Dine Brands Global, Inc. Reports Fourth Quarter and Fiscal 2022 Results

Applebee’s^® and IHOP^® Positive Quarterly Comparable Sales Continued in Q4

Expanded into Fast Casual Segment with Acquisition of Fuzzy’s Taco Shop^®

Returned Over $151 Million to Shareholders and Retired $40 Million of Long-Term Debt

Dine Brands Global, Inc. (NYSE: DIN), the parent company of Applebee’s Neighborhood Grill & Bar^®, IHOP^® and Fuzzy’s Taco Shop^® restaurants, today announced financial results for the fourth quarter and fiscal 2022.

“The common denominator in the solid quarter and full-year results was the hard work of our entire team, from our franchisees to our creative and agile brand leaders,” said John Peyton, chief executive officer of Dine Brands Global, Inc. “Despite ongoing economic pressures and uncertainties, our value-oriented brands reliably continue to meet our customers’ needs and expectations. In tandem with supporting and investing in our brands, we have also taken actions to strengthen our business and create shareholder value, via the acquisition of Fuzzy’s Taco Shop and through the incremental and accretive retirement of our long-term debt and repurchase of shares.”

Vance Chang, chief financial officer, added, “We remain encouraged by the strength of our asset-light business model and even in the face of macro-challenges, we were able to achieve EBITDA above our guidance, return capital to shareholders and retire long-term debt under par.”

Domestic Restaurant Sales for the Fourth Quarter of 2022

• Applebee’s year-over-year comparable same-restaurant sales increased 1.7% for the fourth quarter of 2022. Off-premise sales accounted for 23.8% of sales mix, representing per restaurant average weekly sales of approximately $11,500.

• IHOP’s year-over-year domestic comparable same-restaurant sales increased 2.0% for the fourth quarter of 2022. Off-premise sales accounted for 21.7% of sales mix, representing per restaurant average weekly sales of approximately $7,700.

Fourth Quarter of 2022 Summary

• Total revenues for the fourth quarter of 2022 were $208.0 million compared to $229.6 million for the fourth quarter of 2021. The decline was primarily due to the sale of the 69 company-operated Applebee’s units in October 2022, partially offset by the positive comparable same-restaurant sales growth at both brands.

• Consolidated adjusted EBITDA for the fourth quarter of 2022 was $57.0 million, below the $60.1 million for the fourth quarter of 2021. The decrease was primarily due to lower company restaurants’ segment profits. (See “Non-GAAP Financial Measures” and reconciliation of GAAP net income to consolidated adjusted EBITDA.)

• General and administrative (“G&A”) expenses for the fourth quarter of 2022 were $58.8 million compared to $48.9 million for the fourth quarter of 2021. The variance was primarily due to continued strategic growth investments, including the acquisition of Fuzzy’s Taco Shop and other non-recurring costs, as well as a return to normalized operations.

• GAAP earnings per diluted share of $0.72 for the fourth quarter of 2022 compared to earnings per diluted share of $1.14 for the fourth quarter of 2021. The variance was primarily due to higher G&A expenses including acquisition-related charges and lower contribution from company-operated units, partially offset by lower share count and a gain on debt extinguishment.

• Adjusted earnings per diluted share of $1.34 for the fourth quarter of 2022 compared to adjusted earnings per diluted share of $1.32 for the fourth quarter of 2021. The increase was primarily due to lower share count and one-time tax adjustments partially offset by higher G&A costs. (See “Non-GAAP Financial Measures” and reconciliation of GAAP earnings per diluted share to adjusted earnings per diluted share.)

• Development activity by Applebee’s and IHOP franchisees for the fourth quarter of 2022 resulted in the opening of 32 new restaurants and the closure of 9 restaurants.

2022 Summary

• Total 2022 revenues were $909.4 million compared to $896.2 million for the prior year. The increase was primarily due to strong comparable same restaurant sales growth at both brands and the net addition of new units, partially offset by the sale of the 69 company-operated Applebee’s units in Q4.

• Consolidated adjusted 2022 EBITDA was $251.9 million, which compared to $253.3 million for 2021. The decrease was primarily due to lower company restaurants’ segment profits, partially offset by a higher franchise segment contribution. (See “Non-GAAP Financial Measures” and reconciliation of GAAP net income to consolidated adjusted EBITDA.)

• G&A expenses for 2022 were $190.7 million compared to $171.8 million for 2021. The variance was primarily due to continued strategic growth investments resulting in a higher level of professional services including the acquisition of Fuzzy’s Taco Shop and other non-recurring costs. These higher costs also were related to a return to normalized operations.

• GAAP earnings per diluted share of $4.96 for 2022 compared to earnings per diluted share of $5.66 for 2021. The variance was primarily due to higher G&A expenses and higher income tax expense, partially offset by lower share count, an increase in gross profit and a favorable swing in gain/loss on disposals of assets.

• Adjusted earnings per diluted share of $6.20 for 2022 compared to adjusted earnings per diluted share of $6.54 for 2021. The variance was primarily due to an increase in G&A expenses and higher income tax expense, partially offset by lower share count and an increase in gross profit. (See “Non-GAAP Financial Measures” and reconciliation of GAAP earnings per diluted share to adjusted earnings per diluted share.)

• Cash flows provided by operating activities for 2022 were $89.3 million. This compares to cash provided by operating activities of $195.8 million for 2021. The decline was primarily due to the change in working capital, resulting from payments related to higher incentive compensation earned in 2021, but paid in the first quarter of 2022, and the timing of marketing and other disbursements. Working capital for fiscal 2021 also benefitted from the one-time collection of franchisee deferrals, which did not recur in 2022.

• The Company had adjusted free cash flow of $64.6 million for 2022. This compares to adjusted free cash flow of $191.0 million for 2021. (See “Non-GAAP Financial Measures” and reconciliation of the Company’s cash provided by operating activities to adjusted free cash flow.)

• Development activity by Applebee’s and IHOP franchisees for 2022 resulted in the opening of 67 new restaurants and the closure of 39 restaurants.

Key Balance Sheet Metrics (as of December 31, 2022)

• Total cash, cash equivalents and restricted cash of $325.0 million, of which $269.7 million was unrestricted cash.

• Leverage ratio of 4.4x compared to 4.3x as of September 30, 2022.

• Debt service coverage ratio was 4.1x compared to 4.2x as of September 30, 2022.

• Capacity under the revolving credit facility of $221.6 million available, with a $100 million draw down in August 2022 and $3.4 million pledged.

GAAP Effective Tax Rate

The 2022 effective tax rate of 29.3% applied to pretax book income was different than the statutory Federal income tax rate of 21% due to the state and local income taxes and the non-deductibility of executive compensation. The effective tax rate further increased due to the increase in the effective state tax rate applied to revaluating deferred tax balances. The increase in the effective state tax rate was due to the non-recurring refranchising of 69 Applebee’s company-operated restaurants in the fourth quarter of 2022 and various state legislative changes.

Capital Returns to Debt and Equity Holders

The Company repurchased $120 million of its common stock in 2022.

During December, the Company retired $40 million of its long-term debt, leaving a balance of $653 million of debt outstanding in the Class A-2-I tranche.

On February 16, 2023, the Company's Board of Directors authorized a debt repurchase program of up to $100 million.

On February 21, 2023, it was announced the Company’s Board of Directors declared and approved a quarterly cash dividend of $0.51 per share of common stock. The dividend will be paid on March 31, 2023, to the Company’s stockholders of record at the close of business on March 20, 2023.

Financial Performance Guidance for 2023

The Company introduced its fiscal 2023 guidance items:

• Domestic development activity by Applebee’s franchisees of between 10 and 20 net fewer restaurants.

• Domestic development activity by IHOP franchisees and area licensees is now expected to be between 45 and 60 net new openings.

• Consolidated adjusted EBITDA is expected in the range of between approximately $243 million and $255 million.

• G&A expenses are expected to range between approximately $200 million and $210 million, due to some of our planned 2022 G&A investments extended into 2023 given the disruptions caused by the pandemic last year and other organic investments, including Fuzzy’s. This range includes non-cash stock-based compensation expense and depreciation of approximately $30 million.

• Gross capital expenditures are expected to range between $33 million and $38 million.

Fourth Quarter of 2022 Earnings Conference Call Details

Dine Brands will host a conference call to discuss its results on March 1, 2023 at 9:00 a.m. Eastern time. To access the call, please click this conference call registration link, and you will be provided with dial in details. A live webcast of the call, along with a replay will be available for a limited time at https://investors.dinebrands.com/.

Participants should allow approximately ten minutes prior to the call’s start time to visit the site and download any streaming media software needed to listen to the webcast. An online archive of the webcast will also be available on Events and Presentations under the Investors section of the Company’s website.

About Dine Brands Global, Inc.

Based in Glendale, California, Dine Brands Global, Inc. (NYSE: DIN), its subsidiaries and franchisees support and operate restaurants under the Applebee's Neighborhood Grill + Bar^®, IHOP^® and Fuzzy’s Taco Shop^® brands. As of December 31, 2022, these three brands consisted of over 3,500 restaurants, across 17 international markets, and were operated by 387 franchisees. Dine Brands is one of the largest full-service restaurant companies in the world and in 2022 expanded into the Fast Casual segment. For more information on Dine Brands, visit the Company’s website located at www.dinebrands.com.

Forward-Looking Statements

Statements contained in this press release may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. You can identify these forward-looking statements by words such as “may,” “will,” “would,” “should,” “could,” “expect,” “anticipate,” “believe,” “estimate,” “intend,” “plan,” “goal” and other similar expressions. These statements involve known and unknown risks, uncertainties and other factors, which may cause actual results to be materially different from those expressed or implied in such statements. These factors include, but are not limited to: uncertainty regarding the duration and severity of the ongoing COVID-19 pandemic and its ultimate impact on the Company; the effectiveness of related containment measures; general economic conditions, including the impact of inflation; our level of indebtedness; compliance with the terms of our securitized debt; our ability to refinance our current indebtedness or obtain additional financing; our dependence on information technology; potential cyber incidents; the implementation of restaurant development plans; our dependence on our franchisees; the concentration of our Applebee’s franchised restaurants in a limited number of franchisees; the financial health of our franchisees; our franchisees’ and other licensees’ compliance with our quality standards and trademark usage; general risks associated with the restaurant industry; potential harm to our brands’ reputation; possible future impairment charges; the effects of tax reform; trading volatility and fluctuations in the price of our stock; our ability to achieve the financial guidance we provide to investors; successful implementation of our business strategy; the availability of suitable locations for new restaurants; shortages or interruptions in the supply or delivery of products from third parties or availability of utilities; the management and forecasting of appropriate inventory levels; development and implementation of innovative marketing and use of social media; changing health or dietary preference of consumers; risks associated with doing business in international markets; the results of litigation and other legal proceedings; third-party claims with respect to intellectual property assets; our ability to attract and retain management and other key employees; compliance with federal, state and local governmental regulations; risks associated with our self-insurance; natural disasters, pandemics, epidemics, or other serious incidents; our success with development initiatives outside of our core business; the adequacy of our internal controls over financial reporting and future changes in accounting standards; and other factors discussed from time to time in the Corporation’s Annual and Quarterly Reports on Forms 10-K and 10-Q and in the Corporation’s other filings with the Securities and Exchange Commission. The forward-looking statements contained in this press release are made as of the date hereof and the Corporation does not intend to, nor does it assume any obligation to, update or supplement any forward-looking statements after the date hereof to reflect actual results or future events or circumstances.

Non-GAAP Financial Measures

This press release includes references to the Company's non-GAAP financial measure “adjusted net income available to common stockholders”, “adjusted earnings per diluted share (Adjusted EPS)”, “Adjusted EBITDA” and “Adjusted free cash flow.” Adjusted EPS is computed for a given period by deducting from net income or loss available to common stockholders for such period the effect of any closure and impairment charges, any gain or loss related to debt extinguishment, any intangible asset amortization, any non-cash interest expense, any gain or loss related to the disposition of assets, any merger and acquisition costs and other items deemed not reflective of current operations. This is presented on an aggregate basis and a per share (diluted) basis. Adjusted EBITDA is computed for a given period by deducting from net income or loss for such period the effect of any closure and impairment charges, any interest charges, any income tax provision or benefit, any non-cash stock-based compensation, any depreciation and amortization, any gain or loss related to the disposition of assets, any merger and acquisition costs and other items deemed not reflective of current operations. “Adjusted free cash flow” for a given period is defined as cash provided by operating activities, plus receipts from notes and equipment contracts receivable, less capital expenditures. Management may use certain of these non-GAAP financial measures along with the corresponding U.S. GAAP measures to evaluate the performance of the business and to make certain business decisions. Management uses adjusted free cash flow in its periodic assessments of, among other things, the amount of cash dividends per share of common stock and repurchases of common stock and we believe it is important for investors to have the same measure used by management for that purpose. Adjusted free cash flow does not represent residual cash flow available for discretionary purposes. Additionally, adjusted EPS is one of the metrics used in determining payouts under the Company’s annual cash incentive plan. Management believes that these non-GAAP financial measures provide additional meaningful information that should be considered when assessing the business and the Company’s performance compared to prior periods and the marketplace. Adjusted EPS and adjusted free cash flow are supplemental non-GAAP financial measures and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with U.S. GAAP.