | | :------------------------- | :------------------------------- | :------------------------------- | :--------------------- | :----------------------------- | :----------------------------- | :--------------------- | | Total G&A expenses | $50.8 | $46.9 | $(3.9) | $102.1 | $99.0 | $(3.1) | - General and administrative (G&A) expenses increased by **$3.9 million (8.3%)** for the three months and **$3.1 million (3.1%)** for the six months ended June 30, 2025. This increase was primarily driven by higher compensation-related expenses, professional service fees, and costs associated with company restaurant operations and dual brand/remodel initiatives[208](index=208&type=chunk)[209](index=209&type=chunk) [Other Income and Expense Items](index=44&type=section&id=Other%20Income%20and%20Expense%20Items) This section covers various non-operating income and expense items, including interest, debt extinguishment losses, and impairment charges Other Items (in millions) | Other Items (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Variance (Unfavorable) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Variance (Unfavorable) | | :------------------------ | :------------------------------- | :------------------------------- | :--------------------- | :----------------------------- | :----------------------------- | :--------------------- | | Interest expense, net | $17.8 | $17.9 | $0.1 | $35.5 | $35.9 | $0.4 | | Loss on extinguishment of debt | $0.9 | $— | $(0.9) | $0.9 | $— | $(0.9) | | Closure and impairment charges | $1.2 | $0.4 | $(0.7) | $7.0 | $1.1 | $(5.9) | | Amortization of intangible assets | $2.7 | $2.7 | $0.0 | $5.4 | $5.4 | $0.0 | | Loss (gain) on disposition of assets | $0.0 | $0.2 | $0.2 | $(0.1) | $(0.1) | $0.0 | | Total other income and expenses | $22.5 | $21.2 | $(1.3) | $48.7 | $42.3 | $(6.4) | - Interest expense, net, slightly decreased due to lower interest rates on the Credit Facility. A **$0.9 million** loss on extinguishment of debt was recognized from the repayment of the 2019 Class A-2-II Notes. Closure and impairment charges significantly increased due to the strategic realignment of the IHOP Cincinnati market[211](index=211&type=chunk)[212](index=212&type=chunk)[213](index=213&type=chunk)[214](index=214&type=chunk) [Income Taxes](index=45&type=section&id=Income%20Taxes) This section analyzes the Company's income tax provision and effective tax rate, noting factors influencing changes Income Taxes (in millions) | Income Taxes (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Variance (Unfavorable) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Variance (Unfavorable) | | :------------------------- | :------------------------------- | :------------------------------- | :--------------------- | :----------------------------- | :----------------------------- | :--------------------- | | Income before income taxes | $18.9 | $31.2 | $(12.3) | $31.7 | $55.3 | $(23.5) | | Income tax provision | $5.1 | $8.0 | $2.9 | $9.7 | $14.6 | $4.9 | | Effective tax rate | 27.0% | 25.8% | (1.3)% | 30.6% | 26.4% | (4.2)% | - The effective tax rate for the three and six months ended June 30, 2025, was higher than the prior comparable periods, primarily due to a lower tax deduction related to stock-based compensation[215](index=215&type=chunk) [Liquidity and Capital Resources](index=45&type=section&id=Liquidity%20and%20Capital%20Resources) This section evaluates the Company's ability to generate and manage cash, detailing its debt instruments, covenants, and capital allocation strategies [Instruments](index=45&type=section&id=Instruments) This section describes the Company's long-term debt instruments, including various series of fixed-rate notes and its revolving credit facility - The Company's long-term debt includes **$500 million** of Series 2023-1 7.824% Fixed Rate Senior Secured Notes, **$600 million** of Series 2025-1 6.720% Fixed Rate Senior Secured Notes, and a **$325 million** revolving Credit Facility (2025-1 Variable Funding Senior Notes, Class A-1)[218](index=218&type=chunk)[219](index=219&type=chunk) [Maturity](index=45&type=section&id=Maturity) This section outlines the legal final maturity and anticipated repayment dates for the Company's various debt series and credit facility - The 2023 Class A-2 Notes have a legal final maturity in March 2053, with an anticipated repayment date in June 2029. The 2025 Class A-2 Notes have a legal final maturity in June 2055, with an anticipated repayment date in June 2030. The Credit Facility has a renewal date in June 2030, with options for two additional one-year extensions[220](index=220&type=chunk)[221](index=221&type=chunk) [Payment of Principal and Interest](index=46&type=section&id=Payment%20of%20Principal%20and%20Interest) This section details the requirements for principal and interest payments on Class A-2 Notes and the conditions for their suspension - Quarterly principal and interest payments are required on Class A-2 Notes, but principal payments can be suspended if the leverage ratio is less than or equal to **5.25x**. As of June 30, 2025, the Company's leverage ratio was approximately **4.25x**, so principal payments are not currently required[222](index=222&type=chunk) - The Board authorized a debt repurchase program of up to **$100 million** in February 2023 to reduce future cash interest payments and amounts due at maturity[224](index=224&type=chunk) [Make-whole Premiums](index=46&type=section&id=Make-whole%20Premiums) This section explains the make-whole premiums associated with voluntary or mandatory prepayments of the Company's debt instruments - Voluntary prepayment of the 2023 Class A-2 Notes would incur a make-whole premium of approximately **$23.9 million** as of June 30, 2025. For the 2025 Class A-2 Notes, this premium was approximately **$42.4 million**. Mandatory prepayments due to rapid amortization events or asset dispositions would also trigger make-whole premiums, which are considered immaterial derivatives[225](index=225&type=chunk) [Covenants and Restrictions](index=46&type=section&id=Covenants%20and%20Restrictions) This section outlines the customary covenants and restrictions on the Company's long-term debt, including the Debt Service Coverage Ratio (DSCR) thresholds - The long-term debt is subject to customary covenants, including maintaining a Debt Service Coverage Ratio (DSCR). A DSCR below certain thresholds (e.g., **1.75x, 1.20x, 1.10x**) can trigger a Cash Trapping Event, Rapid Amortization Event, Manager Termination Event, or Default Event. The Company's DSCR was approximately **3.3x** as of June 30, 2025[226](index=226&type=chunk)[227](index=227&type=chunk)[230](index=230&type=chunk) [Credit Facility](index=46&type=section&id=Credit%20Facility) This section details the Company's revolving credit facility, including its outstanding balance, available capacity, and weighted average interest rate - The **$325 million** Credit Facility allows for variable funding notes and letters of credit. As of June 30, 2025, **$100 million** was outstanding, with **$0.6 million** pledged for letters of credit, leaving **$224.4 million** available. The weighted average interest rate for the period was **6.93%**[228](index=228&type=chunk)[229](index=229&type=chunk) [Capital Allocation](index=47&type=section&id=Capital%20Allocation) This section describes the Company's capital allocation strategies, including dividend payments and share repurchase programs Dividend Metric | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Dividends declared per common share | $0.51 | $0.51 | $1.02 | $1.02 | | Dividends paid per common share | $0.51 | $0.51 | $1.02 | $1.02 | | Total dividends paid (in millions) | N/A | N/A | $15.8 | $15.7 | - The Company paid **$15.8 million** in dividends during the six months ended June 30, 2025. Under the 2022 Repurchase Program, **309,778 shares** were repurchased for **$7.6 million**, with **$125.7 million** remaining authorization[231](index=231&type=chunk)[234](index=234&type=chunk) [Cash Flows](index=47&type=section&id=Cash%20Flows) This section analyzes the Company's cash flows from operating, investing, and financing activities, highlighting key changes year-over-year Cash Flow (in millions) | Cash Flow (in millions) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Variance | | :---------------------------------------- | :------------------------------- | :------------------------------- | :------- | | Net cash provided by operating activities | $53.1 | $52.2 | $0.9 | | Net cash used in investing activities | $(5.2) | $(1.1) | $(4.1) | | Net cash used in financing activities | $(33.3) | $(33.3) | $0.0 | | Net increase (decrease) in cash, cash equivalents and restricted cash | $14.6 | $17.8 | $(3.2) | - Operating cash flows increased slightly by **$0.9 million** due to favorable working capital changes. Investing activities used **$4.1 million** more cash, primarily due to increased property and equipment additions and long-term receivables. Financing activities remained consistent year-over-year[237](index=237&type=chunk)[238](index=238&type=chunk)[240](index=240&type=chunk) [Adjusted Free Cash Flow](index=48&type=section&id=Adjusted%20Free%20Cash%20Flow) This section presents the Company's adjusted free cash flow, detailing its components and the factors influencing its change Adjusted Free Cash Flow (in millions) | Adjusted Free Cash Flow (in millions) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Variance | | :------------------------------------ | :------------------------------- | :------------------------------- | :------- | | Cash flows provided by operating activities | $53.1 | $52.2 | $0.9 | | Principal receipts from notes and equipment contracts | $4.8 | $7.5 | $(2.7) | | Additions to property and equipment | $(9.3) | $(6.8) | $(2.5) | | Adjusted free cash flow | $48.7 | $52.9 | $(4.2) | - Adjusted free cash flow decreased by **$4.2 million** to **$48.7 million** for the six months ended June 30, 2025, primarily due to decreased principal receipts from notes and equipment contracts and increased capital expenditures, partially offset by higher operating cash flows[242](index=242&type=chunk) [Contractual Obligations and Commitments](index=48&type=section&id=Contractual%20Obligations%20and%20Commitments) This section confirms that there were no material changes to the Company's contractual obligations since the last annual report - There were no material changes to the contractual obligations as disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2024[243](index=243&type=chunk) [Critical Accounting Policies and Estimates](index=48&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section confirms the consistency of the Company's critical accounting estimates with those outlined in the previous annual report - The Company's critical accounting estimates, including those for asset impairment, income taxes, and lease accounting, remained consistent with those disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024, with no significant changes during the six months ended June 30, 2025[244](index=244&type=chunk)[245](index=245&type=chunk) [Item 3—Quantitative and Qualitative Disclosures about Market Risk](index=48&type=section&id=Item%203—Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section confirms no material changes in market risk disclosures compared to the prior annual report - No material changes were reported regarding quantitative and qualitative disclosures about market risk compared to the previous Annual Report on Form 10-K[246](index=246&type=chunk) [Item 4—Controls and Procedures](index=49&type=section&id=Item%204—Controls%20and%20Procedures) This section outlines the Company's assessment of disclosure controls and procedures and reports on any changes in internal control over financial reporting [Disclosure Controls and Procedures](index=49&type=section&id=Disclosure%20Controls%20and%20Procedures) This section confirms the effectiveness of the Company's disclosure controls and procedures at a reasonable assurance level - The Company's management, including the CEO and CFO, concluded that disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2025[247](index=247&type=chunk) [Changes in Internal Control Over Financial Reporting](index=49&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) This section reports that no material changes occurred in the Company's internal control over financial reporting during the quarter - There were no material changes in the Company's internal control over financial reporting during the fiscal quarter ended June 30, 2025[248](index=248&type=chunk) PART II. OTHER INFORMATION [Item 1—Legal Proceedings](index=50&type=section&id=Item%201—Legal%20Proceedings) This section details the Company's involvement in various legal and administrative proceedings, which management deems unlikely to have a material adverse impact - The Company is subject to various legal proceedings, but management does not currently believe any will have a material adverse impact on the Company[250](index=250&type=chunk) [Item 1A—Risk Factors](index=50&type=section&id=Item%201A—Risk%20Factors) This section confirms no material changes to the risk factors previously disclosed in the Company's annual report - No material changes were reported regarding risk factors compared to the previous Annual Report on Form 10-K[251](index=251&type=chunk) [Item 2—Unregistered Sales of Equity Securities and Use of Proceeds](index=50&type=section&id=Item%202—Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the Company's equity security purchases, including shares repurchased under public programs and those tendered for tax withholding Equity Security Purchases | Period | Total number of shares purchased (a) | Average price paid per share | Total number of shares purchased as part of publicly announced plans or programs (b) | | :------------------------------ | :----------------------------------- | :--------------------------- | :--------------------------------------------------------------------------------- | | March 31, 2025 - April 27, 2025 | 626 | $20.23 | — | | April 28, 2025 - May 25, 2025 | 790 | $23.84 | 104,810 | | May 26, 2025 - June 29, 2025 | 3,109 | $24.75 | 140,099 | | Total | 4,525 | $24.35 | 244,909 | - During the quarter ended June 30, 2025, the Company repurchased **244,909 shares** under its publicly announced program and **4,525 shares** from employees for tax withholding, with an approximate dollar value of **$125,667,000** remaining under the repurchase program[253](index=253&type=chunk) [Item 3—Defaults Upon Senior Securities](index=50&type=section&id=Item%203—Defaults%20Upon%20Senior%20Securities) This section confirms that no defaults occurred upon senior securities during the reporting period - No defaults upon senior securities were reported[254](index=254&type=chunk) [Item 4—Mine Safety Disclosures](index=50&type=section&id=Item%204—Mine%20Safety%20Disclosures) This section clarifies that mine safety disclosures are not relevant to the Company's operations - Mine safety disclosures are not applicable to the Company[255](index=255&type=chunk) [Item 5—Other Information](index=50&type=section&id=Item%205—Other%20Information) This section reports no adoption, modification, or termination of securities trading plans by directors or executive officers during the quarter - No Rule 10b5-1 trading plans or non-Rule 10b5-1 trading arrangements were adopted, modified, or terminated by directors or officers during the fiscal quarter ended June 30, 2025[256](index=256&type=chunk) [Item 6—Exhibits](index=51&type=section&id=Item%206—Exhibits) This section lists all exhibits accompanying the Form 10-Q, including indentures, agreements, and certifications - The report includes exhibits such as the Second Amended and Restated Base Indenture, Series 2025-1 Supplement, Class A-1 Note Purchase Agreement, Fourth Amended and Restated Management Agreement, and certifications from the CEO and CFO[257](index=257&type=chunk) [Signatures](index=52&type=section&id=Signatures) This section contains the required signatures of the Company's CEO, CFO, and Chief Accounting Officer, certifying the report's filing - The report is signed by John W. Peyton (CEO), Vance Y. Chang (CFO), and Allison Hall (Chief Accounting Officer) on August 6, 2025[261](index=261&type=chunk)