Denny’s Corporation Reports Results for Second Quarter 2024

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Insights

Denny's Q2 2024 results paint a mixed picture, with some positive trends but overall pressure on the business. The company's total operating revenue of $115.9 million shows a slight decline from the previous year's $116.9 million. This dip, coupled with the domestic system-wide same-restaurant sales decrease of 0.6%, indicates ongoing challenges in the competitive restaurant industry.

The company's net income of $3.6 million, or $0.07 per diluted share, is significantly lower than the operating income of $9.1 million. This discrepancy suggests substantial interest expenses and tax implications. The adjusted net income of $6.9 million, or $0.13 per share, provides a clearer picture of the company's operational performance.

On a positive note, Denny's outperformed the BBI Family Dining same-restaurant sales for the second consecutive quarter, demonstrating some resilience in a tough market. The expansion of their third virtual brand and the opening of new Keke's locations show the company's commitment to growth strategies.

However, the revised guidance for 2024, particularly the downward adjustment of expected domestic system-wide same-restaurant sales to between -1% and 1% (from 0% to 3%) and the reduced restaurant opening targets, indicate caution about the near-term economic environment.

The company's debt position of $267.4 million, with $257.5 million in credit facility borrowings, warrants attention. While not immediately alarming, it could limit financial flexibility if market conditions worsen.

Denny's Q2 results reflect the broader challenges facing the restaurant industry. The slight decline in same-restaurant sales (-0.6%) aligns with industry trends, as consumers grapple with inflation and economic uncertainty. However, Denny's outperformance relative to the BBI Family Dining benchmark suggests the company is navigating these headwinds better than some competitors.

The company's strategic focus on virtual brands and advertising investments demonstrates adaptability to changing consumer preferences. The expansion of their third virtual brand could be a key differentiator in a crowded market, potentially driving incremental revenue without significant capital expenditure.

The revised guidance for 2024, particularly the reduced restaurant opening targets (30 to 40, down from 40 to 50), signals a more cautious approach to expansion. This prudence may be wise given the uncertain economic outlook, but it could impact long-term growth prospects if sustained.

Interestingly, the company's projected commodity inflation (0% to 2%) is relatively low, which could provide some margin relief. However, the expected labor inflation (3% to 4%) remains a concern, albeit slightly lower than previously forecasted.

The continuation of share repurchases ($4.7 million in Q2) with $91.0 million remaining under the authorization suggests management's confidence in the company's value proposition. This could provide some support for the stock price in the near term.

07/30/2024 - 04:05 PM

SPARTANBURG, S.C., July 30, 2024 (GLOBE NEWSWIRE) -- Denny’s Corporation (the "Company") (NASDAQ: DENN), owner and operator of Denny's Inc. ("Denny's") and Keke's Inc. ("Keke's") today reported results for its second quarter ended June 26, 2024 and provided a business update on the Company’s operations.

Kelli Valade, Chief Executive Officer, stated, "I am very pleased that for the second quarter in a row Denny's outperformed BBI Family Dining same-restaurant sales, and Keke's continued to close the gap in Florida all while navigating a very competitive environment. We are also encouraged to see these trends continuing into July, which is being bolstered by our incremental advertising investments and the expansion of our third virtual brand. Additionally, we opened our second Keke's cafe in Tennessee, as well as completed our first remodel test at our highest volume Keke's corporate location. Despite these results and staying ahead of the competition, we know the overall industry is pressured and therefore we have updated our guidance accordingly and remain confident in our strategies and initiatives.”

Second Quarter 2024 Highlights⁽¹⁾

Total operating revenue was $115.9 million compared to $116.9 million for the prior year quarter.
Denny's domestic system-wide same-restaurant sales** were (0.6%) compared to the equivalent fiscal period in 2023, including (0.4%) at domestic franchised restaurants and (2.6%) at company restaurants.
Opened four restaurants, including one Keke's company location.
Operating income was $9.1 million compared to $14.9 million for the prior year quarter.
Adjusted franchise operating margin* was $30.8 million, or 50.0% of franchise and license revenue, and Adjusted company restaurant operating margin* was $7.2 million, or 13.2% of company restaurant sales.
Net income was $3.6 million, or $0.07 per diluted share.
Adjusted net income* and adjusted net income per share* were $6.9 million and $0.13, respectively.
Adjusted EBITDA* was $20.3 million.

(1) Beginning fiscal 2024, the Company has evolved its definition of non-GAAP measures. Please see the definitions, explanations, and reconciliations further in this release.

Second Quarter 2024 Results

Total operating revenue was $115.9 million compared to $116.9 million for the prior year quarter.

Franchise and license revenue was $61.6 million compared to $62.0 million for the prior year quarter. This change was driven by decreases in franchise occupancy revenue and franchise sales, partially offset by an increase in franchise advertising revenue primarily related to higher local advertising co-op contributions for the current quarter.

Company restaurant sales were $54.3 million compared to $54.9 million for the prior year quarter primarily driven by a decrease in same-restaurant sales, partially offset by three additional Keke's equivalent units for the current quarter.

Adjusted franchise operating margin* was $30.8 million, or 50.0% of franchise and license revenue, compared to $31.6 million, or 50.9% for the prior year quarter. This margin change was primarily driven by the impact of lower sales on royalty and advertising revenues and lease terminations.

Adjusted company restaurant operating margin* was $7.2 million, or 13.2% of company restaurant sales, compared to $8.5 million, or 15.4% for the prior year quarter. This margin change was primarily due to a decrease in same-restaurant sales and increases in marketing and general liability insurance costs for the current quarter.

Total general and administrative expenses were $20.5 million compared to $20.2 million in the prior year quarter. This change was primarily due to an increase in corporate administration expense.

The provision for income taxes was $1.2 million, reflecting an effective tax rate of 25.1% for the current quarter.

Net income was $3.6 million, or $0.07 per diluted share. Adjusted net income* per share was $0.13.

The Company ended the quarter with $267.4 million of total debt outstanding, including $257.5 million of borrowings under its credit facility.

Capital Allocation

The Company invested $5.0 million in cash capital expenditures, primarily related to Keke's development.

During the quarter, the Company allocated $4.7 million to share repurchases resulting in approximately $91.0 million remaining under its existing repurchase authorization.

Business Outlook

The following full year 2024 expectations reflect management's expectations that the current consumer and economic environment will not change materially.

Denny's domestic system-wide same-restaurant sales** between (1%) and 1% (vs. between 0% and 3%).
Consolidated restaurant openings of 30 to 40 (vs. 40 to 50), including 12 to 16 new Keke's restaurants, with a consolidated net decline of 20 to 30 (vs. 10 to 20).
Commodity inflation between 0% and 2%.
Labor inflation between 3% and 4% (vs. between 4% and 5%).
Total general and administrative expenses between $82 million and $85 million (vs. between $83 million and $86 million), including approximately $11 million (vs. $12 million) related to share-based compensation expense which does not impact Adjusted EBITDA*.
Adjusted EBITDA* between $83 million and $87 million (vs. between $87 million and $91 million).

* Please refer to the Reconciliation of Net Income to Non-GAAP Financial Measures, as well as the Reconciliation of Operating Income to Non-GAAP Financial Measures included in the tables below. The Company is not able to reconcile the forward-looking non-GAAP estimate set forth above to its most directly comparable U.S. generally accepted accounting principles (GAAP) estimates without unreasonable efforts because it is unable to predict, forecast or determine the probable significance of the items impacting these estimates, including gains, losses and other charges, with a reasonable degree of accuracy. Accordingly, the most directly comparable forward-looking GAAP estimate is not provided.

** Same-restaurant sales include sales at company restaurants and non-consolidated franchised and licensed restaurants that were open during the comparable periods noted. Total operating revenue is limited to company restaurant sales and royalties, advertising revenue, initial and other fees and occupancy revenue from non-consolidated franchised and licensed restaurants. Accordingly, domestic franchise same-restaurant sales and domestic system-wide same-restaurant sales should be considered as a supplement to, not a substitute for, the Company's results as reported under GAAP.

Conference Call and Webcast Information

The Company will provide further commentary on the results for the second quarter ended June 26, 2024 on its quarterly investor conference call today, Tuesday, July 30, 2024 at 4:30 p.m. Eastern Time. Interested parties are invited to listen to a live broadcast of the conference call accessible through the Company's investor relations website at investor.dennys.com.

About Denny's Corporation

Denny’s Corporation is one of America’s largest full-service restaurant chains based on number of restaurants. As of June 26, 2024, the Company consisted of 1,603 restaurants, 1,528 of which were franchised and licensed restaurants and 75 of which were company operated.

Denny's Corporation consists of the Denny’s brand and the Keke’s brand. As of June 26, 2024, the Denny's brand consisted of 1,541 global restaurants, 1,477 of which were franchised and licensed restaurants and 64 of which were company operated. As of June 26, 2024, the Keke's brand consisted of 62 restaurants, 51 of which were franchised restaurants and 11 of which were company operated.

For further information on Denny's Corporation, including news releases, links to SEC filings, and other financial information, please visit investor.dennys.com.

Non-GAAP Definition Changes

The Company has evolved its definition of non-GAAP financial measures starting in fiscal 2024 to provide more clarity and comparability relative to peers. Denny's Corporation management uses certain non-GAAP measures in analyzing operating performance and believes that the presentation of these measures provides investors and analysts with information that is beneficial to gaining an understanding of the Company's financial results. Non-GAAP disclosures should not be viewed as a substitute for financial results determined in accordance with GAAP.

The Company will begin excluding legal settlement expenses, pre-opening expenses, and other items management does not consider in the evaluation of its ongoing core operating performance from adjusted operating margin*, adjusted net income*, adjusted net income per share*, and adjusted EBITDA*. In addition, the Company will no longer deduct cash payments for restructuring and exit costs, or cash payments for share-based compensation from adjusted EBITDA*. Lastly, the Company will transition to utilizing GAAP cash flows included in its SEC filed documents in lieu of a non-GAAP financial measure.

Reconciliations of these non-GAAP measures are included in the tables of this press release and a recast of historical non-GAAP financial measures can be found on the Company's website, or its most recent investor presentation.

Cautionary Language Regarding Forward-Looking Statements

The Company urges caution in considering its current trends and any outlook on earnings disclosed in this press release. In addition, certain matters discussed in this release may constitute forward-looking statements. These forward-looking statements, which reflect management's best judgment based on factors currently known, are intended to speak only as of the date such statements are made and involve risks, uncertainties, and other factors that may cause the actual performance of Denny’s Corporation, its subsidiaries, and underlying restaurants to be materially different from the performance indicated or implied by such statements. Words such as “expect”, “anticipate”, “believe”, “intend”, “plan”, “hope”, "will", and variations of such words and similar expressions are intended to identify such forward-looking statements. Except as may be required by law, the Company expressly disclaims any obligation to update these forward-looking statements to reflect events or circumstances after the date of this release or to reflect the occurrence of unanticipated events. Factors that could cause actual performance to differ materially from the performance indicated by these forward-looking statements include, among others: economic, public health and political conditions that impact consumer confidence and spending, commodity and labor inflation; the ability to effectively staff restaurants and support personnel; the Company's ability to maintain adequate levels of liquidity for its cash needs, including debt obligations, payment of dividends, planned share repurchases and capital expenditures as well as the ability of its customers, suppliers, franchisees and lenders to access sources of liquidity to provide for their own cash needs; competitive pressures from within the restaurant industry; the Company's ability to integrate and derive the expected benefits from its acquisition of Keke's Breakfast Cafe; the level of success of the Company’s operating initiatives and advertising and promotional efforts; adverse publicity; health concerns arising from food-related pandemics, outbreaks of flu viruses or other diseases; changes in business strategy or development plans; terms and availability of capital; regional weather conditions; overall changes in the general economy (including with regard to energy costs), particularly at the retail level; political environment and geopolitical events (including acts of war and terrorism); and other factors from time to time set forth in the Company’s SEC reports and other filings, including but not limited to the discussion in Management’s Discussion and Analysis and the risks identified in Item 1A. Risk Factors contained in the Company’s Annual Report on Form 10-K for the year ended December 27, 2023 (and in the Company’s subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K).

DENNY’S CORPORATION
Consolidated Balance Sheets
(Unaudited)

($ in thousands)	6/26/24			12/27/23
Assets
Current assets
Cash and cash equivalents	$	1,166		$	4,893
Investments		2,796			1,281
Receivables, net		19,784			21,391
Inventories		1,895			2,175
Assets held for sale		350			1,455
Prepaid and other current assets		9,215			12,855
Total current assets		35,206			44,050
Property, net		96,957			93,494
Finance lease right-of-use assets, net		5,499			6,098
Operating lease right-of-use assets, net		110,554			116,795
Goodwill		66,357			65,908
Intangible assets, net		92,563			93,428
Deferred financing costs, net		1,384			1,702
Other noncurrent assets		51,418			43,343
Total assets	$	459,938		$	464,818

Liabilities
Current liabilities
Current finance lease liabilities	$	1,372		$	1,383
Current operating lease liabilities		14,931			14,779
Accounts payable		17,224			24,070
Other current liabilities		62,600			63,068
Total current liabilities		96,127			103,300
Long-term liabilities
Long-term debt		257,500			255,500
Noncurrent finance lease liabilities		8,552			9,150
Noncurrent operating lease liabilities		107,168			114,451
Liability for insurance claims, less current portion		7,069			6,929
Deferred income taxes, net		7,029			6,582
Other noncurrent liabilities		29,736			31,592
Total long-term liabilities		417,054			424,204
Total liabilities		513,181			527,504

Shareholders' deficit
Common stock		533			529
Paid-in capital		10,135			6,688
Deficit		(13,525	)		(21,784	)
Accumulated other comprehensive loss, net		(34,461	)		(41,659	)
Treasury stock		(15,925	)		(6,460	)
Total shareholders' deficit		(53,243	)		(62,686	)
Total liabilities and shareholders' deficit	$	459,938		$	464,818

Debt Balances
Credit facility revolver due 2026	$	257,500		$	255,500
Finance lease liabilities		9,924			10,533
Total debt	$	267,424		$	266,033

DENNY’S CORPORATION
Condensed Consolidated Statements of Income
(Unaudited)

	Quarter Ended
($ in thousands, except per share amounts)	6/26/24			6/28/23
Revenue:
Company restaurant sales	$	54,348		$	54,881
Franchise and license revenue		61,579			62,034
Total operating revenue		115,927			116,915
Costs of company restaurant sales, excluding depreciation and amortization		47,578			46,568
Costs of franchise and license revenue, excluding depreciation and amortization		33,428			30,460
General and administrative expenses		20,486			20,160
Depreciation and amortization		3,735			3,617
Goodwill impairment charges		20			—
Operating (gains), losses and other charges, net		1,565			1,176
Total operating costs and expenses, net		106,812			101,981
Operating income		9,115			14,934
Interest expense, net		4,573			4,402
Other nonoperating income, net		(224	)		(666	)
Income before income taxes		4,766			11,198
Provision for income taxes		1,198			2,660
Net income	$	3,568		$	8,538

Net income per share - basic	$	0.07		$	0.15
Net income per share - diluted	$	0.07		$	0.15

Basic weighted average shares outstanding		52,689			56,787
Diluted weighted average shares outstanding		52,787			57,051

Comprehensive income	$	4,602		$	10,557

General and Administrative Expenses
Corporate administrative expenses	$	15,776		$	15,160
Share-based compensation		2,624			2,519
Incentive compensation		1,898			1,899
Deferred compensation valuation adjustments		188			582
Total general and administrative expenses	$	20,486		$	20,160

DENNY’S CORPORATION
Condensed Consolidated Statements of Income
(Unaudited)

	Two Quarters Ended
($ in thousands, except per share amounts)	6/26/24			6/28/23
Revenue:
Company restaurant sales	$	106,690		$	108,333
Franchise and license revenue		119,211			126,053
Total operating revenue		225,901			234,386
Costs of company restaurant sales, excluding depreciation and amortization		95,696			93,060
Costs of franchise and license revenue, excluding depreciation and amortization		60,802			62,847
General and administrative expenses		41,708			40,278
Depreciation and amortization		7,316			7,273
Goodwill impairment charges		20			—
Operating (gains), losses and other charges, net		1,238			(153	)
Total operating costs and expenses, net		206,780			203,305
Operating income		19,121			31,081
Interest expense, net		8,993			8,907
Other nonoperating (income) expense, net		(861	)		9,427
Income before income taxes		10,989			12,747
Provision for income taxes		2,730			3,612
Net income	$	8,259		$	9,135

Net income per share - basic	$	0.16		$	0.16
Net income per share - diluted	$	0.16		$	0.16

Basic weighted average shares outstanding		52,879			57,212
Diluted weighted average shares outstanding		53,002			57,423

Comprehensive income	$	15,457		$	11,511

General and Administrative Expenses
Corporate administrative expenses	$	30,968		$	29,339
Share-based compensation		5,400			5,613
Incentive compensation		4,421			4,286
Deferred compensation valuation adjustments		919			1,040
Total general and administrative expenses	$	41,708		$	40,278

DENNY’S CORPORATION

Reconciliation of Net Income to Non-GAAP Financial Measures

(Unaudited)

The Company believes that, in addition to GAAP measures, certain non-GAAP financial measures are useful information to investors and analysts to assist in the evaluation of operating performance on a period-to-period basis. However, non-GAAP measures should be considered as a supplement to, not a substitute for, operating income, net income, and net income per share, or other financial performance measures prepared in accordance with GAAP. The Company uses adjusted EBITDA, adjusted net income and adjusted net income per share internally as performance measures for planning purposes, including the preparation of annual operating budgets, and for compensation purposes, including incentive compensation for certain employees. These non-GAAP measures are adjusted for certain items the Company does not consider in the evaluation of its ongoing core operating performance. These adjustments are either non-recurring in nature or vary from period to period without correlation to the Company's ongoing core operating performance.

	Quarter Ended						Two Quarters Ended
($ in thousands, except per share amounts)	6/26/24			6/28/23			6/26/24			6/28/23
Net income	$	3,568		$	8,538		$	8,259		$	9,135
Provision for income taxes		1,198			2,660			2,730			3,612
Goodwill impairment charges		20			—			20			—
Operating (gains), losses and other charges, net		1,565			1,176			1,238			(153	)
Other nonoperating (income) expense, net		(224	)		(666	)		(861	)		9,427
Share-based compensation expense		2,624			2,519			5,400			5,613
Deferred compensation plan valuation adjustments		188			582			919			1,040
Interest expense, net		4,573			4,402			8,993			8,907
Depreciation and amortization		3,735			3,617			7,316			7,273
Legal settlement expenses		208			121			1,657			230
Pre-opening expenses		191			25			557			25
Other adjustments		2,640			11			2,492			3
Adjusted EBITDA	$	20,286		$	22,985		$	38,720		$	45,112

Net income	$	3,568		$	8,538		$	8,259		$	9,135
Losses and amortization on interest rate swap derivatives, net		167			82			308			10,744
Losses (gains) on sales of assets and other charges, net		526			(522	)		(94	)		(2,044	)
Impairment charges ⁽¹⁾		639			—			734			129
Legal settlement expenses		208			121			1,657			230
Pre-opening expenses		191			25			557			25
Other adjustments		2,640			11			2,492			3
Tax effect ⁽²⁾		(1,086	)		92			(1,402	)		(2,344	)
Adjusted net income	$	6,853		$	8,347		$	12,511		$	15,878

Diluted weighted average shares outstanding		52,787			57,051			53,002			57,423

Net income per share - diluted	$	0.07		$	0.15		$	0.16		$	0.16
Adjustments per share		0.06			—			0.08			0.12
Adjusted net income per share	$	0.13		$	0.15		$	0.24		$	0.28

(1)		Impairment charges include goodwill impairment charges of less than $0.1 million for the quarter and year-to-date period ended June 26, 2024.
(2)		Tax adjustments for the quarter and year-to-date period ended June 26, 2024 reflect effective tax rates of 24.8%. Tax adjustments for the quarter and year-to-date period ended June 28, 2023 reflect effective tax rates of 32.5% and 25.8%, respectively.

DENNY’S CORPORATION

Reconciliation of Operating Income to Non-GAAP Financial Measures

(Unaudited)

The Company believes that, in addition to GAAP measures, certain other non-GAAP financial measures are useful information to investors and analysts to assist in the evaluation of restaurant-level operating efficiency and performance of ongoing restaurant-level operations. However, non-GAAP measures should be considered as a supplement to, not a substitute for, operating income, net income, and net income per share, or other financial performance measures prepared in accordance with GAAP. The Company uses restaurant-level operating margin, company restaurant operating margin and franchise operating margin internally as performance measures for planning purposes, including the preparation of annual operating budgets, and for compensation purposes, including incentive compensation for certain employees.

Restaurant-level operating margin is the total of company restaurant operating margin and franchise operating margin and excludes: (i) general and administrative expenses, which include primarily non-restaurant-level costs associated with support of company and franchised restaurants and other activities at their corporate office; (ii) depreciation and amortization expense, substantially all of which is related to company restaurant-level assets, because such expenses represent historical sunk costs which do not reflect current cash outlays for the restaurants; (iii) special items, included within operating (gains), losses and other charges, net, to provide investors with a clearer perspective of its ongoing operating performance and a more relevant comparison to prior period results.

Company restaurant operating margin is defined as company restaurant sales less costs of company restaurant sales (which include product costs, company restaurant level payroll and benefits, occupancy costs, and other operating costs including utilities, repairs and maintenance, marketing and other expenses) and presents it as a percent of company restaurant sales. Adjusted company operating restaurant margin is defined as company restaurant operating margin less certain items such as legal settlement expenses, pre-opening expenses, and other items the Company does not consider in the evaluation of its ongoing core operating performance.

Franchise operating margin is defined as franchise and license revenue (which includes franchise royalties and other non-food and beverage revenue streams such as initial franchise and other fees, advertising revenue and occupancy revenue) less costs of franchise and license revenue and presents it as a percent of franchise and license revenue. Adjusted franchise operating margin is defined as franchise operating margin less certain items the Company does not consider in the evaluation of its ongoing core operating performance.

Adjusted restaurant-level operating margin is the total of adjusted company restaurant operating margin and adjusted franchise operating margin and is defined as restaurant-level operating margin adjusted for certain items the Company does not consider in the evaluation of its ongoing core operating performance. These adjustments are either non-recurring in nature or vary from period to period without correlation to the Company's ongoing core operating performance.

	Quarter Ended				Two Quarters Ended
($ in thousands)	6/26/24		6/28/23		6/26/24		6/28/23
Operating income	$	9,115	$	14,934	$	19,121	$	31,081
General and administrative expenses		20,486		20,160		41,708		40,278
Depreciation and amortization		3,735		3,617		7,316		7,273
Goodwill impairment charges		20		—		20		—
Operating (gains), losses and other charges, net		1,565		1,176		1,238		(153	)
Restaurant-level operating margin	$	34,921	$	39,887	$	69,403	$	78,479

Restaurant-level operating margin consists of:
Company restaurant operating margin ⁽¹⁾	$	6,770	$	8,313	$	10,994	$	15,273
Franchise operating margin ⁽²⁾		28,151		31,574		58,409		63,206
Restaurant-level operating margin	$	34,921	$	39,887	$	69,403	$	78,479
Adjustments ⁽³⁾		3,039		157		4,706		258
Adjusted restaurant-level operating margin	$	37,960	$	40,044	$	74,109	$	78,737

(1)		Company restaurant operating margin is calculated as operating income plus general and administrative expenses; depreciation and amortization; operating (gains), losses and other charges, net; and costs of franchise and license revenue, excluding depreciation and amortization; less franchise and license revenue.
(2)		Franchise operating margin is calculated as operating income plus general and administrative expenses; depreciation and amortization; operating (gains), losses and other charges, net; and costs of company restaurant sales, excluding depreciation and amortization; less company restaurant sales.
(3)		Adjustments include legal settlement expenses, pre-opening costs, and other adjustments the Company does not consider in the evaluation of its ongoing core operating performance. Adjustments for the quarter and year-to-date period ended June 26, 2024 include a $2.6 million distribution to franchisees related to a review of advertising costs.

DENNY’S CORPORATION
Operating Margins
(Unaudited)

	Quarter Ended
($ in thousands)	6/26/24				6/28/23
Company restaurant operations: ⁽¹⁾
Company restaurant sales	$	54,348	100.0	%	$	54,881	100.0	%
Costs of company restaurant sales, excluding depreciation and amortization:
Product costs		13,632	25.1	%		14,170	25.8	%
Payroll and benefits		20,493	37.7	%		20,488	37.3	%
Occupancy		4,671	8.6	%		4,080	7.4	%
Other operating costs:
Utilities		1,695	3.1	%		1,860	3.4	%
Repairs and maintenance		1,008	1.9	%		782	1.4	%
Marketing		1,876	3.5	%		1,419	2.6	%
Legal settlements		208	0.4	%		121	0.2	%
Pre-opening costs		191	0.4	%		25	0.0	%
Other direct costs		3,804	7.0	%		3,623	6.6	%
Total costs of company restaurant sales, excluding depreciation and amortization	$	47,578	87.5	%	$	46,568	84.9	%
Company restaurant operating margin (non-GAAP) ⁽²⁾	$	6,770	12.5	%	$	8,313	15.1	%
Adjustments ⁽³⁾		399	0.7	%		146	0.3	%
Adjusted company restaurant operating margin (non-GAAP) ⁽²⁾	$	7,169	13.2	%	$	8,459	15.4	%

Franchise operations: ⁽⁴⁾
Franchise and license revenue:
Royalties	$	30,014	48.7	%	$	30,376	49.0	%
Advertising revenue		20,788	33.8	%		19,853	32.0	%
Initial and other fees		2,448	4.0	%		2,616	4.2	%
Occupancy revenue		8,329	13.5	%		9,189	14.8	%
Total franchise and license revenue	$	61,579	100.0	%	$	62,034	100.0	%

Costs of franchise and license revenue, excluding depreciation and amortization:
Advertising costs	$	20,788	33.8	%	$	19,853	32.0	%
Occupancy costs		5,094	8.3	%		5,792	9.3	%
Other direct costs		7,546	12.3	%		4,815	7.8	%
Total costs of franchise and license revenue, excluding depreciation and amortization	$	33,428	54.3	%	$	30,460	49.1	%
Franchise operating margin (non-GAAP) ⁽²⁾	$	28,151	45.7	%	$	31,574	50.9	%
Adjustments ⁽³⁾		2,640	4.3	%		11	0.0	%
Adjusted franchise operating margin (non-GAAP) ⁽²⁾	$	30,791	50.0	%	$	31,585	50.9	%

Total operating revenue ⁽⁵⁾	$	115,927	100.0	%	$	116,915	100.0	%
Total costs of operating revenue ⁽⁵⁾		81,006	69.9	%		77,028	65.9	%
Restaurant-level operating margin (non-GAAP) ⁽⁵⁾	$	34,921	30.1	%	$	39,887	34.1	%

(1)		As a percentage of company restaurant sales.
(2)		Other operating expenses such as general and administrative expenses and depreciation and amortization relate to both company and franchise operations and are not allocated to costs of company restaurant sales and costs of franchise and license revenue. As such, operating margin and adjusted operating margin are considered non-GAAP financial measures and should be considered as a supplement to, not as a substitute for, operating income, net income or other financial measures prepared in accordance with GAAP.
(3)		Adjustments include legal settlement expenses, pre-opening costs, and other adjustments the Company does not consider in the evaluation of its ongoing core operating performance. Adjustments for the quarter ended June 26, 2024 include a $2.6 million distribution to franchisees related to a review of advertising costs.
(4)		As a percentage of franchise and license revenue.
(5)		As a percentage of total operating revenue.

DENNY’S CORPORATION
Operating Margins
(Unaudited)

	Two Quarters Ended
($ in thousands)	6/26/24				6/28/23
Company restaurant operations: ⁽¹⁾
Company restaurant sales	$	106,690	100.0	%	$	108,333	100.0	%
Costs of company restaurant sales, excluding depreciation and amortization:
Product costs		26,943	25.3	%		28,209	26.0	%
Payroll and benefits		40,967	38.4	%		40,728	37.6	%
Occupancy		9,244	8.7	%		8,174	7.5	%
Other operating costs:
Utilities		3,350	3.1	%		3,917	3.6	%
Repairs and maintenance		2,013	1.9	%		1,671	1.5	%
Marketing		3,480	3.3	%		2,814	2.6	%
Legal settlements		1,657	1.6	%		230	0.2	%
Pre-opening costs		557	0.5	%		25	0.0	%
Other direct costs		7,485	7.0	%		7,292	6.7	%
Total costs of company restaurant sales, excluding depreciation and amortization	$	95,696	89.7	%	$	93,060	85.9	%
Company restaurant operating margin (non-GAAP) ⁽²⁾	$	10,994	10.3	%	$	15,273	14.1	%
Adjustments ⁽³⁾		2,214	2.1	%		255	0.2	%
Adjusted company restaurant operating margin (non-GAAP) ⁽²⁾	$	13,208	12.4	%	$	15,528	14.3	%

Franchise operations: ⁽⁴⁾
Franchise and license revenue:
Royalties	$	59,320	49.8	%	$	60,403	47.9	%
Advertising revenue		38,926	32.7	%		39,521	31.4	%
Initial and other fees		4,264	3.6	%		7,606	6.0	%
Occupancy revenue		16,701	14.0	%		18,523	14.7	%
Total franchise and license revenue	$	119,211	100.0	%	$	126,053	100.0	%

Costs of franchise and license revenue, excluding depreciation and amortization:
Advertising costs	$	38,926	32.7	%	$	39,521	31.4	%
Occupancy costs		10,226	8.6	%		11,464	9.1	%
Other direct costs		11,650	9.8	%		11,862	9.4	%
Total costs of franchise and license revenue, excluding depreciation and amortization	$	60,802	51.0	%	$	62,847	49.9	%
Franchise operating margin (non-GAAP) ⁽²⁾	$	58,409	49.0	%	$	63,206	50.1	%
Adjustments ⁽³⁾		2,492	2.1	%		3	0.0	%
Adjusted franchise operating margin (non-GAAP) ⁽²⁾	$	60,901	51.1	%	$	63,209	50.1	%

Total operating revenue ⁽⁵⁾	$	225,901	100.0	%	$	234,386	100.0	%
Total costs of operating revenue ⁽⁵⁾		156,498	69.3	%		155,907	66.5	%
Restaurant-level operating margin (non-GAAP) ⁽⁵⁾	$	69,403	30.7	%	$	78,479	33.5	%

(1)		As a percentage of company restaurant sales.
(2)		Other operating expenses such as general and administrative expenses and depreciation and amortization relate to both company and franchise operations and are not allocated to costs of company restaurant sales and costs of franchise and license revenue. As such, operating margin and adjusted operating margin are considered non-GAAP financial measures and should be considered as a supplement to, not as a substitute for, operating income, net income or other financial measures prepared in accordance with GAAP.
(3)		Adjustments include legal settlement expenses, pre-opening costs, and other adjustments the Company does not consider in the evaluation of its ongoing core operating performance. Adjustments for the year-to-date period ended June 26, 2024 include a $2.6 million distribution to franchisees related to a review of advertising costs.
(4)		As a percentage of franchise and license revenue.
(5)		As a percentage of total operating revenue.

DENNY’S CORPORATION
Statistical Data
(Unaudited)

	Denny's												Keke's
Changes in Same-Restaurant Sales ⁽¹⁾	Quarter Ended						Two Quarters Ended						Quarter Ended					Two Quarters Ended
(Increase (decrease) vs. prior year)	6/26/24			6/28/23			6/26/24			6/28/23			6/26/24			6/28/23		6/26/24			6/28/23
Company Restaurants		(2.6	)%		3.0	%		(2.8	%)		7.0	%		(4.4	)%		N/A		(2.7	%)		N/A
Domestic Franchise Restaurants		(0.4	)%		3.0	%		(0.8	%)		5.5	%		(4.6	)%		N/A		(4.3	%)		N/A
Domestic System-wide Restaurants		(0.6	)%		3.0	%		(0.9	%)		5.6	%		(4.6	)%		N/A		(4.1	%)		N/A

Average Unit Sales
($ in thousands)
Company Restaurants	$	774		$	786		$	1,517		$	1,548		$	447		$	459	$	902		$	925
Franchised Restaurants	$	473		$	466		$	930		$	918		$	457		$	476	$	929		$	967

(1)		Same-restaurant sales include sales at company restaurants and non-consolidated franchised and licensed restaurants that were open during the comparable periods noted. Total operating revenue is limited to company restaurant sales and royalties, advertising revenue, initial and other fees and occupancy revenue from non-consolidated franchised and licensed restaurants. Accordingly, domestic franchise same-restaurant sales and domestic system-wide same-restaurant sales should be considered as a supplement to, not a substitute for, the Company's results as reported under GAAP.

Restaurant Unit Activity	Denny's									Keke's
	Company			Franchised & Licensed			Total			Company			Franchised & Licensed	Total
Ending Units March 27, 2024		64			1,489			1,553			11		50	61
Units Opened		—			3			3			1		—	1
Units Refranchised		—			—			—			(1	)	1	—
Units Closed		—			(15	)		(15	)		—		—	—
Net Change		—			(12	)		(12	)		—		1	1
Ending Units June 26, 2024		64			1,477			1,541			11		51	62

Equivalent Units
Second Quarter 2024		64			1,485			1,549			11		51	62
Second Quarter 2023		65			1,525			1,590			8		47	55
Net Change		(1	)		(40	)		(41	)		3		4	7

Ending Units December 27, 2023		65			1,508			1,573			8		50	58
Units Opened		—			8			8			4		—	4
Units Refranchised		—			—			—			(1	)	1	—
Units Closed		(1	)		(39	)		(40	)		—		—	—
Net Change		(1	)		(31	)		(32	)		3		1	4
Ending Units June 26, 2024		64			1,477			1,541			11		51	62

Equivalent Units
Year-to-Date 2024		64			1,493			1,557			10		50	60
Year-to-Date 2023		65			1,527			1,592			8		46	54
Net Change		(1	)		(34	)		(35	)		2		4	6

FAQ

What were Denny's Q2 2024 earnings per share?

Denny's (DENN) reported net income of $0.07 per diluted share for Q2 2024, with adjusted net income per share at $0.13.

How did Denny's same-restaurant sales perform in Q2 2024?

Denny's domestic system-wide same-restaurant sales decreased by 0.6% in Q2 2024 compared to the equivalent fiscal period in 2023.

What is Denny's updated guidance for 2024 same-restaurant sales?

Denny's updated its 2024 guidance for domestic system-wide same-restaurant sales to between -1% and 1%, down from the previous 0% to 3% range.

How many new restaurants did Denny's open in Q2 2024?

Denny's opened four new restaurants in Q2 2024, including one Keke's company location.

What was Denny's Adjusted EBITDA for Q2 2024?

Denny's reported Adjusted EBITDA of $20.3 million for Q2 2024.

Denny’s Corporation Reports Results for Second Quarter 2024

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What were Denny's Q2 2024 earnings per share?

How did Denny's same-restaurant sales perform in Q2 2024?

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What was Denny's Adjusted EBITDA for Q2 2024?

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Denny’s Corporation Reports Results for Second Quarter 2024

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What were Denny's Q2 2024 earnings per share?

How did Denny's same-restaurant sales perform in Q2 2024?

What is Denny's updated guidance for 2024 same-restaurant sales?

How many new restaurants did Denny's open in Q2 2024?

What was Denny's Adjusted EBITDA for Q2 2024?

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