Denny’s(DENN) - 2025 Q2 - Quarterly Results

Executive Summary CEO's Strategic Commentary Denny's Corporation CEO Kelli Valade highlighted strategic efforts, innovation, and customer focus across both Denny's and Keke's brands, achieving operational efficiencies and shareholder value initiatives - Denny's brand addresses market changes through innovative value platforms, strengthened off-premise business, and optimized franchise system[2] - Keke's brand expanded its unit portfolio by 7% during the year and successfully launched its first system-wide promotion, continuing to grow market share[2] - The company achieved approximately 3.5% in corporate G&A savings and plans to enhance shareholder value through balanced investments and meaningful share repurchases[2] Second Quarter 2025 Highlights Q2 2025 saw total operating revenue of $117.7 million, operating income of $8.6 million, with Keke's domestic system same-restaurant sales up 4.0% and Denny's down 1.3% 2025 Second Quarter Key Financial Metrics | Metric | Amount (Million USD) | | :--------------------------------- | :----------------: | | Total Operating Revenue | 117.7 | | Total Operating Income | 8.6 | | Net Income | 2.5 | | Diluted Net Earnings Per Share | 0.05 | | Adjusted Net Income | 4.8 | | Adjusted Diluted Net Earnings Per Share | 0.09 | | Adjusted EBITDA | 18.8 | 2025 Second Quarter Same-Restaurant Sales Change (YoY) | Brand | Same-Restaurant Sales Change | | :------------------------- | :-------------: | | Denny's Domestic System | (1.3%) | | Keke's Domestic System | 4.0% | - Denny's opened 3 franchised restaurants and completed 14 remodels (including 5 company-owned units) Keke's opened 8 cafes (including 4 franchised units) and refranchised 3 company-owned cafes[3] 2025 Second Quarter Adjusted Operating Margins | Metric | Amount (Million USD) | % of Revenue | | :------------------------- | :----------------: | :-------------: | | Adjusted Franchise Operating Profit | 30.0 | 50.7% | | Adjusted Company Restaurant Operating Profit | 6.7 | 11.5% | Second Quarter 2025 Financial Performance Revenue Analysis Total operating revenue increased 1.5% to $117.7 million in Q2 2025, driven by Keke's company-owned unit growth, partially offset by Denny's franchise closures 2025 Second Quarter Revenue Overview | Revenue Category | Q2 2025 (Million USD) | Q2 2024 (Million USD) | YoY Change (%) | | :------------------------- | :--------------------------: | :--------------------------: | :------------: | | Total Operating Revenue | 117.7 | 115.9 | 1.5% | | Franchise and Licensing Revenue | 59.3 | 61.6 | (3.7%) | | Company Restaurant Sales | 58.4 | 54.3 | 7.5% | - Total operating revenue growth primarily driven by increased Keke's company-owned equivalent units, partially offset by Denny's franchised restaurant closure strategy[4] - Franchise and licensing revenue decline primarily due to fewer Denny's franchised equivalent units and weaker same-restaurant sales[5] Operating Margins Q2 2025 adjusted franchise operating margin rose to 50.7%, while adjusted company restaurant operating margin decreased to 11.5% due to cost pressures and marketing investments 2025 Second Quarter Adjusted Operating Margins | Metric | Q2 2025 (Million USD) | Q2 2025 (%) | Q2 2024 (Million USD) | Q2 2024 (%) | | :------------------------- | :--------------------------: | :------------------: | :--------------------------: | :------------------: | | Adjusted Franchise Operating Profit | 30.0 | 50.7% | 30.8 | 50.0% | | Adjusted Company Restaurant Operating Profit | 6.7 | 11.5% | 6.9 | 12.7% | - The increase in adjusted franchise operating margin is primarily attributed to optimized cost structure, despite fewer Denny's equivalent units and weaker same-restaurant sales[6] - The decrease in adjusted company restaurant operating margin is mainly impacted by rising egg prices, increased marketing investment, and inefficient new cafe openings[7] Expenses Total general and administrative expenses increased to $21.4 million in Q2 2025, influenced by incentive compensation and equity awards, despite corporate G&A savings 2025 Second Quarter Expense Overview | Expense Category | Q2 2025 (Million USD) | Q2 2024 (Million USD) | YoY Change (%) | | :------------------------- | :--------------------------: | :--------------------------: | :------------: | | Total General and Administrative Expenses | 21.4 | 20.5 | 4.4% | | Income Tax Expense | 1.3 | 1.2 | 8.3% | | Effective Tax Rate | 34.3% | 25.1% | 9.2 percentage points | | Corporate G&A Savings | 0.6 | - | (3.5%) | - Total general and administrative expenses increased primarily due to incentive compensation, equity-based compensation, and deferred compensation valuation adjustments[8] - Corporate G&A savings of approximately $0.6 million, a year-over-year reduction of approximately 3.5%[8] - Effective income tax rate increased to 34.3%, primarily including discrete items related to equity-based compensation[9] Net Income and EPS Q2 2025 net income was $2.5 million with diluted EPS of $0.05, while adjusted net income reached $4.8 million with adjusted diluted EPS of $0.09 2025 Second Quarter Net Income and EPS | Metric | Amount (Million USD) | EPS (USD) | | :------------------------- | :----------------: | :--------------: | | Net Income | 2.5 | 0.05 | | Adjusted Net Income | 4.8 | 0.09 | Debt and Liquidity As of Q2 2025 end, total debt stood at $278.6 million, with $268.6 million attributed to credit facility borrowings 2025 Second Quarter End-of-Period Debt | Metric | Amount (Million USD) | | :------------------------- | :----------------: | | Total Debt | 278.6 | | Credit Facility Borrowings | 268.6 | Capital Allocation Investments and Acquisitions The company invested $7.3 million in cash capital expenditures and $4.1 million in strategic acquisitions of Keke's cafes and a Denny's franchised restaurant this quarter 2025 Second Quarter Capital Expenditures and Acquisitions | Category | Amount (Million USD) | | :------------------------- | :----------------: | | Cash Capital Expenditures | 7.3 | | Keke's Cafe Acquisitions | 4.1 | | Denny's Franchised Restaurant Acquisitions | (Included in $4.1 million) | - Capital expenditures primarily allocated to Keke's new cafe development and Denny's company restaurant remodels[11] - Strategic acquisitions included 5 Keke's cafes and one Denny's franchised restaurant in a core market[11] Share Repurchases The company allocated $0.6 million to share repurchases this quarter, with $87.6 million remaining under the existing authorization 2025 Second Quarter Share Repurchases | Metric | Amount (Million USD) | | :------------------------- | :----------------: | | Share Repurchases This Quarter | 0.6 | | Remaining Repurchase Authorization | 87.6 | Business Outlook Full Year 2025 Expectations For FY2025, the company projects Denny's domestic system same-restaurant sales between (2.0%) and 1.0%, 25-40 new openings, 70-90 closures, and adjusted EBITDA of $80-85 million Full Year 2025 Expectations (53 Operating Weeks) | Metric | Expected Range | | :--------------------------------- | :--------------------------------: | | Denny's Domestic System Same-Restaurant Sales | (2.0%) to 1.0% | | Combined New Restaurant Openings | 25 to 40 Units | | Combined Restaurant Closures | 70 to 90 Units | | Commodity Inflation | 3.0% to 5.0% | | Labor Inflation | 2.5% to 3.5% | | Total General and Administrative Expenses | $80 million to $85 million | | Adjusted EBITDA | $80 million to $85 million | | Share Repurchases | $15 million to $25 million | - Total general and administrative expenses include $60 million to $62 million for corporate and administrative expenses (including approximately $1 million impact from the 53rd week), $6 million to $9 million for incentive compensation, and approximately $14 million for equity-based compensation (not impacting Adjusted EBITDA)[18] - Adjusted EBITDA expectations include an approximate $2 million impact from the 53rd week[18] Company Profile and Operations About Denny's Corporation Denny's Corporation, a leading US full-service restaurant chain, operated 1,558 restaurants as of June 25, 2025, comprising 1,474 franchised and 84 company-owned units under the Denny's and Keke's brands Restaurant Count as of June 25, 2025 | Brand | Company-Owned | Franchised and Licensed | Total | | :------------------------- | :----------: | :--------------: | :----: | | Denny's Corporation (Total) | 84 | 1,474 | 1,558 | | Denny's Brand | 62 | 1,422 | 1,484 | | Keke's Brand | 22 | 52 | 74 | Restaurant Unit Activity As of June 25, 2025, Denny's had 1,484 restaurants and Keke's had 74, with specific unit openings, closures, and refranchising activities during the quarter 2025 Second Quarter Restaurant Unit Activity | Brand | Company-Owned (End of Period) | Franchised and Licensed (End of Period) | Total (End of Period) | New Openings (This Quarter) | Closures (This Quarter) | Refranchised (This Quarter) | | :------------------------- | :----------------: | :--------------------: | :-----------: | :-----------: | :-----------: | :--------------------: | | Denny's | 62 | 1,422 | 1,484 | 3 (Franchised) | 10 (Franchised) | - | | Keke's | 22 | 52 | 74 | 4 (Company), 4 (Franchised) | - | 3 (Company) | Equivalent Unit Changes (2025 Second Quarter vs 2024 Second Quarter) | Brand | Company-Owned | Franchised | Total | | :------------------------- | :----------: | :--------: | :----: | | Denny's | (3) | (59) | (62) | | Keke's | 12 | (3) | 9 | Same-Restaurant Sales and Average Unit Sales Q2 2025 saw Denny's domestic system same-restaurant sales decline by 1.3%, while Keke's domestic system sales grew 4.0%, with varying average unit sales performance 2025 Second Quarter Same-Restaurant Sales Change (YoY) | Brand | Company-Owned | Domestic Franchised | Domestic System | | :------------------------- | :----------: | :------------: | :--------: | | Denny's | 0.0% | (1.4%) | (1.3%) | | Keke's | 3.4% | 4.2% | 4.0% | 2025 Second Quarter Average Unit Sales (Thousand USD) | Brand | Company-Owned | Franchised | | :------------------------- | :----------: | :--------: | | Denny's | 789 | 479 | | Keke's | 433 | 484 | Non-GAAP Financial Measures Non-GAAP Definition Changes The company revised non-GAAP financial metric definitions for enhanced clarity and comparability, excluding non-recurring and non-core operating items, and adjusting EBITDA deductions - Company adjusted non-GAAP financial metric definitions to enhance clarity and comparability with peers[19] - Adjusted metrics exclude non-recurring legal settlement expenses, pre-opening expenses, and other non-core operating items[20] - Company no longer deducts cash payments for restructuring and exit costs or equity-based compensation from adjusted EBITDA[20] Reconciliation of Net Income to Non-GAAP Measures This section reconciles GAAP net income to adjusted EBITDA, adjusted net income, and per-share equivalents for Q2 and year-to-date 2025 and 2024, detailing various adjustments Reconciliation of Net Income to Adjusted EBITDA (2025 Second Quarter) | Metric | Q2 2025 (Thousand USD) | Q2 2024 (Thousand USD) | | :--------------------------------- | :--------------------------: | :--------------------------: | | Net Income | 2,470 | 3,568 | | Income Tax Expense | 1,291 | 1,198 | | Operating (Gains), Losses and Other Expenses, Net | 1,700 | 1,565 | | Equity-Based Compensation Expense | 2,982 | 2,624 | | Interest Expense, Net | 5,374 | 4,573 | | Depreciation and Amortization | 4,378 | 3,735 | | Adjusted EBITDA | 18,787 | 20,040 | Reconciliation of Net Income to Adjusted Net Income (2025 Second Quarter) | Metric | Q2 2025 (Thousand USD) | Q2 2024 (Thousand USD) | | :--------------------------------- | :--------------------------: | :--------------------------: | | Net Income | 2,470 | 3,568 | | Interest Rate Swap Derivative Losses and Amortization, Net | 879 | 167 | | Operating (Gains), Losses and Other Expenses, Net | 1,700 | 1,565 | | Tax Impact | (932) | (1,127) | | Adjusted Net Income | 4,794 | 6,986 | | Adjusted Diluted Net Earnings Per Share | 0.09 | 0.13 | Reconciliation of Operating Income to Non-GAAP Measures This section reconciles GAAP operating income to restaurant-level, company restaurant, and franchise operating profits, using non-GAAP metrics to assess operational efficiency Reconciliation of Operating Income to Restaurant-Level Operating Profit (2025 Second Quarter) | Metric | Q2 2025 (Thousand USD) | Q2 2024 (Thousand USD) | | :--------------------------------- | :--------------------------: | :--------------------------: | | Operating Income | 8,572 | 9,115 | | General and Administrative Expenses | 21,445 | 20,486 | | Depreciation and Amortization | 4,378 | 3,735 | | Operating (Gains), Losses and Other Expenses, Net | 1,700 | 1,565 | | Restaurant-Level Operating Profit | 36,095 | 34,921 | | Adjusted Restaurant-Level Operating Profit | 36,740 | 37,714 | Restaurant-Level Operating Profit Components (2025 Second Quarter) | Component | Q2 2025 (Thousand USD) | Q2 2024 (Thousand USD) | | :------------------------- | :--------------------------: | :--------------------------: | | Company Restaurant Operating Profit | 6,050 | 6,770 | | Franchise Operating Profit | 30,045 | 28,151 | | Restaurant-Level Operating Profit | 36,095 | 34,921 | Detailed Financial Statements (Unaudited) Consolidated Balance Sheets As of June 25, 2025, total assets were $491.2 million, total liabilities $525.7 million, and shareholders' deficit $34.6 million, showing slight shifts from December 2024 Consolidated Balance Sheet Summary (Thousand USD) | Metric | June 25, 2025 | December 25, 2024 | | :------------------------- | :-------------: | :--------------: | | Total Assets | 491,150 | 496,274 | | Total Liabilities | 525,729 | 530,299 | | Shareholders' Deficit | (34,579) | (34,025) | | Cash and Cash Equivalents | 1,166 | 1,698 | | Long-Term Debt | 268,600 | 261,300 | Condensed Consolidated Statements of Income (Quarter Ended) Q2 2025 total operating revenue was $117.7 million, with net income of $2.5 million and diluted EPS of $0.05, reflecting a slight revenue increase but decreased profitability year-over-year Condensed Consolidated Statements of Income Summary (Q2 2025 vs Q2 2024, Thousand USD) | Metric | June 25, 2025 | June 26, 2024 | | :--------------------------------- | :-------------: | :-------------: | | Total Operating Revenue | 117,657 | 115,927 | | Operating Income | 8,572 | 9,115 | | Net Income | 2,470 | 3,568 | | Diluted Net Earnings Per Share | 0.05 | 0.07 | | Total General and Administrative Expenses | 21,445 | 20,486 | Condensed Consolidated Statements of Income (Two Quarters Ended) For the half-year ended June 25, 2025, total operating revenue was $229.3 million, with net income of $2.8 million and diluted EPS of $0.05, indicating revenue growth but significant profit decline year-over-year Condensed Consolidated Statements of Income Summary (H1 2025 vs H1 2024, Thousand USD) | Metric | June 25, 2025 | June 26, 2024 | | :--------------------------------- | :-------------: | :-------------: | | Total Operating Revenue | 229,294 | 225,901 | | Operating Income | 13,782 | 19,121 | | Net Income | 2,796 | 8,259 | | Diluted Net Earnings Per Share | 0.05 | 0.16 | | Total General and Administrative Expenses | 41,475 | 41,708 | Operating Margins (Quarter Ended) Q2 2025 company restaurant operating margin was 10.4% (adjusted 11.5%), while franchise operating margin was 50.7% (adjusted 50.7%), showing a decline for company units and an increase for franchise units year-over-year Company Restaurant Operating Margins (2025 Second Quarter vs 2024 Second Quarter) | Metric | June 25, 2025 (%) | June 26, 2024 (%) | | :------------------------- | :----------------: | :----------------: | | Company Restaurant Operating Margin | 10.4% | 12.5% | | Adjusted Company Restaurant Operating Margin | 11.5% | 12.7% | | Product Costs as % of Sales | 25.8% | 25.1% | | Payroll and Benefits as % of Sales | 37.5% | 37.7% | Franchise Operating Margins (2025 Second Quarter vs 2024 Second Quarter) | Metric | June 25, 2025 (%) | June 26, 2024 (%) | | :------------------------- | :----------------: | :----------------: | | Franchise Operating Margin | 50.7% | 45.7% | | Adjusted Franchise Operating Margin | 50.7% | 50.0% | | Royalty Revenue as % of Revenue | 49.1% | 48.7% | | Advertising Revenue as % of Revenue | 32.9% | 33.8% | Operating Margins (Two Quarters Ended) For the half-year ended June 25, 2025, company restaurant operating margin was 8.8% (adjusted 10.3%), and franchise operating margin was 50.8% (adjusted 50.8%), with company unit margins decreasing and franchise margins increasing year-over-year Company Restaurant Operating Margins (2025 Half-Year vs 2024 Half-Year) | Metric | June 25, 2025 (%) | June 26, 2024 (%) | | :------------------------- | :----------------: | :----------------: | | Company Restaurant Operating Margin | 8.8% | 10.3% | | Adjusted Company Restaurant Operating Margin | 10.3% | 12.9% | | Product Costs as % of Sales | 26.1% | 25.3% | | Payroll and Benefits as % of Sales | 38.3% | 38.4% | Franchise Operating Margins (2025 Half-Year vs 2024 Half-Year) | Metric | June 25, 2025 (%) | June 26, 2024 (%) | | :------------------------- | :----------------: | :----------------: | | Franchise Operating Margin | 50.8% | 49.0% | | Adjusted Franchise Operating Margin | 50.8% | 51.2% | | Royalty Revenue as % of Revenue | 48.7% | 49.7% | | Advertising Revenue as % of Revenue | 33.0% | 32.7% | Additional Information Conference Call and Webcast The company will host a webcast on August 4, 2025, at 4:30 PM ET to discuss Q2 2025 results, accessible via its investor relations website - Company to host a webcast on August 4, 2025, at 4:30 PM ET to discuss second-quarter results[14] - Webcast accessible via the company's investor relations website investor.dennys.com[14] Cautionary Language This press release contains forward-looking statements subject to risks and uncertainties that may cause actual results to differ materially, with no obligation for the company to update them unless legally required - This press release contains forward-looking statements, involving risks, uncertainties, and other factors that could cause actual results to differ materially from expectations[22] - The company undertakes no obligation to update these forward-looking statements unless required by law[22] Contact Information Investor inquiries can be directed to 877-784-7167, and media inquiries to 864-597-8005 - Investor contact phone: 877-784-7167[23] - Media contact phone: 864-597-8005[23]