Dine Brands Global, Inc. Reports Fourth Quarter and Fiscal 2020 Results

Dine Brands Global, Inc. (NYSE: DIN), the parent company of Applebee's Neighborhood Grill + Bar^® and IHOP^® restaurants, today announced financial results for the fourth quarter and fiscal 2020.

“Dine Brands enters 2021 positioned for improved sales and robust off-premise growth. In the face of the unprecedented environment resulting from the pandemic, our franchisees, team members and restaurant teams rose to the challenge. Operationally, the collective system implemented heightened cleanliness standards to enhance the safety and well-being of our teams and guests, for both dine-in and off-premise occasions. In 2020, Dine moved swiftly to right size our business and brands in response to the precipitous decline in revenue by reducing costs, strengthening our balance sheet, and lowering capital spending. While the current environment remains challenging, we believe our financial condition is strong and we look ahead to the rest of 2021 with optimism,” said John Peyton, chief executive officer of Dine Brands Global, Inc.

Mr. Peyton added, “I’m proud to be here and I’ve joined an outstanding team made up of an exceptionally talented group of leaders, franchisees and team members. Dine is a well-positioned company with a strong portfolio of brands. We’re confident we have the right plans in place to drive long-term growth for all stakeholders.”

Allison Hall, interim chief financial officer and vice president, controller, added, “Our fourth quarter results are evidence our brands remain effectively positioned to win in an off-premise environment and that our business model is positioned for solid growth once we emerge from the pandemic. Off-premise comparable sales at both Applebee’s and IHOP increased significantly primarily due to the resurgence of COVID-19 cases nationwide and the related reinstatement of federal, state and local level governmental restrictions on dine-in service as well as a shift in consumer behavior. With iconic category-leading brands, Dine is well positioned for future growth for years to come.”

Domestic System-Wide Comparable Same-Restaurant Sales Performance

Domestic Same-Restaurant Sales					Preliminary Sales
		Q4 2020			Q1 2021 QTD through WE 2/21
Applebee's		(17.6%)			(18.1%)
IHOP		(30.1%)			(27.2%)

Domestic Same-Restaurant Sales (Week Ending)
		WE 10/4		WE 10/11		WE 10/18		WE 10/25		WE 11/1		WE 11/8		WE 11/15		WE 11/22		WE 11/29		WE 12/6		WE 12/13		WE 12/20		WE 12/27		WE 1/03
Applebee's		(1.6%)		(1.4%)		(1.9%)		(2.5%)		(11.7%)		(12.3%)		(14.5%)		(21.8%)		(29.3%)		(26.7%)		(26.8%)		(31.1%)		(36.5%)		(27.3%)
IHOP		(24.3%)		(26.3%)		(23.5%)		(21.4%)		(21.1%)		(23.3%)		(24.8%)		(30.4%)		(38.5%)		(32.8%)		(36.4%)		(38.9%)		(40.6%)		(33.8%)

Domestic Same-Restaurant Sales (Week Ending)
		Preliminary January Sales								Preliminary February Sales
		WE 1/10		WE 1/17		WE 1/24		WE 1/31		WE 2/7		WE 2/14		WE 2/21
Applebee's		(18.9%)		(15.9%)		(19.9%)		(17.0%)		(16.9%)		(19.0%)		(19.1%)
IHOP		(26.9%)		(26.6%)		(28.5%)		(25.1%)		(28.1%)		(26.6%)		(28.1%)

Fourth Quarter of 2020

• Applebee’s comparable same-restaurant sales decreased 17.6% for the fourth quarter of 2020.
  
• IHOP’s comparable same-restaurant sales decreased 30.1% for the fourth quarter of 2020.
  
• Comparable same-restaurant sales for the fourth quarter of 2020 declined at both Applebee’s and IHOP primarily due to the impact of the resurgence of COVID-19 cases nationwide and the related reinstatement of federal, state and local level governmental restrictions on in-restaurant dining operations, which resulted in a meaningful decline in traffic.

Fiscal 2020 Summary

• Applebee’s comparable same-restaurant sales decreased 22.4% for 2020.
  
• IHOP’s comparable same-restaurant sales decreased 32.8% for 2020.
  
• Comparable same-restaurant sales for 2020 declined at both Applebee’s and IHOP primarily due to the impact COVID-19 cases nationwide and the related federal, state and local level governmental restrictions on in-restaurant dining operations, which resulted in a meaningful decline in traffic.

Off-Premise and Dine-In Sales Growth Comparison

• Applebee’s off-premise comparable same-restaurant sales for the fourth quarter of 2020 increased by 133.3% primarily due to the resurgence of COVID-19 cases nationwide and the related reinstatement of federal, state and local level governmental restrictions on dine-in service as well as a shift in consumer behavior.
  
• Applebee’s off-premise sales accounted for 36.8% of sales mix for the fourth quarter of 2020. This compares to 34.6% of sales mix for the third quarter of 2020.
  
• Applebee’s delivery sales accounted for 14.0% of sales mix and take-out sales accounted for 22.8% of sales mix for the fourth quarter of 2020. This compares to delivery sales mix of 11.5% and take-out sales mix of 23.1% for the third quarter of 2020.
  
• Applebee’s online sales accounted for 12.4% of total sales for the fourth quarter of 2020. This compares to 12.2% of total sales for the third quarter of 2020.
  
• IHOP’s off-premise comparable same-restaurant sales for the fourth quarter of 2020 increased by 130.4% primarily due to the resurgence of COVID-19 cases nationwide discussed above.
  
• IHOP’s off-premise sales accounted for 33.3% of sales mix for the fourth quarter of 2020. This compares to 32.4% of sales mix for the third quarter of 2020.
  
• IHOP’s delivery sales accounted for 15.6% of sales mix and take-out sales accounted for 17.7% of sales mix for the fourth quarter of 2020. This compares to delivery sales mix of 15.7% and take-out sales mix of 18.3% for the third quarter of 2020.
  
• IHOP’s online sales accounted for 22.7% of total sales for the fourth quarter of 2020. This compares to 22.0% of total sales for the third quarter of 2020.

Fourth Quarter of 2020 Summary

• GAAP net loss per diluted share of $0.10 for the fourth quarter of 2020 compared to earnings per diluted share of $1.59 for the fourth quarter of 2019. The variance was primarily due to a decline in gross profit resulting from a significant decrease in customer traffic due to federal, state and local level governmental restrictions on in-restaurant dining operations to stem the spread of the coronavirus and related changes in consumer behavior.
  
• Adjusted earnings per diluted share of $0.39 for the fourth quarter of 2020 compared to adjusted earnings per diluted share of $1.78 for the fourth quarter of 2019. The variance was primarily due to a decline in gross profit resulting from a significant decrease in customer traffic due to the reasons discussed above. (See “Non-GAAP Financial Measures” and reconciliation of GAAP earnings per diluted share to adjusted earnings per diluted share.)
  
• General and administrative expenses for the fourth quarter of 2020 declined 5.4% year-over-year to $39.4 million from $41.7 million for the fourth quarter of 2019. The improvement was mainly due to lower travel and compensation costs. These cost reductions were due to the Company’s ability to tightly manage general and administrative expenses during a period of austerity.
  
• Consolidated adjusted EBITDA for the fourth quarter of 2020 was $42.0 million. This compares to $67.5 million for the fourth quarter of 2019. The variance was primarily due to a significant decrease in customer traffic resulting from governmental measures to stem the spread of the coronavirus, which led to declines in both total revenues and gross profit. (See “Non-GAAP Financial Measures” and reconciliation of GAAP net income to consolidated adjusted EBITDA.)

Fiscal 2020 Summary

• GAAP net loss per diluted share of $6.43 for 2020 compared to a GAAP earnings per diluted share of $5.85 for 2019. The decrease was primarily due to a decline in gross profit as discussed above and an increase in impairment and closure charges compared to 2019.
  
• Adjusted earnings per diluted share of $1.79 for 2020 compared to adjusted earnings per diluted share of $6.95 for 2019. The decrease was primarily due to a decline in gross profit as discussed above. (See “Non-GAAP Financial Measures” and reconciliation of GAAP earnings per diluted share to adjusted earnings per diluted share.)
  
• General and administrative expenses for 2020 declined 11.1% to $144.8 million from $162.8 million for 2019. The improvement was mainly due to lower compensation expense and travel costs resulting from tight management of general and administrative expenses.
  
• Consolidated adjusted EBITDA for 2020 was $158.7 million. This compares to $273.5 million for 2019. The variance was primarily due to the significant decrease in customer traffic discussed above. (See “Non-GAAP Financial Measures” and reconciliation of GAAP net income to consolidated adjusted EBITDA.)
  
• Cash flows from operating activities for 2020 was $96.5 million. This compares to cash flows from operating activities of $155.2 million for 2019. The decrease mainly was due to a significant decrease in customer traffic due to governmental measures to stem the spread of the coronavirus, which led to declines in both total revenues and gross profit.
  
• The Company continued to generate strong adjusted free cash flow of $106.6 million for 2020. This compares to adjusted free cash flow of $148.8 million for 2019. (See “Non-GAAP Financial Measures” and reconciliation of the Company’s cash provided by operating activities to adjusted free cash flow.)
  
• GAAP net loss available to common stockholders was $104.4 million, or a net loss per diluted share of $6.43, for 2020. This compares to net income available to common stockholders of $100.8 million, or earnings per diluted share of $5.85, for 2019. The decrease in net income was primarily due to the decline in gross profit discussed above and an increase in impairment and closure charges compared to 2019. These items were partially offset by a decline in general and administrative expenses.
  
• Adjusted net income available to common stockholders was $29.3 million, or adjusted earnings per diluted share of $1.79, for 2020. This compares to adjusted net income available to common stockholders of $119.7 million, or adjusted earnings per diluted share of $6.95, for 2019. The decrease in adjusted net income was primarily due to lower gross profit for the reasons discussed above. This item was partially offset by fewer weighted average diluted shares outstanding and lower general and administrative expenses. (See “Non-GAAP Financial Measures” below.)

Cash Position

Dine Brands has taken precautionary measures to increase the Company’s financial flexibility due to the conditions caused by COVID-19. As previously disclosed on March 19, 2020, the Company drew $220 million from its revolving credit facility, all of which remained drawn as of December 31, 2020. As of December 31, 2020, $2.8 million was pledged against the revolving credit facility for outstanding letters of credit. The Company plans to repay the $220 million drawn from its revolving credit facility in the month of March 2021.

As of December 31, 2020, the Company had $456.1 million of total cash and cash equivalents, including restricted cash of $72.7 million. Excluding the $220 million the Company drew from its revolving credit facility, the Company had total cash of $236.1 million as of December 31, 2020, $63.6 million above the total cash of $172.5 million as of December 31, 2019. The variance was primarily due to the temporary suspension of the Company’s quarterly cash dividends and share repurchase program. These steps were taken in response to the COVID-19 pandemic and to maintain financial flexibility. The Company believes that its asset-light business model and cash position will continue to provide strong liquidity during the pandemic.

The Company makes $16.4 million of quarterly interest payments on its Series 2019-1 Class A-2-I, Fixed Rate Senior Secured Notes and Series 2019-1 Class A-2-II, Fixed Rate Senior Secured Notes (the “Class A-2-I Notes”, together with the “Class A-2-II Notes”, the “Class A-2 Notes”). In addition, the Company made a principal payment of $3.25 million on its Class A-2 Notes beginning in the fourth quarter of 2020. The quarterly principal payments under the Class A-2 Notes may be voluntarily suspended when the leverage ratio for the Company and its subsidiaries is less than or equal to 5.25x. As of December 31, 2020, the Company’s leverage ratio was 7.20x.

The Company voluntarily doubled its interest reserve on its Class A-2 Notes during the second quarter of 2020 to $32.8 million to enhance its securitization structure. This increased restricted cash by $16.4 million.

GAAP Effective Tax Rate

Our effective tax rate for 2020 was 4.2% compared to 24.6% for 2019. The effective tax rate for 2020 of 4.2% applied to pretax book loss was significantly different than the statutory Federal income tax rate of 21% primarily because of a $92.2 million impairment of goodwill incurred in the second quarter of 2020, which is not deductible for income tax purposes and therefore has no associated tax benefit.

Financial Performance Guidance for 2021

The Company believes that its consolidated financial results for 2021 could continue to be materially impacted by the global impact from COVID-19. Considering the uncertainty and timing of a reversal in consumer behavior due to the pandemic, the Company currently cannot provide a complete business outlook for fiscal 2021. The Company assumes no obligation to update or supplement this information.

• General and administrative expenses for 2021 are expected to range between approximately $160 million and $170 million, including non-cash stock-based compensation expense and depreciation totaling approximately $45 million. This projection includes approximately $5 million of general and administrative expenses related to the company restaurants.
  
• Capital expenditures are expected to be approximately $14 million, inclusive of approximately $5 million related to the company restaurants segment.

Domestic System Reopening Update

As of December 31, 2020, 3,211 of our domestic restaurants, or 98%, were open for either dine-in service or off-premise service comprised of take-out and delivery. This compares to 3,190 of our domestic restaurants, or 97%, open for either dine-in service or off-premise service comprised of take-out and delivery as of September 30, 2020.

Applebee’s Reopening Update

As of December 31, 2020, out of 1,600 domestic Applebee’s franchise and company-operated restaurants, 1,276 were open for in-restaurant dining, 315 were open for only off-premise sales, comprised of take-out and delivery, and 9 were temporarily closed. This compares to as of September 30, 2020, when out of 1,614 domestic Applebee’s franchise and company-operated restaurants, 1,595 were open for in-restaurant dining, three were open for only off-premise sales, comprised of take-out and delivery, and 16 were temporarily closed.

IHOP Reopening Update

As of December 31, 2020, out of 1,670 domestic IHOP franchise and area license restaurants, 1,174 were open for in-restaurant dining, 446 were open only for off-premise sales, comprised of take-out and delivery, and 50 were temporarily closed. This compares to as of September 30, 2020, when out of 1,683 domestic IHOP franchise and area license restaurants, 1,425 were open for in-restaurant dining, 167 were open only for off-premise sales, comprised of take-out and delivery, and 91 were temporarily closed.

Fourth Quarter of 2020 Earnings Conference Call Details

Dine Brands will host a conference call to discuss its results on March 2, 2021 at 9:00 a.m. Pacific Time.

To participate on the call, please dial (833) 528-0602 and enter the conference identification number 4374875. International callers, please dial (830) 221-9708 and enter the conference identification number 4374875.

A live webcast of the call will be available on www.dinebrands.com and may be accessed by visiting Events and Presentations under the site’s Investors