Dine Brands Global, Inc.

Good day and thank you for standing by. Welcome to the third quarter DynBrands Global Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Executive Director of Investor Relations, Ken Zipty. Please go ahead.

Thank you. Good morning, and welcome to Dime Grant's third quarter 2021 conference call. I'm joined by John Payton, CEO, Vance Chang, CFO, Jay Johns, President of IHOP, and John Sawinski, President of Applebee's. Before I turn the call 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 assumes 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 our website. With that, I'll turn the call over to John.

Thanks, Ken, and good morning, everyone. John, Jay, Vance, Ken, and I appreciate you taking the time to join us this morning. Q3 was another terrific quarter for dime brands. For the second consecutive quarter, both brands beat their competitive sets, Average weekly sales for IHOP and Applebee's exceeded 29 pre-pandemic levels for the first time, and we recorded a 48% increase in quarter-over-quarter EBITDA. Dyn's posting results like this for two reasons, the resilience of our two world-class brands and the value of our asset-light model. And Q3 reinforced, again, the benefits of our highly franchised business in driving our strong performance versus our peers. Let me explain why that is. First, our model reduces complexity and is a significant generator of cash. It allows us to keep our operations lean and our movements agile. And during moments like this, when labor and commodity costs are rising and guest behavior is uncertain due to the pandemic, we deliver less volatile results from period to period. Said another way, AssetLight allows us to invest in what we do best, which is menu innovation, marketing, and building technology. And at the same time, Applebee's and IHOP continue to gain share because guests trust us, they love us, and they appreciate that we're focused on delivering delicious food at great value while also providing experiences that are enjoyable and safe. And just like I said to all of you when I first joined Dine, brands that win are different, better, and special. And they're able to create emotional connections with guests, particularly during tough times. And that's exactly what our brands have been doing all year. So today, I'll share highlights of our fantastic Q3 results. I'll talk about our view of this moment in time in the industry, and I'll address our thoughts on capital allocation and long-term growth. On this call, as all year, we'll be comparing comp sales to the same period in 2019 due to the pandemic's distortion of 2020 sales. So here we go. I'll recap Q3 highlights, including comp sales, EBITDA, cash flow, and development. First, according to BlackBox, Applebee's and IHOP again outperformed their segments in Q3, and for the first time in 2021, both brands' average weekly unit sales exceeded pre-pandemic levels. We recognized revenue of $229 million and EBITDA of $63.3 million, which reflects the compelling resilience of our brands, our franchise model, and continued progress towards a return to steady state. For the nine months ended September 2021, we generated approximately $141.6 million of adjusted free cash. We opened 11 restaurants, which signals our franchisees continued confidence in putting their capital investments back into the business. And we're particularly thrilled that Sun Holdings, the third largest owner of restaurants in the U.S., joined the Applebee's family via its acquisition of 131 restaurants through a transaction with Akon Investments, another signal of Applebee's strong performance. So now let's put our results in the context of this very unique moment in time. We're certainly enjoying meaningful tailwinds. First, Americans continue to dine out, and our numbers indicate that the Delta variant did not have a material adverse effect on that trend. Also, our guests continued their recent habits of takeout and delivery. And while it's certainly unfortunate that 110,000 U.S. restaurants permanently closed, This did lead to five points of market share shift from independence to the national chains, according to the Boston Consulting Group. And as you all know so well, we're also navigating unprecedented headwinds, such as the shortage of workers and the rising cost of labor, the scarcity and rising cost of certain commodities, and, of course, the lingering uncertainty related to vaccine testing and mask mandates. Yet, I've got to tell you, despite this extraordinary moment in time, we are unequivocally bullish on our long-term strategy. I'll tell you why. First, the restaurant industry remains a $485 billion market, and the casual and family segments are expected to fully recover by 2023. Second, U.S. consumers are increasingly optimistic as we emerge from COVID. Research tells us that 44% of consumers report that they will increase their visits to restaurants as COVID recedes, and an additional 35% tell us they'll go just as often as they did before the pandemic. And third, franchising remains an entrepreneurial engine for launching a business, creating wealth, and growing jobs in our country. At Dine and Loan, we have 345 franchisees operating more than 3,400 restaurants across the country and around the globe, And these entrepreneurs employ approximately 125,000 team members, supporting their state and local economies. Now that we're beginning to see the light at the end of the tunnel, our teams are focused on our plans for long-term growth. Our approach is simple and straightforward. It's to set audacious goals, and I'll touch on four of those goals right now. First is the development of new restaurants. We see a path to Applebee's returning to net unit growth in 2023 and beyond. and we see IHOP doubling its historical unit growth also by 2023. We'll achieve those goals through a combination of bricks and mortar stores and ghost kitchens. To drive this growth, we've recently hired two new VPs of development, Jake Barden and Don Rayburn, who come with terrific experience from RBI, Intercontinental, Starwood Hotels, Brinker, and Yum. And these new VPs will be shepherding our new prototypes that reflect the learnings and new consumer behaviors that emerged during COVID. Our second focus is meaningful investments in loyalty programs, our digital ecosystem, and CRM. These tech investments, in addition to our industry-leading menu and marketing innovation, will drive consistent same-store sales growth year over year. And as I've told you before, we're leaning into our scale. Our strategy is to build one common digital architecture for both brands that enables us to do more than either brand could invest on its own. And we remain on track to have approximately 75% of our digital technology tools modernized or new by the end of the year. And we expect this advantage and innovation to accelerate in 2022. In fact, this quarter, our digital sales resulted in 20% of total system sales compared to only 6% in the third quarter of 2019. Third, we're investing in new sources of revenue. Think virtual brands, ghost kitchens, and consumer products. that will contribute to our growth and to our franchisees' bottom line. And finally, we have a renewed focus on our very profitable international business and the potential to significantly grow our footprint. Here, too, we've hired a new VP of International Development, Enrique Cofer, with global experience from GNC and Jamba Juice. He'll be focusing on expanding in four core markets where we currently enjoy momentum and scale. We're looking forward to sharing more details on these and other initiatives during our investor conference in New York City in spring of next year. So in 2022 and beyond, you'll see us invest in growth initiatives to a greater extent than we have in the past. As a result, you can expect a balanced approach to capital allocation that incorporates returning cash to shareholders, judicious ROI-driven investments in both organic and strategic growth, diligent management of our debt, and maintaining the financial flexibility needed right now to address any remaining uncertainty from the pandemic, as well as potential opportunities to pursue scalable acquisitions at the right time. With that as context, our performance year to date and our cautiously optimistic view of the remainder of 21 and 2022 enables us to reinstate both our quarterly dividend in Q4 and our share buyback program. We're also able to share EBITDA guidance for the remainder of 2021 and Vance will discuss details on both our guidance and our dividend and share repurchase programs in just a few moments. I'd like to conclude with an update on our ESG efforts. We've recently issued our initial ESG report entitled Dying Together, which can be found on our Dying Brands website. As we've grown our business, we've broadened our vision to include our impact on the environment and society. This makes good business sense as it resonates with team members and guests who increasingly are looking closely at how businesses and brands contribute to society. Our ESG strategy and report is devoted to four focus areas. They're our planet, our people, our food, and our governance. And for us, our business and our social responsibilities are inextricably linked. And while I'm encouraged by the progress we've made, we've got a lot more to do to meet our goals, deepen our impact, and innovate our systems. And with that, I'll turn it over to Vance to discuss our financial performance.