Dine Brands Global, Inc. (NYSE:DIN) Q2 2024 Earnings Call Transcript August 7, 2024 9:00 AM ET Company Participants Matt Lee - SVP, Finance and IR John Peyton - CEO Vance Chang - CFO Tony Moralejo - President of Applebee's Jay Johns - President of IHOP Conference Call Participants Eric Gonzalez - KeyBanc Dennis Geiger - UBS Jeffrey Bernstein - Barclays Nick Setyan - Wedbush Brian Vaccaro - Raymond James Jake Bartlett - Truist Securities Brian Mullan - Piper Sandler Todd Brooks - The Benchmark Company Andrew ...

Dine Brands (DIN) reported $206.27 million in revenue for the quarter ended June 2024, representing a yearover-year decline of 1%. EPS of $1.71 for the same period compares to $1.82 a year ago. The reported revenue represents a surprise of -2.20% over the Zacks Consensus Estimate of $210.9 million. With the consensus EPS estimate being $1.65, the EPS surprise was +3.64%. While investors scrutinize revenue and earnings changes year-over-year and how they compare with Wall Street expectations to determine the ...

Dine Brands (DIN) came out with quarterly earnings of $1.71 per share, beating the Zacks Consensus Estimate of $1.65 per share. This compares to earnings of $1.82 per share a year ago. These figures are adjusted for nonrecurring items. This quarterly report represents an earnings surprise of 3.64%. A quarter ago, it was expected that this parent company of Applebee's and IHOP restaurants would post earnings of $1.59 per share when it actually produced earnings of $1.33, delivering a surprise of -16.35%. Ove ...

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Unaudited consolidated financial statements for Q2 and H1 2024, including Balance Sheets, Income, Stockholders' Deficit, Cash Flows, and detailed notes, are presented [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Total assets decreased to **$1.69 billion**, liabilities to **$1.93 billion**, and stockholders' deficit improved to **$(231.7) million** by June 30, 2024 Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2024 (Unaudited) | December 31, 2023 | | :--- | :--- | :--- | | **Total Assets** | **$1,693,502** | **$1,740,287** | | Cash and cash equivalents | $153,534 | $146,034 | | Goodwill | $254,062 | $254,062 | | **Total Liabilities** | **$1,925,204** | **$1,991,261** | | Long-term debt, net | $1,085,510 | $1,084,502 | | **Total Stockholders' Deficit** | **$(231,702)** | **$(250,974)** | [Consolidated Statements of Comprehensive Income](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Q2 2024 revenues slightly decreased to **$206.3 million** while net income rose to **$23.2 million**; H1 2024 revenues and net income declined Key Income Statement Data (in thousands, except per share data) | Metric | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $206,267 | $208,415 | $412,502 | $422,182 | | Gross Profit | $99,271 | $97,342 | $196,695 | $200,958 | | Net Income | $23,182 | $18,248 | $40,655 | $45,658 | | Diluted EPS | $1.50 | $1.16 | $2.64 | $2.91 | [Consolidated Statements of Stockholders' Deficit](index=7&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Deficit) Stockholders' deficit improved to **$(231.7) million** by June 30, 2024, driven by net income, offset by share repurchases and dividends - During the first six months of 2024, the company purchased **269,621 shares** of its common stock for **$12.0 million**[12](index=12&type=chunk) - The company paid dividends on common stock totaling **$15.7 million** during the first six months of 2024[12](index=12&type=chunk) [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow increased to **$52.2 million** in H1 2024, with total cash, cash equivalents, and restricted cash rising by **$17.8 million** Cash Flow Summary - Six Months Ended June 30 (in thousands) | Cash Flow Category | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $52,179 | $42,684 | | Net cash used in investing activities | $(1,072) | $(16,572) | | Net cash used in financing activities | $(33,308) | $(194,278) | | **Net change in cash, cash equivalents and restricted cash** | **$17,799** | **$(168,166)** | [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Detailed notes explain accounting policies and financial figures, covering revenue, debt, equity, segments, and fair value measurements - The company's four reportable segments are: franchise operations, company-operated restaurant operations, rental operations, and financing operations[70](index=70&type=chunk) - The company's long-term debt is subject to covenants, including a Debt Service Coverage Ratio (DSCR) of approximately **3.5x** as of June 30, 2024, well above the **1.75x** trigger[51](index=51&type=chunk) - As of June 30, 2024, **$133.3 million** remained available for repurchases under the **$250 million** stock repurchase program authorized in February 2022[60](index=60&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=28&type=section&id=Item%202%E2%80%94Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses H1 2024 financial performance, key business drivers, and liquidity, highlighting mixed brand results, income decline, and improved adjusted free cash flow [Overview and Key Financial Results](index=28&type=section&id=Overview%20and%20Key%20Financial%20Results) Dine Brands operates nearly **3,600** restaurants globally; H1 2024 income before taxes decreased by **$5.3 million** due to lower gross profit and higher interest expense - The company is one of the largest full-service restaurant companies in the world with close to **3,600** restaurants under the Applebee's, IHOP, and Fuzzy's Taco Shop brands[87](index=87&type=chunk) Change in Income Before Income Taxes - H1 2024 vs H1 2023 (in millions) | Component | Variance | | :--- | :--- | | Decrease in gross profit | $(4.3) | | Increase in G&A expenses | $(0.1) | | Increase in interest expense, net | $(3.4) | | Favorable change in loss on disposition of assets | $2.2 | | **Total decrease in income before income taxes** | **$(5.3)** | [Key Performance Indicators and Restaurant Data](index=29&type=section&id=Key%20Performance%20Indicators%20and%20Restaurant%20Data) H1 2024 saw negative domestic same-restaurant sales across all brands and net restaurant count reductions, with off-premise sales remaining significant Domestic Same-Restaurant Sales % Change - H1 2024 vs H1 2023 | Brand | H1 2024 % Change | | :--- | :--- | | Applebee's | (3.2)% | | IHOP | (1.5)% | | Fuzzy's | (8.6)% | Net Restaurant Development - H1 2024 | Brand | Net Change | | :--- | :--- | | Applebee's | (17) | | IHOP | (3) | | Fuzzy's | (7) | - For H1 2024, off-premise sales mix was **21.8%** for Applebee's, **20.4%** for IHOP, and **40.1%** for Fuzzy's[96](index=96&type=chunk)[98](index=98&type=chunk)[100](index=100&type=chunk) [Consolidated Results of Operations](index=35&type=section&id=Consolidated%20Results%20of%20Operations) H1 2024 total revenue decreased to **$412.5 million** and gross profit to **$196.7 million**, driven by lower franchise and rental revenues and higher net interest expense Franchise Gross Profit - H1 2024 vs H1 2023 (in millions) | Brand | H1 2024 | H1 2023 | Variance | | :--- | :--- | :--- | :--- | | Applebee's | $86.4 | $87.3 | $(0.9) | | IHOP | $91.0 | $88.2 | $2.8 | | Fuzzy's | $3.5 | $6.8 | $(3.3) | | **Total** | **$180.9** | **$182.3** | **$(1.4)** | - G&A expenses for H1 2024 were **$99.0 million**, a marginal **0.1%** increase from the prior year, primarily due to higher stock-based compensation and severance, offset by the stopping of the IHOP Flip'd initiative[121](index=121&type=chunk) - Net interest expense for H1 2024 increased by **$3.4 million** to **$35.9 million**, driven by higher interest rates on refinanced securitized notes and the Credit Facility[122](index=122&type=chunk) [Liquidity and Capital Resources](index=39&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains liquidity with **$223.1 million** available on its credit facility, a **4.2x** leverage ratio, and improved adjusted free cash flow of **$52.9 million** in H1 2024 - As of June 30, 2024, the company had **$223.1 million** available for borrowing under its **$325 million** Credit Facility[129](index=129&type=chunk) - The company's leverage ratio was approximately **4.2x** as of June 30, 2024, below the **5.25x** threshold for mandatory principal payments on Class A-2 Notes[126](index=126&type=chunk) Adjusted Free Cash Flow Reconciliation (in millions) | Component | H1 2024 | H1 2023 | | :--- | :--- | :--- | | Cash flows provided by operating activities | $52.2 | $42.7 | | Principal receipts from notes and equipment contracts | $7.5 | $4.2 | | Additions to property and equipment | $(6.8) | $(22.8) | | **Adjusted free cash flow** | **$52.9** | **$24.1** | [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=42&type=section&id=Item%203%E2%80%94Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) No material changes occurred in market risk disclosures from the Annual Report on Form 10-K for the fiscal year ended December 31, 2023 - There were no material changes from the market risk information contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2023[143](index=143&type=chunk) [Item 4. Controls and Procedures](index=42&type=section&id=Item%204%E2%80%94Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of June 30, 2024, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the Company's disclosure controls and procedures are effective at the reasonable assurance level as of the end of the reporting period[145](index=145&type=chunk) - No changes in internal control over financial reporting occurred during the fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal controls[146](index=146&type=chunk) [PART II. OTHER INFORMATION](index=44&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=44&type=section&id=Item%201%E2%80%94Legal%20Proceedings) The company is involved in various ordinary course legal proceedings, none of which are expected to have a material adverse impact - The Company is subject to various lawsuits and claims in the ordinary course of business but does not presently believe any will have a material adverse impact[148](index=148&type=chunk) [Item 1A. Risk Factors](index=44&type=section&id=Item%201A%E2%80%94Risk%20Factors) No material changes occurred in the risk factors previously disclosed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2023 - There are no material changes from the risk factors set forth in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023[149](index=149&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=44&type=section&id=Item%202%E2%80%94Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Details of Q2 2024 stock repurchase activity, with **141,142 shares** repurchased and **$133.3 million** remaining under authorization Share Repurchases - Q2 2024 | Period | Total Shares Purchased (Public Plan) | Average Price Paid | | :--- | :--- | :--- | | Apr 1 - Apr 28, 2024 | 44,519 | $44.89 | | Apr 29 - May 26, 2024 | 45,409 | $44.05 | | May 27 - Jun 30, 2024 | 51,214 | $39.03 | | **Total Q2 2024** | **141,142** | **-** | - As of June 30, 2024, approximately **$133,266,000** remained available for future share repurchases under the publicly announced plan[149](index=149&type=chunk) [Item 5. Other Information](index=44&type=section&id=Item%205%E2%80%94Other%20Information) No directors or executive officers adopted, modified, or terminated Rule 10b5-1 or other trading plans during Q2 2024 - During the fiscal quarter ended June 30, 2024, no directors or officers adopted, modified, or terminated a Rule 10b5-1 trading plan or a non-Rule 10b5-1 trading arrangement[151](index=151&type=chunk) [Item 6. Exhibits](index=45&type=section&id=Item%206%E2%80%94Exhibits) Exhibits filed with Form 10-Q include CEO and CFO certifications and Inline XBRL documents - Exhibits filed include certifications from the Chief Executive Officer and Chief Financial Officer, as well as Inline XBRL documents[153](index=153&type=chunk)

Exhibit 99.1 News Release | --- | --- | --- | |-------|-------|-----------------------------------------------------------------------------------------------------------------------------------------------| | | | Investor Contact Matt Lee Sr. Vice President, Finance and Investor Relations Dine Brands Global, Inc. IR@dinebrands.com | | | | Media Contact Susan Nelson Sr. Vice President, Global Communications Dine Brands Global, Inc. Mediainquiries@dinebrands.com | Dine Brands Global, Inc. Reports Second Quar ...

Core Viewpoint - The upcoming earnings report for Dine Brands is anticipated to show a year-over-year decline in earnings despite higher revenues, with analysts becoming bearish on the company's earnings prospects [17][19]. Group 1: Earnings Expectations - Dine Brands is expected to report quarterly earnings of $1.65 per share, reflecting a year-over-year change of -9.3% [18]. - Revenues are projected to be $210.9 million, which is an increase of 1.2% from the same quarter last year [10]. - The consensus EPS estimate has been revised 0.51% lower over the last 30 days, indicating a reassessment by analysts [19]. Group 2: Earnings Surprise Prediction - The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate, with the Most Accurate Estimate being a more recent version [12]. - Dine Brands currently has a negative Earnings ESP of -9.31%, making it difficult to predict a positive earnings surprise [22]. - The company has a Zacks Rank of 5 (Strong Sell), further complicating the prediction of beating the consensus EPS estimate [14][27]. Group 3: Historical Performance - Over the last four quarters, Dine Brands has beaten consensus EPS estimates three times, indicating some potential for positive surprises [24]. - However, the stock may still move lower even with an earnings beat due to other disappointing factors [25]. - The historical performance of earnings surprises should be considered when gauging future expectations [23].

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photobyphm/iStock Editorial via Getty Images My Rating History on DIN (Seeking Alpha) Underneath the weak financials, same-restaurant sales are performing poorly, as Applebed's showed -5.9% a year-over-year performance in the quarter. IHOP's same- restaurant sales declined by -1.7%. Fuzzy's, representing a minimal part of total revenues, had the worst performance at -9.8%. The weaker foot traffic ultimately had an impact on profitability, as the operating margin declined from 23.3% to 20.5%. The 2024 financ ...

With the market continuing to generally rise above a wall of worries, the concept of bargain stocks to buy might seem sadly irrelevant. However, with so many opportunities available, it's not possible to provide equal coverage to every company. In other words, some ideas will slip through the cracks. For those who have procrastinated on this bull run, that's good news. While Wall Street has certainly ogled heavily hyped names, there are ideas that haven't quite grabbed the spotlight. Nevertheless, they dese ...

Applebee’s $1 margaritas and boneless wings have proven to be a sweet and satisfying deal for consumers as they chase promotional offers and value, according to Dine Brands CEO John Peyton. Dine Brands, a parent company that oversees some of the country’s popular eateries, has crafted irresistible promotions that are helping its restaurants navigate the money-conscious consumer in today’s economy. "The consumer sent a message this past quarter. It was a tough quarter for us, and it was a tough quarter for t ...