- EBITDA: $67 million compared to $67.3 million in the same quarter last year.
- Revenue: Down 1% from the same quarter last year.
- Applebee's Comp Sales: Negative 1.8%.
- IHOP Comp Sales: Negative 1.4%.
- Adjusted Free Cash Flow: $23.2 million.
- Franchise Revenues: Decreased 0.8% to $176.5 million.
- G&A Expenses: Decreased 2.1% to $46.9 million.
- Adjusted Diluted EPS: $1.71 compared to $1.82 for the same period last year.
- CapEx: $6.8 million compared to $22.8 million for the same period last year.
- Total Unrestricted Cash: $153.5 million compared to $145 million at the end of the first quarter.
- Share Repurchase: $6 million in shares repurchased.
- Dividends Paid: $7.9 million.
- Applebee's Average Weekly Sales: Over $53,900.
- IHOP Average Weekly Sales: $38,400.
- Applebee's Commodity Costs: Fell 2.9%.
- IHOP Commodity Costs: Grew 0.6%.
- Annualized Savings: Over $35 million across the system.
- Revised Applebee's Comp Sales Guidance: Negative 4% to Negative 2%.
- Revised IHOP Comp Sales Guidance: 0% to 2%.
- Revised EBITDA Guidance: $245 million to $255 million.
- Revised CapEx Guidance: $14 million to $16 million.
- Revised IHOP Development Guidance: 0 to 10 net new domestic restaurants.
- Applebee's Development Guidance: 25 to 35 net fewer domestic restaurants.
Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Dine Brands Global Inc (DIN, Financial) maintained strong bottom-line performance despite a pullback in top-line growth due to economic challenges.
- The company has a solid asset-light model and strong cash flow, with improved year-over-year margins and steady leverage.
- Applebee's saw an improvement in comp sales and traffic versus Q1, driven by successful promotions and menu innovations.
- IHOP's guest satisfaction scores increased by 8%, outperforming peers, and the brand saw strong demand for its retail products.
- Dine Brands Global Inc (DIN) continues to return capital to shareholders, repurchasing $6 million in shares and paying $7.9 million in dividends in Q2 2024.
Negative Points
- Dine Brands Global Inc (DIN) experienced a 1% decline in Q2 revenue compared to the same quarter last year.
- Applebee's reported negative 1.8% comp sales, and IHOP reported negative 1.4% comp sales, reflecting challenging industry headwinds.
- The company revised its full-year financial and development guidance downward due to ongoing market pressures.
- Franchise revenues decreased by 0.8% to $176.5 million, primarily driven by a decrease in advertising revenue.
- The development of new IHOP restaurants faced delays, leading to a revised guidance of zero to 10 net new domestic restaurants, down from the previously expected 15 to 25.
Q & A Highlights
Q: My question's about the competitive landscape. How much has the recent viral success of a competitor impacted your business, and what can you do to mitigate this in the future?
A: (John Peyton, CEO) We have a strategy for Applebee's and are confident in it. We learned from the first two quarters that we need to be flexible and agile, leaning more toward value promotions. Our data shows Applebee's is not losing significant share to competitors. (Tony Moralejo, President of Applebee's) We conducted a deep dive and concluded that no single brand is impacting our performance significantly. Our strategy remains focused on value, which is crucial for maintaining market share.
Q: Can you provide an update on the percentage of orders that are Limited Time Offers (LTOs) and how you think this might change in the second half of the year?
A: (John Peyton, CEO) The percentage of tickets that are LTOs and everyday value items is about 33%, up from the mid to low 20s last year. (Tony Moralejo, President of Applebee's) For the second half of the year, you can expect a heavy dose of value offerings due to inflationary pressures, along with promotions tied to our NFL partnership.
Q: Can you talk about the sentiment among franchisees, particularly regarding development and the challenging macro environment?
A: (John Peyton, CEO) Franchisees are still eager to open more IHOPs, but predicting timelines is challenging due to various factors. (Jay Johns, President of IHOP) We still have great demand for IHOP, and the pipeline is filled for future years. We are trying to be more realistic with our guidance this year.
Q: How are guest satisfaction scores trending at Applebee's, and what are the biggest opportunities for improvement?
A: (Tony Moralejo, President of Applebee's) We are focused on driving greater frequency by improving accessibility, enhancing off-premise offerings, and solving late-night staffing issues. Our promotions and value offerings are designed to stay top of mind with our guests.
Q: Can you share any color on sequential trends through Q2 and into Q3, and the components of the comp at each brand?
A: (John Peyton, CEO) We saw momentum in Q1, but macro pressures intensified in Q2. We anticipate these pressures to continue throughout the year. For Applebee's, menu pricing increased by 2.6%, and mix was down about 2%. For IHOP, menu pricing increased by 7%, and mix was also down about 2%.
Q: How are conversations with franchisees regarding aggressive discounting, and how do you avoid the risk of damaging the brand?
A: (John Peyton, CEO) We have extensive committees made up of franchisees who plan promotions collaboratively. Promotions must be profitable, and we do postmortems to make adjustments. (Tony Moralejo, President of Applebee's) Our franchisees are supportive of value campaigns and are implementing profitability initiatives to offset cost increases.
Q: Could you provide more details on the profitability of recent value promotions at IHOP and the traffic lift needed for them to be profitable?
A: (Jay Johns, President of IHOP) The risk is trade-down, but we do financial analysis to predict the impact. We use a barbell strategy to balance discounted items with full-price innovations, making promotions profitable for franchisees. (Tony Moralejo, President of Applebee's) We do not implement loss leader promotions; every promotion is intended to be profitable.
Q: Could you elaborate on what you're seeing from a daypart perspective at IHOP and any differences in trends between weekends and weekdays?
A: (Jay Johns, President of IHOP) Overnight has been our best-performing daypart due to more restaurants being open 24 hours. There are no huge differences otherwise, and it depends on the promotions we run.
Q: Can you explain the magnitude of the same-store sales guidance decline at Applebee's and how you balance conservatism with opportunities?
A: (Vance Chang, CFO) The range in our guidance reflects the uncertainty of macroeconomic headwinds. The magnitude depends on these pressures and the success of our value campaigns.
Q: What progress has been made in lowering build costs for new units, especially for Applebee's and dual-branded locations?
A: (John Peyton, CEO) We are not ready to reveal costs for dual-branded locations yet. (Tony Moralejo, President of Applebee's) We are on track with our value-engineered prototype and plan to introduce it to the system in 2025 after consumer and operational tests.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
