Denny’s Corporation Reports Results For Second Quarter 2021

SPARTANBURG, S.C., Aug. 03, 2021 (GLOBE NEWSWIRE) -- Denny’s Corporation (NASDAQ: DENN), franchisor and operator of one of America's largest franchised full-service restaurant chains, today reported results for its second quarter ended June 30, 2021 and provided a business update on the Company’s operations.

John Miller, Chief Executive Officer, stated, “We are simply delighted to welcome guests back now that all of our operating domestic dining rooms are open while still providing them with the convenience of our off-premise options. With the easing of restrictions, the rollout of our two new virtual brands, The Burger Den and The Meltdown, along with the perseverance of our entire organization, both June and July domestic system-wide same-store sales** surpassed 2019 pre-pandemic levels. We are encouraged by the potential for additional sales growth as we overcome staffing challenges and return to 24/7 operations across our system."

Second Quarter 2021 Highlights

• Total operating revenue increased 164.3% to $106.2 million, primarily due to the COVID-19 recovery.
• Domestic system-wide same-store sales** decreased 1.2% compared to the equivalent fiscal period in 2019, including a 1.5% decrease at domestic franchised restaurants and a 1.9% increase at company restaurants.
• Domestic system-wide same-store sales** increased 117.0% compared to the equivalent fiscal period in 2020.
• Opened three franchised restaurants, including one international location.
• Operating income (loss) was $18.3 million compared to ($13.5) million in the prior year quarter.
• Franchise Operating Margin* was $29.9 million, or 51.0% of franchise and license revenue, and Company Restaurant Operating Margin* was $9.8 million, or 20.5% of company restaurant sales.
• Net loss was $0.8 million, or $0.01 per diluted share.
• Adjusted Net Income* was $11.6 million, or $0.18 per share.
• Adjusted EBITDA* was $25.3 million compared to ($5.1) million in the prior year quarter.
• Cash provided by (used in) operating, investing, and financing activities was $33.1 million, ($1.2) million, and ($35.6) million, respectively.
• Adjusted Free Cash Flow* was $17.8 million compared to ($11.5) million in the prior year quarter.
• Provided guidance for the fiscal third quarter 2021.

Current Trends

Domestic system-wide same-store sales** for the second quarter ended June 30, 2021, continued to trend toward pre-pandemic levels. Fiscal periods June and July surpassed 2019 sales levels at both company and domestic franchise restaurants. With all operating dining rooms open, off-premise sales, inclusive of virtual brands, have remained strong at approximately 24% of total sales compared to 12% pre-pandemic.

Additionally, during the second quarter the Company substantially completed the rollout of its first virtual brand, The Burger Den, to over 1,100 domestic locations and began a phased rollout of its second virtual brand, The Meltdown, to approximately half of the domestic system. Transactions for these two virtual brands are highly incremental and leverage labor during underutilized dayparts.

In an effort to provide greater transparency due to the COVID-19 pandemic, Denny's is providing the following tables that present monthly results for 2021 compared to the equivalent fiscal periods in 2019:

Domestic System-Wide Same-Store Sales^** Compared to 2019 Fiscal Periods and Domestic Average Units for 2021 Fiscal Periods

	Domestic System-Wide Same-Store Sales**
	Fiscal Year 2021
	Jan	Feb	Mar	Apr	May	Jun	Jul 1
System	(31%)	(25%)	(9%)	(2%)	(3%)	1%	3%
24/7 Units	(20%)	(16%)	2%	11%	11%	14%	15%
Limited Hour Units	(38%)	(32%)	(16%)	(11%)	(12%)	(8%)	(7%)
	July results are preliminary.

	Domestic Average Units
	Fiscal Year 2021
	Jan	Feb	Mar	Apr	May	Jun	Jul 1
System	1,504	1,501	1,501	1,499	1,498	1,497	1,495
24/7 Units	519	532	569	566	561	566	576
Limited Hour Units	939	928	912	920	926	920	909
Temporary Closures	46	41	20	13	11	11	10
	July results are preliminary.

Second Quarter Results

Denny’s total operating revenue increased 164.3% to $106.2 million compared to $40.2 million in the prior year quarter. Franchise and license revenue was $58.6 million compared to $25.0 million in the prior year quarter. Company restaurant sales were $47.6 million compared to $15.1 million in the prior year quarter. These changes were primarily due to reduced dine-in restrictions and fewer temporary closures related to the COVID-19 pandemic in the current period as compared to the prior year period.

Franchise Operating Margin* was $29.9 million, or 51.0% of franchise and license revenue, compared to $9.8 million, or 39.1%, in the prior year quarter. This margin increase was primarily due to the improvement in sales performance at franchised restaurants, partially offset by fewer equivalent units.

Company Restaurant Operating Margin* was $9.8 million, or 20.5% of company restaurant sales, compared to ($4.5) million, or (29.6%), in the prior year quarter. This change in margin was primarily due to the improvement in sales performance at company restaurants in addition to lower payroll and benefits costs due to staffing challenges. Additionally, the Company recorded approximately $0.6M in favorable reserve adjustments and tax credits related to the CARES Act.

Total general and administrative expenses were $17.5 million, compared to $13.2 million in the prior year quarter. This change was primarily due to increases in both performance-based incentive compensation and share-based compensation expense in addition to temporary cost reductions during the prior year quarter. These increases were partially offset by market valuation changes in the Company's deferred compensation plan liabilities compared to the prior year quarter as well as approximately $0.5 million in tax credits related to the CARES Act.

Denny’s ended the quarter with $194.9 million of total debt outstanding, including $180.0 million of borrowings under its credit facility. Subsequent to the end of the second quarter, the Company paid down an additional $5 million on its revolving credit facility, bringing the current outstanding balance to $175.0 million.

The benefit from income taxes was $1.2 million, compared to $5.1 million in the prior year quarter, reflecting an effective tax rate of 59.3%. Approximately $1.5 million in cash taxes were paid during the quarter.

Net loss was $0.8 million, or $0.01 per diluted share, compared to net loss of $23.0 million, or $0.41 per diluted share, in the prior year quarter. Adjusted Net Income* per share was $0.18 compared to Adjusted Net Loss* per share of $0.25 in the prior year quarter.

Adjusted Free Cash Flow* and Capital Allocation

Denny’s generated $17.8 million of Adjusted Free Cash Flow* after investing $1.5 million in cash capital expenditures, including maintenance capital.

Business Outlook

The following expectations for the fiscal third quarter ending September 29, 2021 reflect management's expectations that the current economic environment will not change materially:

• Domestic system-wide same-store sales** growth between 2% and 4% compared to the equivalent fiscal period in 2019.
• Total general and administrative expenses between $17 million and $18 million, including approximately $3.5 million related to share-based compensation.
• Adjusted EBITDA* between $22 million and $24 million.
  

* Please refer to the Reconciliation of Net Income (Loss) and Net Cash Provided by (Used In) Operating Activities to Non-GAAP Financial Measures, as well as the Reconciliation of Operating Income (Loss) to Non-GAAP Financial Measures included in the following tables. The Company is not able to reconcile the forward-looking non-GAAP estimates set forth above to their most directly comparable 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 estimates are not provided.

** Same-store 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, fees and occupancy revenue from non-consolidated franchised and licensed restaurants. Accordingly, domestic franchise same-store sales and domestic system-wide same-store 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

Denny’s will provide further commentary on the results for the second quarter ended June 30, 2021 on its quarterly investor conference call today, Tuesday, August 3, 2021 at 4:30 p.m. Eastern Time. Interested parties are invited to listen to a live broadcast of the conference call accessible through the investor relations section of Denny’s website at investor.dennys.com.

About Denny’s

Denny's Corporation is the franchisor and operator of one of America's largest franchised full-service restaurant chains, based on the number of restaurants. As of June 30, 2021, Denny’s had 1,645 franchised, licensed, and company restaurants around the world including 149 restaurants in Canada, Puerto Rico, Mexico, the Philippines, New Zealand, Honduras, the United Arab Emirates, Costa Rica, Guam, Guatemala, El Salvador, Indonesia, and the United Kingdom. For further information on Denny's, including news releases, links to SEC filings, and other financial information, please visit the Denny's investor relations website at investor.dennys.com.

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: the rapidly evolving COVID-19 pandemic and related containment measures, including the potential for further operational disruption from government mandates affecting restaurants; economic, public health, social and political conditions that impact consumer confidence and spending with respect to social unrest and the COVID-19 pandemic; competitive pressures from within the restaurant industry; 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 (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 30, 2020 (and in the Company’s subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K).

DENNY’S CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)				6/30/21				12/30/20
Assets
	Current assets
		Cash and cash equivalents		$	10,882			$	3,892
		Investments		2,069				2,272
		Receivables, net		20,407				21,349
		Inventories		1,280				1,181
		Assets held for sale		1,621				1,125
		Prepaid and other current assets		12,168				18,847
			Total current assets	48,427				48,666
	Property, net			82,490				86,154
	Financing lease right-of-use assets, net			9,437				9,830
	Operating lease right-of-use assets, net			135,229				139,534
	Goodwill			36,884				36,884
	Intangible assets, net			50,892				51,559
	Deferred financing costs, net			1,727				2,414
	Deferred income taxes, net			19,854				23,210
	Other noncurrent assets			33,407				32,698
			Total assets	$	418,347			$	430,949
Liabilities
	Current liabilities
		Current finance lease liabilities		$	1,637			$	1,839
		Current operating lease liabilities		16,348				16,856
		Accounts payable		14,376				12,021
		Other current liabilities		55,251				46,462
			Total current liabilities	87,612				77,178
	Long-term liabilities
		Long-term debt		180,000				210,000
		Noncurrent finance lease liabilities		13,265				13,530
		Noncurrent operating lease liabilities		132,959				137,534
		Liability for insurance claims, less current portion		9,602				10,309
		Other noncurrent liabilities		94,332				112,844
			Total long-term liabilities	430,158				484,217
			Total liabilities	517,770				561,395
Shareholders' deficit
		Common stock		642				640
		Paid-in capital		129,176				123,833
		Deficit		(172,161		)		(194,514		)
		Accumulated other comprehensive loss, net		(57,080		)		(60,405		)
			Total shareholders' deficit	(99,423		)		(130,446		)
			Total liabilities and shareholders' deficit	$	418,347			$	430,949
Debt Balances
(In thousands)				6/30/21				12/30/20
Credit facility revolver due 2022				$	180,000			$	210,000
Finance lease liabilities				14,902				15,369
	Total debt			$	194,902			$	225,369

DENNY’S CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited)
			Quarter Ended
(In thousands, except per share amounts)			6/30/21				6/24/20
Revenue:
	Company restaurant sales		$	47,572			$	15,128
	Franchise and license revenue		58,593				25,033
		Total operating revenue	106,165				40,161
Costs of company restaurant sales, excluding depreciation and amortization			37,813				19,606
Costs of franchise and license revenue, excluding depreciation and amortization			28,735				15,244
General and administrative expenses			17,548				13,153
Depreciation and amortization			3,897				4,058
Operating (gains), losses and other charges, net			(113		)		1,627
		Total operating costs and expenses, net	87,880				53,688
Operating income (loss)			18,285				(13,527		)
Interest expense, net			4,066				4,947
Other nonoperating expense, net			16,251				9,565
Loss before income taxes			(2,032		)		(28,039		)
Benefit from income taxes			(1,204		)		(5,074		)
Net loss			$	(828	)		$	(22,965	)
Basic net loss per share			$	(0.01	)		$	(0.41	)
Diluted net loss per share			$	(0.01	)		$	(0.41	)
Basic weighted average shares outstanding			65,294				55,686
Diluted weighted average shares outstanding			65,294				55,686
Comprehensive loss			$	(578	)		$	(18,550	)
General and Administrative Expenses			Quarter Ended
(In thousands)			6/30/21				6/24/20
Corporate administrative expenses			$	10,345			$	9,701
Share-based compensation			3,388				1,511
Incentive compensation			3,032				1
Deferred compensation valuation adjustments			783				1,940
	Total general and administrative expenses		$	17,548			$	13,153

DENNY’S CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited)
			Two Quarters Ended
(In thousands, except per share amounts)			6/30/21				6/24/20
Revenue:
	Company restaurant sales		$	81,141			$	57,419
	Franchise and license revenue		105,600				79,437
		Total operating revenue	186,741				136,856
Costs of company restaurant sales, excluding depreciation and amortization			67,977				55,724
Costs of franchise and license revenue, excluding depreciation and amortization			52,493				44,414
General and administrative expenses			34,495				20,895
Depreciation and amortization			7,558				8,204
Operating (gains), losses and other charges, net			419				3,100
		Total operating costs and expenses, net	162,942				132,337
Operating income			23,799				4,519
Interest expense, net			8,343				8,898
Other nonoperating expense (income), net			(13,797		)		12,328
Income (loss) before income taxes			29,253				(16,707		)
Provision for (benefit from) income taxes			6,900				(2,755		)
Net income (loss)			$	22,353			$	(13,952	)
Basic net income (loss) per share			$	0.34			$	(0.25	)
Diluted net income (loss) per share			$	0.34			$	(0.25	)
Basic weighted average shares outstanding			65,273				55,993
Diluted weighted average shares outstanding			65,789				55,993
Comprehensive income (loss)			$	25,678			$	(42,209	)
General and Administrative Expenses			Two Quarters Ended
(In thousands)			6/30/21				6/24/20
Corporate administrative expenses			$	21,217			$	21,482
Share-based compensation			6,860				(26		)
Incentive compensation			5,118				15
Deferred compensation valuation adjustments			1,300				(576		)
	Total general and administrative expenses		$	34,495			$	20,895

DENNY’S CORPORATION

Reconciliation of Net Income (Loss) and Net Cash Provided by (Used in) Operating Activities to Non-GAAP Financial Measures

(Unaudited)

The Company believes that, in addition to GAAP measures, certain non-GAAP financial measures are appropriate indicators to assist in the evaluation of operating performance and liquidity on a period-to-period basis. The Company uses Adjusted EBITDA, Adjusted Free Cash Flow, Adjusted Net Income (Loss) and Adjusted Net Income (Loss) 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. Adjusted EBITDA is also used in the calculation of financial covenant ratios in accordance with the Company’s credit facility. Adjusted Free Cash Flow is also used as a non-GAAP liquidity measure by Management to assess the Company’s ability to generate cash and plan for future operating and capital actions. Management believes that the presentation of Adjusted EBITDA, Adjusted Net Income (Loss), Adjusted Net Income (Loss) Per Share and Adjusted Free Cash Flow provide useful information to investors and analysts about the Company’s operating results, financial condition or cash flows. However, each of these non-GAAP financial measures should be considered as a supplement to, not a substitute for, operating income (loss), net income (loss), net cash provided by (used in) operating activities, or other financial performance and liquidity measures prepared in accordance with U.S. generally accepted accounting principles.

	Quarter Ended								Two Quarters Ended
(In thousands)	6/30/21				6/24/20				6/30/21				6/24/20
Net income (loss)	$	(828	)		$	(22,965	)		$	22,353			$	(13,952	)
Provision for (benefit from) income taxes	(1,204		)		(5,074		)		6,900				(2,755		)
Operating (gains), losses and other charges, net	(113		)		1,627				419				3,100
Other nonoperating expense (income), net	16,251				9,565				(13,797		)		12,328
Share-based compensation expense (benefit)	3,388				1,511				6,860				(26		)
Deferred compensation plan valuation adjustments	783				1,940				1,300				(576		)
Interest expense, net	4,066				4,947				8,343				8,898
Depreciation and amortization	3,897				4,058				7,558				8,204
Cash payments for restructuring charges and exit costs	(869		)		(690		)		(1,274		)		(1,374		)
Cash payments for share-based compensation	(69		)		—				(1,565		)		(3,211		)
Adjusted EBITDA	$	25,302			$	(5,081	)		$	37,097			$	10,636

DENNY’S CORPORATION
Reconciliation of Net Income (Loss) and Net Cash Provided by (Used in) Operating Activities to Non-GAAP Financial Measures
(Unaudited)
			Quarter Ended								Two Quarters Ended
(In thousands)			6/30/21				6/24/20				6/30/21				6/24/20
Net cash provided by (used in) operating activities			$	33,136			$	(9,859	)		$	43,371			$	(7,958	)
Capital expenditures			(1,525		)		(1,658		)		(3,108		)		(4,476		)
Cash payments for restructuring charges and exit costs			(869		)		(690		)		(1,274		)		(1,374		)
Cash payments for share-based compensation			(69		)		—				(1,565		)		(3,211		)
Deferred compensation plan valuation adjustments			783				1,940				1,300				(576		)
Other nonoperating expense (income), net			16,251				9,565				(13,797		)		12,328
Gains (losses) on investments			5				(25		)		(3		)		91
Gains (losses) on termination of leases			106				(25		)		72				(53		)
Amortization of deferred financing costs			(344		)		(188		)		(688		)		(340		)
Gains (losses) on interest rate swap derivatives, net			(17,227		)		(11,466		)		12,506				(11,466		)
Interest expense, net			4,066				4,947				8,343				8,898
Cash interest expense, net (1)			(4,455		)		(4,717		)		(9,041		)		(8,437		)
Deferred income tax (expense) benefit			1,888				1,128				(2,211		)		3,705
Provision for (benefit from) income taxes			(1,204		)		(5,074		)		6,900				(2,755		)
Income taxes paid, net			(1,521		)		(53		)		(1,942		)		(277		)
Changes in operating assets and liabilities
Receivables			(404		)		6,473				(757		)		(9,342		)
Inventories			111				(179		)		98				(175		)
Other current assets			(1,383		)		6,704				(6,677		)		2,593
Other noncurrent assets			1,116				1,472				1,317				(106		)
Operating lease assets and liabilities			217				(1,787		)		821				(1,769		)
Accounts payable			(3,800		)		(6,928		)		(5,620		)		537
Accrued payroll			(3,696		)		(1,264		)		(1,992		)		11,519
Accrued taxes			(814		)		(259		)		(434		)		712
Other accrued liabilities			(3,454		)		214				(4,649		)		6,551
Other noncurrent liabilities			887				220				2,036				2,827
Adjusted Free Cash Flow			$	17,801			$	(11,509	)		$	23,006			$	(2,554	)

(1

)

Includes cash interest expense, net and cash payments of approximately $0.8 million and $1.6 million for dedesignated interest rate swap derivatives for the quarter and year-to-date periods ended June 30, 2021, respectively.

DENNY’S CORPORATION
Reconciliation of Net Income (Loss) and Net Cash Provided by (Used in) Operating Activities to Non-GAAP Financial Measures
(Unaudited)
			Quarter Ended								Two Quarters Ended
(In thousands)			6/30/21				6/24/20				6/30/21				6/24/20
Adjusted EBITDA			$	25,302			$	(5,081	)		$	37,097			$	10,636
Cash interest expense, net (1)			(4,455		)		(4,717		)		(9,041		)		(8,437		)
Cash paid for income taxes, net			(1,521		)		(53		)		(1,942		)		(277		)
Cash paid for capital expenditures			(1,525		)		(1,658		)		(3,108		)		(4,476		)
Adjusted Free Cash Flow			$	17,801			$	(11,509	)		$	23,006			$	(2,554	)
			Quarter Ended								Two Quarters Ended
(In thousands, except per share amounts)			6/30/21				6/24/20				6/30/21				6/24/20
Net income (loss)			$	(828	)		$	(22,965	)		$	22,353			$	(13,952	)
(Gains) losses on interest rate swap derivatives, net			17,227				11,466				(12,506		)		11,466
(Gains) losses on sales of assets and other, net			(65		)		12				(1,007		)		(1,058		)
Impairment charges			—				—				—				2,181
Tax effect (2)			(4,756		)		(2,168		)		3,189				(2,396		)
Adjusted Net Income (Loss)			$	11,578			$	(13,655	)		$	12,029			$	(3,759	)
Adjusted diluted weighted average shares outstanding			65,829				55,686				65,789				55,993
Diluted Net Income (Loss) Per Share			$	(0.01	)		$	(0.41	)		$	0.34			$	(0.25	)
Adjustments Per Share			$	0.19			$	0.16			$	(0.16	)		$	0.18
Adjusted Net Income (Loss) Per Share			$	0.18			$	(0.25	)		$	0.18			$	(0.07	)

(1	)	Includes cash interest expense, net and cash payments of approximately $0.8 million and $1.6 million for dedesignated interest rate swap derivatives for the quarter and year-to-date periods ended June 30, 2021, respectively.
(2	)	Tax adjustments for the quarter and year-to-date periods ended June 30, 2021 reflect an effective tax rate of 27.7% and 23.6%, respectively. Tax adjustments for the reclassification of losses related to derivatives are calculated using an effective tax rate of 25.7% for the quarter and year-to-date periods ended June 24, 2020. Tax adjustments for all other items for the quarter and year-to-date periods ended June 24, 2020 are calculated using an effective rate of 5.4% and 8.8%, respectively.

DENNY’S CORPORATION

Reconciliation of Operating Income (Loss) to Non-GAAP Financial Measures

(Unaudited)

The Company believes that, in addition to GAAP measures, certain other non-GAAP financial measures are appropriate indicators to assist in the evaluation of restaurant-level operating efficiency and performance of ongoing restaurant-level operations. 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 these three non-GAAP measures are used to evaluate operating effectiveness.

The Company defines Restaurant-level Operating Margin as operating income (loss) excluding the following three items: general and administrative expenses, depreciation and amortization, and operating (gains), losses and other charges, net. Restaurant-level Operating Margin is presented as a percent of total operating revenue. The Company excludes 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. The Company excludes 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. The Company excludes 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.

Restaurant-level Operating Margin is the total of Company Restaurant Operating Margin and Franchise Operating Margin. The Company defines Company Restaurant Operating Margin 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. The Company defines Franchise Operating Margin as franchise and license revenue (which includes franchise royalties and other non-food and beverage revenue streams such as initial franchise fees, advertising revenue and occupancy revenue) less costs of franchise and license revenue and presents it as a percent of franchise and license revenue.

These non-GAAP financial measures provide a meaningful comparison between periods and enable investors to focus on the performance of restaurant-level operations by excluding revenues and costs unrelated to food and beverage sales in addition to corporate general and administrative expense, depreciation and amortization, and operating (gains), losses and other charges, net. However, each of these non-GAAP financial measures should be considered as a supplement to, not a substitute for, operating income (loss), net income (loss) or other financial performance measures prepared in accordance with U.S. generally accepted accounting principles. Restaurant-level Operating Margin, Company Restaurant Operating Margin and Franchise Operating Margin do not accrue directly to the benefit of shareholders because of the aforementioned excluded items, and are not indicative of the overall results for the Company.

	Quarter Ended								Two Quarters Ended
(In thousands)	6/30/21				6/24/20				6/30/21				6/24/20
Operating income (loss)	$	18,285			$	(13,527	)		$	23,799			$	4,519
General and administrative expenses	17,548				13,153				34,495				20,895
Depreciation and amortization	3,897				4,058				7,558				8,204
Operating (gains), losses and other charges, net	(113		)		1,627				419				3,100
Restaurant-level Operating Margin	$	39,617			$	5,311			$	66,271			$	36,718
Restaurant-level Operating Margin consists of:
Company Restaurant Operating Margin (1)	$	9,759			$	(4,478	)		$	13,164			$	1,695
Franchise Operating Margin (2)	29,858				9,789				53,107				35,023
Restaurant-level Operating Margin	$	39,617			$	5,311			$	66,271			$	36,718

(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; 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; less company restaurant sales.

DENNY’S CORPORATION
Operating Margins
(Unaudited)
					Quarter Ended
(In thousands)					6/30/21						6/24/20
Company restaurant operations: (1)
	Company restaurant sales				$	47,572		100.0	%		$	15,128		100.0	%
	Costs of company restaurant sales:
			Product costs		11,447			24.1	%		4,305			28.5	%
			Payroll and benefits		16,970			35.7	%		8,039			53.1	%
			Occupancy		2,844			6.0	%		2,728			18.0	%
			Other operating costs:
				Utilities	1,390			2.9	%		1,098			7.3	%
				Repairs and maintenance	635			1.3	%		428			2.8	%
				Marketing	1,365			2.9	%		607			4.0	%
				Other direct costs	3,162			6.6	%		2,401			15.9	%
	Total costs of company restaurant sales				$	37,813		79.5	%		$	19,606		129.6	%
	Company restaurant operating margin (non-GAAP) (2)				$	9,759		20.5	%		$	(4,478	)	(29.6	)%
Franchise operations: (3)
	Franchise and license revenue:
	Royalties				$	27,117		46.3	%		$	6,719		26.8	%
	Advertising revenue				18,600			31.7	%		7,232			28.9	%
	Initial and other fees				2,066			3.5	%		1,346			5.4	%
	Occupancy revenue				10,810			18.4	%		9,736			38.9	%
	Total franchise and license revenue				$	58,593		100.0	%		$	25,033		100.0	%
	Costs of franchise and license revenue:
	Advertising costs				$	18,600		31.7	%		$	7,232		28.9	%
	Occupancy costs				6,879			11.7	%		5,829			23.3	%
	Other direct costs				3,256			5.6	%		2,183			8.7	%
	Total costs of franchise and license revenue				$	28,735		49.0	%		$	15,244		60.9	%
	Franchise operating margin (non-GAAP) (2)				$	29,858		51.0	%		$	9,789		39.1	%
Total operating revenue (4)					$	106,165		100.0	%		$	40,161		100.0	%
Total costs of operating revenue (4)					66,548			62.7	%		34,850			86.8	%
Restaurant-level operating margin (non-GAAP) (4)(2)					$	39,617		37.3	%		$	5,311		13.2	%
Other operating expenses: (4)(2)
	General and administrative expenses				$	17,548		16.5	%		$	13,153		32.8	%
	Depreciation and amortization				3,897			3.7	%		4,058			10.1	%
	Operating (gains), losses and other charges, net				(113		)	(0.1	)%		1,627			4.1	%
	Total other operating expenses				$	21,332		20.1	%		$	18,838		46.9	%
Operating income (loss) (4)					$	18,285		17.2	%		$	(13,527	)	(33.7	)%
(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 is considered a non-GAAP financial measure. Operating margins should be considered as a supplement to, not as a substitute for, operating income (loss), net income (loss) or other financial measures prepared in accordance with U.S. generally accepted accounting principles.
(3		)	As a percentage of franchise and license revenue.
(4		)	As a percentage of total operating revenue.

DENNY’S CORPORATION
Operating Margins
(Unaudited)
					Two Quarters Ended
(In thousands)					6/30/21						6/24/20
Company restaurant operations: (1)
	Company restaurant sales				$	81,141		100.0	%		$	57,419		100.0	%
	Costs of company restaurant sales:
			Product costs		19,719			24.3	%		14,435			25.1	%
			Payroll and benefits		29,935			36.9	%		25,145			43.8	%
			Occupancy		5,694			7.0	%		5,891			10.3	%
			Other operating costs:
				Utilities	2,615			3.2	%		2,534			4.4	%
				Repairs and maintenance	1,168			1.4	%		1,217			2.1	%
				Marketing	2,332			2.9	%		1,726			3.0	%
				Other direct costs	6,514			8.0	%		4,776			8.3	%
	Total costs of company restaurant sales				$	67,977		83.8	%		$	55,724		97.0	%
	Company restaurant operating margin (non-GAAP) (2)				$	13,164		16.2	%		$	1,695		3.0	%
Franchise operations: (3)
	Franchise and license revenue:
	Royalties				$	47,961		45.4	%		$	30,566		38.5	%
	Advertising revenue				32,711			31.0	%		24,758			31.2	%
	Initial and other fees				3,904			3.7	%		3,043			3.8	%
	Occupancy revenue				21,024			19.9	%		21,070			26.5	%
	Total franchise and license revenue				$	105,600		100.0	%		$	79,437		100.0	%
	Costs of franchise and license revenue:
	Advertising costs				$	32,711		31.0	%		$	24,758		31.2	%
	Occupancy costs				13,418			12.7	%		13,238			16.7	%
	Other direct costs				6,364			6.0	%		6,418			8.1	%
	Total costs of franchise and license revenue				$	52,493		49.7	%		$	44,414		55.9	%
	Franchise operating margin (non-GAAP) (2)				$	53,107		50.3	%		$	35,023		44.1	%
Total operating revenue (4)					$	186,741		100.0	%		$	136,856		100.0	%
Total costs of operating revenue (4)					120,470			64.5	%		100,138			73.2	%
Restaurant-level operating margin (non-GAAP) (4)(2)					$	66,271		35.5	%		$	36,718		26.8	%
Other operating expenses: (4)(2)
	General and administrative expenses				$	34,495		18.5	%		$	20,895		15.3	%
	Depreciation and amortization				7,558			4.0	%		8,204			6.0	%
	Operating (gains), losses and other charges, net				419			0.2	%		3,100			2.3	%
	Total other operating expenses				$	42,472		22.7	%		$	32,199		23.5	%
Operating income (4)					$	23,799		12.7	%		$	4,519		3.3	%
(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 is considered a non-GAAP financial measure. Operating margin should be considered as a supplement to, not as a substitute for, operating income (loss), net income (loss) or other financial measures prepared in accordance with U.S. generally accepted accounting principles.
(3		)	As a percentage of franchise and license revenue.
(4		)	As a percentage of total operating revenue.

DENNY’S CORPORATION
Statistical Data
(Unaudited)
Changes in Same-Store Sales (1)				Quarter Ended								Two Quarters Ended
(Increase (decrease) vs. 2019)				6/30/21								6/30/21
	Company Restaurants			1.9		%						(10.6		)%
	Domestic Franchised Restaurants			(1.5		)%						(10.2		)%
	Domestic System-wide Restaurants			(1.2		)%						(10.2		)%
Changes in Same-Store Sales (1)				Quarter Ended								Two Quarters Ended
(Increase (decrease) vs. prior year)				6/30/21				6/24/20				6/30/21				6/24/20
	Company Restaurants			172.1		%		(64.9		)%		46.8		%		(35.9		)%
	Domestic Franchised Restaurants			113.2		%		(56.1		)%		30.8		%		(28.4		)%
	Domestic System-wide Restaurants			117.0		%		(56.9		)%		31.9		%		(29.1		)%
Average Unit Sales				Quarter Ended								Two Quarters Ended
(In thousands)				6/30/21				6/24/20				6/30/21				6/24/20
	Company Restaurants			$	732			$	246			$	1,257			$	890
	Franchised Restaurants			$	416			$	183			$	742			$	589
								Franchised
Restaurant Unit Activity				Company				& Licensed				Total
Ending Units March 31, 2021				65				1,584				1,649
	Units Opened			—				3				3
	Units Closed			—				(7		)		(7		)
			Net Change	—				(4		)		(4		)
Ending Units June 30, 2021				65				1,580				1,645
Equivalent Units
	Second Quarter 2021			65				1,582				1,647
	Second Quarter 2020			62				1,622				1,684
			Net Change	3				(40		)		(37		)
								Franchised
Restaurant Unit Activity				Company				& Licensed				Total
Ending Units December 30, 2020				65				1,585				1,650
	Units Opened			—				6				6
	Units Closed			—				(11		)		(11		)
			Net Change	—				(5		)		(5		)
Ending Units June 30, 2021				65				1,580				1,645
Equivalent Units
	Year-to-Date 2021			65				1,583				1,648
	Year-to-Date 2020			64				1,627				1,691
			Net Change	1				(44		)		(43		)
(1		)	Same-store 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, fees and occupancy revenue from non-consolidated franchised and licensed restaurants. Accordingly, domestic franchise same-store sales and domestic system-wide same-store sales should be considered as a supplement to, not a substitute for, the Company's results as reported under GAAP.

Investor Contact:
Curt Nichols
877-784-7167

Media Contact:
Hadas Streit, Allison+Partners
646-428-0629