Dine Brands Global, Inc. Q4 FY2024 earnings call

• John Peyton expressed sympathy for LA fires and discussed leadership changes, including Tony Moralejo stepping down as Applebee's President and Lawrence Kim as new IHOP president.
• Focused on 2025 priorities: elevating guest experience, improving menu and value offerings, and dynamic marketing.
• Applebee's 2025 priorities: evaluating marketing capabilities, launching new everyday value platform, innovating core menu items, and enhancing restaurant appearance with 'Lookin' Good' reimaged program.
• IHOP's Lawrence Kim focusing on basics (highlighting core breakfast offerings), ease of operations, and culture-centric marketing; also testing expansion of House Faves menu.
• Fuzzies focusing on refining value offerings, improving menu quality, and leveraging technology.
• International business performed well, with dual-brand concept success domestically and internationally, including opening first US dual-brand location in Texas.

Dine Brands Global, Inc. generated $106.4 million in adjusted free cash flow in 2024. Full-year adjusted EBITDA was $239.8 million, down from $256.4 million in 2023. Q4 adjusted EBITDA was $50.1 million compared to $62.2 million in Q4 2023. Revenues were down 2.3% for the full year and decreased 0.7% in Q4. IHOP had a full-year comp sales decline of 2% (vs 3.5% growth in 2023) and Q4 comp sales of negative 2.8%. Applebee's full-year comp sales were negative 4.2% (vs 0.6% growth in 2023) and Q4 comp sales declined 4.7%. Franchise revenues decreased, partially offset by increased company restaurant sales from taking back 47 Applebee's restaurants in November.

• Applebee's expects 20-35 net fewer domestic restaurants in 2025, with domestic system-wide comp sales range -2% to +1%.
• IHOP expects between 10 net fewer domestic restaurants to 10 net domestic openings, with domestic system-wide comp sales range -1% to 2%.
• G&A range $200 million to $205 million.
• EBITDA guidance $235 million to $245 million.
• CapEx expected $20 million to $30 million.

• Macro headwinds affecting consumer spending, especially for guests with household incomes <$75,000.
• Intense competition in the restaurant space.
• Commodity cost pressures, particularly eggs affecting IHOP due to avian influenza.
• Labor cost challenges for franchisees.
• Difficulty in breaking through marketing messages in a crowded advertising space.

Q: Last quarter, concerns were about marketing messaging vs customer trial. Do you still think it's messaging miss?

A: John Peyton said marketing is important, with progress seen in Applebee's 'Really Big Meal Deal' and IHOP 'House Faves' late in Q4, and plans to build on these.

Q: Touch on total value incidents and Applebee's back half value plans?

A: John Peyton discussed mix of LTOs and value menu portions, and Applebee's plan to roll out new everyday value platform with offerings for singles, pairs, and groups.

Q: Confidence in franchisees' turnaround plan?

A: John Peyton stated strong alignment with franchisees, examples like oversubscribed Applebee's renovation incentive and positive dual-brand results.

Q: Directional commentary on Q1 trends?

A: Vance Chang said Q4 showed improvement in IHOP late and Applebee's from Q3, expecting Q1 to modestly improve but consumer environment remains challenged.

Q: IHOP's food cost outlook, especially eggs?

A: Vance Chang said low to mid-single-digit inflation for IHOP, primarily driven by eggs, with some tailwinds from other items and no surcharges yet.

Q: Innovation in 2024 and 2025?

A: John Peyton mentioned dual-brand success, NFL partnership, and plans for Club Applebee's loyalty program and new menu items.

Q: Takeback of Applebee's restaurants?

A: John Peyton said takebacks drive revitalization, remodeling, and dual-brand conversion, advancing multiple initiatives.

Q: What attracted Lawrence Kim to IHOP?

A: Lawrence Kim talked about IHOP's iconic brand, passionate team, and potential for growth despite challenges.