• Denny’s Corporation Reports Results for Fourth Quarter and Full Year 2022

    ソース: Nasdaq GlobeNewswire / 13 2 2023 16:05:01   America/New_York

    SPARTANBURG, S.C., Feb. 13, 2023 (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 fourth quarter and full year ended December 28, 2022 and provided a business update on the Company’s operations.

    Kelli Valade, Chief Executive Officer, stated, "We were pleased to deliver Adjusted EBITDA* that was slightly above the high-end of our previously guided range for the fourth quarter given the persistent choppy operating environment. With an evolved leadership structure, the addition of a complementary brand, and refined strategic priorities, we enter 2023 with renewed energy and focus on brand revitalization efforts at Denny’s and plans for accelerated growth at Keke’s."

    Fourth Quarter 2022 Highlights

    • Total operating revenue grew 12.3% to $120.8 million compared to the prior year quarter.
    • Denny's domestic system-wide same-restaurant sales** grew 2.0% compared to the equivalent fiscal period in 2021, including a 1.7% increase at domestic franchised restaurants and a 6.0% increase at company restaurants.
    • Opened 13 franchised restaurants, including 5 international locations and 1 Keke's location.
    • Completed seven remodels, including six franchised restaurants.
    • Operating income was $17.6 million compared to $62.6 million in the prior year quarter.
    • Franchise Operating Margin* was $31.6 million, or 47.6% of franchise and license revenue, and Company Restaurant Operating Margin* was $6.8 million, or 12.6% of company restaurant sales.
    • Net income was $12.8 million, or $0.22 per diluted share.
    • Adjusted Net Income* and Adjusted Net Income Per Share* were $10.5 million and $0.18, respectively.
    • Adjusted EBITDA* was $23.4 million.
    • Cash provided by (used in) operating, investing, and financing activities was $14.5 million, $(2.6) million, and $(12.7) million, respectively.
    • Adjusted Free Cash Flow* was $14.6 million.
    • Repurchased $7.8 million of common stock.

    Full Year 2022 Highlights

    • Acquired Keke's on July 20, 2022 for $82.5 million.
    • Total operating revenue grew 14.6% to $456.4 million compared to the prior year.
    • Denny's domestic system-wide same-restaurant sales** grew 6.3% compared to the equivalent fiscal period in 2021, including a 6.0% increase at domestic franchised restaurants and a 10.4% increase at company restaurants.
    • Opened 30 franchised restaurants, including 8 international locations and 2 Keke's locations.
    • Completed 49 remodels, including 38 franchised restaurants.
    • Operating income was $60.6 million compared to $104.1 million in the prior year.
    • Franchise Operating Margin* was $121.3 million, or 47.3% of franchise and license revenue, and Company Restaurant Operating Margin* was $20.3 million, or 10.2% of company restaurant sales.
    • Net income was $74.7 million, or $1.23 per diluted share.
    • Adjusted Net Income* and Adjusted Net Income Per Share* were $31.6 million and $0.52, respectively.
    • Adjusted EBITDA* was $77.5 million.
    • Cash provided by (used in) operating, investing, and financing activities was $39.5 million, $(86.6) million, and $20.0 million, respectively.
    • Adjusted Free Cash Flow* was $40.7 million.
    • Repurchased $64.9 million of common stock.

    Fourth Quarter Results

    Total operating revenue increased 12.3% to $120.8 million compared to $107.6 million in the prior year quarter.

    Franchise and license revenue was $66.5 million compared to $60.2 million in the prior year quarter. This increase was primarily driven by $5.6 million related to the kitchen modernization rollout and $1.5 million of Keke's franchise revenue in the current quarter.

    Company restaurant sales were $54.4 million compared to $47.4 million in the prior year quarter. This increase consists of benefits from Denny's price increases and changes in product mix compared to the prior year quarter and $3.5 million of Keke's company restaurant sales in the current quarter.

    Franchise Operating Margin* was $31.6 million, or 47.6% of franchise and license revenue, compared to $31.1 million, or 51.6%, in the prior year quarter. The margin rate was impacted by approximately 450 basis points as kitchen modernization equipment was sold to franchisees at cost.

    Company Restaurant Operating Margin* was $6.8 million, or 12.6% of company restaurant sales, compared to $7.0 million, or 14.8%, in the prior year quarter. This margin change was primarily due to commodity and labor inflation, partially offset by the improvement in sales performance at company restaurants.

    Total general and administrative expenses were $17.0 million, compared to $17.7 million in the prior year quarter. This change was primarily due to decreases in share-based compensation expense and performance-based incentive compensation, partially offset by an increase in corporate administration expenses compared to the prior year quarter.

    The provision for income taxes was $3.3 million, reflecting an effective tax rate of 20.7% for the quarter, compared to an annual effective tax rate of 24.9%. Approximately $3.1 million in cash taxes were paid during the quarter.

    Net income was $12.8 million, or $0.22 per diluted share, compared to $43.5 million, or $0.67 per diluted share, in the prior year quarter. This change in net income was primarily related to the sale of two parcels of real estate in the prior year quarter. Adjusted Net Income* per share was $0.18 compared to $0.16 in the prior year quarter.

    The Company ended the quarter with $272.7 million of total debt outstanding, including $261.5 million of borrowings under its credit facility.

    Adjusted Free Cash Flow* and Capital Allocation

    Adjusted Free Cash Flow* in the quarter was $14.6 million after investing $1.7 million in cash capital expenditures, including the remodel of one company restaurant and facilities maintenance.

    During the quarter, the Company allocated $7.8 million to share repurchases resulting in approximately $153 million remaining under its existing repurchase authorization.

    Business Outlook

    The following full year 2023 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 3% and 6%.
    • Consolidated restaurant openings of 35 to 45, including 8 to 12 new Keke's restaurants, with a consolidated net decline of 15 to 25.
    • Commodity inflation between 4% and 6%.
    • Labor inflation of approximately 5%.
    • Consolidated total general and administrative expenses between $79 million and $82 million, including approximately $14 million related to share-based compensation expense which does not impact Consolidated Adjusted EBITDA*.
    • Consolidated Adjusted EBITDA* between $86 million and $90 million.

    *   Please refer to the Reconciliation of Net Income and Net Cash Provided by Operating Activities to Non-GAAP Financial Measures, as well as the Reconciliation of Operating Income 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 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 estimates are 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, 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 fourth quarter ended December 28, 2022 on its quarterly investor conference call today, Monday, February 13, 2023 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 December 28, 2022, the Company consisted of 1,656 restaurants, 1,582 of which were franchised and licensed restaurants and 74 of which were company operated.

    Denny's Corporation consists of the Denny’s brand and the Keke’s brand. As of December 28, 2022, the Denny's brand consisted of 1,602 global restaurants, 1,536 of which were franchised and licensed restaurants and 66 of which were company operated. As of December 28, 2022, the Keke's brand consisted of 54 restaurants, 46 of which were franchised restaurants and 8 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.

    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 evolving COVID-19 pandemic and related containment measures, including the potential for further operational disruption from government mandates affecting restaurants; economic, public health and political conditions that impact consumer confidence and spending, including COVID-19; commodity and labor inflation; the ability to effectively staff restaurants; 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 29, 2021 (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)12/28/22 12/29/21
    Assets   
     Current assets   
      Cash and cash equivalents$3,523  $30,624 
      Investments 1,746   2,551 
      Receivables, net 25,576   19,621 
      Inventories 5,538   5,060 
      Assets held for sale 1,403   — 
      Prepaid and other current assets 12,529   11,393 
       Total current assets 50,315   69,249 
     Property, net 94,469   91,176 
     Finance lease right-of-use assets, net 6,499   7,709 
     Operating lease right-of-use assets, net 126,065   128,727 
     Goodwill 72,740   36,884 
     Intangible assets, net 95,034   50,226 
     Deferred financing costs, net 2,337   2,971 
     Deferred income taxes, net —   11,502 
     Other noncurrent assets 50,876   37,083 
       Total assets$498,335  $435,527 
           
    Liabilities   
     Current liabilities   
      Current finance lease liabilities$1,683  $1,952 
      Current operating lease liabilities 15,310   15,829 
      Accounts payable 19,896   15,595 
      Other current liabilities 56,762   64,146 
       Total current liabilities 93,651   97,522 
     Long-term liabilities   
      Long-term debt 261,500   170,000 
      Noncurrent finance lease liabilities 9,555   10,744 
      Noncurrent operating lease liabilities 123,404   126,296 
      Liability for insurance claims, less current portion 7,324   8,438 
      Deferred income taxes, net 7,419   — 
      Other noncurrent liabilities 32,598   87,792 
       Total long-term liabilities 441,800   403,270 
       Total liabilities 535,451   500,792 
           
    Shareholders' deficit   
      Common stock 650   642 
      Paid-in capital 142,136   135,596 
      Deficit (41,729)  (116,441)
      Accumulated other comprehensive loss, net (42,697)  (54,470)
      Treasury stock (95,476)  (30,592)
       Total shareholders' deficit (37,116)  (65,265)
       Total liabilities and shareholders' deficit$498,335  $435,527 
           
    Debt Balances
     Credit facility revolver due 2026$261,500  $170,000 
     Finance lease liabilities 11,238   12,696 
      Total debt$272,738  $182,696 


    DENNY’S CORPORATION
    Condensed Consolidated Statements of Operations
    (Unaudited)
          
       Quarter Ended
    ($ in thousands, except per share amounts)12/28/22 12/29/21
    Revenue:   
     Company restaurant sales$54,399  $47,406 
     Franchise and license revenue 66,450   60,233 
      Total operating revenue 120,849   107,639 
    Costs of company restaurant sales, excluding depreciation and amortization 47,554   40,386 
    Costs of franchise and license revenue, excluding depreciation and amortization 34,814   29,178 
    General and administrative expenses 16,985   17,694 
    Depreciation and amortization 3,810   4,066 
    Operating (gains), losses and other charges, net 46   (46,309)
      Total operating costs and expenses, net 103,209   45,015 
    Operating income 17,640   62,624 
    Interest expense, net 4,240   3,134 
    Other nonoperating expense (income), net (2,714)  989 
    Income before income taxes 16,114   58,501 
    Provision for income taxes 3,343   15,046 
    Net income$12,771  $43,455 
          
    Net income per share - basic$0.22  $0.67 
    Net income per share - diluted$0.22  $0.67 
          
    Basic weighted average shares outstanding 58,406   64,449 
    Diluted weighted average shares outstanding 58,480   64,870 
          
    Comprehensive income$13,377  $45,241 
        
    General and Administrative Expenses 
     Corporate administrative expenses$13,812  $11,993 
     Share-based compensation 1,933   3,390 
     Incentive compensation 866   1,617 
     Deferred compensation valuation adjustments 374   694 
      Total general and administrative expenses$16,985  $17,694 


    DENNY’S CORPORATION
    Condensed Consolidated Statements of Operations
    (Unaudited)
          
       Fiscal Year Ended
    ($ in thousands, except per share amounts)12/28/22 12/29/21
    Revenue:   
     Company restaurant sales$199,753  $175,017 
     Franchise and license revenue 256,676   223,157 
      Total operating revenue 456,429   398,174 
    Costs of company restaurant sales, excluding depreciation and amortization 179,458   146,932 
    Costs of franchise and license revenue, excluding depreciation and amortization 135,327   109,140 
    General and administrative expenses 67,173   68,686 
    Depreciation and amortization 14,862   15,446 
    Operating (gains), losses and other charges, net (1,005)  (46,105)
      Total operating costs and expenses, net 395,815   294,099 
    Operating income 60,614   104,075 
    Interest expense, net 13,769   15,148 
    Other nonoperating income, net (52,585)  (15,176)
    Income before income taxes 99,430   104,103 
    Provision for income taxes 24,718   26,030 
    Net income$74,712  $78,073 
          
    Net income per share - basic$1.23  $1.20 
    Net income per share - diluted$1.23  $1.19 
          
    Basic weighted average shares outstanding 60,771   65,171 
    Diluted weighted average shares outstanding 60,879   65,573 
          
    Comprehensive income$86,485  $84,008 
        
    General and Administrative Expenses 
     Corporate administrative expenses$52,115  $44,367 
     Share-based compensation 11,400   13,602 
     Incentive compensation 5,811   8,628 
     Deferred compensation valuation adjustments (2,153)  2,089 
      Total general and administrative expenses$67,173  $68,686 


    DENNY’S CORPORATION
    Reconciliation of Net Income and Net Cash Provided by 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 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. 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, Adjusted Net Income 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, net income, net income per share, net cash provided by operating activities, or other financial performance and liquidity measures prepared in accordance with GAAP.

     Quarter Ended Fiscal Year Ended
    ($ in thousands)12/28/22 12/29/21 12/28/22 12/29/21
    Net income$12,771  $43,455  $74,712  $78,073 
    Provision for income taxes 3,343   15,046   24,718   26,030 
    Operating (gains), losses and other charges, net 46   (46,309)  (1,005)  (46,105)
    Other nonoperating expense (income), net (2,714)  989   (52,585)  (15,176)
    Share-based compensation expense 1,933   3,390   11,400   13,602 
    Deferred compensation plan valuation adjustments 374   694   (2,153)  2,089 
    Interest expense, net 4,240   3,134   13,769   15,148 
    Depreciation and amortization 3,810   4,066   14,862   15,446 
    Cash payments for restructuring charges and exit costs (402)  (219)  (1,067)  (1,767)
    Cash payments for share-based compensation —   (193)  (5,147)  (1,758)
    Adjusted EBITDA$23,401  $24,053  $77,504  $85,582 
            


    DENNY’S CORPORATION
    Reconciliation of Net Income and Net Cash Provided by Operating Activities
    to Non-GAAP Financial Measures Continued
    (Unaudited)
       Quarter Ended Fiscal Year Ended
    ($ in thousands)12/28/22 12/29/21 12/28/22 12/29/21
    Net cash provided by operating activities$14,502  $12,944  $39,452  $76,173 
    Capital expenditures (1,698)  (2,034)  (11,844)  (7,355)
    Acquisition of real estate and restaurant(1) —   (10,369)  (750)  (10,369)
    Cash payments for restructuring charges and exit costs (402)  (219)  (1,067)  (1,767)
    Cash payments for share-based compensation —   (193)  (5,147)  (1,758)
    Deferred compensation plan valuation adjustments 374   694   (2,153)  2,089 
    Other nonoperating expense (income), net (2,714)  989   (52,585)  (15,176)
    Gains (losses) on investments (16)  (32)  (305)  (21)
    Gains (losses) on early termination of debt and leases 8   471   37   523 
    Amortization of deferred financing costs (159)  (159)  (634)  (1,105)
    Gains (losses) and amortization on interest rate swap derivatives, net 2,311   (2,142)  54,989   12,629 
    Interest expense, net 4,240   3,134   13,769   15,148 
    Cash interest expense, net(2) (3,925)  (3,916)  (14,923)  (17,152)
    Deferred income tax expense 937   (10,384)  (14,732)  (14,097)
    Decrease (increase) in tax valuation allowance (546)  5,031   (546)  5,031 
    Provision for income taxes 3,343   15,046   24,718   26,030 
    Income taxes paid, net (3,135)  (4,304)  (9,296)  (9,942)
    Changes in operating assets and liabilities, excluding acquisitions and dispositions       
    Receivables 1,104   2,809   5,892   (1,373)
    Inventories (3,406)  3,830   460   3,879 
    Other current assets 2,821   (3,158)  1,138   (7,454)
    Other noncurrent assets 5,318   860   2,129   1,881 
    Operating lease assets and liabilities 136   371   696   1,521 
    Accounts payable (7,033)  (248)  (3,918)  (6,608)
    Accrued payroll (535)  (1,651)  2,850   (3,113)
    Accrued taxes 2,007   1,570   81   317 
    Other accrued liabilities 3,843   (6,794)  5,867   (12,684)
    Other noncurrent liabilities (2,732)  1,284   6,513   5,517 
    Adjusted Free Cash Flow$14,643  $3,430  $40,691  $40,764 
              


    (1)For the year-to-date period ended December 28, 2022, amount includes cash paid for the acquisition of a Denny's franchise restaurant and excludes capital paid for the acquisition of Keke's.
    (2)Includes cash interest expense (income), net and cash (receipts) payments of approximately $(0.1) million and $1.8 million for dedesignated interest rate swap derivatives for the quarter and year-to-date periods ended December 28, 2022, respectively. Includes cash interest expense, net and cash payments of approximately $0.9 million and $3.3 million for dedesignated interest rate swap derivatives for the quarter and year-to-date periods ended December 29, 2021, respectively.


    DENNY’S CORPORATION
    Reconciliation of Net Income and Net Cash Provided by Operating Activities
    to Non-GAAP Financial Measures Continued
    (Unaudited)
       Quarter Ended Fiscal Year Ended
    ($ in thousands, except per share amounts)12/28/22 12/29/21 12/28/22 12/29/21
    Adjusted EBITDA$23,401  $24,053  $77,504  $85,582 
    Cash interest expense, net(1) (3,925)  (3,916)  (14,923)  (17,152)
    Cash paid for income taxes, net (3,135)  (4,304)  (9,296)  (9,942)
    Cash paid for capital expenditures, real estate and restaurant(2) (1,698)  (12,403)  (12,594)  (17,724)
    Adjusted Free Cash Flow$14,643  $3,430  $40,691  $40,764 
            
    Net income$12,771  $43,455  $74,712  $78,073 
    (Gains) losses on interest rate swap derivatives (2,311)  2,142   (54,989)  (12,629)
    (Gains) losses on sales of assets and other charges, net (67)  (46,722)  (3,378)  (47,822)
    Impairment charges —   442   963   442 
    Tax effect(3) 152   11,177   14,294   15,002 
    Adjusted Net Income$10,545  $10,494  $31,602  $33,066 
            
    Diluted weighted average shares outstanding 58,480   64,870   60,879   65,573 
            
    Net Income Per Share - Diluted$0.22  $0.67  $1.23  $1.19 
    Adjustments Per Share$(0.04) $(0.51) $(0.71) $(0.69)
    Adjusted Net Income Per Share$0.18  $0.16  $0.52  $0.50 
              


    (1)Includes cash interest expense (income), net and cash (receipts) payments of approximately $(0.1) million and $1.8 million for dedesignated interest rate swap derivatives for the quarter and year-to-date periods ended December 28, 2022, respectively. Includes cash interest expense, net and cash payments of approximately $0.9 million and $3.3 million for dedesignated interest rate swap derivatives for the quarter and year-to-date periods ended December 29, 2021, respectively.
    (2)For the year-to-date period ended December 28, 2022, amount includes cash paid for capital expenditures and the acquisition of a Denny's franchise restaurant, and excludes capital paid for the acquisition of Keke's.
    (3)Tax adjustments for the quarter and year-to-date periods ended December 28, 2022 reflect an effective tax rate of 6.4% and 24.9%, respectively. Tax adjustments for the quarter and year-to-date periods ended December 29, 2021 reflect an effective tax rate of 25.3% and 25.0%, 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 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 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 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.

    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, net income or other financial performance measures prepared in accordance with GAAP. 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 Fiscal Year Ended
    ($ in thousands)12/28/22 12/29/21 12/28/22 12/29/21
    Operating income$17,640 $62,624  $60,614  $104,075 
    General and administrative expenses 16,985  17,694   67,173   68,686 
    Depreciation and amortization 3,810  4,066   14,862   15,446 
    Operating (gains), losses and other charges, net 46  (46,309)  (1,005)  (46,105)
    Restaurant-level Operating Margin$38,481 $38,075  $141,644  $142,102 
            
    Restaurant-level Operating Margin consists of:       
    Company Restaurant Operating Margin(1)$6,845 $7,020  $20,295  $28,085 
    Franchise Operating Margin(2) 31,636  31,055   121,349   114,017 
    Restaurant-level Operating Margin$38,481 $38,075  $141,644  $142,102 


    (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.


    DENNY’S CORPORATION
    Operating Margins
    (Unaudited)
           
        Quarter Ended
    ($ in thousands)12/28/22 12/29/21
    Company restaurant operations:(1)     
     Company restaurant sales$54,399100.0% $47,406 100.0%
     Costs of company restaurant sales, excluding depreciation and amortization:     
      Product costs 14,74327.1%  11,833 25.0%
      Payroll and benefits 20,81438.3%  17,998 38.0%
      Occupancy 3,8387.1%  2,955 6.2%
      Other operating costs:     
       Utilities 2,0623.8%  1,539 3.2%
       Repairs and maintenance 1,0712.0%  853 1.8%
       Marketing 1,4172.6%  1,023 2.2%
       Legal settlements 10.0%  990 2.1%
       Other direct costs 3,6086.6%  3,195 6.7%
     Total costs of company restaurant sales, excluding depreciation and amortization$47,55487.4% $40,386 85.2%
     Company restaurant operating margin (non-GAAP)(2)$6,84512.6% $7,020 14.8%
             
    Franchise operations:(3)     
     Franchise and license revenue:     
     Royalties$29,61544.6% $28,128 46.7%
     Advertising revenue 19,28429.0%  19,031 31.6%
     Initial and other fees 8,22712.4%  2,663 4.4%
     Occupancy revenue 9,32414.0%  10,411 17.3%
     Total franchise and license revenue$66,450100.0% $60,233 100.0%
             
     Costs of franchise and license revenue, excluding depreciation and amortization:     
     Advertising costs$19,28429.0% $19,030 31.6%
     Occupancy costs 5,7398.6%  6,374 10.6%
     Other direct costs 9,79114.7%  3,774 6.3%
     Total costs of franchise and license revenue, excluding depreciation and amortization$34,81452.4% $29,178 48.4%
     Franchise operating margin (non-GAAP)(2)$31,63647.6% $31,055 51.6%
             
    Total operating revenue(4)$120,849100.0% $107,639 100.0%
    Total costs of operating revenue(4) 82,36868.2%  69,564 64.6%
    Restaurant-level operating margin (non-GAAP)(4)(2)$38,48131.8% $38,075 35.4%
             
    Other operating expenses:(4)(2)     
     General and administrative expenses$16,98514.1% $17,694 16.4%
     Depreciation and amortization 3,8103.2%  4,066 3.8%
     Operating (gains), losses and other charges, net 460.0%  (46,309)(43.0)        %
     Total other operating expenses (income)$20,84117.2% $(24,549)(22.8)        %
             
    Operating income(4)$17,64014.6% $62,624 58.2%
             
    (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, net income or other financial measures prepared in accordance with GAAP.
    (3)As a percentage of franchise and license revenue.
    (4)As a percentage of total operating revenue.


    DENNY’S CORPORATION
    Operating Margins
    (Unaudited)
           
        Fiscal Year Ended
    ($ in thousands)12/28/22 12/29/21
    Company restaurant operations:(1)     
     Company restaurant sales$199,753 100.0% $175,017 100.0%
     Costs of company restaurant sales, excluding depreciation and amortization:     
      Product costs 53,617 26.8%  42,982 24.6%
      Payroll and benefits 76,412 38.3%  65,337 37.3%
      Occupancy 15,154 7.6%  11,662 6.7%
      Other operating costs:     
       Utilities 7,273 3.6%  5,814 3.3%
       Repairs and maintenance 3,874 1.9%  2,743 1.6%
       Marketing 5,294 2.7%  4,594 2.6%
       Legal settlements 4,224 2.1%  2,134 1.2%
       Other direct costs 13,610 6.8%  11,666 6.7%
     Total costs of company restaurant sales, excluding depreciation and amortization$179,458 89.8% $146,932 84.0%
     Company restaurant operating margin (non-GAAP)(2)$20,295 10.2% $28,085 16.0%
             
    Franchise operations:(3)     
     Franchise and license revenue:     
     Royalties$113,891 44.4% $103,425 46.4%
     Advertising revenue 75,926 29.6%  69,957 31.3%
     Initial and other fees 28,262 11.0%  8,009 3.6%
     Occupancy revenue 38,597 15.0%  41,766 18.7%
     Total franchise and license revenue$256,676 100.0% $223,157 100.0%
             
     Costs of franchise and license revenue, excluding depreciation and amortization:     
     Advertising costs$75,926 29.6% $69,957 31.3%
     Occupancy costs 24,090 9.4%  26,237 11.8%
     Other direct costs 35,311 13.8%  12,946 5.8%
     Total costs of franchise and license revenue, excluding depreciation and amortization$135,327 52.7% $109,140 48.9%
     Franchise operating margin (non-GAAP)(2)$121,349 47.3% $114,017 51.1%
             
    Total operating revenue(4)$456,429 100.0% $398,174 100.0%
    Total costs of operating revenue(4) 314,785 69.0%  256,072 64.3%
    Restaurant-level operating margin (non-GAAP)(4)(2)$141,644 31.0% $142,102 35.7%
             
    Other operating expenses:(4)(2)     
     General and administrative expenses$67,173 14.7% $68,686 17.3%
     Depreciation and amortization 14,862 3.3%  15,446 3.9%
     Operating (gains), losses and other charges, net (1,005)(0.2)%  (46,105)(11.6) %
     Total other operating expenses$81,030 17.8% $38,027 9.6%
             
    Operating income(4)$60,614 13.3% $104,075 26.1%
             
    (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 is considered a non-GAAP financial measure. Operating margin 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)As a percentage of franchise and license revenue.
    (4)As a percentage of total operating revenue.


    DENNY’S CORPORATION
    Statistical Data
    (Unaudited)
                      
       Denny's Keke's(2)
    Changes in Same-Restaurant Sales(1)Quarter Ended Fiscal Year Ended Quarter Ended Fiscal Year Ended
    (Increase vs. prior year)12/28/22 12/29/21 12/28/22 12/29/21 12/28/22 12/29/21 12/28/22 12/29/21
     Company Restaurants 6.0%  58.6%  10.4%  55.3% N/A N/A N/A N/A
     Domestic Franchise Restaurants 1.7%  48.3%  6.0%  40.1% N/A N/A N/A N/A
     Domestic System-wide Restaurants 2.0%  49.0%  6.3%  41.1% N/A N/A N/A N/A
                      
       Denny's Keke's(2)
    Average Unit SalesQuarter Ended Fiscal Year Ended Quarter Ended Fiscal Year Ended
    ($ in thousands)12/28/22 12/29/21 12/28/22 12/29/21 12/28/22 12/29/21 12/28/22 12/29/21
     Company Restaurants$776  $735  $2,985  $2,709  $438 N/A $772 N/A
     Franchised Restaurants$448  $431  $1,729  $1,597  $453 N/A $802 N/A
                      
    (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, 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.
     Keke's comparable same-restaurant sales will not be reported for the first year following the acquisition.
    (2)Effective July 20, 2022, the Company acquired Keke's, as such the data represents post-acquisition results.


       Denny's Keke's
         Franchised     Franchised  
    Restaurant Unit ActivityCompany & Licensed Total Company & Licensed Total
    Ending Units September 28, 202266 1,547  1,613  8 45 53
     Units Opened— 12  12  — 1 1
     Units Acquired— —  —  — — —
     Units Reacquired— —  —  — — —
     Units Closed— (23) (23) — — —
      Net Change— (11) (11) — 1 1
    Ending Units December 28, 202266 1,536  1,602  8 46 54
                  
    Equivalent Units           
     Fourth Quarter 202265 1,543  1,608  8 46 54
     Fourth Quarter 202164 1,580  1,644  — — —
      Net Change1 (37) (36) 8 46 54
                  
       Denny's Keke's
         Franchised     Franchised  
    Restaurant Unit ActivityCompany & Licensed Total Company & Licensed Total
    Ending Units December 29, 202165 1,575  1,640  — — —
     Units Opened— 28  28  — 2 2
     Units Acquired(3)— —  —  8 44 52
     Units Reacquired1 (1) —  — — —
     Units Closed— (66) (66) — — —
      Net Change1 (39) (38) 8 46 54
    Ending Units December 28, 202266 1,536  1,602  8 46 54
                  
    Equivalent Units           
     Year-to-Date 202265 1,561  1,626  4 20 24
     Year-to-Date 202165 1,581  1,646  — — —
      Net Change— (20) (20) 4 20 24
      
    (3)
    		Effective July 20, 2022, the Company acquired Keke's, consisting of 8 company operated restaurants and 44 franchised restaurants.

     


    Investor Contact:
Curt Nichols
877-784-7167

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

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