Dine Brands Global, Inc.

Hello, and welcome to the first quarter 2021 DynBrands Global Earnings Conference Call. My name is Christian, and I'll be your conference operator today. After the speaker's presentation, there will be a question and answer session, but we ask that you please limit your question to one and one follow-up. Please also note that today's conference is being recorded. I'll now turn the call over to Mr. Ken Dipty, Executive Director of Investor Relations. Sir, you may begin.

Good morning, and welcome to Dine Grand's first quarter 2021 conference call. I'm joined by John Payton, CEO, Allison Hall, interim CFO and controller, Jay Johns, president of IHOP, and John Sawinski, president of Applebee's. Before I turn the call over to John, please remember our safe harbor regarding forward-looking information. During the call, management may discuss information that is forward-looking and involves known and unknown risks, uncertainties, and other factors which may cause the actual results to be different than those expressed or implied. Please evaluate the forward-looking information in the context of these factors, which are detailed in today's press release and 10-Q filing. The forward-looking statements are as of today and assume no obligation to update or supplement these statements. We may also refer to certain non-GAAP financial measures, which are described in our press release and also available on Dynagrand's website. With that, I'll turn the call over to John.

Thanks, Ken. Good morning, everyone. Thanks for joining us today. When we spoke last quarter, I shared my belief that the industry, and our brands in particular, were on the cusp of a restaurant renaissance. And our headline today is that the renaissance is here. I love this notion of renaissance because it's all about resurgence and creativity and pushing beyond established boundaries. And that's exactly what we're doing at Stein Brands. We're changing the way people think and we are turbocharging creativity and experimentation. A willingness to learn and adapt is flourishing throughout our organization. I see it every day from our franchisees to our company staff to the restaurant teams, our general managers and our servers. And that's why I'm so proud of our company and our franchisees. I'm proud of our management team and I'm especially proud of the thousands of hardworking restaurant team members around the world. Now, as I look back on the first quarter, it's remarkable how we continue to persevere and grow. Our brands posted meaningful improvements during the first quarter, and on this call, Alice and John, Jay and I will be comparing comp sales to the same period in 2019 due to the pandemic's profound distortion of 2020 sales. So let me share those results through the lens of store sales, total revenue, and cash generation, because obviously each one leads to the next. So first, sales. Average weekly sales at both IHOP and Applebee's exceeded pre-pandemic levels several different times during the first quarter. According to Blackbox, and this is impressive, Applebee's increase in same-store sales for Q1 outperformed the casual dining segment. Off-premise. In March, both IHOP and Applebee's off-premise sales reached absolute dollar levels higher, higher than when the restaurants were 100% off-premise in 2020, indicating the staying power of this largely incremental business. Revenue, we achieved revenue of $204.2 million and EBITDA of $58.1 million, reflecting strong underlying performance across our business. Cash, we generated free cash flow of $30.7 million which in part enabled us to repay our $220 million revolver in early March. And also importantly, our franchisees opened 10 new restaurants during the quarter, indicating that they're beginning to pivot towards growth. We're very encouraged by our Q1 performance, and we're certainly optimistic that economic tailwinds will sustain us throughout 2021. You know, contributing to that view is historically high consumer savings, the federal spending that we've been enjoying, as well as a new potential infrastructure bill The unemployment rate is the lowest since the pandemic began. And with vaccinations rising, the economic growth outlook firming, and the strength and resilience of our brand, I'm confident that we'll build on the strong Q1 performance to drive market share gains and deliver profitable growth throughout the year. Now, our fundamental strengths are something many CEOs would love to have. Number one, we are an asset-light 98% franchise model that is a significant generator of cash. Second, we've got two iconic world-class brands that are number one in both the casual and family dining categories. And third, we've got the most talented, most resilient team members in the industry today, along with the next generation of workers still to be hired. And as tough as the past year has been, the pandemic actually gave us new competitive competencies. Here's what we have today that no one could have even imagined pre-COVID. We've got significant incremental off-premise business in both brands. Our teams moved quickly and aggressively to add the tech and operations capability needed to nurture and sustain this new business. Second, we leaned heavily into ghost kitchens and virtual brands like Cosmic Wings and others on the horizon that offer new sources of revenue for dine and our franchisees, all of that due to the creativity and talent of our people. And we advanced our digital platform and loyalty programs that will increase our share of wallets. So with COVID-19 vaccine appointments now more widely available and capacity restrictions being eased across the country, we are seeing increased traffic in our restaurants. A couple of questions that might be on your mind. First is about hiring, and that is certainly a challenge in the industry today and all around the country. So I want you to know that we are aggressively working to help our franchisees recruit adequate staffing to accommodate the increase in demand. And this is a great example of where Dyn's scale makes a big difference. We're launching national campaigns for two recruiting days next week. Applebee's and IHOP are collaborating with their franchisees on the 17th and 19th with the goal of hiring more than 20,000 new team members. And we're making it easy to apply via text, email, and in person. And both brands are leveraging very creative social campaigns to generate interest. Your second question today might be around procurement, and I want you to know that we're working to secure the continuity of our supply chain. During the past few months, the surge in guests going out to eat created demand that has outpaced supply. This is actually not a terrible problem to have, as we see it as just a moment in time. Nonetheless, our purchasing co-op remains heavily engaged with both brands, and we've adjusted our full-year food forecast slightly upward due to generally higher commodity and input costs. However, we expect prices to fall back to equilibrium as our suppliers adjust to the new demand forecasts over the remainder of the year. We want the world to know right now that Applebee's and IHOP are open for business, so our marketing plans encompass national TV, digital media, social media platforms, and one-to-one marketing. And of course, as we welcome guests back, we remain focused on providing them with a welcoming and safe environment. Both IHOP and Applebee's have standard operating procedures in place, and our employees have done a terrific job of adhering to best practices like QR code menus upon request, tables that aren't set until the guest is seated, the proper use of masks, and enhanced cleaning protocols. And so with safety in place, we're doubling down on innovation to fuel the renaissance. And specifically, we've got five growth platforms that build on Dyn's competitive advantage. Number one, We're developing and investing in new, smaller restaurant prototypes for both brands. Flip is a good example of our new thinking. Number two is off-premise enhancing technology, like Flyby. Number three, virtual brands. Think Cosmic Wings. Number four is Ghost Kitchens. For IHOP, they're up and running in Dubai, Kuwait, and Saudi Arabia. And for Applebee's and Cosmic Wings, we're up and running in LA, Philadelphia, and coming soon in Miami. And as always, we're focused on new culinary creations like IHOP's burritos and bowls. So I know that you're waiting for our comprehensive long-term growth plan. And I can tell you that we're currently conducting a top-to-bottom strategic review of the business. And as part of that process, we're embracing a bigger, more holistic vision for our future. But in the near term, I can tell you that we've already decided to lean into three incremental investments that I know will make a difference, and since we spoke last quarter. First is technology that enhances the guest experience. We're accelerating the redesign of IHOP.com and the IHOP app. We're accelerating the Flipped website and its app, as well as the platform needed to support our loyalty programs for IHOP and Applebee's. Second, we're leaning into Flipped by IHOP. We'll increase investment to accelerate the launch of this IHOP sister brand. And on that topic, I can just say stay tuned for some news coming soon. And third, we're making investments to improve the guest experience in our portfolio of 69 company-owned Applebee's restaurants in the Carolinas, which, by the way, consistently rank among the top performers in the domestic Applebee's system based on sales. So these three investments that I just mentioned are largely an investment in CapEx, and they represent an additional $5 million in CapEx since we last spoke. We don't expect them to alter our previously issued G&A guidance. So I'm confident in our plans and very confident in our management team. We've identified the building blocks for the restaurant renaissance, and we'll use those as a way for all of you to continue to follow the progress of our story. An important part of our story is a strong balance sheet because it enables us to create that future, and Allison will now give you an update on that as well as on our financial results.

Thank you, John, for providing that great overview of exciting things we're going to do at Dying Brands as well as what we're currently doing. Good morning, everyone. I'll begin with an update on the business. Our performance in the first quarter reflects pent-up consumer demand for our brand, vaccines being administered across the country, the distribution of government stimulus checks, and the gradual easing of dining room restrictions. At the end of the first quarter, 99% of our domestic restaurants were open for dining operations, with restrictions in some states. I'm pleased to reiterate that we repaid the $220 million drawdown from our revolving credit facility in early March 2021 as planned. We now expect to achieve an annual interest savings of approximately $5 million. Our cash position remains strong. We ended the first quarter with total unrestricted cash of $179.6 million. This compares to unrestricted cash of $163.4 million for the fourth quarter of last year, excluding the $220 million that was drawn against our revolving credit facility, a 10% increase. Switching gears to our operating results, I'll start with the income statement. For the first quarter, adjusted EPS was $1.75. compared to $1.45 for the same quarter of 2020. The year-over-year improvement was primarily due to lower tax expense, as well as a higher gross profit, driven by an increase in revenue from Applebee's company operator restaurants, due to a higher average check and increased traffic. We believe the distribution of the latest round of government stimulus checks in March favorably impacted both traffic and average check. The increase in average check was also partially attributable to favorable product mix and date card shifts. Growth profit for our Applebee's Company restaurants increased 5.9 percentage points to 9% for the first quarter compared to the same quarter in 2020. Rental segment revenue for the first quarter of 2021 was $26.1 million compared to $29 million for the same period last year. The variance was primarily due to a decrease in base rent resulting from restaurant closures and lease buyouts and a decline in percentage of rental income based on franchisees' retail sales. Rental segment growth profit was 19.8% for the first quarter of 2021. This represents sequential improvement of 12 percentage points compared to the fourth quarter of 2020, which was more heavily impacted by charges related to the planned closures of underperforming IHOP restaurants. Turning to our GAAP effective tax rate for the first quarter. Our effective tax rate for the first quarter of 2021 was negative 6.6% compared to 23.2% for the same quarter of 2020. The change in effective tax rate was primarily due to one-time recognition of excess tax benefits on stock-based compensation related to the departure of our previous CEOs. Switching gears to G&A. G&A for the first quarter of 2021 was $39.9 million compared to $37.6 million for the same quarter of last year. The increase was primarily due to higher personnel costs associated with equity-based and other incentive compensation, partially offset by lower travel costs. We continue to view G&A as a significant lever for the organization. Turning to the cash flow statement, cash from operations for the first quarter of 2021 was $30.6 million compared to $29.6 million for the same quarter last year. The increase was primarily due to the recognition of excess tax benefits on stock-based compensation. Our highly franchised model continued to generate strong adjusted free cash flow of $30.7 million for the first quarter of 2021 compared to $27.5 million for the same quarter in the prior year. The variance was primarily due to the increase in cash flow operations just discussed and lower CapEx compared to the first quarter of 2020. We believe that our strong cash position, cash from operations, disciplined G&A management, and the ongoing improvement in our business will allow us to invest and grow as the recovery from the pandemic continues. Regarding capital allocation and financial flexibility, our business decisions are driven by the improvements in our restaurant operations and industry conditions. As a result of our progressive recovery, we chose to repay the $220 million drawn against the revolver in early March. We'll continue to evaluate our business performance, which will influence our decisions on capital allocation. Turning to our franchisees assistance programs, as of March 31st, 78% of the $61.9 million in royalty, advertising fees, and rent payment deferrals that Dine Brands provided to 223 franchisees across both brands has been repaid. Dying Brands started the year strong. Both Applebee's and IHOP posted meaningful sequential improvement in comp sales. Average weekly sales in dollars for both brands increased to pre-pandemic levels in certain weeks during the first quarter. We ended the first quarter with a strong cash position, allowing us to make additional investments in our business. We're very pleased with our start to 2021, and we remain optimistic about the second half of the year. Now you'll hear more from our brand presidents, starting with John Soonski, who will tell you about the significant progress we're making at Applebee's. John?

Great job, Allison. Thank you, and hello, everyone. After a year of navigating the pandemic, March and April represented an extraordinarily positive inflection point for the Applebee's brand. In fact, in more than four years as president of Applebee's, I honestly can't recall the brand being better positioned than it is at this very moment. We just delivered the two highest monthly sales volumes Applebee's has achieved since the inception of Dine in 2008. In fact, it's quite likely March and April represent two of our all-time highest volume months in the 40-year history of the brand, but I really can't confirm this as our database only goes back 13 years. What I can confirm is that March comp sales were positive 6.1% versus 2019, reflecting the confluence of consumer stimulus, compelling marketing, and most importantly, operational excellence. Momentum continued to accelerate in April as Applebee's delivered a plus 11.4% comp sales result versus that same 2019 baseline. While it's impossible to determine how much of this momentum can be attributed to government stimulus versus demand, it's very clear to me that America is dining out again in full force. So here's the real story. According to Black Box, 2021 comp sales versus 2019, as John referenced, Applebee's has now significantly outperformed the casual dining category for 12 consecutive weeks. I get this, an average of 560 basis points. In many respects, this is reminiscent of Q1 of last year, when we posted 10 consecutive weeks of positive comps before the emergence of COVID. Clearly, Applebee's momentum has returned, and it's returned in a very powerful way. It's important to remember that this momentum started to emerge in the last week of February, well before stimulus checks, when we introduced our successful Burgers and Wings event. This message really resonated with Applebee's guests behind the enormously popular Chicken Fried lyrics from our friends at the Zac Brown Band. In the April return of our signature Irresistibles, currently on air, is the latest example of Applebee's providing big flavor and abundant value. This advertising was choreographed to the classic ACDC rock anthem, Back in Black, and it delivered breakthrough results. This is just more evidence of Applebee's talented marketing team continuing to innovate around what I firmly believe to be the most enduring, memorable, and likable ad campaign in the entire industry, and frankly, outside of the industry. Of course, I'm talking about eating good in the neighborhood, something that's a real point of pride for our franchise partners, the restaurant teams, and our entire organization. We hear about our advertising all the time from our guests, and it always brings a smile to my face. Equally important to our guests is the innovation our team continues to deliver behind Applebee's $5 mucho cocktails as we begin to see the alcohol business steadily return to pre-COVID normalcy. The easing of capacity constraints, the opening of bar seating, and the reemergence of our late-night day park represent clear incremental growth opportunities as we progress through the year. And after scaling back media spending in January and February, our national media plan is now substantial and equally balanced throughout the remainder of the year with favorable Q2, Q3, and Q4 comparisons with each of the same quarters in 2019, which bodes very well for the brand. Additionally, there are other indicators that our performance isn't short-term in nature. Applebee's unaided brand awareness and advertising awareness continue to significantly outpace all casual dining competitors. And key metrics such as affordability, menu variety, guest satisfaction, brand affinity, and likelihood to visit consistently outperform the category average. Now, I'd like to share a few insights regarding our on-premise and off-premise business. For both March and April, Applebee's restaurant sales averaged an impressive $54,000 per week. As anticipated, our on-premise business has steadily increased as dining restrictions have eased. It's worth noting here that our off-premise volume has held steady between $17,000 and $18,000 per week per restaurant, reflecting the staying power of this off-premise business. Without question, Applebee's has significantly broadened its reach, and relevance within this important convenience-driven segment. For the month of April, Applebee's sales mix consisted of 67% dine-in, 20% car-side-to-go, and 13% delivery. Included in this delivery segment is our new virtual brand, Cosmic Wings. And after about 10 weeks in market, Cosmic Wings sales have averaged about $330 per restaurant per week, with significant geographic variability reflecting Uber Eats coverage. For context, individual restaurants range from below $100 per week to a high of $2,000 per week. Now, importantly, we add Postmates delivery this week and then expand to include DoorDash later this month, which will significantly enhance Cosmic Wing's distribution, visibility, and trial. After this expansion, I should be able to quantify the size of the Cosmic Wings opportunity. In the meantime, you can use your imagination as to what the addition of DoorDash may mean for the business. Now, with respect to restaurant operations, I'm very encouraged with the integration of handheld tablets in about 500 Applebee's restaurants. With staffing challenges across the country, these tablets provide a meaningful hedge against labor inflation while enabling our servers to be far more efficient in taking care of their guests. The bottom line is servers love these tablets because it makes their job easier and allows them to make more money. Additionally, one of the positive outcomes of this past year was the approximate 33% reduction in our core menu and the simplification of our operation. The resulting food and labor benefits have had a favorable impact on restaurant margins as well as restaurant execution. I should also reinforce that over the past year, our teams have been quietly focused on building an awesome innovation pipeline of culinary beverage marketing and technology initiatives for future deployment. So in wrapping up, it's quite evident to me that America trusts Applebee's as we're beginning to see the benefits of the goodwill that our franchise partners worked so hard to create over this past year. Virtually all of our restaurants are now open. Royalty collections remain rock solid. Our advertising fund is now comparable to what it was in 2019, and it's a big lever for us moving forward. We have an exceptionally talented team who have been eagerly waiting this day, and franchisees are aligned behind our business plan and confident in our ability to not only perform, but to thrive in this environment. For the first time in a long time, I now believe we control our own destiny, and we're poised to unlock the full potential of this great brand. While I'm sure there'll be other challenges along the way, there always are, Applebee's has genuine momentum right now, and I couldn't be more optimistic about our future than I am right now. Thank you, and with that, I'm going to turn it to my partner, Jay.

John, you must be really proud of those results and what your team and franchisees are accomplishing right now. I know I'm very proud of it, so nice job. Good morning, everyone. Like Applebee's, we've made great progress this quarter. compared to where we were during the pandemic as well. Our first quarter comp sales improved sequentially by 8.9 percentage points compared to the fourth quarter. As our business improved, our average weekly sales in dollars has grown significantly and surpassed pre-pandemic levels at times during the quarter as stimulus checks provided our guests with additional buying power. Average weekly sales were approximately 26,000 for January and sequentially increased to just under 36,000 for March, reaching a high for the quarter of approximately 40,000. Regarding our domestic restaurants open for business, 97% of restaurants were open for dine-in service with restrictions in most states as of March 31st. That compares to only 70% with dine-in as of December 31st. With guests eager to return to in-restaurant dining, we're pleased that California recently increased indoor restaurant capacity to 50%. IOP's presence in California makes up approximately 13% of our domestic business, so we're optimistic about the potential lift overall there. To drive sustainable growth, we're continuing to execute against four strategies. As I discussed with you last quarter, these are focusing on our PM day parts, providing compelling value, maintaining our gains in off-premise sales, and lastly, our development growth. Our plans have yielded tangible results. To provide some color on our first two strategies, focusing on that PM day part and value, we launched iHoppy Hour in September of last year to offer our guests a broad selection of value options during those non-peak day part hours, mainly 2 to 10 p.m. iHoppy Hour continues to drive incremental sales even as business improves across all of our day parts. Additionally, IHOPI hours traffic is two to three times higher than the rest of the day compared to September 2020 when we launched it. This actually equates to a low to mid single digit lift in sales for the entire day. To further increase the appeal of IHOPI hours menu, which has been very well received by our guests, we plan to update the menu items over time. We're continually innovating to maintain IHOP's category-leading position in family dining. Our latest innovation is IHOP's new Steakhouse Premium Bacon, which is available on our new Bacon Obsession menu. This makes IHOP the first national family dining restaurant chain to offer this type of thick-cut premium bacon. The Bacon Obsession menu continues to solidify our position as the leader in breakfasts and highlights our commitment to both innovation and value across all of our day parts. During 2020, we played both defense and offense to remain resilient during and also prepare to thrive after the pandemic. We played defense by making operational changes and moving heavily or completely at times into off-premise occasions. But we also invested heavily in our menu and preparation for the recovery. We wanted to be ready with a fresh and appealing menu for guests to enjoy when they return to our restaurant, but also accommodate guests who choose to dine off-premise. This culminated in the launches of iHoppy Hour and our signature burritos and bowls. Both have been very well received by our guests. Burritos and bowls perfectly fill the gap we had in our menu and continues to capture 8% to 10% of total ticket order incidents since we launched it with really minimal promotions. Our overarching menu strategy underscores innovation and supports both breakfast and non-breakfast occasions while also being portable for guests on the go. Now, let's switch gears to our third strategy of maintaining our gains in off-premise sales. Despite capacity restrictions generally being eased across the country in the first quarter, our off-premise sales held steady at 33.3% of total sales. That's flat compared to the fourth quarter. However, we've seen a steady increase in net off-premise sales in dollars. For the first quarter, our sales mix consisted of 66.7% dine-in, 16.8% to-go, and 16.4% delivery. We continue to believe that sustaining off-premise sales mix at a much higher rate is feasible in a post-pandemic environment and will strongly complement the anticipated return of our dine-in business. In fact, Our weekly off-premise sales in March reached dollar levels higher than when we were 100% off-premise last year, even at the height of the shutdowns. In the first quarter, as the overall business increased, so has the to-go business. The pandemic has certainly influenced consumer behavior and changed how guests use IHOP. We adapted to the changes in this behavior through innovation and developing highly portable items such as burritos and bowls. We believe the convenience of takeout and delivery will remain appealing to our guests. Turning to our fourth strategy, development. We have the benefit of being able to now provide our franchisees with four different development platforms. These include our traditional formats, non-traditional, our first flipped by IHOP locations, which we planned to open in 2021, and a new small prototype that we intend to test this year. In the first quarter, our franchisees open eight new restaurants globally, and for the remainder of the year, we expect to resume development that was paused due to the pandemic. Looking ahead, we have a plan in place for more robust development starting in 2022. We believe the brand can potentially exceed its historical annual average of approximately 60 new restaurants open over the last decade. As we begin to plan our growth for the next three years, we intend to have a blended mix between these four types of development vehicles. We made great progress over the last 12 months. We're successfully executing against our four strategies and are seeing tangible results. IHOP remains in a position of strength and is poised for long-term growth. I'm going to now turn the call back over to John Payton for his closing thoughts on how IHOP and Applebee's are positioned to thrive coming out of this pandemic. John?

Thanks, Jay, and John and Allison. Your leadership during all of 2020 is what led to a great quarter in Q1, and thanks for telling our story today. Look, I can't say enough to all of you on the call. The restaurant renaissance is here, and our Q1 performance is certainly evidence of that. I've got so much confidence in our future because I really believe that restaurants are an essential part of society, and people want a place to gather and celebrate. And after 13 months of being locked in our houses, Americans are ready to do that. Our people, our teams, our franchisees, and the thousands of restaurant team members across the country are amazingly resilient. They've demonstrated this time and time again, and they're ready to welcome guests back into our restaurants. You know, I mentioned last time that I worked in my parents' restaurant when I was in high school, and that's why I think the favorite part of my job is when I get to visit team members in the field. I've finally gotten to do that in the last couple of weeks, and it's truly energizing and invigorating. And what impressed me the most on my recent visits to our restaurants is that even after 13 months of extreme challenge, I was greeted with unbelievable enthusiasm and optimism about the future. And every team member I met, from the kitchen staff to servers, the hosts, our general managers, told me they love our two brands and all they want to do is welcome guests back into their restaurants. So as we transition to a post-pandemic environment, Dime will continue to invest in innovation and the strategic platforms that we know will drive long-term sustainable growth. And with that, we are looking forward to taking your questions. And I will turn it back to the operator.

Ladies and gentlemen, if you have a question at this time, Please press star, then the number one key on your touchdown telephone. And again, we ask that you please limit your question to one and one follow-up. Your first question is from Brian Mullen from Doja Bank.

Hey, thank you. Just a question about the development outlook at IHOP. You know, in the prepared remarks, Jay outlined four different avenues for growth, you know, traditional, nontraditional growth. flipped and a small prototype. But John Payton, it would be great to get your take. Like when you add it all up, what is the right way to think about potential domestic net unit growth pace for this business over a multi-year period? Is this a 1% to 2% net unit growth business in a normalized year? Could it actually get to 3% to 4% if your initiatives take hold? You know, any thoughts would be great. And if you want to layer in anything on maybe more near-term conversion opportunities, that would be helpful too.

So I think Jay will talk specifically about IHOP, and then I'll come back on the second half of that question.

Yeah, Brian, obviously the way we're looking at this is we think we can really ramp up development coming out of this pandemic. And to kind of answer your last question first, we're already seeing our franchisees bring us a lot of sites that are conversions. And we're very good at conversions. We have about a third of our system used to be something else. So while we develop new prototypes and do a lot of prototypical work, We do a lot of conversions as well, and I think that will ramp up in this environment coming out of the pandemic. I think as we move forward, we'll probably initially see the heavier load of the development be more traditional, and non-traditional keeps growing over the last couple of years. But as we get flipped, stood up, and get results there, I think that will speed up. I think the small prototype we're testing will will speed up as well. And I think that in marrying those two thoughts, we're already seeing franchisees bring us smaller buildings as conversions as well, and we're going to not only have new prototypical small prototypes we'll be testing, but we're going to be doing some conversions that includes applying the small prototype theories and philosophies into conversions as well.

Yeah, Brian, and I want to be careful here, right? And I don't want to give, you know, specific guidance on where we think the development growth for both brands will land. But, you know, I'll tell you where I think we have potential, and I'll tell you the challenge, you know, that I've given to both Jay and to John when it comes to growth. You know, as you know, IHOP grows at about 40 to 50 new restaurants a year, has been its historical rate. As I look at the market, as I look at the four different prototypes that Jay's discussed, My challenge to Jay is to double that pace, and we're looking to see if we can put plans together that get us there. I think it's possible, but I think give us another quarter before we give you a forecast. But that's the challenge. When it comes to Applebee's, we've spent the last three years under John's leadership of cleaning up and tightening the portfolio. We've reduced it by several hundred restaurants so that we now have a much tighter, high-performing group of restaurants to move forward with, and we're at the pivot point now where we can pivot from our effort on cleaning up the portfolio to growing it again, and that's the challenge that John has. is working on a plan to grow the Applebee's with somewhere in the neighborhood of 10 to 15 new restaurants a year. And again, I want to be careful. I'm not giving you a forecast, but just the challenge that I think our brand leaders have and the potential that I think we have as we put our plans together over the next couple of months.

Okay, thank you. And then just as my follow-up, pivoting over to Applebee's, you know, John, thank you for sending that caller about cosmic wings and your prepared remarks, you know, after you add Postmates and DoorDash as partners, and you've had some time to evaluate, is there a threshold level of sales that you're looking to see where you will know that this is an initiative you want to stand behind over the long term? And, and related to that, you know, do you think the fact that Applebee's is a franchise system rather than company owns? Does that make launching a virtual brand harder? I'd just be curious to hear your thoughts. Thanks.

Hey, Brian. Good questions. We love Cosmic Wings, so business is incremental. It's not complicating our operation. Our franchisees love it as well. We're not going to know the full potential until Postmates and DoorDash come online. That's our phase two. As I mentioned on our next call, I'll be able to dimensionalize that pretty well. As to whether it's more complicated within a franchise area, business versus a company-owned business. I can't comment on that other than to say we've got 30 exceptional partners, and any time we have a business case that represents incremental growth, they're aligned behind it. We do everything together here. We're strategic and have had no issues in partnership with our franchisees. So I don't see a difference there from my perspective.

Thank you. Thank you. Your next question is from Jake Barba from Trova Securities.

Great. Thanks for taking the question. You know, my first one is for Jay. And, you know, just looking at the performance of Applebee's in April specifically versus IHOP, the differential in the sales recovery, what are the main reasons for the difference, you know, as you see it? If there's any way you can kind of quantify those, and, you know, I imagine some is less late-night business, but just things like that to help us understand why the recovery at IHOP is trailing Applebee's.

I think that's a great question, Jake. I think it's a few different things, and this is my mission when I get up every day to close that gap, and John has set a high bar for me to go after, so I actually appreciate that. It keeps me on my toes. I think the big difference is, as we've talked about before, the capacity restrictions hit us very hard on the weekends. And I can see, if I just look at my sales trends without getting into specific numbers, we've been doing really, really well during the weekdays. And then I see my sales dip back off again on the weekend. It is obvious that what's happening is, as we don't need the extra capacity, we're doing great with our... As that capacity... squeezes off on the weekend, we're seeing that impact. I think the other big piece for us is we're typically a 24-7 type business. And as franchisees are trying to get themselves staffed, we've said about our recruiting days, and it's very well documented in the industry that staffing is an issue at the moment. But the franchisees are adding hours and days and overnights back online as they are capable of doing that. And that's a little bit of a slow process, slower in places like California. So we're missing some of our sales in some of the day parts and hours that we used to have. That's going to take a little longer to come back as well. And then the third part that's still an opportunity for us is obviously the new way, as we talked about before, the new way people are working. They're working from home. They're not going out. They're not necessarily stopping for breakfast the way they used to. So the pattern of business is a little different. We've been able to, you know, fend some of that off with the off-premise and to-go business, but I think those are the bigger pieces. When we can get back to having absolute full capacity, absolute full hours of operation at all of our locations, I think we'll close that gap with Applebee's.

And on the weekends now, we have a new name for it. It's called the Adam Sandler Effect. So if Adam can't get in on an IHOP on a weekend, then we truly have capacity constraints.

Right. You know, my next follow-up question is for John Sawinski. You know, and just I want to better understand the commentary on the average weekly sales trends in March and April. You know, as I heard it, it sounded like average weekly sales was the same in both months. but it looks just from the same source sales that would have improved in April. So maybe just see if you can kind of clarify that. And then, you know, within that, the mix of off-premise, you know, I think you said 17,000 to 18,000, you know, just trying to kind of gauge in April, as you've seen the acceleration, you know, just how well the off-premise business has held.

Yeah, Jake, the – The off-premise business is terrific. That's a new core competency for us. Our restaurants are now... They were very good at it before. They're now really great. And we see that in our guest satisfaction metrics. That business has held in the $17,000 to $18,000 range. So the mix has declined as dine-in has come back, if you look at it on a percentage basis. If you look at it on a dollar basis, it's held steady. And... Yeah, and the mix between to-go and delivery is it continues to be fluid, in particular as restaurants have opened back up. But it's, you know, think about 68% of our business being on-premise and the balance being off-premise with to-go being the lion's share of that off-premise business. To answer your first question, Jake, $54,000 per month, very consistent in terms of average weekly dollar volume, and the reason you see a swing from 6% to 11% comps has to do with the base rollover from 2019. Got it.

I appreciate that.

Thank you.

Your next question is from Brian Baccaro from Raymond James.

Thanks. Good morning. I wanted to just revisit on the average weekly sales on the IHOP side. Jay, could you just – I missed what you said. I heard a 36 and a 40, but I wasn't clear if that was 36 in March and 40 in April. So could you just kind of clarify the average weekly sales dollars you're seeing in recent months?

Yeah, I believe what I said was that when we – I was doing it sequentially by month, basically. So I said in January we were at 26,000. And by March, we were at $36,000. And we did have some weeks in there we peaked out at $40,000.

Got it. And could you share, as John did on the Applebee's side, where average weekly sales are here in April for IHOP?

I think that was in our release we put out.

The average weekly sales dollars?

We haven't disclosed that, just the percentage. The percentage was down 4.7 in April.

Okay. Got it. Got it. On the effective capacity side, I appreciated the details in the 10Q and noted that more than, I think it was around two-thirds of the units at both brands still at less than 50% capacity at the end of March. I guess my question is, how much progress have you made since then? Could you give maybe those buckets or an idea of what percent of units are now at 100 or above 50%? just trying to frame how much the April improvement you might attribute to the easing capacity restrictions, and then also, obviously, how much more of a benefit it could be in future months as restrictions ease further.

Jay Goulden Well, this is Jay. I guess I can start. You know, I think this is very fluid. changes all the time. So we've made a little bit of progress in places. In California they had a few, L.A. County changed their color code today as a matter of fact I think. New York, New Jersey announced on the 19th of this month they're going to go completely open. So I think over the course of this month this is just going to keep getting better and I think on into June there's been communities that have said by July they're going to open up completely, or by June they'll be open up completely. So I think on the IHOP side this is just going to keep getting better but it It's not a light switch that just flips on overnight. It's a slow trickle that just keeps coming.

I concur with that, Jake, with Applebee's. We're far from fully optimized on capacity. That represents headroom for both brands into the foreseeable future.

Understood. And then the last one I just want to ask, you mentioned some investments to enhance the guest experience. Could you just expand on what specifically you're doing there? Have these enhancements been made by other franchisees? And if not, what might the timeline look like for rolling it to the rest of the system?

Jake, is that a reference to handheld tablets?

Sorry, this is Brian Vaccaro.

Hi, Brian, I'm sorry.

Yeah, well, the handhelds, I guess John, I think John mentioned some investments in the company stores, the 69 company stores, and then you mentioned the handhelds, so I assumed that was a part of it. Is there other things that you're doing to enhance the experience and then just kind of thinking broader across the system?

Yeah, with respect to the Carolina portfolio, the company-owned portfolio, we have some repair and maintenance work that candidly was deferred a bit with the pandemic. We lost the 12-month period there. So we're investing in the assets. We're investing in the people. We love our performance. As John said, it's a top-five portfolio. performer out of our 30 franchise groups. And so all the investments that you would expect in terms of people and asset and technology are taking place in the Carolinas. Got it.

I'll pass it along. Thank you.

The next question is from Eric Gonzalez from KeyBank.

Hey, thanks for the question. Presumably with the comp growth in April, at Applebee's up 11.4% and maybe down 4.7% at IHOP. And that off-premise mix sustaining in the low to mid 30s at both your brands. My math suggests that the dine-in business is roughly down, I don't know, 10% to 15% versus 19 levels at Applebee's and maybe 25% to 30% below at IHOP last month. Is that in the ballpark?

Well, I think on the IHOP side, you know, if you look at my numbers, as a percentage, my off-premise business stayed exactly the same at 33% basically versus Q4. So as I said in my message, what's happening is, yeah, our total sales are going up. We're making progress. I'm moving almost in lockstep with each other, right? So my boats are floating up at the same rate. So as I'm getting more business on dine-in, I'm getting the same lift on to-go simultaneously, which is why the mix is staying the same even though the total sales are going up So I have not – now, long-term, I don't know how well that will hold when we're fully open and more people are willing to get out of the house and come out to eat. It's quite likely that the mix will drop at some point and not stay at 33%. But I'm looking at those dollar sales. Those are important to me because if I can give back my full dine-in business Yet, even if I've got 20, 25% off premise mix, that's way higher than what we did before the pandemic. That will all be incremental business and incremental flow through for my franchisees on the backside of the pandemic. So right now I'm going in lockstep as the things are improving. That will probably vary at some point, but right now that's holding.

Just in terms of, I think this question was sort of asked, but maybe I'll ask in a different way. You know, the majority of that gap, you know, in the dine-in sales, do you think the majority of that will be closed through traditional drivers, such as marketing, innovation, or do you think it's really just a capacity issue and that's more of the low-hanging fruit towards getting back that dine-in business?

I think it's – this is Jay again. I think it's two different answers, really, because I think if we can solve – when you're comparing versus 2019, which is what we're all doing right now to see if you're back to pre-pandemic levels – I think we can get there just with capacity and just with hours of operation. Everything else is going to be incremental. It makes us go up. We do a great job with new menu items. We do a great job with innovation, great job with marketing. We're going to steal share. We're going to keep growing. That's all upside, I think, afterwards. I think we can get back to where we were and beyond just with the capacity and the hours.

Eric, on the Applebee's side, I've long believed there's been too much focus on off-premise, that the dine-in segment of our business will become a core strength again. Think about our brand purpose. It's facilitating connection, emotional connection, between folks over a meal and a drink. They've been longing for that. They're hungry to dine out again. The convenience-driven occasion has very clear drivers. But that dine-in occasion is about connection. It's about indulgence. It's about being served and being relaxed and a little escape from home. We love our position on that front.

Hey, Eric, it's John Payton. comments that I want to make on this that I think is important to pull out, which is the off-premise business and where it is right now for Dyn and for both brands. Pre-pandemic, both brands were slightly less than 10% in off-prem, and now they're at about a third. To Jay's point, it's not just the third that we're focused on. It's that the absolute dollar value of that off-premise business is holding steady and and has for months and months and months. So that looks like incremental business to us. And at the same time that we're focused on welcoming our guests back to our restaurants, as John talked about, we are very focused on investing in and nurturing via technology and marketing that off-premise business. Applebee's and IHOP, one could argue, were not significantly in the off-premise consideration set before the pandemic, and now they are, and we need to keep that.

Yeah. I mean, that absolutely makes sense. You know, maybe if I could ask one on the labor side. You know, you've heard some management teams saying that staffing will be a huge issue and others maybe not as concerned as some others might be. Do you see this as a temporary issue, you know, due to the supply, demand, and balance for labor that exists due to the government unemployment benefits? Or just really wondering what the house view is on the current state of labor market, whether it's temporary or you see this as a longer-term issue?

Yeah, I'll take that. It's John Payton again for both brands. And I would start by saying that Applebee's and IHOP are both places where people want to work, right? They're restaurants that are in the center of their neighborhoods and they're aspirational for the people who work in those brands and they love... working there. And we've actually been hiring for the past couple of months. Even though we're talking about 20,000 people who we need, we've been hiring consistently, and we're leveraging the campaigns we are to do that. We think this is a point in time. We think this is a point in time where the labor market is sorting itself out as we transition from the federal funding and support and stimulus and enhanced unemployment benefits to to a, you know, post-pandemic economic environment. And I think it's going to take, you know, we think three to six months for us to get on the other side of what a steady state labor market looks like.

That's great. I'll pass it along.

Your next question is from Beth Levy from AKM Part Price.

Great. Thanks. Appreciate the color. You talked about, you made a mention earlier of just the pressures that you're seeing on the inflationary side on the food cost as well as labor. Could you share a little bit more color on that and then also as it pertains to how you're thinking about messaging going forward, whether you feel like there is a disconnect between the ability to take additional pricing as an offset while still focused on value as a key pillar? Just the dynamics on both of those, if you wouldn't mind. Thanks.

Yeah, Brett, it's John Payton again. I'll take the commodity side of it, and then Jay or John might comment on the pricing and menu impact. You know, as I mentioned, during the last couple of months, there clearly has been a disconnect between the volume of guests in our restaurants and takeout versus what our suppliers were prepared to meet. And I think, like the labor issue, it's a moment in time as the supply chain catches up, but it is putting pressure on food costs. To just give you a range, IHOP is looking at a 1.2% to 1.6% food cost inflation. Applebee's at about 0.8% to 1.5%. Both of them are driven generally by paper and packaging, pork and chicken, and then IHOP pancake mix, which is specific to them. Again, we see this as a market being at disequilibrium, and as suppliers catch up to where we are with demand, we think it will work itself out throughout the year. When it comes to the way in which we reflect that in our menu pricing, John and Jay can comment on that.

Yeah, I think the – Brett, this is John. There are a couple of points here. We certainly have labor challenges. We have food cost challenges. But I mentioned a couple of initiatives that really have hedged against that, and there's one I didn't mention. The server tablets, even though it's only in a third of our system at the moment, is a very meaningful hedge. The fact that we spent the past 12 or 13 months simplifying our menu, we did that early, has led to very specific food and labor savings on our restaurant P&Ls. Significant benefit there. We're not going to give that up. If you recall, Brett, over the past three-plus years, I've referenced our restaurant profit initiative, and in particular the work we did with PwC early on, We captured a couple hundred basis points of cost reduction. Both brands are restarting that work. We candidly put it on the shelf during the pandemic. That'll start up again, and that'll provide benefits in particular as we look at 22.

This is Jay. On the IHOP side, historically, our franchisees take between 1% to 3% in price annually. And I think it's a balancing act. they're going to take in their local markets what they think they need to take. And the challenge always is, how do you take price to help offset costs but not lose traffic? Because the top line is the absolute most important thing I have franchises can get right now. If we can get our sales back, that helps your bottom line and your profitability more than anything. So I'm sure they will be taking price I'm sure they'll be in that one to three range in most cases. Depending on where they are and what their particular situation is will dictate whether they're taking on the low end of that or the high end of that probably. Value is a key pillar of ours, but that's to drive traffic. That's to drive people who need value to come to our restaurants. The interesting thing about any value platform is if you do it well, like in our IHoppy Hour platform, There's a percentage of people that buy that, but a lot of people that come with them, more than half the people that come with them are buying full-price items. So the overall mixture of that value in with the other menu items help the franchisees maintain profitability. So it's going to be a balancing act. I'm sure there will be some price they will take. We don't want to lose traffic because of it, though.

And the final point I'll make on that, Brett, from an Applebee's perspective, We rank number one on affordability in casual dining. We love that position, and there are all sorts of ways to convey value to a consumer beyond simply price.

Thank you. Thank you.

Your next question is from Nick from Red Bull Securities.

Thank you. Obviously, post-COVID, there seem to be some changes that are permanent and beneficial. You spoke about the year of your growth in marketing in Q2, Q3, Q4. How does the message change, if at all? Historically, there's been a very heavy focus on value. does the innovation and new menu introductions, are they going to be higher versus, say, 2019? Any color there would be helpful.

Nick, could you repeat? You said, will what be higher?

New menu innovation.

Oh, yeah. So on the Applebee's front, we took a pause on innovation. We simplified. We reduced the menu, as I'm certain many brands have. So Our messaging is we strike a balance between being welcoming and reassuring in this environment and being creative and having some fun and recognizing we're in the hospitality business. Music is a very important part of our culture. We leverage that. We don't take ourselves too seriously. And then innovation is critically important for us, always has been. You'll see an elevated emphasis on that Moving forward, there's always a fine balance between innovating and complicating, right, the operation. And so that's a partnership we have with our franchisees and understanding how to pace and sequence and do that well.

Hey, Nick, this is Jay John. I think on the IHOP side, you know, our mission right now, I have a new CMO, as you're probably familiar with, And our mission right now is we need to unlock the love that our fans have for IHOP. We hear it all the time how much they love the brand and love IHOP. And we've got to make sure that our marketing and our messaging syncs up to activate that brand love into visits. That's the bottom line.

And then, you know, as a follow-up, you know, given the higher off-premise mix, given the less complicated menu, how should we think about sort of the medium to longer-term margin implications as the dining room business comes back? But, you know, we do have these incremental layers of sales.

Nick, I think your question is capacity to satisfy that demand. Is that the question?

Well, as capacity comes back and we have incremental layers of fails around off-premise, how does that change the margin dynamic around labor? And now we have a less complicated menu, so potentially lower food costs. How does that permanently benefit the margin structure going forward?

Well, one of the interesting dynamics out of the pandemic is we saw off-premise average check really escalate. And while it typically doesn't include the beverage component of the mix, we saw folks economizing and purchasing and placing additional food items in the refrigerator. So check has moved north, which is good. The economic model is a little different for dine-in than it is for the off-premise business. But we find both very attractive and We look to satisfy our guests regardless of their need state and their occasion. This is very much a revenue game for us, and when you see volumes like we've seen of late, it flows through very well off-premise and on-premise.

Yeah, Nick, this is Jay. Same thing for IOP branches. You know, sales are king when it comes to making money. You give me a high-volume restaurant, I'll give you a restaurant that makes a lot of money. You give me one that doesn't have very good sales, they're going to struggle. So it's like a flywheel that goes, and what ends up happening is as sales go up, productivity goes up. And any of these extra sales we can keep and increase our business compared to where we were pre-pandemic, I think that's going to help overall profitability. Sure, there are costs we have to overcome. We just heard us talk about food cost inflation. But I think in the big picture, if we can get sales to maintain at higher levels thanks to this off-premise business and the demand being there when we come back, when we're fully open and we can get more people in our restaurants than we did before, that's all going to be positive for profitability just because of the flow through from the top line.

And, Nick, I would reinforce on that off-premise business, and in particular if you're asking about delivery, again, we know that guest is willing to pay for that convenience. That's important to them, and we pass that cost along to the guest. Our objective has always been to be rather agnostic on on-premise, off-premise, and margin neutral, regardless of which channel you're you're talking about. So our franchisees are whole. They're with one exception. They don't typically capture the beverage benefit that they would with a dine-in occasion.

Thank you very much.

Thank you.

Our next question is from Jeffrey Bernstein from Barclays.

Great. Thank you very much. Two questions. Just one on the thing that we focused A lot on the sales side. I'm just wondering from a corporate cost standpoint, you mentioned G&A as a significant leverage opportunity. As a 99% franchise system, the G&A being the biggest cost on your P&L. I'm just wondering how much you think is the normalized spend that you're incurring. I know you reiterated 21's guidance, but how should we think about that as a lever going forward? Whether you target it dollars or as a percentage of revenues, where do you think that goes or the opportunities that is to lever that G&A line?

As you mentioned, we really refer back to our guidance. Our range is $160 million to $170 million. We continue to believe that is what we're going to be in line with for the full year. Just to let you know, we did have more hiring back to pre-pandemic levels. We had some travel cost savings currently in the first part of the year, but that probably will ramp up as you know, the business and the conditions out in the industry continue to improve. So I would just look to the guides for now.

Got it. But is there any, in terms of an outlook as you look at 22 and beyond, whether or not there's opportunities to reduce that or whether you have a target as a percentage of sales or does it just go one year at a time?

Right now I would just say we're looking at to see what the industry conditions are, so I would just look at this year.

Jeff, it's John Payton. I would say that as I'm working with the team to conduct really a top-to-bottom review of the company that looks at our capital allocation, our opportunities for growth, we're also looking at our cost structure. So that's something that is a work in progress in terms of what I think is the long-term model for that.

Gotcha. And then you mentioned the cash usage. Obviously, you did a big debt pay down in March. I think in a release year now, the way you calculate it, your leverage is sitting at roughly seven turns. I'm just wondering where you target that to go in the short or long term. And you mentioned your allocation options, but just wondering how you prioritize once debt pay down is at more desired levels, how would you prioritize the repurchase versus dividend versus other alternatives? Thank you.

We don't really have a quantitative goal. We're in a very strong cash position. You know, we have strong adjusted free cash flow, so we're quite happy with where we are right now in terms of our financial flexibility.

Yeah, Jeff, it's John again. You know, I would add that, you know, dying generates a lot of cash. We have historically, and we will continue to do so. We, you know, as you allude to, we've got a history of returning capital to shareholders through a robust system. dividend and share repurchase programs, and our intent is to return to some degree to that program. Our first step, deliberately, was settling in Revolver, which we've done. There's two things that we need to see to recommit to the dividend. For example, we're still in unprecedented times, and we need to know that we've settled into the new normal. Each quarter now is unlike any other quarter, and I'd like to see you know, two sequential quarters that feel like the new steady state to us, where we're confident that we are on the other side of the pandemic implications. And as I mentioned before, we're also looking at the overall view of the company and the overall capital plan that includes not only returning shareholders, but also the investments we need to make to grow, as I've been mentioning. So those are the two lenses that I'm looking at through.

Understood. But the seven times leverage is something you're comfortable with, or is it planned to further pay that down before you consider those options?

I think it's going to improve slightly during the year in terms of the long term. It's part of the analysis we're doing as we look at our capital allocation. So, you know, I'd like to take another quarter or two before I give you a target on that.

Yeah, we'll naturally deliver all the time.

Okay, thank you. Your next question is from Todd Brooks from CL King and Associates.

Hey, thanks for squeezing me in. Just a couple questions. John Payton, you've been talking about the renaissance starting to play out in the restaurant industry. And I'm wondering if you, either at the brand level or the franchise level, can comment on if the case for survivor bias is playing out in some of these trends that you're seeing today. Any updates on competitive closures as you look at the competitive set or that as a potential driver of the spike in business that we're seeing near term?

Well, I'll interpret Todd's survivor bias in a different way, which is I think strong brands win. in both tough times and good times. And I think because Applebee's and IHOP are iconic brands that resonate with consumers, I think because they both have strong franchisee networks that weathered the pandemic and are on board with our brand's visions for how to emerge from the pandemic, that's why they're doing well as we move forward. Yes, there's been something like 17% of the restaurants in this country have closed, mostly independents. But I think it's because it's the strength of our brand that we had a strong quarter.

Okay, great. And then a follow-up question on the Applebee's side of the house. John, you were talking some about early signs of a comeback in the liquor bar component of the business. Can you dimensionalize that at all for us? How is that unfolding as the consumer's kind of rushing back out for normalized dining experiences and maybe where that liquor bar component is relative to fiscal 19 levels would be helpful.

Thank you. Sure, Todd. So think about, let's go back a year. There was a point in time where dining rooms were not open. We were 100% off premise and therefore alcohol consumption was negligible, you know, with the exception of some, you know, mucho cocktails to go, which which is one of the kind of emerging opportunities coming out of the pandemic. Our mix has historically, recent history, alcohol been 14% to 15% of total sales. When the off-premise business moved from 12% to north of 40%, that took a hit. But when you look at just dine-in year over year, you'll see that uh, that 14 to 15 to 16% mix holding very steady and seeing some indication, I wouldn't call it a trend of indulgence, um, as we come out of this pandemic, uh, with guests really, um, enjoying their experience and things like alcoholic beverages and appetizers and desserts being ordered with some frequency now, um, perhaps a special occasion that hasn't taken place in quite a while. We look at the alcohol business, and in particular the late night day part, which was hardest hit in the pandemic, as significant growth opportunity for us, and perhaps others.

That's great. Thank you. Thank you.

Ladies and gentlemen, that is all the time we have for Q&A session. I'm now going to call back to Mr. John Payton for closing remarks.

Hey, thanks, Christian, and thanks, guys, for your questions. We appreciate it. I do want to correct one comment I made. I mentioned that IHOP had ghost kitchens in the Middle East, and I just want to clarify that IHOP has ghost kitchens in Dubai, and Applebee's has a ghost kitchen in Kuwait. Just to be clear, there's an Applebee's ghost kitchen in the Middle East as well. So thank you all for your questions. We appreciate it. Thank you for staying a little bit past the hour, but it was important to us to make sure that we could answer as many questions as possible. And we'll talk to you throughout the day and next quarter. Thanks so much. Take care.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.