DIN - Earnings call transcript Q4 2017 | Dine Brands Global, Inc.

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Operator

Welcome to the Q4 2017 Dine Brands Global, Inc. earnings conference call. My name is Paulette and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. that is note recorded. Please Instructions] this being conference [Operator to the Executive I turn over Ken will now call Diptee, Relations. Director, Investor

Ken Diptee

Thank Kalvin, IHOP; interim and to welcome Corporate Controller; XXXX joined morning. Cywinski, President quarter CFO, Steve Good of Rebelez, by Gregg fiscal I'm conference President DineEquity's CEO; Joyce, John Darren and call. you. fourth And of Applebee's.

information. call over our regarding forward-looking remember to Safe please the Steve, turn I Before Harbor

forward-looking unknown today risks, DineEquity's During available to refer also management and described which and the discuss filing. call as involves update in are over may that which release information factors, to be the results results obligation to forward-looking our and Steve. the expressed Please XX-K measures is uncertainties and cause also press in that, information or which of no call, certain supplement and may these the forward-looking on We of from or press actual these factors are website. detailed turn non-GAAP other are With financial implied. release The today's known I'll statements. assumes to may the the context evaluate statements and different in

Stephen Joyce

Ken. Well, good morning, everyone. Thanks,

two and accelerate offering absolutely we greater XXXX, to growth, our provide We've of the in consumer autonomy areas support from including and very insights in Over technology decision-making the investing key the plan know necessary. from to respond who top-tier and to to that has brands culinary, resources brand growth to organization, to stabilize the channels and team before. and is This better steps revenue strong strategic Applebee's. marketing. and leadership shifted talent both to sustainable to quickly enhanced pleased what across provided platforms expect compared and grow than to accountability. took further our invested in us To course guests expand year. in we business business, our has performance several they and We I'm that are This believe environment base operations produced to operate. IHOP to off-premises information validation changes our enabled at corporate we and brands has in analytics directly we competitive the understand which incremental IHOP process. We've To develop XXXX in ever our say previous brands our to our to-go as improvement in at such Applebee's. developed leadership,

away initiatives but give for a these part few to reasons, growth. strategy of just to to want much too don't return competitive I are exciting Now, that are our

performance our traffic that progress Applebee's With and to X% continue and against said, the at grow encouraging brands of performance up report IHOP. X% January, in plan at positive both make We with comps sales both I'm stabilize and good to pleased approximately brands. to at

performance culture. I'm To While drive believe confident to have culture. goals, a these achieve drives I we taking to leadership are and firmly the our we we value-based steps more results early work have on sustainable in do, build must momentum. that very

our very a and that categories. type place respective transition in to a back to their leadership seasoned have We ensure change growth of team can needed effect to the Dine that leaders remain in company the brands

philosophy in a Brands culture, and Dine come, Dine to shift our today company we transition. Brands, the in the of changes the Inc. The to rebranding new announced company change way are of strategy. our To and reflects our We new reflect thinking our in a Global, name, name

to plan create shift shareholders significant in for as growth initiatives and culture our mentioned, we're transition franchisees. to our value and I part and As several a the new currently company implementing of

you walk me Dine. expect you from let Now, through what can

our of drive to points of that encompasses performance advertising abundant the from guests this culinary our guests affinity at traffic have the brands executing outside stabilize tie house front operations non-traditional taking to with we must centers, strong better by excellence dedicated And providing some our providing markets utilizing we the unique footprint our guests the with a and all only the back us provide our as that our competition, that our can guests level guest additional growth the creating brands. presence are to growing and when how our have innovation end, combination international breakthrough high-traffic insights strategically for effective they as employing such in us To want, color, exceptional To differentiates focusing and through against brands IHOP consumer Applebee's, strategy next domestic to plan. airports currently we're for brand, visit. formats as restaurants, offerings our that value they engage get in with to US. to on our touch penetrate by ensure expanding allow foremost, each from additional more consumers analytics which travel traditional comprehensive well and First of leveraging every for on the teams experience together, the of and an

priority for expect the will can you the return Secondly, us. of that remain capital top

$XXX We of dividend shareholders. meaningful shareholders. returned funded XXXX, repurchases. the the first our on strong maintained returning share have combined was returns dividends the have Since remain consistent our quarter a We focused to quarterly cash capital form delivering and million of over we in record to of in

our yields efficient payout appropriate ratio repurchases. shareholders dividend attractive very be through we've intend thoughtful have of done the We of where release set the and the in the can our to over to we from target morning, capital grown be have The believe dividend After we industry. As as with savings time this you in meaningful saw reallocated an past we that our $X.XX it and to return XX% quarterly gradually of in opportunistic of more announced review, will XX%. to provide one highest a dividend share. press comprehensive continue dividend per to share

Third, or for drive performance joint acquisitions of both additional after our long-term to company. small growth stabilized we have tuck-in expect you can ventures us explore the brands, to sustainable

We extremely have model. business scalable an

will we evaluate move to growth as forward. We continue opportunities all

As as allows in the another model. XXX% each of business added is XX%-plus past, said a scale us of spread our has of benefit to the about this line. incremental costs our our over franchise bottom to The value I've all franchise is great number This units. larger unit flow-through

X% in growing at the Lastly, in growing and to test best practices design. to terms us ability footprint global we've initiatives of continue over to expect achieve expanding to Since goal international grown our build international in XXXX. XXX and units international both to representing approximately in end pleased division strongest XXX opening say I'm over intend This to our to to division a size with US. a of of on in long-term our increase that, with This we be our in Key restaurants We meaningful this across experienced presence. XXXX, restaurants XXX CAGR. is decade, having us a business. XXXX. XXXX, the XX to represents internationally remains brands. our our franchisees strategy This we part formed of a our domestically, addition flexible XXXX, international allows from development the formats the before by leveraging momentum XX% our

are significant we for to see, can you franchisees. shareholders our value on and executing several create initiatives As

were Applebee's importantly, to team sustainable have of the of points. sales. taking with am the financial and quarter excited as points part both this in will walk this successful improvement going XXX and, in on work sequential shift we steps Gregg? for January. traffic growth. part of We build both time and basis in of we quarter and first to and the to compared to execution drive this growth. to the we the Gregg basis through quarter you also confident incredibly the I comps improvement to experienced With a strong fourth To positive more since third IHOP experienced and of performance positive end, marked momentum believe plan that, comps the we in brands the results positive results are XXXX. guidance. XXXX I'm team place that company at XXX will a in now I'm brands as leadership quarter our sustainable our second be that ask culminate that improved over transition

Greggory Kalvin

Thank I'll our quarter you, turning everyone. fourth briefly performance for Steve. Good morning, cover financial the before our and full guidance. XXXX year-to-date performance to XXXX

in increase $X.XX not to contribution note contribution per fund. earnings operations an a Applebee's our Applebee's closures and national an due increase from due of national and advertising fund, operation For Applebee's paid debt in the was the franchisor XXXX. the to personnel-related as in until lower cash, due to increase in compared expense, the G&A XXXX quarter Applebee's of primarily in to higher to royalties costs. our the share $X XXXX was Applebee's mainly adjusted The in impact in modest same the fourth in Please compared of franchise of that expenses gross period profit decline advertising same were recognized and to decrease to XXXX period a for bad expense million franchise a increase bad the result quarter, debt a $X.XX fourth

to of in fund, Applebee's the compared initiatives, to recognized modest not decline due in in decrease and a sales, in half royalties XXXX. our expense, earnings ad was gross a decline Applebee's a result to same from year and operations increase to in Applebee's revenue the first Applebee's due $X.XX our For the increase X.X% debt the stabilization the due XXXX, franchise comp adjusted of G&A full as to brand bad until the an XXXX national per closures increase mainly paid the primarily in share year. contribution in period of for a lower The profit was $X.XX cash,

we our tax assets reflect deferred of liabilities and from Jobs XX%. to XX% federal Regarding of on December Act are the our a a to fourth-quarter Cuts income to rate in legislation tax XXXX, our result under Tax perform revaluation benefits, reduction corporate accounting of tax GAAP balance and the as required GAAP sheet

to As deferred the benefit a of approximately tax in revaluation, liabilities tax net rate. in result future at quarter income of million this fourth recorded our XX% reset income $XX the new statement an our we

was XXXX our per year share the XX% rate, tax basis. for on tax XXXX our full earnings Regarding adjusted an rate effective

was to charges severance and cash flow from higher operation in stabilization to the operations, free gross and G&A expenditures $X $XX G&A. XXXX. profit related to non-recurring the approximately was in increase incurred to in as Turning the was Adjusted approximately higher the the a Applebee's capital cash approximately decrease resulting previously million in period operating mainly discussed, Applebee's year compared The from investments consumer-facing the for The to approximately $XXX and XXXX. period and compared cash $XXX capital cash at The from approximately net variance was year. to attributed for last due for of due XXXX to overall year period construction IT headquarters test additional flows was lower million The activities mainly initiatives. for million costs corporate same to kitchen XXXX comparable million full increase to last decline our for XXXX due flow compared statement, million income of our compared of expenditures to primarily in same cash for for $XX were million from decline initiatives. franchise $X

real-time will financial reviewed basis. and closely of on including closures matters have support. partner and direct are Currently, assistance avail on various Applebee's financial franchisees Applebee's of health, continue Franchisee any lessors. necessary. franchisees themselves to Direct lenders minority to financial support to only and includes to this continue their an update health real in program. the a restaurant the partnership Turning franchisees ability a franchisees' our with by estate themselves financial of direct programs, our financial financial availed This assistance as brand number we

that to closure participated like process I'd for out the However, but a underperforming restaurants. all, have in approved point few franchisees

XX guidance follows. our on comparable review expected today as guidance. Applebee's Please see XXXX Financial range of performance issued sales and will positive to performance expected fiscal press flat domestic-wide to same-restaurant our we restaurant expected XX develop international between restaurants XXXX to range between between are is for X%. sales to franchisees to also majority Applebee's flat the are globally, and X%. new system-wide expected for Now, complete I our guidance. same details performance IHOP's openings. financial be is which domestic comparable positive is release

will the expected standards, and restaurants, health its be to area to of which operational based are XXX meeting expected XX analysis optimize the part ongoing primarily IHOP to between image be our and As system, our XX of approximately as we franchisees restaurants criteria, franchisee systemwide licensees to brand closure globally, openings. including domestic and of of The as develop well the expected XX on domestic. results. closures anticipate the are majority several

closure We expect that of national to profit to be XX the is to segment contributed expense the $X.X million. this to Included $XX will million. of expected $XXX continuing in Applebee's approximately one-time is contribution approximately XX be XXXX the franchise advertising restaurants. $XXX Franchise amount million fund, million a

in expect contributions XXXX. XXXX first the combined half to to marketing We support of the and initiatives XXXX adequate be Applebee's

administrative and depreciation $XX Weighted $X approximately We expenses million. generate quarters $XX financing to Rental million compensation million, including to expected million expensed of approximately to second interest XXXX. be are projected profit. million first expense expected $XXX combined $XX $XXX non-cash are be expect of and million and the approximately outstanding Approximately ratably shares be $XX in million. expense. to to average range stock million between expected are diluted to Interest XX the expected shares. and over and expense approximate General non-cash is segments is

$XXX is million. to flows Cash be be and Our GAAP between free Adjusted between is With $X.XX million expected range by per are that, and operating provided $XX diluted call over from flow to from XX%. earnings turn income range is $X.XX. to $X.XX to I'll the approximately million. tax diluted share to range activities expenditures range are expected expected million. now $X.XX. $XX projected rate to to John. to share per $XXX earnings to expected Adjusted $XXX is Capital expected million cash

John Cywinski

I've categorized perhaps course, everyone. a Thanks, Gregg, Applebee's of of and, strategies, a assessment, terms foundational year, transitional morning, year, as good previously in XXXX execution. and structure for even

a in gain materialize have we're we our in While anticipated traction roots. to returned to our initiatives to we strategy of – QX QX. our pleased anticipate initiatives XXXX, certainly beginning From results early see perspective,

We perspective, which what these occasion-based who have We're family to we Said forward. moving we we're We're grasp love comfortable and targeting across for overly core and folks neighborhood connect we at at abundant place simply is brand to who with the our from an on we an perspective view and we position a strengths embraced all-American purchase demographics in plan a pretend a are diverse and a real have We guest strength. our and with leverage Xers, what Applebee's and of both trendy we From firm know neighborly Applebee's core and as DNA to behavior come insights. familiar welcoming or boomers, stand and value equal with wonderfully millennials, be strive drives CDR an a know differently, percentage our wouldn't hip we marketplace. we to with age category. Demographically, brand. and we be Gen as the guest variety and profile friends.

our guests' and process. from $XXX,XXX, $XX,XXX development household ranges guides marketing our which certainly to culinary income Importantly,

target mentioned routine into tendencies I've well-positioned both spot here conducive of and forward. these represent have seekers, and to folks moving frequency Without we Now, that value Applebee's and drive sweet traditionalists to detail, our previously getting characteristics we're preference. whom

guests. our an items broadly and focused getting our Applebee's. are and back at niche or appealing menu chef his profiles about mainstream We're for roots, As team flavor to on polarizing Bulgarelli example Stephen of not

sriracha, So, anytime it's pomegranate unlikely quinoa you'll see soon. or

will on continue innovation value pipeline. see our and simplification to emphasis across You abundant an

very industry this deep, in place. particular. in is team our in the challenging team On experienced structural is talented and now The – leadership navigating experienced side, firmly

and and with franchisees. in innovation simple, is reestablish enhance partnership generate personality, great goal our brand execution, unique Applebee's growth sustained profitable relevance Our through

relentless satisfaction. while a from franchisees team, this XXXX guest to progress have future. system have our has of Chief While improvement with his All never at our in on guest shown remains Carroll, job priority Kevin considerably. to our execution From with Officer our brand we're easy partnering a and standpoint, an pleased our early certainly variability ops category, done terrific and excellence Operations metrics top narrowed confident create XXXX, about focus restaurant Applebee's.

accountability these we continue Our and restaurants. great embrace franchisees the standards, complexity pride brand from around take in results remove while to

marketing as comes immediate brand. now on us culinary couldn't Marketing and Officer, full emotional at From new Joel Chief across to on consumer our his Applebee's we're I bringing Yashinsky, "Eatin' make innovation orientation marketing Now, Joel points are pleased process business. development we an impact I announced about been McDonald's to benefits on and is beginning such Neighborhood" as Good of approachable two directly all the front. in and the to where be His arrival and disciplined rational franchisee here successful quite months life with likable recently actively Under pipeline the display more involved Applebee's. and a regarded to for executive turnarounds. in results Joel's touch he place standpoint, highly was leadership, already in showcase our a and populate nine our has for the nicely. the

Additionally, benefits compromising we in to this as XXXX PricewaterhouseCoopers food initiative with importantly full swing – guest initiatives begin beginning is to see and enhance level partnership XXXX. chain the packaging enthusiastic experience. expect this – now our as and and labor very to about profitability remain continuing Franchisees year supply restaurant without we P&L throughout meaningful implement

The to to is for good Applebee's first returned were comp since sales results. growth QX. in time the attention very XXXX. here our has both X.X% up sales in positive QX and turn Comp continued have let's Now, news late and into Applebee's QX QX traffic that

the over category same has Applebee's the timeframe. CDR Additionally, outperformed

perspective, be a our performance with that achieve able change of our still my strategic can In recent we've are the we're there attributed to here. to trajectory out. combination in execution strategic that stages been pleased While components variables of the stand and in of initiatives, From particular, our five plan. early the

as partnership certainly satisfaction two. alignment, making a number huge and Number elevated media brand and clarifier of of And resonated impact to three as difference difference. focus the are four, "Eatin' Franchisee That's not least, buy. and it's buzzworthy. have meaningful Good show Neighborhood" and refined and placement consistent proving propositions guests. five, with our position has complementary Our the collaboration point Number in and number targeting effectiveness value-oriented number certainly and one, it's continues guest franchisee and relevant, last on and it's our but genuine food beverage a really progress. is media our

As our highlighted propositions release, fund number to digital with increasing will and proper one-time contribution in ad us production, of the weeks. testing, to support the while advertising social media, allow marketing on-air our

likely over closing, of will portfolio truly mentioned In the now well brand. likelihood the introduction among as planned the the exceptional. consolidation existing balance of in leadership a year evolution. and franchisees of on of selective scenarios very place previously front. perhaps as franchisee Now, are they our positive very portfolio some occur our to as new this I've the these is Both part of team

are within brand. Our relevance, now remain the franchisees enhancing embedded Together, committed it execution the we turn resilient walking this win. hungry powerful I'll sustained and that, growth Applebee's on to and while passionate talk Darren. unlocking to they're With every day restaurant-level to

Darren Rebelez

in declines, traffic is Thanks, with not with a traffic check good consistent declined our fourth X.X%, everyone. comp John, morning, decrease that were comp IHOP's reflecting and sales increases. category quarter offset

by year. declined XXX dining XX for quarter. basis family was sequentially improvement sales same by the in points the business, in the approximately to-go third strong our growth encouraged total nearly also increase for last improved to by sales business, primarily category to January. which basis by points off-premise performance overall very sales comps versus our fourth reflecting IHOP's which This of comp quarter, We're XXX contributed period an in positive fourth-quarter of compared results driven the over have basis X% points, accounted of fourth-quarter Although our

very opened I'm strong pace decade. development the at our have in development, that pace a last average annually to franchisees restaurants continued the an to say of briefly XXXX. Turning pleased XX over of

XX we're our I'll starting to our guest is. strategy, base where which which our traffic and This the the franchisees restaurants, for dine. those the We of opened to each and overall Our when XX-year provide to which in compared execute Among enhancing locations. demand great outside running represents drive This development experience, To continuing strength experience. environment of many understand is to significantly a impressive an growth guests the XX% To history. guest restaurants traffic, US. franchisee the and were remodel program, is XX with encompasses these Rise international guest globally, guests domestically that as of average. factors them the being sustainable a in drive ten-year growth, four-pronged driving to the the brand the strong restaurants, touch atmosphere. our significantly consider deciding both brand's and where enhancing with implemented the on most Shine we welcoming warm well 'N nearly as is comprehensive briefly, testament

I'm pleased XX bring Our second the first we've of total XXX great progress franchisees goal in in XXX. year. this the rolled program completed of quarter full fourth of the XXXX, Since on front. report to the out for have remodels remodeled to that was A exceeded remodels. tally we restaurants quarter the our to were consecutive made XXX

the really by Looking encouraged of program. success ahead, I'm this

a will XXX to is pace continue the XXX remodels complete. per year on We system until of

of is the of our factors when aspect millennials XX% of guests. important providing choosing every best and say guest most and the Approximately a Another are convenience needs friendliness. the adults experience meeting convenience day restaurant XX% availability, possible of important

convenient carryout reasons, in these For ever. our than now service is more restaurants offering important

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quarter growth provide the we XXXX earlier, IHOP As were ago. 'N color, the some a GO XX% in strong XX%. also of in full-year sales increase. year quarter same the our quarter strong fourth an we in To comp to to-go I fourth up platform very saw a compared a impressive basis, On experienced mentioned overall

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of order XX% In to each week, enjoyed occasions fact, in XX% Americans go or being delivery two restaurant resulting all off-premise. dining times of

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higher In of check the percentage including check orders, the XX% increase than size orders was for The a average since XXXX fact, quarter check in to-go call-ins. average mid-single fourth the approximately all in the size quarter the average online for first quarter. to-go fourth online experienced other digit size to-go

completion experience even steps of Lastly, for our of more in to national technology extend The about brand, guests the our the of also guests. brand excited our includes to compelling access ihop.com. the omnichannel We're mobile ordering utilize taking reach the we the rollout GO very system quarter. the and fourth a with to to create IHOP's online to we completed a we're app continued the of through our guest To provide ways 'N fully rollout integrated platform experience. expansion IHOP of enhance

of service only been next in we that both high of we overall XXXX. ensure XXX to achieved report best in our their our the efforts hard an scores new To improvement a Turning our of in record we restaurants. points excellence members marked guest our running restaurants. see part like of team house. that in did operations to back franchisees to satisfaction receive scores, in December. improvement focused end, basis on to strategy, in happy laser the and We've Not I'm guests the the the our and front for that saw commend work great the I'd

To tier So, launched with experience iHospitality guests our additional are as to them of to Program. training team well-versed, we guests Training performance. valued. every that the with unparalleled making connection an to a and excellence program This in entire our team. restaurants. our for congratulations program the providing iHospitality hospitality, encompasses reinforce has our believe making day, provides members genuine an team visitation recognition extraordinary and potential such the members teamwork, to We to a food various feel program drive acknowledge areas ensure preparation

as in combined the You their on which more "Pancakes, very promotion, kickoff breakthrough on strategy, Switching January agency for taken regional our meet more breakthrough to creative or high traffic. and third In marketing Pancakes, addition our of to proposition in to compelling us firm of pleased driving with our record category, the Eat and operators. last we've All we achieve according with program, training led combination ad Pancakes bring a creative need steps resources $X.XX to creating We initial year, the resources launched Pancakes!" restaurants has campaign to DrogaX to assist exceed standards. their our IHOP This our sales to messaging. strong gears Black this prong announced themed popular We're to start effective quarter very we've to the the outperforming that value franchisees Can selected X. and advertising provide top-tier field with a operations brand they ensure our to Box with To traffic. also Data this, restructured

is. the where prong, final being the Regarding guest

This yielding mentioned restaurants net since domestic the the for and year we've franchisees. business, a for in of by seen XXXX. of our represents brand As XXXX, strong the year. XX In development I consistent our new IHOP earlier, development new the IHOP best restaurants franchisees net XX developed

future. see our very into to our as the into the see, our and prototype restaurant can non-traditional you To new success expect drive wrap, performance broad. small With sustainable scope the of is accelerated venues, we positive format to expansion of growth strategy

tirelessly working sales done, build While momentum. by to be to IHOP's performance very traffic encouraged we're positive work We're there's January. and that more on in

February our Steve like the I'd X to donate over I Day. between IHOP's closing locations PM XX at call of now to Pancake comments. participating and to battling to turn AM a stack that you that, for his Finally, pancakes free illnesses. National With back and is encourage everyone enjoy buttermilk X short remind help children I'll critical delicious

Stephen Joyce

Darren. Thanks,

vision positive a plan have a both We sustainable at and drive clear brands. to performance

some While to in we strategy still full realize return positive high-level results to to January are and confident potential. and a I've are for I on comprehensive am growth Dine taking to work the that very of our sales do. the traffic have provided encouraging, lot steps we details our

have not will updating shareholders. lowering To repurchases, to provide believe we lost I our while that highest capital the continue our you progress as commitment dividend manner sight to close, to industry. in of most returns the share We in for maintaining efficient We the dividend on look the during year return implement our to through strategy. go-forward the forward

our had Square, tomorrow in us. day to who being for feel free New Union of those For have at not the please investor the join held chance York you register W to

Diptee for can details. Ken You contact

to call Now, Operator? open be you questions to the might we'll have. any pleased

Operator

from first Gallo Michael C.L. our go [Operator question comes Please you. And Thank ahead. Instructions] King. from

Michael Gallo

Hi. Good morning.

Stephen Joyce

morning, Good Michael.

Operator

line your open. is Michael, now

Michael Gallo

profit one-time results. out I two, year-over-year improved going that you called getting I there roughly to wondering one, $XX favorable be benefit. line allow on clearly, is, a franchisee And you that then, grow given guess, the to you – a $XX that congratulations it more million you're to why offsets or contribution in in in as $XX the the was Yeah, are I But, will XXXX Gregg, the know contribution press that's XXXX despite think My expense that. million release. be million, incremental in question are significant for going enough.

Greggory Kalvin

I'll if take question Essentially, because should first. the we second the XXXX, guidance projections collectability have, less that see improved you we of will. and in issues,

be the positive will expense line. So, that to franchise a

through there But pieces lot be in You've of line, if positive will, will got spend. going of event, because major a that moving you the that coming through. ad the

also we historically and in debt line, the which through line, XXXX, higher which stated flows as a this For the expense on franchise to obviously, experienced revenue expect we, amount improve bad remarks we year. both the expense, prepared through

talk advertising, to the Steve is going Regarding that. to

Stephen Joyce

we're overall advertising and important is contribution which are we guests. with a what for the are that question. that no to strategy. part commitment XX-second and, the made to get make contribution those There's and story I think his fulfilling. XXXX clearly, John came now We some the believe and using customers both about dominate the in, think that with that we But with story. we to that doing team are fund a of our programs commercials an when needed difference traction from we resonate we're getting making XXXX, So, airwaves we our funds out

the we restaurants, our And in vital we in contribution and we that is think made sales. a So, are and traffic seeing both making in difference to are that.

turn thought John forward. the stand was and of XXXX, But type going to story the itself, However, the structured to momentum And and be to I on as positive in sufficient really story. going based made into same we it in that we ad franchisees continue way a his commitment the with a them side-by-side strong fund, think mentioned, were of it's growth we important. will

far, So pretty well. be working seems that to

And of to we so, get we that a contribution here. traction we're hoped can had from and think we beyond point making the have appropriate we think anticipation this build because we no getting

John Cywinski

strong rationale Yeah, Steve There's it rhyme not We're and a I Michael. outlined. behind This would manner, very figure. specific to John. reason an putting as that thing add is in figure. use and The that's only arbitrary to that

results franchisees our aligned this we fully So, investment. are and with anticipate

Michael Gallo

that projecting million you're in obviously, positive up the the all rolling Just am have If anticipate with spending $XX comps. in it versus closures, the with one contribution, I be XXXX? advertising you expect XXXX follow-up. Do will you quick do you'll

Greggory Kalvin

And with answer be is contribution, higher. the the will yes. forward, same at expect that Well, going at our to be It level levels. we then, and it

Michael Gallo

you. Thank Okay, great.

Operator

Stephen Anderson The Maxim Group. from comes from question next Our

Michael Gallo

to What I'll you morning. follow-up. you had any of just franchisees both are have Good and Applebee's been pricing Yes. to at and looking discussions tracking with actually kind about at? Couple IHOP. range wanted – of ask questions. menu wanted And I pricing menu quick if

Stephen Joyce

involved me environment, – is turn And believe integrally all over We But in it value restaurant because and memorable dining the they're in food this that. with more start the much I'll about success a brand to value. combination is service both particular, long-term discussion. let of – guys provided, providing our the overall experiences.

Look, their group guest us However, brands. believe a the we our great represent that they of having of is And part both entire and our in a wants more XX%. makes to said our relevant they will are consumer strategy hard-working as expect. continue on to values major to that, going segment we restaurant equation and be because believe value money value forward what and the to see that we

We business. are luxury a in not restaurant

a to a we as respite month. many not. quiet are world frequent think We that to business an fun of want and us us And is want enjoyable during a in and them people where the times in we a

our as so, And to make to comment? we relevant come we things into continue need the offer Darren, to our forward, going it and turn of think to to want to guests them rest restaurants you that that want success. will about

Darren Rebelez

And on is IHOP counsel Stephen, with say with probably been moderate started franchisees months basis, ago. a taking pretty a approaching a perhaps ongoing this this curve of about an recently. have Darren. and some that bit would the franchisees that I our their Yeah, the strategic savvy more from on them they've year, bit and ahead a on pricing to standpoint. more we, XX little price

relevant bit a into them that in range we're be forward, more to really versus data competition. some dial to we're strategic little that more a trying and our with staying analysis, Moving so within work

handicap Steve's equation. for it'd comments to But franchisees at So, would continue our this with I difficult say important. me to balancing to is point. work that, that on we be to going value We're value believe that value, regarding

Michael Gallo

question. This Okay. follow-up a is

mentioned whether potential one category, any And casual particular tuck-in industry. is acquisitions there potential categories looking fast at looking be be whether would you that within it acquisitions? – You the potentially the at looking it be dining, casual

Stephen Joyce

on me to move John, to want do Let just Applebee's? you – finish

John Cywinski

correlation collaborate we're as they see There's on to and look, franchisees this fixated between frequently Sure. free We're price a direct Steve, all question fit. traffic strategy, partner pricing traffic. right? environment. on and inverse we with on cautious your pricing, They're in

priority X% is of our category in our But, that's guidance and in in traffic outside at terms to So, to number executing level. lower the on our franchisees. of annually. at one you this focus range the of again, number side see We'd in the of be we'll value the that restaurant restaurant a brands on level. Historically, X% deliver ways

Stephen Joyce

brands, both to in So, we're to to answer categories. of brands have add your question our the clearly, in number one going about we where interested our

family one years been We've pretty is and dining achievement. number casual a remarkable XX which So, restaurants. for

both think lot read categories. about forward. we the of death enormous I've Now, going a brands our have runway

if numbers, you our In age fact, at of customers half are look XX. our the under of

us, nationally. can relatively we beginning we a while us to something just going the but healthy. we brand of small, to terms quite itself, run that different categories. to we've find in of think is the we're ethnic, got said obviously complementary we in would that, but brands. fast in think of actual be that that grow we're left So, fits accretive we're our kind of a like like these bit in hoping Having also to casual at, look we areas And attractive something search, transaction terms brands

could we're is with of And having multi-brand we early conversations that this those a next year, hope probably So, to folks transition fit us to tail-end you something to start hoping what categories. small platform. with gradual see a do brands

Michael Gallo

you. Thank right. All

Operator

Our go question from Brian Vaccaro come Raymond from next Please James. ahead.

Brian Vaccaro

sort the segment fourth on if couple of franchise had embedded handy? quick in a then and you fourth XX in million-ish-and-change question high-level number was franchise morning. and ones Thank quarter quarter, a you items expense could. what I bad good – line the Gregg, Applebee's have of expense. I the detailed that debt Do question

Greggory Kalvin

$X approximately Probably $X about to million – million.

Brian Vaccaro

your if Okay. about think $XX And the profitability, segment we of the then, excel one-time NAF I guidance million. franchise as for

that about I expense. Did improvement in guidance hear segment as royalties Your and franchise Applebee's cash an debt thinking bad also profitability correctly? assumes basis we're

Greggory Kalvin

Yes.

Brian Vaccaro

guess, Okay. and improvement All I great. the follow-up that maybe to insights done. I work lens the ask this the some team of your right, Applebee's of has sales transitioning, through consumer wanted it on

has mentioned you groups Asian balanced been seekers. recent it improvement guess, demographics sales the You more the the the been And, mentioned? concentrated one or that these I in traditionalists question in routine months across, of value is, or specifically and the has say, groups

John Cywinski

it of and the that an organically primarily occasion have older is And it's From This with surprisingly traffic. Brian. pleased a as very as balanced, well It's coming kind switchers seen of Hey, so. coming through well. discretionary the fact John. from We're millennials is category multitude We've standpoint, almost those the folks it's or some Gen been initiatives. as through who dollars both within brand Xers category. growth

the we're anything with else, And seeing. this. more component than pleased pleased with the diversity what we're So, we're of organic of

quite We seen in time. it some haven't

Brian Vaccaro

of business? you on But more improvement improvement your or part where scores has different of you've that, think, bit, could as – guest mentioned mentioned most you the And color metrics. most maybe Okay. satisfaction to seen provide where impactful been you a in some I the improvement quite and that the

John Cywinski

on Brian, all metrics. it, on every we've actually, seen seen – We've it just about guest

list, XX. top from So, guest that be shift would percentage meaningful be of satisfaction XX – satisfaction call a overall it to a X – would we'll the at – point

we make range who down in at to We're it On to the expecting now X%. flipside level. to of point, about At restaurant that, hover problems moving double-digit It's experience this one the – X% was guests for X% number the track quality a problems behalf managers that little brand. cleanliness, and general And speed, part moving their then, a right other in jobs to simplify our friendliness, of have around engagement, to And of attributes the food, on that and hot food easier. all direction. effort been servers forward. is

the and franchisees. All we've in restaurant are we're category, formidable attributes direction. brutal that competitors level the but execution. very got the attribute clear And terms look, a evidence moving I in right is to in our So,

Brian Vaccaro

right. All helpful. That's

know of I the I profitability level on or sort are I level-set, could profitability But yet could. cetera. maybe the on one stabilized traffic last a important to Applebee's comps for it to back franchisee and there. the high and a circle if of in there a improve bottom one initiatives improved et profitability, store critically positive still comps Just And are just months wanted you are where me. factor today? even have recent average has margins, at as stands to lot we

Greggory Kalvin

in also. franchisee sales, that we're This up, we're the to is important. positive And it at In improves, some signs as and same-store Consistent level. the Gregg, improvement with directionally our area in is just the especially this Brian. also push going seeing level, collectability

So, or are from up three looking last think four both months. sides, the things in I

Brian Vaccaro

All right. you. helpful. That's Thank

Operator

comes question Our from ahead. Alex go from Please next Mergard J.P. Morgan.

Alexander Mergard

Thank sheet, Hi. your you XXXX. debt It's has in And the for your capital maturity on expect September question. balance on an to allocation.

what of incremental cash thinking improved this the in from of to dividend point operations, to be is debt should free on any that some that paydown with we at front? the or expectation or So, reducing it reallocate flow time your

Stephen Joyce

We, our the I we see to restructure we've So, – in want sort our like an to to is at space of X.X something We appropriate obviously, debt actually That's already we discussions on. think want started our level. category. debt. the X think approach we're

offers We on will the are time it in when appropriate the based market, to both pricing us. also made but

the at looking in position a the right maturity timing. we're does We've that next obviously, debt probably the today. determine it But, year well-structured got have to over So, midterm.

end debt And where about comfortable be the levels pricing our that. be at don't clear, till and let's to so, very wait reside today. company. the market, we start structuring thinking we appropriate is will it sort for the view on our We think But we're this the we point. And our both based to are want want of what of

it at of you'll balance in these our terms sheet leverage, the of we of optimize us do – us continue stability and that mostly levels helps the so, see of cash think as And the because also flow, and cash to de-lever, figure brands that ways is then, to one will to generate because we and number And priority. investing get in we'll growth. that cash out shareholders look begin for our we to

Alexander Mergard

That's very that. you follow-up. helpful. it. for got And just Thank then, Okay, one

is stream, developed it's lot in income So, on strategy of that your understanding a periods. XXXX in prior that that time derived back really was my from the IHOP rental

you So, middle sub-lease in still those your are expirations, this stay franchisees the them? on as day, face renew to agreements trying essentially to franchise those lease with and

Greggory Kalvin

is Yes. Gregg. This

But will, leases. As you our the those new that then the We store into we old to probably of business renew, if model. have process the new and ever, model. they most with lease over them goes continue new go those into under a the it If business those stores, would lease, closes continue XXX future. of a there's with

Alexander Mergard

Thank you.

Operator

will [Operator showing back we no are now closing comments. Instructions]. further I And turn Steve for questions. the call to Joyce

Stephen Joyce

joining So, thank for you us.

and as to make year about continue results reporting the clearly throughout you the excited to progress. generated are We we for

in date. results as us. look But we the also very to out to our with goes on. the And are forward satisfied of to we year reporting you that believe front is of bulk work our We that

Operator

And for Thank concludes Thank you, conference. ladies and may gentlemen. This you disconnect. today's now participating. you

Dine Brands Global (DIN) 20 Feb 182017 Q4 Earnings call transcript