Dine Brands Earnings Call: Balancing Growth and Challenges

Dine Brands ((DIN)) has held its Q4 earnings call. Read on for the main highlights of the call.

In the recent earnings call, Dine Brands Global, Inc. presented a balanced outlook, highlighting both strengths and challenges. The company showcased notable successes in generating free cash flow and launching a dual-brand concept, while also grappling with declining same-restaurant sales, adjusted EBITDA, and increased commodity costs.

Adjusted Free Cash Flow Increase

Dine Brands Global, Inc. demonstrated financial stability by generating $106.4 million in adjusted free cash flow, an increase from $103.3 million last year. This growth in free cash flow underscores the company’s solid financial footing despite other challenges.

Successful Dual-Brand Concept Launch

The launch of the first U.S. dual-brand location in Seguin, Texas, was a significant success, achieving sales nearly three times its performance as a standalone IHOP. This innovative concept shows promise for future expansion and revenue growth.

IHOP Loyalty Program Growth

IHOP’s loyalty program experienced substantial growth, increasing by over 30% and adding 2.4 million members. This brings the total membership to over 10 million, indicating strong customer engagement and potential for increased sales.

Strong Franchisee Engagement

Franchisees have shown strong commitment to the brand, with an oversubscription to the Applebee’s renovation program and interest in dual-brand locations. This engagement is crucial for the company’s growth and adaptation strategies.

Decline in Same-Restaurant Sales

Despite these successes, the company faced challenges with declining same-restaurant sales. Applebee’s sales were down 4.2% for 2024, and IHOP’s were down 2%, reflecting broader industry trends and consumer spending challenges.

Decrease in Adjusted EBITDA

Adjusted EBITDA for 2024 decreased to $239.8 million from $256.4 million in 2023, highlighting financial pressures despite efforts to stabilize other areas of the business.

Revenue Decline

Total revenues saw a decline of 0.7% in Q4 and 2.3% for the full year, indicating a need for strategic adjustments to reverse this trend.

Challenges in Consumer Spending

Macro headwinds significantly impacted consumer spending, particularly among guests with household incomes below $75,000, affecting overall sales performance.

Increase in Commodity Costs

IHOP faced a 4.7% increase in commodity costs in Q4, driven by factors such as the avian influenza outbreak impacting egg pricing, which added to the financial challenges.

Forward-Looking Guidance

Looking ahead to 2025, Dine Brands Global, Inc. provided guidance with expectations for domestic system-wide comp sales for Applebee’s to range between negative 2% and positive 1%, and for IHOP, between negative 1% and 2%. The company plans to remodel 30 Applebee’s restaurants and convert five to a dual-brand concept. They forecast a 2025 adjusted EBITDA range of $235 million to $245 million, with CapEx spending between $20 million and $30 million.

In conclusion, Dine Brands Global, Inc.’s earnings call reflected a mixed sentiment, with strong financial stability and innovative strategies being offset by challenges in sales and costs. The company’s forward-looking guidance suggests cautious optimism as they navigate these hurdles and aim for growth in 2025.