Good day, and thank you for standing by. Welcome to the Dine Brands Fourth Quarter and Fiscal Year 2025 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. And now I'd like to introduce your host for today's program, Matt Lee, Senior Vice President, Finance and Investor Relations. Please go ahead, sir.

Good morning, and welcome to Dine Brands Global's Fourth Quarter and Fiscal 2025 Conference Call. This morning's call will include prepared remarks from John Peyton, CEO and President of Applebee's; 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, and 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 that is available on Dine Brands' Investor Relations website. With that, it's my pleasure to turn the call over to Dine Brands' CEO, John Peyton.

Good morning, everyone, and thanks for joining us today. As usual, today, we'll discuss Dine's fourth quarter and full year 2025 financial results. I'll share some key insights into what we learned in 2025 and how we'll leverage those learnings to extend our strategy in the year ahead, and Vance will then discuss our financial results and 2026 guidance. Our brands' 2025 performance improved compared to 2024, and that was no accident. It was driven by deliberate execution against our clear set of priorities, enhancing the guest experience through operational improvements, strengthening our marketing to better connect with guests and advancing menu innovation and everyday value platforms across our brands. In parallel, we, along with our franchisees, continue to invest in the bricks-and-mortar experience of our restaurants through dual brand openings, supporting Applebee's remodels and improving the look and feel of our company-owned portfolio. These initiatives built trust with our guests and started translating into tangible results with improving unit level performance driven by positive sales and traffic trends and higher guest engagement scores across our brands. This progress came amid a still challenging consumer environment with guests remaining highly intentional about how they spend their discretionary dollars. Value remains a critical driver in that decision-making. Of note, in the fourth quarter, both the casual and family dining categories experienced some softening in comp sales and traffic as we moved into December. Overall, the value mix remained steady for both brands with Applebee's at 34% and IHOP at 20% despite IHOP's value menu increasing from 5 to 7 days. Over the past few years, we've been intentional in evolving how we define and deliver value, ensuring that we have compelling everyday offerings that are available at all of our brands anywhere, anytime. For us, value is not simply price. It's…

Thanks, John. We made meaningful progress in 2025. Applebee's returned to positive comparable sales for the year, and IHOP exited the year with 2 consecutive quarters of positive traffic. We also completed our debt refinancing in June and continue to return capital to shareholders, all while maintaining a strong balance sheet. On the top line, consolidated total revenues increased 6.2% to $217.6 million in Q4 versus $204.8 million in the prior year, primarily driven by the timing of when we took back restaurants from franchisees. This was offset by a decrease in franchise revenues, primarily due to the take back of restaurants and closures. For the full year, we generated $879.3 million in total revenues, which was 8.2% higher than the prior year, resulting from the timing of when we took back company restaurants, partially offset by a decrease in franchise revenues from the restaurants taking back and a decrease in rental income. Excluding advertising revenues, franchise revenues in Q4 decreased 2.8%. For the full year, franchise revenues, excluding advertising revenues decreased 3% due to the decrease in IHOP domestic same-restaurant sales, the company taking back restaurants from franchisees, closures and merchandise sales. Rental segment revenues for the fourth quarter of 2025 decreased compared to the same quarter of 2024, primarily due to lease terminations and the impact of company acquired IHOP restaurants in March of 2025. G&A expenses were $51.5 million in Q4 of 2025, down from $52.3 million in the same period of last year, primarily driven by the recovery of fees from the franchisee. We ended the year with $203.8 million, up from $196.7 million last year due to an increase in compensation-related expenses, predominantly incentive compensation and professional services fees, partially offset by the fee recovery. Adjusted EBITDA for Q4 of 2025 increased to $59.8 million…

Thanks, Vance. I'll close just with a brief recap. 2025 was a meaningful improvement for all of Dine, rooted in strong partnerships with our franchisees, driven by focused priorities across our brands and executed against clear long-term goals to generate value for the future. We will remain disciplined with capital allocation, accelerating share repurchases to capitalize on what we see as a meaningful valuation discount. Given the strong start to Q1, we're optimistic for the year ahead and achieving additional growth, led by improved comp sales, improved traffic and net unit development. And so with that, I will turn the call over to the operator for questions and answers.

[Operator Instructions] And our first question for today comes from the line of Jeffrey Bernstein from Barclays.

My first question is just on the comp trends. You seem encouraged by the strengthening fundamentals of both brands. I know both brands fell short of, I guess, the sell-side consensus for the fourth quarter comp, but I'm assuming that's just us perhaps not modeling it very well. I'm just wondering how the fourth quarter compared to your internal expectations? And then just to clarify, I want to make sure that the first quarter, I think you said strong start at both brands despite the weather. So is it fair to assume both brands are running within that flat to plus 2% that you guided to for the full year?

Jeff, it's John. Vance will take you through the comp trends in the first quarter.

Jeff, this is Vance. For both of our brands, the momentum that we saw, we talked about in Q3 continue to build into Q4. But as you noticed with the best of the industry, we did experience some temporary softening in December. So that's the inter-quarter trend. But we're now seeing that momentum building back up in Q1 despite the winter storms and both brands have recovered to the pre-winter storm trend of positive trajectory, which allows us to provide the guidance that we just did.

Understood. So it's safe to say that both are now positive and within that 0 to plus 2% despite the inclement weather?

That's correct.

Understood. And then my follow-up, Vance, the share repurchase, you talked about the acceleration in '25 versus '24. I think it was north of $60 million in '25, which, like you said, I think is like 15% of the market cap. I think you had already implied that between the fourth quarter and the first quarter, you're looking at a combined $50 million, which would leave, I guess, $20 million for this first quarter. Just wondering what your plans are for full year '26 with your view that such a significant valuation discount, how we should think about the share repurchase plans for the full year '26?

Jeff, our capital allocation priority is the same. We're going to invest organically to drive dual brand development to drive company restaurant improvement. But a key part of it is capital return, and we are net buyers at this price. So we're going to continue that buyback program as long as we believe there is a discount in our share price versus the price where we think the company should be.

And our next question comes from the line of Dennis Geiger from UBS.

This is Paul on with Dennis. And my first one is just wondering if you guys have noticed any change in consumer behavior by different income or age cohort. And I think I recall last quarter, you guys mentioned there's some higher income shifting in -- some lower income shifting out. Just wondering if you are still seeing that happening in fourth quarter and maybe into first quarter?

Paul, it's John. I can answer that on behalf of Applebee's and IHOP because we see very similar consumer behavior in both brands. The way I would characterize the consumer broadly for 2025 is that they were looking for both the value and the vibe. And by value, we mean, obviously, the price of the item, but also the taste, the quality, an abundant serving and most importantly, the vibe, which is a really good service. And we see that trend continuing to '26. In terms of specific consumer behavior, it was pretty consistent through all 4 quarters of last year. The value portion of tickets at Applebee's was about 1/3, and that number was about 20% at IHOP. And you're correct, of all of our cohorts, both brands saw growth in the higher-income guests. The other income categories were relatively stable. And then both brands also attracted new guests in the fourth quarter, which we attribute to our product innovation and our marketing. On the Applebee's side, that would be the Grilled Cheeseburger and the Ultimate Trio via 2 for $25 and at IHOP, the everyday value menu expanding to 7 days a week and all the promotion we had behind that.

Great. And then just on the dual brand openings, I think you guys talked about at least 50 in 2026. And I think the net opening between the 2 brands is about maybe down 25 to plus 5 units. Is that correct? And does that imply that there's going to be about like 45 to maybe 75 total closures? And how should we think about development and closures going maybe a little bit beyond 2026 based on the current projections and pipeline?

Sure, Paul, it's John again. I'll take that in terms of the development strategy. And then perhaps, Vance, you can follow up with more detail about the net numbers. So when it comes to development, our strategy the last couple of years has been to make sure that we have multiple products available to our franchisees and to other developers so that we have the right product for the right franchisee in the right market. And at this point, of course, that includes the dual brands. It also includes individual Applebee's and IHOPs. And it includes both new builds and conversions. As we've mentioned in the past, more than 80% of new IHOPs are actually conversions. And so as we look at our total pipeline that's been accelerated by our dual brands, as you referenced, we see an inflection point coming where we get to positive net unit growth sometime in the next 12 to 24 months. And that's fueled certainly in part by the interest in the duals and the pipeline that we're building. Vance, can you speak more specifically to the unit count question and the closures that Paul referenced?

Sure. Paul, good to hear from you. So the way we think about closures, we've said this before, for a system our size, we typically see closures in the 2% to 3% of our portfolio in that range. So you can probably model it the same way going forward. That closure rate hasn't changed dramatically. In fact, it probably in the next few years, it should come down primarily because of, one, the dual brand possibility; two, the natural expiration of the franchise agreement is going to come down over the next few years. So we see that. But aside from that, I think the other side of the equation is opening, so you can net out the math to get to the net numbers you're talking about. And so that's -- for this year, globally, I think we opened 80 restaurants this year, and that number will continue to go up as we build our dual brand pipeline.

And specifically, Vance, just to connect that last dot is that the closures are expected to decline because the dual brand is now serving as a mechanism to "save" lower revenue restaurants that might have otherwise closed. But now that they can add the second brand, it puts them back into a healthy space.

And our next question comes from the line of Brian Mullan from Piper Sandler.

This is Allison Arfstrom on for Brian Mullan. Curious what you're seeing at IHOP with the changes on value on the weekend. Is it bringing on the weekend working for franchisees? Or any other color would be helpful there.

Allison, that sounds a good question for Lawrence.

As in all promotions and programs, we partner closely with our franchisee partners before bringing a program like that to life, and that is in particular, even with the everyday value menu. And as we converted the House phase, which is a Monday through Friday program into the everyday value menu, which launched this past September, we obviously tested this prior in key several markets to understand the incidents on the weekend impact. And the great news is that even on the weekends, our incidents remained at around 10% of total checks even as expanded from Monday to Friday into the weekend. And so in partnership with our franchisee partners, we've continued to maintain momentum of the everyday value menu. We're actually extending it all throughout 2026, and we're excited for the momentum it's bringing, especially in regards to traffic.

[Operator Instructions] Our next question comes from the line of Nick Setyan from Mizuho.

In 2025, obviously, there was a big pivot towards value at both brands, which stabilized to accelerated traffic trends. How are we thinking about 2026? Is sort of the cadence of value? Is it enough now? Is there anything that we need to do more, whether it's in value or in addition to value? How are we thinking about incremental comp drivers in 2026? And then the second question is just on the operating cash flow side, any reason why it shouldn't be in line to above 2025 given the EBITDA guidance?

Nick, it's John. I'll address Applebee's first and then Lawrence will take IHOP and Vance will take cash flow. So our strategy for Applebee's is to, number one, have fewer promotions in market for longer periods of time. And so in the past several years, we might have 10 to 12 different promotions in a given year. In '26 and at the end of '25, we're focused more on 6 to 8. And our primary message is the 2 for $25 menu, which on its own accounts for 22% of our tickets. We think that communicating that program more consistently and more often is exactly what guests are looking for in 2026, just as they were in 2025. The second component of that is that as we communicate 2 for $25 each quarter, we will introduce a new a new entree and a new appetizer so that we also have exciting new news and innovation along the way. And so as an example, when we introduced the Grilled Cheese Cheeseburger in Q4, that became our #1 selling burger of all time and drove the performance that we saw toward the end of the year before we slowed in December. And in January, as Vance referenced, we introduced the O-M-Cheese Burger, which if you haven't seen it, is a burger cut in half and served in a skillet of bubbling cheese. And that quickly became our #1 best-selling burger ever, blew up on social media and has been a big driver of our performance in Q1. And so our strategy for the year is to leverage 2 for $25, and we have other exciting new entrees like the O-M-Cheese Burger planned for the rest of the year. Lawrence?

Yes. And similar to Applebee's, for IHOP, we also, in the same light, have fewer promotions with longer period times in terms of sustaining those promotions. As you know, our current primary messaging is around the $6 everyday value menu, and you're going to continue to see that trend. But as mentioned in a prior call, we are complementing that with our barbell strategy. And this is including other promotions, for example, like our latest bottomless pancake promotion, which we tied in with a very strong cultural moment with fantasy football. But also, we have a great lineup of innovation. And you have to complement that with new news to balance that equation of value plus innovation and bring that excitement and awareness to new consumer bases as well. So we're constantly listening to our guests, looking at different trends. And coming into 2026, we're going to complement our everyday value menu with, for example, a new proprietary coffee because you got to have the best coffee in the world together with the best pancakes in the world. But also, we're going to be innovating around our omelet platform. So this March, we're also going to introduce a new barbecue pulled pork omelet, which we're excited because it's something our guests have been asking for. And then, of course, as we go further into the year, we have a whole lineup of innovation to balance that. But we're staying extremely focused and vigilant in terms of our key strategies of maintaining value as the core and driving that and complementing that together with innovation.

Nick, this is Vance. Good to have you back, man. So for free cash flow -- in this quarter, we -- there were some timing issues. So we actually had to pay 2 quarters of interest expense. And that's part of our -- that's impacting the cash flow. We also had higher remodel incentives. And obviously, you saw the nonoperating part, the CapEx and some of the working capital changes that's impacting this year's cash flow. But we do expect next year to be back on a more normalized basis. And given the higher EBITDA guidance, we expect cash flow to improve next year as well.

And our next question comes from the line of Brian Vaccaro from Raymond James.

Just back to the fourth quarter comps. Could you walk us through the traffic and check dynamics for each brand?

Sure, Vance can do that.

So fourth quarter, let me see -- so we had negative 0.4% comp for Applebee's. Check was up about 3% and then the rest was traffic for Applebee's. IHOP comp was 0.3% and then our check was slightly down, call it, flattish, and then the traffic was up. So that's the makeup.

All right. And in the quarter -- or in the year of 2025, the company operations, I think the EBIT loss was about $8 million, which I think was a little bit ahead of your expectations. But I'm just curious, what kind of an EBIT loss have you layered into your '26 EBITDA guidance for company operations?

Brian, so -- basically -- so you're talking about EBIT and then we kind of -- we're thinking about it in terms of EBITDA with a similar trend. But basically, we're expecting company restaurant portfolio to be at a breakeven level for '26. And then 2025, if you're backing out depreciation, company restaurant and backing out some of the onetime stuff, transitory cost type of things, company restaurant portfolio was negative $10 million of EBITDA. So we're expecting to see a meaningful swing in performance.

This does conclude the question-and-answer session of today's program. I'd like to hand the program back to John Peyton, Dine Brands' CEO, for any further remarks.

Jonathan, thank you for moderating, and thank you, everybody, for your questions this morning. I'll just summarize with where we started in that we're pleased that 2025 performed better than 2024. We certainly don't think that was an accident. We think it was because both of the big brands focused on marketing and social media with new messages and new plans. Both of them really put the value programs front and center in front of consumers and backed it up with great menu innovation like we discussed today. And we also made great experience in the guest experience in terms of operations and OSAT, which we didn't talk about this morning, but both guests improved their reviews in terms of guest satisfaction. So thank you all for your time this morning, and look forward to talking to you next time.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.