Dine Brands Global, Inc.

Good day and thank you for standing by. Welcome to the Dine Brands Global Inc. Second Quarter 2022 Earnings Conference Call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask the question during the session, you will need to press star 11 on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker for today, Brett Levy, Vice President of Investor Relations and Treasurer of Dine Brands Global. Brett, please go ahead.

Good morning, and welcome to Dine Brands' second quarter conference call. I'm Brett Levy, Vice President of Investor Relations and Treasury for Dine Brands Global, and I am joined this morning by John Payton, CEO, Vance Chang, CFO, Jay Johns, President of IHOP, and John Suwinski, President of Applebee's. Before we 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 Dine Brand's Investor Relations website. Beginning with this release, we have returned to our prior quarterly same-store or comparable store sales schedule, rather than the more recent practice of sharing monthly results, which we believe became temporarily necessary during the peak of the pandemic, given significant month-to-month volatility and uncertainty during the time. With that, I'll turn the call over to John.

Thanks, Brett. Welcome to the team and good morning, everyone. Brett brings to dine more than 25 years of advisory and investment experience in the restaurant and retail sectors, both on the sell side and on the buy side. And prior to joining us, Brett was a publishing analyst for Deutsche Bank, UBS, and MKM Partners. covering the restaurant industry. He received his degree in economics from Rutgers, and I know he's going to be a great asset as Don continues to grow, and we're looking forward to Brett driving our shareholder engagement and outreach. Welcome, Brett, to the team. So now shifting to the quarter. Thanks to the hard work of our team members and our franchisees, we sustained strong momentum and achieved another quarter of solid performance in Q2. Our competitive position today remains strong because of what makes us uniquely Dine, and that's our delicious food, our two world-class brands, our asset-like business model, and our committed teams and franchisees around the globe. The last few years have showed us how important restaurants are and how, more than ever, guests crave connection and community with one another. So in Q2, both brands sustained and built on last year's momentum. Here's the highlights. Applebee's and IHOP achieved positive comp sales of 1.8% and 3.6%, respectively. Off-premise sales remain strong, in particular relative to pre-pandemic levels, and dine-in continues to recover. In Q2, Dyn delivered strong EBITDA despite higher costs, and we remain comfortable that we will deliver results within our fiscal 22 guidance range. During the quarter, we returned $61 million in cash to our shareholders, which resulted in the repurchase of over 900,000 shares. or about 5% of our shares outstanding. We raised our dividend 11% to 51 cents, and we're on plan to meet our development guidance for the year in spite of lending, supply chain, and permitting difficulties across the country. That said, economic conditions absolutely remain challenging. This morning, I'll address the operating environment, including cost of goods, consumer sentiment, labor, and pricing, and I'll provide an update on our outlook. First, I'll begin with the acute cost inflation we're experiencing across all inputs to our restaurants. Our brands experienced a 22% rise in commodity costs during the second quarter, but Dines P&L was not materially impacted because of our asset-light model. We're forecasting commodity cost inflation to ease to the low teens for Applebee's and mid-teens for IHOP during the back half of the year. Second, we experienced some weakening consumer sentiment to varying degrees in each brand, consistent with the economy's overall slowing momentum. We understand the economic pressures that our guests are facing, including gas prices. In fact, if the declining gas costs during the last 50 days are sustained, it could serve as an indicator that suggests the potential for improvements for the back half of the year. Third, the labor market also continued to be tight last quarter, especially in the service sector, as has been widely reported. And while it varies by brand and by geography, we remain at about 90% of pre-pandemic staffing levels. And it's important to emphasize that team members are truly the heart and soul of every restaurant. Our franchisees are investing in their people. They're providing flexibility, better work-life balance, and community support to help them retain and attract talent. And at the brand level, Applebee's and IHOP are enhancing back-of-house and front-of-house training and technology to help our team members become more productive. So while the conditions we're operating in are difficult, we do believe that Dine is positioned well for challenging times. And that's because during past economic downturns, Applebee's and IHOP both demonstrated resilience. For example, as leaders in the casual and family dining categories, Applebee's and IHOP benefit from consumers trading down from higher-priced formats. And as value leaders, both brands have expertise and a proven track record of creating and executing enhanced value and marketing propositions that meet our guests where they are. On past calls, I've talked about playing both offense and defense during uncertain times, and that absolutely remains our approach. At the start of this year, we committed to a long-term strategic plan that includes investments in tech, development, and new sources of revenue, and we're making tangible progress against those goals. For example, we've launched the International Bank of Pancakes, and by year end, we'll have delivered on our plan to provide a simpler, faster, more agile tech stack across the Dyn system. We continue to introduce new restaurant formats, and our teams are working with our franchisees to evolve our restaurants to meet changes in consumer behavior while also optimizing in economics. And third, we're investing in disruptive new growth channels like virtual brands and ghost kitchens. Finally, Dimes' long-term health depends on the health of our franchisees. And our franchisees remain healthy. Year to date, they are current in their financial obligations to dine, and we haven't experienced an increase in workouts or distress situations. This signals to us that our franchisees emerge stronger from COVID. They're leaner, they're more productive, and they're benefiting from off-prem and other new sources of revenue. However, the cost pressure on four-wall profitability is a priority focus, and we will continue to closely monitor the health of our franchisees. Across both brands, franchisees raised prices about 7% to 10% in Q2 on average. This prudent, balanced approach protects four-wall margin while creating opportunity to take share. And in response to cost and traffic headwinds during the past two quarters, we leaned into advising our franchisees on menu pricing, on cost mitigation, and productivity strategies. So to wrap up, we remain cautiously optimistic on both our near-term and our long-term outlook. Based on our solid first half of 22, we expect to achieve full-year results within the guidance ranges provided on our Q4 call and reaffirmed after Q1. And our reiterated outlook incorporates the weakening consumer sentiment we've seen over the past three months. Of course, we don't know exactly what lies ahead, but what we do know is that we have the focus, the energy, and the commitment of our franchisees and our team members that gives me great confidence and optimism for the future. I'll now turn the call over to Vance to review our financial performance and outlook in more detail, and then John and Jay will join us to talk about each of the individual brands' performance, momentum, and outlook as well. Vance.