Denny's Corporation

Chairman, greetings and welcome to the Denise Corporation First Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star and zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Gail Armani. Senior Director of Investor Relations. Please go ahead.

Good afternoon. Thank you for joining Denny's first quarter 2025 earnings conference call. With me today from management are Kelly Vallade, Denny's Chief Executive Officer, and Robert Verostik, Denny's Executive Vice President and Chief Financial Officer. Please refer to our website at investor.denny.com to find our first quarter earnings press release along with the reconciliation of any non-GAAP financial measures mentioned on the call today. This call is being webcast and an archive of the webcast will be available on our website later today. Kelly will begin today's call with a business update, then Robert will provide a recap of our first quarter financial results and a development update before commenting on guidance. After that, we will open it up for questions. Before we begin, let me remind you that in accordance with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, the company knows that certain matters to be discussed by members of management during this call may constitute forward-looking statements. Management urges caution in considering its current trends and any outlook on earnings provided during this call. Such statements are subject to risk, uncertainties, and other factors that may cause the actual performance of Denny's to be materially different from the performance indicated or implied by such statements. Such risks and factors are set forth in the company's most recent annual report on Form 10-K for the year ended December 25, 2024, and in any subsequent Forms 8-K and quarterly reports on Form 10-Q. With that, I will now turn the call over to Kelly Vallade, Denny's Chief Executive Officer. Thank you, Kayla.

Good afternoon, everyone, and thank you for joining us. Today's discussion will focus on the continued progress we've made to bring profitable traffic-driving initiatives to our flagship Denny's restaurants. We'll also talk about our continued confidence in our growth brand, Kiki's Breakfast Cafe. And after that, we'll provide updates on our quarterly financial results. With that, let's get started. It's been a challenging start to the year, and while we're starting to see some improvements, macro pressures persist. Consumer sentiment remains negative as fear around tariffs and higher price of goods combined with concerns about the job market resulted in consumers pulling back on spending. We are now operating in one of the most aggressive value-driven environments we've seen in years. Guests are stretched, inflation pressures remain, and every brand is fighting for share by pushing harder on price and promotion while trying to win with the guest experience. In the first quarter, Denny's same restaurant sales decreased 3%, and we did lose traction compared to the BBI Family Dining Sales Index. However, we did sequentially improve in the latter part of the quarter. Despite this improvement, we knew we needed to lean even harder into value and break through the clutter to provide guests with more value options when they need them most. In collaboration with our franchisees, the best deal in America, the buy one slam, get one for a dollar, featuring either our original Grand Slam or our All-American Slam was born. This LTO promotional value versus our everyday value with 2468 has been instrumental in regaining transactions and has driven more lapsed and new customer trial than any other value offer in our recent history. Nearly 70% of BOGO transactions have come from lapsed or new customers, and as a result, April same restaurant sales came in approximately flat. We've been very pleased with this promotion and know that it's critical to our guests that really need compelling value offers during this time of uncertainty. We're also providing additional reasons to visit and introduce Denny's to new audiences through on-trend menu offerings and partnerships. We recently launched Slammin' Sodas, Denny's take on the pop culture sensation of dirty sodas. These sodas are a spin on all-time classics Coke, Sprite, and Dr. Pepper with a delicious new twist. And better yet, they drove incremental beverage incidents of over 100 basis points as guests were enticed to try this new offering. We also teamed up with NVIDIA founder and CEO Jensen Wang at their annual GTC conference in San Jose, attended by more than 20,000 global developers, engineers, researchers, inventors, and IT professionals. At that event, we launched the limited-time offer NVIDIA Breakfast Bites, which honor NVIDIA CEO Jensen Wang and his long-standing relationship with Denny's. Our collaborative effort with NVIDIA's social channels successfully amplified brand awareness and introduced Denny's to a new audience in a relevant and timely way. The Instagram post became Denny's top-performing content by impressions in the past 16 months, with approximately 90% of accounts reached being non-followers, a strong indicator of extended reach and new audience exposure. We also remain confident in our off-premise strategies, which we believe uniquely position Denny's as a leader in the family dining category. While most are pulling away from off-premise growth, we are leaning in because we know there's very little overlap between a dine-in and off-premise guests, as well as the off-premise guest is less price sensitive and more resilient during times like these. In fact, our off-premise sales contributed a 1% improvement in same restaurant sales during Q1, which now represents a 22% mix coming from off-premise channels. This was primarily due to the launch of our third virtual brand, Bando Burrito, but also due to our smart investments in digital, which increased traffic to our website, improved conversion rates by over 16%, and delivered more effective promotions on our third-party platforms. Overall, we remain focused on living our values and executing against our strategic initiatives. We're leaning into our strengths as a brand, winning in key occasions like breakfast and value, and engaging the next generation of brand fans to drive meaningful results for our business. I'd like to thank our dedicated Denny's franchisees for their continued partnership as we navigate these challenging times and for having the courage to be bold and go deep in value to meet the guests where they are. Now turning to Kiki's Breakfast Cafe, our small but mighty brand that has made tremendous progress. Kiki's continues to delight our guests. And as we've taken the brand beyond Florida, we're seeing incredibly strong sentiment, including a 4.8 Google rating. This positive sentiment for the brand is driving sales and contributed to Kiki's first quarter same restaurant sales increasing by 3.9%. In addition, Kiki significantly outperformed the BBI Family Dining Index in Florida by nearly 400 basis points. Highlights for the quarter contributing to the positive sales momentum include off-premise growth, new compelling offers, and marketing initiatives. Additionally, a strong focus on operations remains core to the Kiki's business model. Another area of focus for Kiki's is development. We opened three new cafes during the quarter, including our first cafe in Georgia. And just in the last few weeks, we've opened another three cafes, one of which is company-owned. We're just starting to unlock the growth opportunities for Kiki's. And I want to thank our teams and franchisees for their commitment and enthusiasm as we aim to become one of the largest competitors in the fastest-growing daytime eatery segment. In closing, we continue to focus on executing our strategic initiatives across both brands and winning with our guests while being nimble, facing challenges head-on, and meeting our guests where they are. We are a value leader, and we know how to leverage that strength to drive profitable traffic and support our guests' needs. We are hopeful that the environment will continue to stabilize and improve, and we are confident in our sales levers. These include a continued focus on value and off-premise, our expanding remodel programs and new digital enhancements, such as an improved digital guest experience and a new loyalty CRM platform set to launch in the back half of the year. We have a lot to look forward to, and I'm incredibly proud of our teams, our franchise partners, and all of those leading these amazing brands, executing our strategies, and taking great care of our guests every single day. I'll now turn the call over to Robert Borostek, Denny's Chief Financial Officer, to discuss our Q1 financial results.