Denny's Corporation Reports Results for First Quarter 2025

SPARTANBURG, S.C., May 05, 2025 (GLOBE NEWSWIRE) -- Denny’s Corporation (the "Company") (NASDAQ: DENN), owner and operator of Denny's Inc. ("Denny's") and Keke's Inc. ("Keke's"), today reported results for its first quarter ended March 26, 2025 and provided a business update on the Company’s operations. Kelli Valade, Chief Executive Officer, stated, "The beginning of the year has presented significant challenges for consumers, which is evident in our results. Our teams have remained focused on executing against our strategic initiatives and winning with our guests, despite these macro headwinds. This included staying true to our Denny's flagship, by focusing on compelling value, being strategic in reaching new younger demographics through innovative partnerships and new menu offerings. Keke's continued to steal share in its home state of Florida while also growing to its seventh state, Georgia. The dedication of our teams and franchisees continue to push our brands forward and we remain committed to navigating these headwinds together." First Quarter 2025 Highlights Total operating revenue was $111.6 million compared to $110.0 million for the prior year quarter.Denny's domestic system-wide same-restaurant sales** were (3.0%) compared to the prior year quarter.Keke's domestic system-wide same-restaurant sales** increased 3.9% compared to the prior year quarter.Denny's opened six franchised restaurants.Denny's completed six remodels, including five at company restaurants.Keke's opened three new cafes including the first in Georgia.Keke's acquired five franchised cafes.Operating income was $5.2 million compared to $10.0 million for the prior year quarter.Adjusted franchise operating margin* was $29.4 million, or 50.9% of franchise and license revenue, and adjusted company restaurant operating margin* was $4.9 million, or 9.1% of company restaurant sales.Net income was $0.3 million, or $0.01 per diluted share.Adjusted net income* and adjusted net income per share* were $4.2 million and $0.08, respectively.Adjusted EBITDA* was $16.8 million. First Quarter 2025 Results Total operating revenue was $111.6 million compared to $110.0 million for the prior year quarter. Franchise and license revenue was $57.7 million compared to $57.6 million for the prior year quarter. This increase was primarily driven by higher local advertising co-op contributions for the current quarter, partially offset by fewer equivalent units, softer Denny's same-restaurant sales** and lower franchise occupancy revenue. Company restaurant sales were $53.9 million compared to $52.3 million for the prior year quarter. This increase was primarily driven by 11 additional Keke's equivalent units, partially offset by five fewer Denny's equivalent units and softer Denny's same-restaurant sales**. Adjusted franchise operating margin* was $29.4 million, or 50.9% of franchise and license revenue, compared to $30.3 million, or 52.5% for the prior year quarter. This margin change was primarily due to fewer Denny's equivalent units and softer Denny's same-restaurant sales**. Adjusted company restaurant operating margin* was $4.9 million, or 9.1% of company restaurant sales, compared to $6.8 million, or 13.0% for the prior year quarter. This margin change was primarily due to higher product costs which were heavily impacted by higher egg prices, investments in marketing and expected new cafe opening inefficiencies. Total general and administrative expenses were $20.0 million compared to $21.2 million in the prior year quarter. This decrease was primarily due to lower deferred compensation valuation adjustments and incentive compensation. The provision for income taxes was $0.3 million, reflecting an effective tax rate of 47.4% for the current quarter, compared to $1.5 million and an effective tax rate of 24.6% in the prior year quarter. The higher effective income tax rate for the current quarter included discrete items related to share-based compensation which were not comparable in the prior year quarter. Net income was $0.3 million, or $0.01 per diluted share. Adjusted net income* was $4.2 million, or $0.08 per diluted share. The Company ended the quarter with $276.2 million of total debt outstanding, including $266.0 million of borrowings under its credit facility.Capital Allocation The Company invested $9.1 million in cash capital expenditures during the current quarter, which included Keke's new cafe development and Denny's company restaurant remodels. The Company also allocated $1.0 million to share repurchases during the first quarter resulting in approximately $88.2 million remaining under its existing repurchase authorization. Business Outlook The following full year 2025 (53 operating weeks) expectations reflect management's expectation that recent shifts in consumer sentiment due to macro events will moderate over time. Denny's domestic system-wide same-restaurant sales** between (2.0%) and 1.0%.Consolidated restaurant openings of 25 to 40.Consolidated restaurant closures between 70 and 90.Commodity inflation between 3.0% and 5.0% (vs. between 2.0% and 4.0%).Labor inflation between 2.5% and 3.5%.Total general and administrative expenses between $80 million and $85 million, inclusive of: Corporate and administrative expenses between $60 million and $62 million, including approximately $1 million related to the 53rd week;Incentive compensation between $6 million and $9 million; and,Approximately $14 million related to share-based compensation expense which does not impact Adjusted EBITDA*. Adjusted EBITDA* between $80 million and $85 million, inclusive of approximately $2 million related to the 53rd week.Share repurchases between $15 million and $25 million. * Please refer to the Reconciliation of Net Income to Non-GAAP Financial Measures, as well as the Reconciliation of Operating Income to Non-GAAP Financial Measures included in the tables below. The Company is not able to reconcile the forward-looking non-GAAP estimate set forth above to its most directly comparable U.S. generally accepted accounting principles (GAAP) estimates without unreasonable efforts because it is unable to predict, forecast or determine the probable significance of the items impacting these estimates, including gains, losses and other charges, with a reasonable degree of accuracy. Accordingly, the most directly comparable forward-looking GAAP estimate is not provided. ** Same-restaurant sales include sales at company restaurants and non-consolidated franchised and licensed restaurants that were open during the comparable periods noted. Total operating revenue is limited to company restaurant sales and royalties, advertising revenue, initial and other fees and occupancy revenue from non-consolidated franchised and licensed restaurants. Accordingly, domestic franchise same-restaurant sales and domestic system-wide same-restaurant sales should be considered as a supplement to, not a substitute for, the Company's results as reported under GAAP. Conference Call and Webcast Information The Company will provide further commentary on the results for the first quarter ended March 26, 2025 on a webcast today, Monday, May 5, 2025 at 4:30 p.m. Eastern Time. Interested parties are invited to listen to the webcast accessible through the Company's investor relations website at investor.dennys.com. About Denny's Corporation Denny’s Corporation is one of America’s largest full-service restaurant chains based on number of restaurants. As of March 26, 2025, the Company consisted of 1,557 restaurants, 1,475 of which were franchised and licensed restaurants and 82 of which were company operated. The Company consists of the Denny’s brand and the Keke’s brand. As of March 26, 2025, the Denny's brand consisted of 1,491 global restaurants, 1,430 of which were franchised and licensed restaurants and 61 of which were company operated. As of March 26, 2025, the Keke's brand consisted of 66 restaurants, 45 of which were franchised restaurants and 21 of which were company operated. For further information on Denny's Corporation, including news releases, links to SEC filings, and other financial information, please visit investor.dennys.com. Non-GAAP Definition Changes The Company has evolved its definition of non-GAAP financial measures to provide more clarity and comparability relative to peers. Denny's Corporation management uses certain non-GAAP measures in analyzing operating performance and believes the presentation of these measures provides investors and analysts with information that is beneficial to understanding the Company's financial results. Non-GAAP disclosures should not be viewed as a substitute for financial results determined in accordance with GAAP. The Company excludes certain legal settlement expenses not considered to be normal and recurring, pre-opening expenses, and other items management does not consider in the evaluation of its ongoing core operating performance from adjusted operating margin*, adjusted net income*, adjusted net income per share*, and adjusted EBITDA*. In addition, the Company no longer deducts cash payments for restructuring and exit costs, or cash payments for share-based compensation from Adjusted EBITDA*. Reconciliations of these non-GAAP measures are included in the tables of this press release and a recast of historical non-GAAP financial measures can be found on the Company's website, or its most recent investor presentation. Cautionary Language Regarding Forward-Looking StatementsThe Company urges caution in considering its current trends and any outlook on earnings disclosed in this press release. In addition, certain matters discussed in this release may constitute forward-looking statements. These forward-looking statements, which reflect management's best judgment based on factors currently known, are intended to speak only as of the date such statements are made and involve risks, uncertainties, and other factors that may cause the actual performance of Denny’s Corporation, its subsidiaries, and underlying restaurants to be materially different from the performance indicated or implied by such statements. Words such as “expect”, “anticipate”, “believe”, “intend”, “plan”, “hope”, “will”, and variations of such words and similar expressions are intended to identify such forward-looking statements. Except as may be required by law, the Company expressly disclaims any obligation to update these forward-looking statements to reflect events or circumstances after the date of this release or to reflect the occurrence of unanticipated events. Factors that could cause actual performance to differ materially from the performance indicated by these forward-looking statements include, among others: economic, public health and political conditions that impact consumer confidence and spending, commodity and labor inflation; the ability to effectively staff restaurants and support personnel; the Company's ability to maintain adequate levels of liquidity for its cash needs, including debt obligations, payment of dividends, planned share repurchases and capital expenditures as well as the ability of its customers, suppliers, franchisees and lenders to access sources of liquidity to provide for their own cash needs; competitive pressures from within the restaurant industry; the Company's ability to integrate and derive the expected benefits from its acquisition of Keke's Breakfast Cafe; the level of success of the Company’s operating initiatives and advertising and promotional efforts; adverse publicity; health concerns arising from food-related pandemics, outbreaks of flu viruses or other diseases; changes in business strategy or development plans; terms and availability of capital; regional weather conditions; overall changes in the general economy (including with regard to energy costs), particularly at the retail level; political environment and geopolitical events (including acts of war and terrorism); and other factors from time to time set forth in the Company’s SEC reports and other filings, including but not limited to the discussion in Management’s Discussion and Analysis and the risks identified in Item 1A. Risk Factors contained in the Company’s Annual Report on Form 10-K for the year ended December 27, 2023 (and in the Company’s subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K). DENNY’S CORPORATIONConsolidated Balance Sheets(Unaudited) ($ in thousands)3/26/25 12/25/24Assets Current assets Cash and cash equivalents$1,039 $1,698 Investments 1,129 1,106 Receivables, net 17,197 24,433 Inventories 1,876 1,747 Assets held for sale 210 381 Prepaid and other current assets 10,383 10,628 Total current assets 31,834 39,993 Property, net 114,918 111,417 Finance lease right-of-use assets, net 5,874 6,200 Operating lease right-of-use assets, net 126,834 124,738 Goodwill 66,357 66,357 Intangible assets, net 89,394 91,739 Deferred financing costs, net 907 1,066 Other noncurrent assets 51,957 54,764 Total assets$488,075 $496,274 Liabilities Current liabilities Current finance lease liabilities$1,253 $1,284 Current operating lease liabilities 16,177 15,487 Accounts payable 16,731 19,985 Other current liabilities 52,145 58,842 Total current liabilities 86,306 95,598 Long-term liabilities Long-term debt 266,000 261,300 Noncurrent finance lease liabilities 8,960 9,284 Noncurrent operating lease liabilities 123,056 120,841 Liability for insurance claims, less current portion 5,926 5,866 Deferred income taxes, net 7,683 9,964 Other noncurrent liabilities 26,564 27,446 Total long-term liabilities 438,189 434,701 Total liabilities 524,495 530,299 Shareholders' deficit Common stock 516 513 Paid-in capital 1,566 — Deficit (2,173) (2,499)Accumulated other comprehensive loss, net (35,348) (32,039)Treasury stock (981) — Total shareholders' deficit (36,420) (34,025)Total liabilities and shareholders' deficit$488,075 $496,274 Debt BalancesCredit facility revolver due 2026$266,000 $261,300 Finance lease liabilities 10,213 10,568 Total debt$276,213 $271,868 DENNY’S CORPORATIONCondensed Consolidated Statements of Income(Unaudited) Quarter Ended($ in thousands, except per share amounts)3/26/25 3/27/24Revenue: Company restaurant sales$53,900 $52,342 Franchise and license revenue 57,737 57,632 Total operating revenue 111,637 109,974 Costs of company restaurant sales, excluding depreciation and amortization 50,025 48,118 Costs of franchise and license revenue, excluding depreciation and amortization 28,354 27,374 General and administrative expenses 20,030 21,222 Depreciation and amortization 4,107 3,581 Operating (gains), losses and other charges, net 3,911 (327)Total operating costs and expenses, net 106,427 99,968 Operating income 5,210 10,006 Interest expense, net 4,428 4,420 Other nonoperating expense (income), net 162 (637)Income before income taxes 620 6,223 Provision for income taxes 294 1,532 Net income$326 $4,691 Net income per share - basic$0.01 $0.09 Net income per share - diluted$0.01 $0.09 Basic weighted average shares outstanding 52,324 53,068 Diluted weighted average shares outstanding 52,443 53,214 Comprehensive income (loss)$(2,983) $10,855 General and Administrative Expenses Corporate administrative expenses$15,244 $15,192 Share-based compensation 2,785 2,776 Incentive compensation 2,257 2,523 Deferred compensation valuation adjustments (256) 731 Total general and administrative expenses$20,030 $21,222 DENNY’S CORPORATIONReconciliation of Net Income to Non-GAAP Financial Measures(Unaudited) The Company believes that, in addition to GAAP measures, certain non-GAAP financial measures are useful information to investors and analysts to assist in the evaluation of operating performance on a period-to-period basis. However, non-GAAP measures should be considered as a supplement to, not a substitute for, operating income, net income, and net income per share, or other financial performance measures prepared in accordance with GAAP. The Company uses adjusted EBITDA, adjusted net income and adjusted net income per share internally as performance measures for planning purposes, including the preparation of annual operating budgets, and for compensation purposes, including incentive compensation for certain employees. These non-GAAP measures are adjusted for certain items the Company does not consider in the evaluation of its ongoing core operating performance. These adjustments are either non-recurring in nature or vary from period to period without correlation to the Company's ongoing core operating performance. Quarter Ended($ in thousands, except per share amounts)3/26/25 3/27/24Net income$326 $4,691 Provision for income taxes 294 1,532 Operating (gains), losses and other charges, net 3,911 (327)Other nonoperating (income) expense, net 162 (637)Share-based compensation expense 2,785 2,776 Deferred compensation plan valuation adjustments (256) 731 Interest expense, net 4,428 4,420 Depreciation and amortization 4,107 3,581 Non-recurring legal settlement expenses 318 2,213 Pre-opening expenses 709 366 Other adjustments(1) 31 — Adjusted EBITDA$16,815 $19,346 Net income$326 $4,691 Losses and amortization on interest rate swap derivatives, net 259 141 Operating (gains), losses and other charges, net 3,911 (327)Non-recurring legal settlement expenses 318 2,213 Pre-opening expenses 709 366 Other adjustments(1) 31 — Tax effect(2) (1,359) (589)Adjusted net income$4,195 $6,495 Diluted weighted average shares outstanding 52,443 53,214 Net income per share - diluted$0.01 $0.09 Adjustments per share 0.07 0.03 Adjusted net income per share$0.08 $0.12 (1) Other adjustments for the quarter ended March 26, 2025 include less than $0.1 million of leadership transition costs.(2) Tax adjustments for the quarter ended March 26, 2025 reflect an effective tax rate of 26.0%. Tax adjustments for the quarter ended March 27, 2024 reflect an effective tax rate of 24.6%. DENNY’S CORPORATIONReconciliation of Operating Income to Non-GAAP Financial Measures(Unaudited) The Company believes that, in addition to GAAP measures, certain other non-GAAP financial measures are useful information to investors and analysts to assist in the evaluation of restaurant-level operating efficiency and performance of ongoing restaurant-level operations. However, non-GAAP measures should be considered as a supplement to, not a substitute for, operating income, net income, and net income per share, or other financial performance measures prepared in accordance with GAAP. The Company uses restaurant-level operating margin, company restaurant operating margin and franchise operating margin internally as performance measures for planning purposes, including the preparation of annual operating budgets, and for compensation purposes, including incentive compensation for certain employees. Restaurant-level operating margin is the total of company restaurant operating margin and franchise operating margin and excludes: (i) general and administrative expenses, which include primarily non-restaurant-level costs associated with support of company and franchised restaurants and other activities at their corporate office; (ii) depreciation and amortization expense, substantially all of which is related to company restaurant-level assets, because such expenses represent historical sunk costs which do not reflect current cash outlays for the restaurants; (iii) special items, included within operating (gains), losses and other charges, net, to provide investors with a clearer perspective of its ongoing operating performance and a more relevant comparison to prior period results. Company restaurant operating margin is defined as company restaurant sales less costs of company restaurant sales (which include product costs, company restaurant level payroll and benefits, occupancy costs, and other operating costs including utilities, repairs and maintenance, marketing and other expenses) and presents it as a percent of company restaurant sales. Adjusted company operating restaurant margin is defined as company restaurant operating margin less certain items such as legal settlement expenses, pre-opening expenses, and other items the Company does not consider in the evaluation of its ongoing core operating performance. Franchise operating margin is defined as franchise and license revenue (which includes franchise royalties and other non-food and beverage revenue streams such as initial franchise and other fees, advertising revenue and occupancy revenue) less costs of franchise and license revenue and presents it as a percent of franchise and license revenue. Adjusted franchise operating margin is defined as franchise operating margin less certain items the Company does not consider in the evaluation of its ongoing core operating performance. Adjusted restaurant-level operating margin is the total of adjusted company restaurant operating margin and adjusted franchise operating margin and is defined as restaurant-level operating margin adjusted for certain items the Company does not consider in the evaluation of its ongoing core operating performance. These adjustments are either non-recurring in nature or vary from period to period without correlation to the Company's ongoing core operating performance. Quarter Ended($ in thousands)3/26/25 3/27/24Operating income$5,210 $10,006 General and administrative expenses 20,030 21,222 Depreciation and amortization 4,107 3,581 Operating (gains), losses and other charges, net 3,911 (327)Restaurant-level operating margin$33,258 $34,482 Restaurant-level operating margin consists of: Company restaurant operating margin(1)$3,875 $4,224 Franchise operating margin(2) 29,383 30,258 Restaurant-level operating margin$33,258 $34,482 Adjustments(3) 1,027 2,579 Adjusted restaurant-level operating margin$34,285 $37,061 (1) Company restaurant operating margin is calculated as operating income plus general and administrative expenses; depreciation and amortization; operating (gains), losses and other charges, net; and costs of franchise and license revenue, excluding depreciation and amortization; less franchise and license revenue.(2) Franchise operating margin is calculated as operating income plus general and administrative expenses; depreciation and amortization; operating (gains), losses and other charges, net; and costs of company restaurant sales, excluding depreciation and amortization; less company restaurant sales.(3) Adjustments include non-recurring legal settlement expenses, pre-opening costs, and other adjustments the Company does not consider in the evaluation of its ongoing core operating performance. DENNY’S CORPORATIONOperating Margins(Unaudited) Quarter Ended($ in thousands)3/26/25 3/27/24Company restaurant operations:(1) Company restaurant sales$53,900 100.0% $52,342 100.0%Costs of company restaurant sales, excluding depreciation and amortization: Product costs 14,211 26.4% 13,311 25.4%Payroll and benefits 21,096 39.1% 20,474 39.1%Occupancy 5,059 9.4% 4,573 8.7%Other operating costs: Utilities 1,694 3.1% 1,655 3.2%Repairs and maintenance 836 1.6% 1,005 1.9%Marketing 2,028 3.8% 1,604 3.1%Legal settlements 405 0.8% 1,449 2.8%Pre-opening costs 709 1.3% 366 0.7%Other direct costs 3,987 7.4% 3,681 7.0%Total costs of company restaurant sales, excluding depreciation and amortization$50,025 92.8% $48,118 91.9%Company restaurant operating margin (non-GAAP)(2)$3,875 7.2% $4,224 8.1%Adjustments(3) 1,027 1.9% 2,579 4.9%Adjusted company restaurant operating margin (non-GAAP)(2)$4,902 9.1% $6,803 13.0% Franchise operations:(4) Franchise and license revenue: Royalties$27,837 48.2% $29,306 50.8%Advertising revenue 19,073 33.0% 18,138 31.5%Initial and other fees 2,874 5.0% 1,816 3.2%Occupancy revenue 7,953 13.8% 8,372 14.5%Total franchise and license revenue$57,737 100.0% $57,632 100.0% Costs of franchise and license revenue, excluding depreciation and amortization: Advertising costs$19,073 33.0% $18,138 31.5%Occupancy costs 4,933 8.5% 5,132 8.9%Other direct costs 4,348 7.5% 4,104 7.1%Total costs of franchise and license revenue, excluding depreciation and amortization$28,354 49.1% $27,374 47.5%Franchise operating margin (non-GAAP)(2)$29,383 50.9% $30,258 52.5%Adjustments(3) — —% — —%Adjusted franchise operating margin (non-GAAP)(2)$29,383 50.9% $30,258 52.5% Total operating revenue(5)$111,637 100.0% $109,974 100.0%Total costs of operating revenue(5) 78,379 70.2% 75,492 68.6%Restaurant-level operating margin (non-GAAP)(5)$33,258 29.8% $34,482 31.4% (1) As a percentage of company restaurant sales.(2) Other operating expenses such as general and administrative expenses and depreciation and amortization relate to both company and franchise operations and are not allocated to costs of company restaurant sales and costs of franchise and license revenue. As such, operating margin and adjusted operating margin are considered non-GAAP financial measures and should be considered as a supplement to, not as a substitute for, operating income, net income or other financial measures prepared in accordance with GAAP.(3) Adjustments include non-recurring legal settlement expenses, pre-opening costs, and other adjustments the Company does not consider in the evaluation of its ongoing core operating performance.(4) As a percentage of franchise and license revenue.(5) As a percentage of total operating revenue. DENNY’S CORPORATIONStatistical Data(Unaudited) Denny's Keke'sChanges in Same-Restaurant Sales(1)Quarter Ended Quarter Ended(Increase (decrease) vs. prior year)3/26/25 3/27/24 3/26/25 3/27/24Company Restaurants (0.9%) (3.0%) 0.5% (1.1%)Domestic Franchise Restaurants (3.2%) (1.2%) 4.9% (4.0%)Domestic System-wide Restaurants (3.0%) (1.3%) 3.9% (3.6%) Average Unit Sales ($ in thousands) Company Restaurants$757 $743 $411 $455 Franchised Restaurants$452 $457 $513 $472 (1) Same-restaurant sales include sales at company restaurants and non-consolidated franchised and licensed restaurants that were open during the comparable periods noted. Total operating revenue is limited to company restaurant sales and royalties, advertising revenue, initial and other fees and occupancy revenue from non-consolidated franchised and licensed restaurants. Accordingly, domestic franchise same-restaurant sales and domestic system-wide same-restaurant sales should be considered as a supplement to, not a substitute for, the Company's results as reported under GAAP. Restaurant Unit ActivityDenny's Keke's Franchised Franchised Company & Licensed Total Company & Licensed TotalEnding Units December 25, 2024 61 1,438 1,499 14 55 69 Units Opened — 6 6 2 1 3 Units Reacquired — — — 5 (5) — Units Closed — (14) (14) — (6) (6)Net Change — (8) (8) 7 (10) (3)Ending Units March 26, 2025 61 1,430 1,491 21 45 66 Equivalent Units Year-to-Date 2025 60 1,434 1,494 20 46 66 Year-to-Date 2024 65 1,501 1,566 9 50 59 Net Change (5) (67) (72) 11 (4) 7

Denny's Corporation Reports Results for First Quarter 2025

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