Good day, and thank you for standing by. Welcome to the Dine Brands Global, Inc. Fourth Quarter and Fiscal 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your host today, Matt Lee, Senior Vice President, Finance and Investor Relations.

Good morning, and welcome to Dine Brands Global's Fourth Quarter and Fiscal 2024 conference call. This morning's call will include prepared remarks from John Peyton, CEO, and Vance Chang, CFO. Following those prepared remarks, Lawrence Kim, president of IHOP, will also be available along with John and Vance, to address questions from the investment community during the Q&A portion of the call. Please remember our safe harbor regarding forward-looking information. During the call, management will discuss information that is forward-looking and involves known and unknown risks, uncertainties, and other factors, which may cause the actual results to be different than those expressed or implied. Please evaluate the forward-looking information in the context of these factors which are detailed in today's press release and 10-K filing. The forward-looking statements are as of today, we assume no obligation to update or supplement these statements. We will refer to certain non-GAAP financial measures, which are described in our press release and available on Dine Brands Global, Inc.'s Investor Relations website. For calendar planning purposes, we are tentatively scheduled to release our Q1 2025 earnings before the market opens on May 7, 2025, to host a conference call that morning to discuss the results. With that, it is my pleasure to turn the call over to Dine Brands Global, Inc. CEO, John Peyton.

Good morning, everyone. Thanks for joining us today. First, I want to express our sympathy and ongoing commitment to our team members and the community affected by the devastating fires in LA. We're proud to be a Pasadena-based company, and we will continue to support our community during this very difficult time. And now on to our remarks. Today, we will discuss review Q4 and full-year 2024 financial results, share key priorities for improving performance in 2025, and our expectations for the year ahead, and then Vance will discuss our financial results and 2025 guidance in greater detail. In January, we announced that Tony Moralejo will step down as Applebee's President effective March 4th. And for now, I'll assume the role of interim Applebee's president, while continuing my current capacity as CEO of Dine Brands Global, Inc. I'm grateful to Tony for the passion and commitment he's brought to his work. And Tony and I both share a deep respect for the DNA of Applebee's. And we are all thankful for his contributions since he took on this role two years ago. We've initiated a nationwide search for a new leader for Applebee's with proven expertise in brand stewardship, marketing, and restaurant operations. And in the meantime, Tony will serve as an adviser through June 4th to support the transition. This change, together with new leadership in place at IHOP and Fuzzies, as well as recent steps to rightsize our organization, is part of our broader strategic effort to capture the next generation of loyal guests, unlock our growth potential, and drive improved performance. Now looking at our financial performance during fiscal 2024, Dine Brands Global, Inc. generated $106.4 million in adjusted free cash flow, and while other financial metrics were down year over year, the steady state of cash…

Thanks, John. Despite the challenges in 2024, we generated strong free cash flow of $106 million and returned $43 million of capital to shareholders while maintaining a healthy balance sheet. Our asset-light business model continues to position us well to perform even in the midst of ongoing headwinds. On the top line, consolidated total revenues decreased 0.7% to $204.8 million in Q4 versus $206.3 million in the prior year, primarily driven by an $8.7 million decrease in franchise revenues partially offset by an increase in company restaurant sales due to the take back of 47 Applebee's restaurants in November. Excluding the take backs, revenues would have been down 4.7%. For the full year, we generated $812.3 million in total revenues, primarily due to negative comps and a decrease in rental revenues partially offset by an increase in company restaurant sales due to the take back of 47 Applebee's restaurants in November. Excluding the take backs, revenues would have been down 3.2%. If we exclude advertising revenues, franchise revenues in Q4 decreased 5.1% year over year and 2.5% for the full year. Rental segment revenues for the fourth quarter of 2024 decreased compared to the same quarter of 2023 primarily due to operating lease terminations. G&A expenses were $52.3 million in Q4 of 2024, up from $50.5 million in the same period of last year. We ended the year with $196.7 million of G&A expenses, down from $198.1 million last year due to stopping the IHOPFLIP initiative in the prior year, a decrease in professional services, including acquisition costs, and a decrease in occupancy costs, partially offset by an increase in depreciation expense and organization restructuring costs. Adjusted EBITDA for Q4 2024 decreased to $50.1 million from $62.2 million in Q4 of 2023. Adjusted EBITDA for 2024 decreased to $239.8 million,…

As we wrap up our call, it's clear that 2025 offers opportunities to enhance our performance. I want to thank our franchisees, our team members, and restaurant teams for their continued support and extraordinary work to serve our guests every day in our restaurants. We'll now open the call for Q&A. Lawrence and Vance are here with me ready to answer your questions. Operator, please share the instructions for joining the queue and open the line for our first question.

Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. We ask that you please limit yourselves to one question and one follow-up question. Our first question comes from the line of Eric Gonzalez from KeyBanc. Your line is now open.

Hi. Thanks for the question and good morning. Last quarter, you pointed to the marketing strategy as the primary source of the recent underperformance of your brands. It was said that the messages you share, the kind of value that you communicated was not as compelling as you needed, as opposed to there being some sort of operational problem or issue with guest satisfaction. I think there was some hope that the issues with value would have been addressed in the fourth quarter, but it seems that some of your promotions again didn't cut through. So I'm just wondering, do you still think it's the messaging that was the miss versus there being a reason why customers are not coming back after their initial trial?

Eric, good morning. Appreciate the question. So in our comments about last quarter, it's John, by the way, remain the same is that, like, you know, like, our guests and the guests for, you know, restaurants in general, we're looking for value, particularly the all-in value of the meal. And we leaned in hard on Applebee's to that really big meal deal, and we've leaned in on IHOP to the house faves. And both of those, we started pushing, you know, late mid to late fourth quarter, and we saw progress from both. We saw an increase in traffic in the really big meal deal, an increase in traffic from the IHOP house faves, late in the quarter. And so both of those for us, are programs that we intend to build on. That really big meal deal in particular, Eric, drove incremental sales at lunch, and we also overperformed on our digital channels for Applebee's. So, yeah, the marketing is really important. The story we tell. And it's also important to note that it was a crowded space in terms of communication. You know, you couldn't watch a football game on Sunday in the fourth quarter without seeing restaurants promoting some version of a, you know, a full deal a full meal value. And so breaking through in one quarter was not necessarily our objective. It's to start to make progress and build on it, which is exactly what we did.

Thank you. One moment for our next question. Our next question comes from the line of Dennis Geiger from UBS. Your line is now open.

Great. Thanks, guys. First one, if I could, maybe just a follow-up on the value helpful color. I know you gave the mix on the meal deal. Could you touch a bit more on maybe just what total value incidents was if you guys have that number? And more on the kind of the exciting news coming at Applebee's in the back half of the year. I'm sure not too much to share, but anything more there has that been tested yet? Will you be testing that over the coming months before the launch in 2H? Anything more on those value plans as you look to kind of expand that, and that net news on value in 2025.

Sure. Thanks, Dennis. It's John again. I can take that for both brands. So for total mix, you know, we define that as, you know, the LTOs for the period plus the value portion of our menu. So for Applebee's, that would be the really big meal deal, you know, plus the two for $25 portion of the menu. And for the quarter, that was about 27, 28%. Which is consistent with where we've been the last couple of quarters. On the IHOP side, that would be the house faves plus the over 55 menu, which is our value portion of that menu. And they were at about 17, 18%, which is also consistent with where they've been the last couple of quarters, but an increase of a couple of points from the prior year. In terms of where Applebee's is headed, you know, I'm excited about the value program that we're building out, the everyday value platform. So the core of it is two for $25, which has been in place for more than 15 years. It's a fan favorite and as you alluded to, is 20% of Applebee's mix. But as we talk to our guests, we've done a lot of research in the last six months. What we can do to build on it is if you imagine two for $25 being the center column of that platform, to the right, we want to have more offerings for groups and families in terms of being able to share larger portions. And to the left of it, we want to have more promotions that are relevant to single individuals who aren't necessarily looking to share two entrees as an appetizer. So that larger value platform for singles, for pairs, and for groups is what we're building and we expect it to roll out, you know, late spring early summer. It'll include some new menu items as well and some new combinations that are appealing not only particularly to new guests, and particularly to younger guests as well.

Thank you. One moment for our next question. Our next question comes from the line of Pratik Patel from Barclays. Your line is now open.

Great. Thanks. This is Pratik on for Jeff at Barclays. John, the release mentions the ongoing partnership with franchisees. Can you just talk about the confidence that they have in the turnaround plan and how much they're willing to invest further in their brands, just how those conversations have gone? I had a follow-up. Thanks.

Sure, Pratik. Thank you for the question. Look, I want to take a step back because when you look at our performance since COVID, right, our brands, Applebee's in particular, you know, had three years in a row of beating the comp set and having positive comps. We're disappointed with our 2024 results, but in the context of the last four years, I think it's important to keep that in mind. And when you ask about our franchisees, they, like us, want to do better than we did in 2024. And we're very aligned on our plans for 2025. I think I've mentioned before, you know, between my 18, 19 years at Starwood Hotels, four years at Realty, and now five years here. You know, I've never seen in my career cooperation, communication, and, you know, consensus building among franchisees and a franchisor. Which we have through our extensive, you know, committee network. And so when it comes to our plans for 2025 in both brands, our marketing committees are aligned with us on the direction we're heading. Our operations committees are aligned, etcetera. And when it comes to franchisees' willingness to invest in the brands, it remains, I think, as strong as it's ever been. And examples of that include we opened 40 IHOP restaurants last year and we'll do that about the same number again this year. We opened our new dual brand in Seguin with fabulous results, over the last two weeks. We've got 12 to 14 of those that are gonna open this year. And based upon what our franchisees are seeing there, we've got a pipeline building of 50 to 60 into next year. And the last thing I'll say is, you know, the Applebee's franchisees, we offered an incentive to begin the renovation process this year, and it's already oversubscribed. You know, including seven of our top ten franchisees who've signed up to renovate restaurants within just the first few weeks of promotion. So, you know, all of that to me points to our franchisees' strong commitment to investing in their brands and to working with us on our plans to grow in 2025.

Great. I appreciate that color, John. And then my follow-up was just about the guest experience. There's obviously a strong effort in elevating the guest experience, and you've talked about the renovations and the remodels that have been oversubscribed. John, just beyond those remodels, like, what do you see as the greatest opportunities to elevate the guest experience and, you know, what sort of time frame are we looking at and what sort of costs might there be to achieve that? Any near-term strategies you can call out?

Yeah. So the restaurant business is extraordinarily competitive. It has been for years. It certainly was in 2024. And we expect it will be in 2025. And, you know, I think I've said in the past, there isn't a single silver bullet that will transform the performance of any one of our brands or any for that matter. What needs to happen is that we need to execute excellently, you know, across the board. And that means we have to have excellent and relevant marketing, including social media and the promotions we have. We have to have excellent guest experiences in the restaurant, which includes both the service, the experience from our team members, as well as the preparation of the food. We also have to have a great physical restaurant that is contemporary and welcoming, and modern. We've gotta hit all of those at the same time, and we've got plans at both Applebee's and IHOP, you know, around those key moments that matter in the restaurants. And I'm very confident you'll expect to see improved performance, you know, in 2025.

Thank you. One moment for our next question. Our next question comes from the line of Nick Setyan from Wedbush. Your line is now open.

Thank you. Just given the industry volatility and pressure we've seen quarter to date, you know, across the industry and the peer set, it would be really helpful if you guys gave us, now at least directional, you know, commentary around where trends are, you know, in Q1 and or at least relative to the full-year guidance in terms of the comp that would be very, very helpful.

Okay. Thanks, Nick. Vance, it'd be great if you could go through what we saw in Q4 and Q1.

Sure. Hey, Nick. Good morning. So, you know, what we saw in Q4, IHOP, we did see stronger performance towards the later part of Q4, that's really driven by the launch of our house faves value menu. Applebee's, on the other hand, saw a more mixed performance throughout the quarter, but, you know, the improvement over Q3 was really driven by the launch of the really big meal deal as John mentioned. And we are expecting Q1 to continue to improve modestly from Q4. But, you know, we do expect the consumer environment to remain challenged for the rest of the year. So that's been built into our guidance. You know, a good portion of our call is talking about the focus areas for 2025. We're driving forward, you know, the 2025 focus areas. With guest experience, with menu and value offering, and, you know, the dynamic marketing that we're working on. And that will help us improve the performance and hit the guidance that we provided.

Thank you. One moment for our next question. Our next question comes from the line of Brian Vaccaro from Raymond James. Your line is now open.

Hi. Thanks, and good morning. My question is on IHOP's food cost outlook. Can you just help us understand what is assumed for eggs specifically? And I'm curious if there's other items in the basket that you're seeing capability on that help offset that egg pressure. And then have any of your franchisees taken egg surcharges like we've seen from some other breakfast concepts in recent weeks?

Thanks, Brian. Vance can walk us through the IHOP market basket.

Hey, Brian. So for IHOP, as I mentioned, we're expecting sort of low to mid-single-digit inflation cost for the year, and that's really primarily driven by eggs. Outside of that, I think there's some headwinds with bacon and coffee as well. You know, you asked specifically about some of the tailwinds. What we're seeing is chicken strips and chicken breast, turkey, and ribs. Ribs more for the Applebee's basket, that's helping. And our franchisees have not taken surcharges as of today for egg pricing. You know, CSCS is really working hard at maintaining the availability of eggs at prices that are very competitive in the market right now. We have tremendous support from suppliers supporting our system in this very challenging environment. So, but as I said, franchisees have not implemented surcharges and we're monitoring the situation very closely.

Thank you. One moment for our next question. Our next question comes from the line of Jake Bartlett from Truist Securities. Your line is now open.

Great. Thanks for taking the question. You know, mine was on innovation. It's something that you've talked about for, you know, a little while here. And I'm not sure how much we, you know, I guess maybe if you can kind of frame what you did in 2024 that really kind of you think kind of, you know, innovative. And then also just what you're looking to in 2025. I think from the last call, you highlighted, you know, 14 items on the Applebee's side that were, you know, tested and kind of ready to go. Maybe just your confidence that innovation is gonna be a meaningful driver of accelerating comps here. And then I had a follow-up. Thanks.

Thanks, Jake. It's John. There's so much to talk about when it comes to innovation. You know, I'll start with the dual brand. If you find yourself in Seguin, Texas, you've gotta stop in. The restaurant looks fantastic. It was an IHOP that had been there for many, many years. And in the two weeks since it's opened, it's doing 3x the revenue it did when it was an IHOP and stronger in the second week than the first week, which is unusual. You know? And what we're seeing is, you know, two really compelling findings. One is clearly the economics for the franchisee are terrific and the franchisee with whom we partner there is ecstatic. And in terms of the guest reaction, they're loving the choice and the variety, and that's exactly what guests are looking for today. So to be able to choose from both the Applebee's and the IHOP menu all day is really terrific. And, you know, when I was there for a couple of days, I saw at ten thirty in the morning a four top, two of whom had omelettes and two of whom had ribs. And the same thing in the afternoon, you know, seeing steaks come out for dinner along with pancakes. And so guests are really enjoying the variety there. And that is absolutely tremendous innovation, including new menu items are there. You know, in terms of innovations throughout the year. You know, we had some really good marketing programs, and I'll give you just Applebee's as an example. The NFL partnership, which is a three-year deal for us, did a lot to raise visibility and drive traffic, particularly. So Date night performs really well. And what you'll see is a new idea in 2025 is, you know, Club Applebee's. You know, we're gonna lean into Club Applebee's. And growing out the loyalty program in a way that we haven't before, having learned from IHOP and having learned from Applebee's. And just in the last couple of weeks, we've had the big easy promotion, you know, which is a new New Orleans themed extension. You know, our existing menu that has been performing really well. We've had a terrific couple of weeks from that. So there's a lot of innovation there from last year and a lot of new ideas for this year, you'll see particularly on the menu side.

Great. I appreciate it. Then, yeah, my next question, I just I wanted to maybe you're trying to understand what's coming in the back half with the everyday value menu. Is it more of a reorganization of the menu so that kind of all of the value, you know, items are kind of put in one place? Is it about marketing, or is this about kind of new offerings that you're gonna be, you know, that you're gonna be adding to the menus? It's just sort of a reorganization kind of more of a marketing push than is there will change to what? The options that the consumers have.

It's all three. You know, you outlined the strategy perfectly. Right? So it's all three. One is it's reorganizing some of the menu more clearly around two for $25, which is one of the most sought-after and purchased pieces of our menu. Number two, it will include some new menu offerings. And so some of our innovation and our new combinations will launch via that platform. And, of course, we're gonna introduce it into our marketing and storytelling in a big way next year. So it's all three.

Thank you. One moment for our next question. Our next question comes from the line of Todd Brooks from The Benchmark Company. Your line is now open.

Hey. Thanks for taking my question. Wanted to explore the takeback of the two Applebee's franchisees in those 47 units. I guess, historically, you've had good success kind of shifting units between franchisees and getting them to stronger operators. What was the impetus for the takeback here at this time if you think about the amount of time that you would expect these to stay in the portfolio before having them ready to refranchise? Anything that you can kind of frame up for details about why and the duration of this potential transaction.

Yeah. So as you mentioned, Todd, from time to time, you know, opportunistically, we've got the ability to take back restaurants, and we've done that in the last quarter, and we will, you know, do it again in the future if necessary. You know, the rationale for doing this is that, you know, in conjunction and in conversation with the franchisees, we felt this is a better path forward for these restaurants than if they remained in the status quo. But it's more than just there's really three reasons to take back these restaurants that are exciting to us. You know, the first is, of course, we believe that we can revitalize and refresh them and spin them off back to franchisees in about a three-year time frame, plus or minus, and obviously increase the value of those restaurants and have a return for Dine Brands Global, Inc. on that. But we also take them back at a time when we are launching our remodeling campaign for Applebee's. And so we'll remodel 30 of these restaurants ourselves, and that allows us to demonstrate to franchisees what that remodel looks like, it enables us to focus on what the ROI is and to obviously put our money where our mouth is and do the same thing that we're asking of our franchisees. And the last thing it does is there's probably about a half a dozen of them are candidates to convert to dual brand, which, again, is gonna advance our strategy and our mission there to roll out the dual brands in 2025 and 2026. And, you know, we'll invest there as well because we believe so strongly in the concept. So for us, it's really driving three key initiatives at the same time, and that's a super valuable moment in time for us.

Thank you. One moment for our next question. Our next question comes from the line of Brian Mullan from Piper Sandler. Your line is now open.

Thanks. Question on IHOP. I believe you said Lawrence was on the call. I wanted to make sure before I is Lawrence on the call?

He is. He's dying for a question, Brian.

I just want to make sure before I okay. So, Lawrence, it would be great to hear what attracted you to the opportunity, and IHOP specifically just, you know, talk about how you thought about the chain family dining segment. You know, traffic trends have tended to be negative. I'm sure you knew that coming into the role. So just a thesis or a hypothesis you have on the category or the brand any color on how you thought about it would be great.

Alright. Good morning. Yeah. So when I was evaluating coming in, speaking with John and the team, the first thing I did was really go deep into the restaurants. And, you know, I've been in the industry or always, you know, the restaurant industry for over a decade now, and I just saw an iconic brand. You know, I spoke with a lot of consumers, obviously, a lot of peers, the industry, who have also left QSR and gone into casual dining. And I just saw amazing potential. And when you look at the incredible food, you know, I've cooked in a lot of kitchens now at IHOP, and I've gone deep into restaurants, spoken with team members, GMs, you just see the passion. You know, you see the magic that's happening in the back of the house. You see the prep time, the time they spend, the love that comes into the back of house and the preparation of the food. And what I really saw was true love. And so that's what really got me excited because when you speak with, you know, even consumers or guests in our restaurants, I remember the one trigger that really got me excited is I sat down, I met this girl, and she was with the family. And I asked her how many times she comes to IHOP a year. And I didn't expect any number, and she said thirty. And then I knew there was this area that just I had to focus on from consumer love, brand excitement, and, you know, there were just so many opportunities to drive growth for the brand and that's really what attracted me. I understand the reality, you know, transaction declines, but I also know that this can be reversed. And there are so many areas of opportunity that we can drive growth for, and that's what's keeping me and the team excited. And we have a lot of work that we're doing right now around it.

Thank you. I'm showing no further questions at this time. I would now like to turn it back to John Peyton, Dine Brands Global, Inc. CEO for closing remarks.

Gigi, thanks for taking such good care of us. We always appreciate it. And to all of you who joined and asked questions, thank you. And I'll just wrap by reinforcing where I started, which is we all, our franchisees and all of us at Applebee's, Fuzzies, IHOP, and Dine Brands Global, Inc. intend to have a strong 2025. We're not satisfied with our 2024 results, and we are working very hard to focus on those moments that matter and in implementing our plans to have a really great 2025. So appreciate your questions. Thanks very much.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.