DIN Dine Brands Global

Ken Diptee Executive Director, IR
Greg Kalvin Corporate Controller
Steve Joyce CEO
Tom Song CFO
John Cywinski President, Applebee's
Darren Rebelez President, IHOP
Michael Gallo CL King
Brian Vaccaro Raymond James
Nick Setyan Wedbush Securities
Stephen Anderson Maxim Group
Call transcript
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Welcome to the Fourth Quarter 2018 Dine Brands Global Incorporated Earnings Conference Call. My name is Paulette and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] Please note that this conference is being recorded. the Relations. to turn Director Diptee, now Investor of will call Ken over Executive I

begin. may You

Ken Diptee

Good morning Steve as during to IHOP; Kalvin, conference Song and our welcome Darren well. John call. fiscal quarter CFO; will Applebee's; I'm XXXX Cywinski, and Corporate President joined and President Controller Q&A by Rebelez, Joyce, of Tom Dine CEO; of Brands Greg fourth available be

Steve, please information. I remember safe Before over turn forward-looking call harbor to the regarding our

forward-looking which that as information which are also filing. our described and During actual detailed the today call evaluate discuss these call, information press of the uncertainties assumes those factors, to now turn may and measures, the known other XX-Q may results press than in are over risks, statements. and With no in on We Please the context to release may forward-looking financial are and today's statements unknown Steve. or different non-GAAP are our obligation management website. update involves available that, in the implied. of expressed I'll forward-looking which to release these certain and be The refer cause factors, and

Steve Joyce

you Thanks, a press saw Ken. that solid quarter results. morning strong very fourth for everyone we year this morning, participating thank Good today. our finished issued In and release you with a

on course double-digit Brands against as as transformative We year-over-year multi-pronged across metrics revenues, to and the CEO key deliver growth a Brands to growth adjusted Dine initial focused Dine a company. was the as year well a EPS, continued EBITDA. executed company. strategy full profit, of We adjusted stayed returning including total for My gross year

value-based I'm in performance-driven firmly go-forward very the plans. confident place, culture With our in

I'm for and and transitional period end, continued Applebee's momentum this sales growth. growth into at January. positive both building IHOP, relevance to year our brand XXXX To while dedicated to that brands in achieved pleased report comp driving and Following enhancing that was this XXXX, momentum

like and several brand-specific our While achievements go I'd notable to highlight into little later, year. Darren more of past will John details a this

focus we restaurant guest visit all, premises abundant franchises. and and all consumer-facing and of unit menu member enhancing in We insight; are also and traffic-generating a a on leadership are value we CRM; everyone numbers big innovation accelerating accelerating team First we we giving and winning through reason research our and team to and increased growth; a we restaurants; of technology engagement have trusted to in returned consumer investments are on nurturing business.

was health there overall a their all improvement marked franchisee advertising franchisees X.XX%. to front, Applebee's rate to Applebee's points the XX financial increase Applebee's in by On agreed contribution basis and temporarily nearly

quarterly sales X.X%. growth Applebee's increase Additionally, quarter achieved comp highest years in third of posting the in the XX

domestic and area development our unit net new IHOP, returned Turning the developed in franchisees ultimate marking creating ended very brand to XX IHOP Buzzworthy sales media with launch. the its growth. in comp at decade XXXX licenses and next the restaurants, solid campaign least in a The positive net most consecutive of the state with very, quarter. also innovation took level history a burger year to

off-premise and guest lastly, strong overall highs And their both Additionally, both business. scores. in brands reached Applebee's IHOP satisfaction growth in experienced their all-time

us to bad was upsized solid to XXXX significantly flexibility. to foundation success few we These Regarding decline helped from approximately XX%, and Dine franchised much build advertising to and in us position name margins accomplishments more on. overall, very provide excluding million financial $XXX our to gives year-over-year produced better VFN million, long-term $XXX debt us for of a have a which for stable substantial a compared EBITDA expense adjusted There highly robust model our revenues. and

trajectory. which place, in We plan have a our believe current we sustain will

XXXX about ahead. encouraged very are and we forward, the years Looking

little this to we of reasons, we completed when provide color. the cleaner a have picture advertising fund untapped as slate a reflects of Applebee's year our of national half the year, was is we in that for million first last and it several made contribution a Importantly it bit will better potential Notably, $XX non-recurring.

improved royalty have collections. We visibility into

pay of resolved resolutions we've for for Additionally, Applebee's. in of fees in $XX.X This things December our all with plus settlement the franchisees favorable a reached the franchisee million largest other and required royalties advertising due terms the have past other one successfully Applebee's franchisees, our among approximately issues total. to us

position positive with momentum the accelerated support growth to strong brands, from continued With both profitable of our in better the drive even franchisees. a are we

growth. gaining on our focus and embracing opportunities will as developed formats small trade continued rural We areas, higher technology areas significant in further strong produce non-traditional exploring the well believe all-premise traction. growth as urban penetrate are include platforms, and We leveraging can These enhance to brands at cost guest which both experience. to in businesses

XX% Applebee's increased XX% respectively, mainly approximately and growth. XXXX, traffic off-premise and double-digit comp sales IHOP's by For by driven

to to more in I'm Tom in to to We the our as footprint Ecuador. our in primarily its going separate international potential U.S. announced numbers. restaurants into a and on healthy, on IHOP side. brand plans the are turn under of to X% detail restaurants in XX over call engine. recently Approximately America outside Peru internationally restaurants also presence The agreements the grow of the build a South Most remains XX view provide that, the and interest With its expanded of operations Thailand growth franchise our little brands

Tom Song

Thank Great. Steve. everyone. Good you, morning

like the perspective on finished very the a share. brief before Our you $X.XX highly-franchise of per guidance of model I highlights do, by Brands to XXXX with EPS my results our in the continue business to high our our performance. year, with I'll produce and results. provide I'd but Dine impressive for exceeding strong end adjusted full fourth quarter provide review

brands of industry. categories We their both the of have at top the near the performing top and

XXXX, to strong the the XXXX, our income statement. I company. finish the with shareholders, our while our will capital leverage of which has guidance reflects I return to confidence Later, the in their notable prioritized on have start changes decreased. We for will continued review

adjusted For the comp for XX% The collection EPS expense debt is of to fourth was driven a increase at growth in profit, royalties. XXXX, to the decline by of of the quarter, compared was mainly to XXXX. the $X.XX brands, the which $X.XX same bad previously increase in franchise primarily quarter due sales fourth segment both a compared unrecognized quarter

that profit, compared brands resolution and financial $X.XX XXXX, to expense bad performance $X.XX adjusted certain declined favorable income bad previously the for of debt favorable cash franchisee was by to in compared of at franchisees was due pleased marked increase issues expense and the segment resolution lower in just and resulted XXXX higher I'm fiscal is financial primarily improvement the $XX issues, to both which to revenues. tax million the For EPS prior mainly of health Applebee's due franchise health royalty debt sales these collections The XXXX. the which comp higher and year in to unrecognized approximately due lower report to discussed.

for is meaningful levels, bad Importantly, which debt now historical return to will anticipate level. a not that XXXX, we

to Turning G&A.

were the quarter million same compared primarily higher XXXX G&A fourth December the in $XX.X million personnel-related of for personnel-related approximately approximately approximately costs was million $XXX in due Applebee's was $XX to to to for increase increased compared XX to approximately $XXX XXXX. The year. legal XXXX fiscal the costs, for related and to increase The in announced related costs period incentive expenses. of performance-based compensation. million G&A of last acquisition was Our restaurants

offset reprioritization by at costs were higher there reminder, XXXX costs. also technology some professional in a declines that severance to contributed As items project These and were services during G&A.

Regarding our tax rate.

Our tax to compared XX.X% effective for rate was fiscal XXXX GAAP XXXX. for fiscal XX%

have related adjustments tax increased resulting years This from federal XX%. approximately $X.X and state provision effective been an combined tax through of estimated tax action million rate we increased XXXX, XXXX IRS for to tax what rate During from our approximately XXXX. by our audits would

Turning cash statement. to flow

receivable shareholders highly adjusted cash The due for million $XXX.X XXXX from changes net approximately EBITDA due of primarily due strong shareholders. a to our of in we franchise $XXX some both $XX higher compared that increase operations remains gross was In to XXXX and XXXX. over compared Our our provide working the cash equipment million to common repurchased flow from profit to top to brands model a in cost nearly total The higher contributed XXXX $XX franchise returned To adjusted in million capital for XXXX. highlight million to revenues at performance and for combined million. in was XXXX. $XXX.X a Consolidated and of like paid for $XX.X to million notes priority. contracts compared and free approximately in increase approximately in favorable million $XX total was quarterly we XXX,XXX shares increase of to dividends of XXXX, compared I cash variance an to capital to receipt solid favorable XXXX. The income, return to would generated stock XXXX. color,

cash business As cash further you reflects to $X.XX increase stable our by our quarterly release share. flow. dividend we today, our common increased predictable in The in XX% saw generates per and press model, confidence which

replacing a approved authorization repurchase new million. share existing Directors with our of to of $XXX Board our authorization Additionally, up

of guidance. new would comment implementation like accounting briefly regarding to I XXX lease the Now on ASC's

guidance XXXX. required the adopt are We new to effective in

on sheet, the there on will liability and P&L we and anticipate and geography do a changes not the be any result As changes. asset net an not any balance offsetting

Finally, fiscal guidance our complete Please guidance. issued financial press see today details XXXX. of the I'll for highlights discuss for the we performance our on release

At expect X%. comp to Applebee's X%. be at sales positive and and comp expect X% we between sales IHOP, positive X% We to range positive between

of approximately $XXX and expected to restaurant which reflects company EBITDA, million of drive Our continued be to a between the brands million. to Consolidated million is $XXX comp Total the driving $XXX which $XX both as momentum. expected guidance and million segment is company segment expected be for and between sales is segment $XXX approximately and between approximately profit, initiatives implementation traffic $X million. restaurant continued to million excludes range be inclusive sales EBITDA

openings compensation globally globally, highlight domestic to inclusive our XX G&A $X and We sector. of majority projected to is Please of including of expect we to million to which our health analysis note franchisees that stock-based which At $XXX approximately net that domestic system-wide the million these I be restaurant franchises. related are XX continue continue with like net between between of noncash to be closures. is range development range expect to IHOP would approximately expected and openings. this million approximately of depreciation the $XXX million. expected to G&A range restaurants of and new $XX expense Applebee's expected XX closures company part were have and of of between restaurants closures majority XX our to to improve are appetite the the to

adjusted per close $X. Lastly be share expected between XXXX solid very to for brands. per XX diluted earnings is a $X.XX. share and for our year was To XXXX

will we initiatives execution and on to growth capital line ahead to continue our strategies of return top the several of deliver operating Looking to shareholders. growth bottom to value focus line and

over with call the I will to turn John. that So now

John Cywinski

morning Thanks Tom and good everyone.

we industry comp healthy QSR is and Applebee's as casual Applebee's increase franchise And prior sales business year We capable year's plus in full has X.X% of has fine are stable casual fifth another with in the Applebee's for dining and including according performance for QX restaurant notably X% Applebee's category neighborhood dining our increased all key our Eatin' can with consistently brand our Box differentiating family the and a industry. a with very continue both for continue our plus committed plus Applebee's casual off-premise its year's strategy our This Applebee's XX dining. we is a what XXXX year outperformed evident we comp to excellence of lapping growth. to Neighborhood X.X% success. predictable comp on as represented center two-year performance Together certainly authenticity Applebee's guests. X.X% team. and clearly vibrant drives positive indicator with resulted performance Most as of sales metrics every perspective very prior from culinary guests the to and Good to of of This on Applebee's momentum resonates top to our and Without advertising annual Most be around truly strategy exceptional brand we position of again of and this for sales was remains with proud strategic successes. is course satisfaction milestone our upscale once representing as a QX. attributed operating years. growth. our our drives of and question Applebee's beverage commitment sales our as a operations quarter best This it Black posted our result activation is I'm partners vision my pleased value plus great in that best-in-class relevant also believe all very our we embodies to From and model yet restaurant the comp surprise the which in is sustain clear importantly piece experience. money. innovative guest who talented and the restaurant are reestablished

Our introduction focus flavors was teams smart a that Innovation remains here successful will case on indulgent execute focused our and and culinary QX. value strategy and can the level. be a on fully our restaurants with pasta abundant in and as mainstream validated consistently very recipes selective at with high

drivers segment in with specific results. of the guest we that and states occasion each distinct beverage messaging meaningful and innovation and our our represents for to off-premise us be business leverage in profiles Now execution. Each continue very

optimized to see example approximately engagement not of grew connect business few as in go I this around off-premise according no our past which There very ahead emotionally our view While Applebee's a of hope XX% beverage with that yet have better air substantially to again rate the continues is guests. growth to had our over advertising the chance you fully Box. run recent outperforming most a XXXX And dining relatable engines Black casual incremental weeks. to at Applebee's we brand. and for on

off-premise top XXXX both and in expand and continue focus our While we catering. our optimize priority to remains delivery

portfolio the mid-December. Steve restaurants in front franchise on we XX restaurants as Now North South and highlighted acquired Carolina in

from now a are with We very have we been system geography early leadership this and for while operations the perspective. sales At encouraged for running comp for outpacing currently present this company-owned execution. and a team's

comp Applebee's see the fact to our here. we in confident portfolio across after progress you in this only In and And system. keep of at we and franchisees trend business sales new informed all X we as ownership X as remain this related now certainly year-to-date achieving X will is owners a new goals rank months and two performance we

will U.S. base low as restaurant XXXX approximately previously normalize and full our in beyond. to Turning rate closures in and closure we as of outlined Applebee's X% approach XXXX

that and and which XXXX. ad very significant royalty in of brand important challenge sign disappeared a sign health Another important is essentially here XXXX have delinquencies front XXXX represented in

now brand absolutely Finally enhanced the to we With forward. love than Applebee's this franchise confident we Darren. and our America stronger this simply that business in partnership remain goal. ability that in on market. set sustain we We restaurant position a goal fundamentals execution become to is is it our most in delivered improved XXXX restaurant in and sound to our our I'll moving significantly momentum turn ever are

Darren Rebelez

All Thanks everyone. morning Good right. John.

a only report generate best pillars: fuel that map includes comp approach immediate growth. success and future our pleased guest off-premise. has significant the growth. IHOP being experience this the was has sales brand quarter at sales quarter great in addressed represent X% demonstrates XXXX. today quarter to full is. the intended accomplishment as On solid outstanding specific I strategic sales of total of X. family with team I'm our each of have road brand. revenue franchisees grew and for comp Significantly positive guest our X% grew running category the been IHOP's basis last the comp an fourth both the brand's on increase for and our actions traffic clearly consecutive strength to and for we of of strategy have and and this sales consecutive is the our couldn't results. focused efforts four results fourth since have integral members third a Based they and quarter comp the comp the in the which This was we best pillar year the that outperformed another which Serving believe parts but against XXXX. sales. in The achieve where has executing to quite quarter both dining and also Over drivers underpinned that enhancing on Not all are we our very based a measurable year iconic sales. plan broad it This on our the be guest produced sustainable experiencing key proud the this several role restaurants marks played experience in large restaurants the aspects done an these work these past X% the holistic strategy driving under to people year of top done there will year are of performance and love highest XXXX. everything since to contribute positive X. quarter fourth quarterly IHOP

we narrative With and and that attract guests the time both First and the day lunch dinner of fourth value successfully occasions menu the at IHOP year. our strongest for we can abundant parts on variety full any changed day. we quarter proved with regarding

our the While space focus are launch. always grow. Consistent breakfast platform us remained the that we Burger ultimate the than had untapped largely sales the theme before still more fourth help with drive results. to to white will continues be double quarter positive and to burger strong continue the levels for in represent for our

seeing is primarily are in by our solid we which business growth driven Second traffic. off-premise

than higher and Online as by approximately orders check comp significant us by for average a XX%. orders. sales strong is other online rose to-go increased a For opportunity all orders represent XX% fourth the for to-go quarter XX% approximately the comp traffic

potential. there we increasing the relevance ordering online is believe upside of significant With

in last a of guests. business. complete increasing another In specifically website our of the Go DoorDash DoorDash providers just ordering the expanding mobile it's the DoorDash upside XXX online repeat year. marketing for participating July. relationships created business the year bringing around will our enhanced to new already app our with with tripled our delivery address have ordering currently restaurants the provide we efforts added best six national-wide and program of the of total of than and delivery launched our will initial restaurants partnership isn't by aimed and And which program to experience efficient We more XXXX believe driving fourth last of well on quarter number be our off-premise IHOP overall profitable. system IHOP omnichannel new This and our to restaurants just months delivery strong increase we've sales more from expected online service all all more To leading and Our X% our another even awareness year. points to-go be as an from XXX platform end basis further accounts focus at to for building as guests

is IHOP development IHOP of to industry to where year contrast guests more ended continue domestically won't report another and This a net we the had component in XX for in that and trend restaurants We XXXX. guest strong positive the new restaurants rest the being Another increase stark IHOP with of another year go. this to XX development. expect restaurant our I'm putting is the with happy we with where internationally.

for guest an program the important Turning perceptions shaping plays part the the in remodel third driver brand. which to

to comfortable with modern them Rise and exceeds remodel. in gave we a their that N' restaurants were guests Shine it Our expectations

tool includes thanks guests Rise remodels of times I-hospitality image dining are our revisit operational while the easily the pay among Fourth remodel their and as Rise focus to testing bringing the restaurants guest-facing our technology overall guest scores improvement. completed which to possession for to devices N' aspects another the the intent of our guest allow We card. more and over increase card the Such wireless retaining total our that efficiency combined XXX number sharpened wait all the year and focus enhances overall to we to new of N' we group with currently tablets renewed accurate XXXX accuracy program. peer our experience second experience. satisfaction provide This to and credit highest service restaurants Shine on order of credit with We achieved Shine on when openings. new

overall indicates In achieved all-time our in satisfaction score seeing which our guest tangible fact we guests the an efforts October high are of results.

platform consumers Steakburgers value below items back breakfast enables XXXX menu with continuing Such initiatives help and will with to Steve for restaurants. I'm year equity Ultimate to our IHOP. our our will award popular combo entertainment XXth free that an brand. into change want the I'll plan another opening against IHOP. close XXXX excited To year IHOP of notable brand successful several growth universally heading with efforts brave menu incredible was It limited us broad-based the and the expansion four yet momentum expand with media comments. name we And for into delivering dining. guests our be anniversary and property campaign drive as enticing strong including turn Steve? our innovation focus a new our the to offer creating that leverage lot time continue his call that promotions Lastly to highlights our with and by winning our We're the pillars to offer. and a our on with confident our year family key to closing over launch IHOP developments our accelerate for domestic off-premise about be around buzz which to and

Steve Joyce

recap To to make Brands we returning company. Darren. a a continued had progress strong growth year in and significant Thanks we to Dine

While we ahead great get lifting this we to a of to still have us. of heavy lot point done have of a work deal

are strategy executing positive has produced results. a we that We place have on plans right in the and multipronged

of headwinds significantly are stronger in position us into XXXX. a XXXX behind we the With headed

to and attributes I'll as is due margins compelling No.X to cash an shareholders. capital profile flow our EBITDA return a model which robust adjusted attractive lot free repeat have such continue priority of and adjusted We to franchise our of highly

would up we call Now to Operator? questions. the open for pleased be


comes Gallo question from our from first CLK. And Michael

Michael Gallo

past? guess you back low-hanging there the opportunity potential I getting my year or I really not to the Steve at But haven't speak brand analyze in done of you if progressed things data if you years. things to bigger as some is now package Applebee's untapped is you a the new And about feet. you of that again some you the in there John you look get remodel about start there question forward its to of could been next really that to think kind well. wondering kind the was as the that sure if on fruit I'm low-hanging opportunities you have but the few was a of over or fruit? longer-term Obviously think Applebee's could just kind system speak

Steve Joyce


I'll this just to mostly John head it So let but off. direct me

have the. is we view righted Our

We our franchisees. a have for into area back moved profitable very

We the the that we excited growth are very about traffic have seen.

about We well returning growth. off-premise to opportunities are excited as expanded as both in

by add hopefully looking end of are to year. the new units the at starting We

starting conversations speak. are have with We to as franchisees our we

a brand in is got has is high for XX you as demographics climbing seen we customers under what so XX% and restaurants. while robust which but a has our And have our been around

got component to to got to we opportunities new a strong think internationally. brand favorable got And future. people grow and and do. lot very love us of roots also its with we've both we domestically a to So brand that history people leads what we our to is demographics think which a that a we've this a wanted returned But have long-term

and came we conference start side franchisee I seeing to expect our domestic interest large brand California real investment from the a a back the was in On just here out some about got development. previous the conference was I end the people success had but to from nothing terms. There in say. me panels already really left talked three of speak for at in to remarkable. Applebee's

color. opportunity. we about why fill So you that are with excited in don't John pretty

John Cywinski

and Sure. XXXX call to ability our the XXXX transitional to or think results. was the year was foundational demonstrate generate growth consistently return it Michael relevance in critically important Thanks I we and Steve. predictably let's year

position that in right are We now.

at And with we so I franchisees. and I unique as feel extraordinarily look have the brand model an business partnership our

we partners. strategic We XX We a partially casual and in large new significant in have industry in a Their unlocks closed know-how with works opportunities. restaurants. operators restaurant franchisees We put We We They of basis. other with great back underperforming that in some and And teams. at partnership in full consumer partnership XXXX with team as now meet particularly deep debate are every with insight experience look deck. XXXX. healthy leveraged well. XXXX kind We leaders. our month our place had We're of dining. dealing an exceptional on really

look take markers. location motivations We based -- distinct drivers it the we understand So We mark occasions. at accordingly. we we and and

selective the will in disciplined our we are very front We see beverage and and and both on that continue front the to innovation culinary selectively from team.

Our off-premise business has three components.

remains brands. delivery up two or in three other is XX-plus based a the XXXX that brand to there We variety a are percent secondary restaurants today. next the years XX%-or-so very for are business internationally priorities catering components catering locally got and will about get delivery call moment we emerging over fundamentally primarily our footprint It at it XXXX on activated to-go of fruit low-hanging focused of and whilst but

positioned So we well. think we're

that all significant restaurant probably add You is that up opportunity we positioned. well most business excellence and are and very

has satisfying. Our franchisees have of experience and leadership equally team hour The to-go variability what our made experiencing narrowed did really Applebee's to tremendous is Carroll guests X.X-hour one in they Kevin heyday and progress. terrific a under experience probably the our our

in and all and we are we that and positioned add future. candidly well are very beyond you So Mike XXXX our excited about


Raymond from comes Brian from James. next Our question Vaccaro

Brian Vaccaro

XXX and in clarifications few covering think delivery X think Couple XXX. and looking saw Applebee's I John question. ago a was a under follow-up little minutes just of a quick mentioned I through units. you the I I

XXX Am So it currently? quarter-to-date. interpreting implies I I you guess that rolled another that that

John Cywinski

providers both from as delivery units have getting anticipate where including we to as But as yes providers well perspective. we national I Brian a up contract that formal a eventually Yes. providers local well. XXXX handful there local have

Brian Vaccaro

the improvements for more to that six you've color you Okay. seen to in improvement see experience the to on at in-restaurant further into the you've little can And the three circling provide Applebee's opportunities back where That's great. where a most And improvement months? last you XXXX? made

John Cywinski

From the perspective restaurant operations Brian.

Brian Vaccaro


John Cywinski

one variability when performers XXXX performers and bottom between Number Meaning our large. variability. stepped in was I would be top our the

been And so dramatically. that's tightened

dramatically we guest Our which defect quantify we percentage basis X% you are moved and the experiencing will. daily for those And satisfaction on problem two strongly placed where the are it's and money. value correlated. which very is to both then they a of And a a guests very if a about low on rate premium point has significant south

performance is overall encourage frankly accelerated And over to franchisees have system. sales past tightly they actions correlated We and underperforming the the underperforming very that be the we taken our interestingly And want standards. have accountable. tough we to applauded accountable. And they improvements. units two to operators exit to hold Our held comp years

economic in savings Both probably 'XX so are the a a And a underway. individual that's also improvement unit where brands basis. those the add operationally. in XXXX we I pleased And are with initiatives in have few restaurant progress and profitability anticipate XXXX substantial would and doing We so captured on that profitability. perpetual are highlights we focused restaurant

Brian Vaccaro

if one right. just great. All And then Tom. That's could I

to XX-K bit the question. Looking a little

fourth Applebee's franchise in On the quarter. back into put annual obviously numbers so the segment you the

questions. two had Just

was was that that past wanted collection the includes of footing Can I around the and franchise million in you range could takes? $XX That million of expense puts down. think through expense On think just walk is that $X two on $XX it the if to then looks like revenue it within bad million I I right. confirm And million debt if royalties confirm mid-$X my Applebee's that. expense. side was it franchise you on the

through puts expense the walk QX Just takes the of and that please? franchise in

Steve Joyce

Tom why don't start you off.

Tom Song


on you're of revenue right. the So Applebee's It end year. the collection the franchise the doesn't segment include at

segment speaking are. answers again you you to With hopefully question. franchise expenses to So that specifically just are respect that so Applebee's

Brian Vaccaro

$X We movements. know kind I off-line it $X.X sensitive. Yes. for about the can I'm debt Applebee's but follow-up think if segment was which follow-up it is to bad million of can I'm absolutely franchise off-line the I down be just trying speaking quarter. just specifically to million to we but on And looks there makes

Tom Song


that's so if of it debt year expenses about have over there. a million And you for you some the bulk in have the recall have bad Brian. you of $X You little

So that million about $X.X it's you actually. gets

Brian Vaccaro

a guess going Okay. expense million expect XXXX normal the a if And quarter forward the should and I the so volatility the I'm Applebee's or something you going a sorry bad see profitability think a collection is message 'normal' going forward something about we run rate franchise line royalty it forward? $X segment normal dampens debt we rate seems

Steve Joyce

That's Yes. absolutely right.

So both back you're respect going to have debt brands with the norms expense. to bad to


Wedbush Setyan Nick Our comes from next Securities. from question

Nick Setyan

above The is obviously phenomenal guidance anyone's expectation.

think terms X% brands? So the that into extremely begs least confidence of X% kind some from we quarter-to-date And about What have in comp? that to the can to of commentary comp maybe how start drives at at question. be both that would helpful any which to foundation

Steve Joyce


you with a really start think, if the John really gets numbers, to multipronged and the and strategy. it comp it Darren performance I brand So

off-premise. pieces of several employing. couple is for one next years think which of are ones big different the Obviously, is growth growth, there the provide So providing we we're we'll

So we leading another in into and of shipped integrity We've offices We've with lot homes lot into we catering people's containers it. that got talked our we a product of a because we the investment in. put technology. invested ways and think opportunities about delivering

available it's not store So only in being it could electronically, receive you also in is our product restaurant. any available

I so are think that. recognizing people And

surface We opportunity haven't even really both catering brands. the in of scratched the

a think So just opportunity big us. for we that's

are technology side, option. restaurant investing dollars profitability points enhancing things friction the lots are customers on that we of or significant in Secondly,

own there we wait are options, talked bring options. device about options, you your no So it, tablet the

we First the kitchen but to are taking menu. it innovate to also the simplify,

a So that we is in it healthy. are categories are

years We continue position long lead, growth of possible. think leadership I numbers have are got And XX as run. as to we in these

we're that operating assumes we healthy in. that what Now a environment is got

excite give to options on our we our plan in just have options best to menu to brands have probably in of changed that to guests we confidence lasting been have a that involved healthy But this year from sensitive reasons standpoint and things come restaurants. believe are on into which wider the both at groups going the trajectory It's since to for provide as ever both consumer this year know to the them we're well is we that needs through are had we come most in of variety the both the exciting do to to don't you simply as things incredibly people the little. that turn restaurants XXXX. people's to I company looking exciting sensitive a to advocacy store numbers what So

So options year things out promotions pretty drive to both not of in that are things but surprises their food we putting kind think obviously we wide hit terms wanted But Applebee's we in to fun. really because sweet traffic now be are really we be a that exciting going right the gave we going to range bringing the to several brands to the this operating spot of are environment. new we're

we side also restaurants of our know brands that's million for burger we think innovative every There think ourselves with but take In resonating too follow year. always both pancheeza are I more them sides. that people able more interesting brands. from it's seeing starting size over business a I an it's royalty that delivering On the of And And I that into now becomes. took our maps. times such advantage only are franchise at it following us the scale to valuable with campaign IHOP are we're but the we brands I we incredible makes not both of company this we the edgy we represent. that's brand. that And an the visitors And this. way we a American the market we set is demographics XX% fun we to more the with the fun people of which seriously. them are feel the public are we strong on The on think But come having a these tap And national. have think don't but think about more XX these we to campaign and I little in

that to job grow scale. is here Our

restaurant profitability a provide we every built Applebee's side So and improved right for interesting we also better. going But time restaurants run from the the on guests. we never things the The including both and forward. doing have been franchises innovative the our and right the company IHOP more teams they're

we're have have franchisees. had It seen. I business is in for of group a We a years. been a have just. time I working this better as been never has never good as long relationship. XX just this There almost better a And situation

potentially sure our as so XX growth we as make the that on over build job is we we And brands deals growth is year that which of international last accelerate we to restaurant year. to well accelerate that signed these continue a others great

So think our that's we every is opportunity a about the now great where position tools this fit. we we're in is putting start. day we're just need customers huge that the the a and But in we're we and more think foundation is learning place

Nick Setyan

of trends of bid the we seeing. a have implies two-year trajectory You the significant been Even in comp uptick which guidance mentioned a the already end low there.

you on current will kind there seen see acceleration And two-year terms have trajectory a continue what so I is indicate to we mean at this QX basis? of in least that a of

Steve Joyce

had for Well Applebee's. year last was a great a year. have I remarkable year

guidance we that are on the we expect can gave. you that into So trajectory fits the

Nick Setyan


ask It The flow. by flow that annual million. the other the free I exceeded adjusted on looks to is want I cash $XX about like about had guidance cash seen question out free there

terms in adjusted cash free I think at we are $XXX-million-plus of flow.

correct? XXXX? should that flow think second we is And about how cash First free in

Steve Joyce

coming that making of front. the Applebee's we're correct, to contribution million -- but that the remember think advertising is So that not $XX it from I another that a is lot

right. incredible more cash So that's provide The what of amount system be flow business a scale machine if will yes, about returning that to cash as right. franchise in with which EBITDA the flow so think a flow with robust and lot margins, position, a this But the cash will increase. provides of we're model, same particularly you is difference cash enormous it's

then the as return to that continue and end of to shareholders. going I of at primary mentioned capital do goal we're is call, the So our to

So the this quarter, you we're saw doing saw dividend. with what you

to XX% of above every Now right increase we're be -- flow. to XX% our XX% the wanted and is guidance not That quite set increase We dividend increase flow. we our cash us free to year. going of frankly, between XX% somewhere cash gets

in we is dividend. good investing Obviously investment. So a we with comfortable our very believe are stock

the opportunities it We in also that add. for us invest will But continue brands potentially to from other to us. see look brings brands and to new

Tom Song

our of really think cash EBITDA I'll model business you about well from just if CapEx south of add flow the figure is that strong. is through flow to XX% very free EBITDA. our very Typically

other And are company that so business contrast that's in sharp significantly more models to predominantly or operated.

Nick Setyan

be in I the of towards should on think million anything in follow-up. aside were when kinds cash from we're that I'm we of I onetime contribution fund that XXXX about if that And funds. a on XXXX there correct XXXX any wrong flow? in that? top about or nature XXXX. of bad thing any I Is onetime $XXX mean XXXX thinking in there should ad about or the Just think Were tailwind this

Tom Song


on We had piece came one with increased a litigation a QX have respect just an is different It bit. favorable little resolution up on one to number to with performance-related this to significant in on bit last is respect respect did on highlight that think mentioned with G&A the I to litigation little items. to we a a incentive One a earnings I compensation second the But very the and increase was which G&A was was drove obviously was expected. employee case. cost compensation. So specifically that few thing continued call of

finally the And respect then was so mentioned we the into in IT. that And QX I that a bit. had headed went dollars And little there number year. as with of it half up final continued to of reallocation

Some of it the reprioritized G&A development and hence dollars. became activity was

towards so And IT had again a function of we just movement that's some that development. in

on better year they're the decisions allocating how they dollars. progresses IT As make

Nick Setyan


that first half XXXX should XX-plus in sort positive implies second QX at still it is we back QX Applebee's at closures? of growth half get growth I like of in the something unit the half then unit the net And Applebee's? guess On

Steve Joyce

that units say the we would second be that open starting believe towards end course I hopefully we half. the will up to year. we are wouldn't say be on of I to

So that. lot given But see signings a do more see start because that of year it things those that believe are franchisees that prototype do obviously than franchises end are with be of to compelling both it will for And the probably had the on to the just think you are openings. we will brand already are think we franchisees one this and you actually to was and the I will to way We about got doing going grow the a build. encourage that going bearing our making to a we it are year. well that as fruit combination conversions starting in a number performance lot struggling start this focused conversations will to sure is looking and a options category brands of towards franchisees because for are of attractive very for we a at

opportunity think a just want dialogue the our strong opportunity conversion new and think restaurants franchisees with bringing we system build builds potentially that performance and the well. new But restaurant we very combined in very as as at with well we buy that be that So are brand our space of is combination that of will this are for that there opportunities demand a to as into folks that least think quite us. that's and for we those level franchisees frankly for not affordable

Nick Setyan

the would sure would Applebee's of helpful franchisee guys And I'm numbers really the is know often get at gave I you some be a where kind helpful? franchisee question profitability at you be question. it. us that's very then Applebee's. any profitability Got around if reminder but on It last

Steve Joyce


which office the cost kitchen we fairly as of all have front on in average looking profitability So internal doing unit to believe vary going we with to is decline of though can study and cost at obviously we cost and will But to product that expecting before be And points focused our of about that and the them thing to we operating labor are in made and years and now to improvement cost kitchen. profitability the at making our at operations are an and as point markets from the improve that the We're next about done be changes in permanent fruit. ways profitability. where are most are slightly this phase us. are are about seeing way the in obviously and X.X very this year as terms of that's well monitor need closely labor is tight. increases volume to in an franchisees interesting we both this. it a steep the model worth the that labor think up the a obviously we're We've we're several they basis offset house we boost actually that could are their are that improvement. of in think potential real for I our because their of cases and franchisees talked margin lot actually reduce costs over proving XXX bearing think work even We it The

here about represent talk we XX%. As we do

are our back going people Those us. customers. for sword X-edge a it's So to work

benefit getting and is as it in which some think close into But how others. the double-digits as now mentioned where the average they obviously to in where is and you're XXXX cost in volume can high-teens as is we versus in that market intense depending revenues on an they range can X.X is were on range I the are. unit there pressure exacerbated labor some So in the general are higher well it

Nick Setyan

royalties after after that's And that contribution? some

Steve Joyce

Yes yes.


next from question Anderson Group. Stephen comes from Maxim Our

Stephen Anderson

a of Just couple follow-up questions.

what I That of guidance impact EPS the the your is all the you quantify from in locations. XX have? First ownership can

Steve Joyce


John Cywinski


gave we're flows slightly consolidated it about EBITDA Steven. through is component accretive that of the contribution about you we modest and take it for think the restaurants about relatively the when obviously expect be adjusted million we year so guidance talking this but you which if $XX So numbers to the company

Steve Joyce

real We upside just did is to we so is in of getting we to made all together obviously the But the we Well answer think restaurants. the I pulling acquisition. think diligence that are them optimizing the and due structure. process the before we are significant there some of

We XX of there are on today We next revenues. very think to revenue the We cost out is with over days. think will the XX obviously picture the side. the shake happy performance upside

quarter will share and immediately we about will call. more grow. it in it's the that first think accretive But We

Stephen Anderson

of call have is want this question of And with you on my if franchisees? discussed the if see final that concept terms any you but just to with and in I

Steve Joyce

that? repeat you can sorry I'm

Tom Song

concept. restaurant Third

Steve Joyce

have point next now the said ready. they months within be XX some will at I

looking So something specific we are for very okay.

are for you're major going us. looking a acquisition not to not We by see purchase big

for it looking tuck-in are a call sub-$XXX We acquisition million.

is to nationally concept So grow and there units. That's think the about be that. for accretive XX regional what that that means. equity. can are means it's That to concept restaurant several immediately to got a a with One we part key most XX components

going this. are distract to come So new a a Two major with not not a team it self-contained brands going management that we because we're our bringing is from brand. has

expertise that team capital and franchising provide that's with concept their in a grow to What needed us. and wants is franchisees. we the we So coming founder and nationally obviously

of is build. brand to are we part franchises only want to that So the other picture our at going look

business margins our the will got off be because franchisees the better. add built-in margin Franchise we our we be more scale. better will will better the audience. be can be will to better returns scale that So The our the

to So we announce we're circumstances. this will we announce. things afford at specific point but it we those fit at not can criteria are when We and something will I lots of looking looking of tell you but set or for very a


Brian go question with Raymond ahead. Vaccaro comes next Please Our James. from

Brian Vaccaro

one Just more just quick clarification.

sort is $X the EBITDA that clearly G&A. million $XX a you G&A allocation? of or true million burdened question release. units The is the before in of number to with mentioned acquired the On press clear that $X million so that's the

Tom Song

That burden. is

Steve Joyce

to We would add. say value growth enhanced like revenue


CEO to turn for now Steve will over call the closing Joyce back I comments.

Steve Joyce

thanks Well for time Okay. today. your again

We are with to report the look first you great X May day. scheduled we and to there. results forward for a speaking Have on quarter


conference. today's participation. for Thank you concludes you This and ladies your Thank gentlemen.

You may now disconnect.