Dine Brands Global, Inc.

Good day and thank you for standing by. Welcome to the Dine Brands' fourth quarter and fiscal year 2025 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 this session, you'll need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. And now I'd like to introduce your host for today's program, Matt Lee, Senior Vice President, Finance and Investor Relations. Please go ahead, sir.

Good morning, and welcome to Dying Brands Global's fourth quarter and fiscal 2025 conference call. This morning's call will include prepared remarks from John Payne, CEO and President of Applebee's, and Vance Ching, CFO. Following those prepared remarks, Lawrence Kim, President of IHOP, will also be available, along with John and Vance, to address questions from the investment community during the Q&A portion of the call. Please remember our safe harbor regarding forward-looking information. During the call, management will 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-K filing. The forward-looking statements are as of today, and we assume no obligation to update or supplement these statements. We refer to certain non-GAAP financial measures, which are described in our press release, that is available on Dynabrand's Investor Relations website. With that, it is my pleasure to turn the call over to Dine Brands CEO, John Payton.

Good morning, everyone, and thanks for joining us today. As usual, today we'll discuss Dine's fourth quarter and full year 2025 financial results. I'll share some key insights into what we learned in 2025 and how we'll leverage those learnings to extend our strategy in the year ahead, and Vance will then discuss our financial results and 2026 guidance. Our brand's 2025 performance improved compared to 2024, and that was no accident. It was driven by deliberate execution against our clear set of priorities, enhancing the guest experience through operational improvements, strengthening our marketing to better connect with guests, and advancing menu innovation and everyday value platforms across our brands. In parallel, we, along with our franchisees, continue to invest in the bricks and mortar experience of our restaurants through dual brand openings, supporting Applebee's remodels, and improving the look and feel of our company-owned portfolio. These initiatives built trust with our guests and started translating into tangible results, with improving unit-level performance driven by positive sales and traffic trends and higher guest engagement scores across our brands. This progress came amid a still challenging consumer environment, with guests remaining highly intentional about how they spend their discretionary dollars. Value remains a critical driver in that decision-making. Of note, in the fourth quarter, both the casual and family dining categories experienced some softening in comp sales and traffic as we moved into December. Overall, the value mix remained steady for both brands, with Applebee's at 34% and IHOP at 20%, despite IHOP's value menu increasing from five to seven days. Over the past few years, we've been intentional in evolving how we define and deliver value, ensuring that we have compelling everyday offerings that are available at all of our brands, anywhere, anytime. For us, value is not simply price. It's an all-encompassing experience that includes portion size, food quality, and most importantly, the overall guest experience. We refer to that as the vibe. And that focus on the vibe, the food, the service, the atmosphere, represents a meaningful opportunity to drive traffic and strengthen brand relevance. We believe this approach positions us well for sustained positive performance in 2026 and beyond. And as we look to 2026, We're staying the course. The progress we made throughout 2025 validated our strategy, and our focus is on disciplined execution, continuing to drive steady improvement and building on the positive momentum we established. So with that, I'll walk through our financial results. For the full year, we generated $219.8 million of adjusted EBITDA compared to $239.8 million last year. In Q4, adjusted EBITDA was $59.8 million, compared to $50.1 million in the same quarter last year. Adjusted free cash flow was $62 million. And in terms of comp sales, Applebee's comp sales were positive 1.3% for the full year, compared to 2024's comp sales of negative 4.2%. And in Q4, Applebee's reported negative 0.4% in comp sales. IHOP had full-year comp sales of negative 1.5% compared to comp sales of negative 2% in 2024. For the quarter, IHOP posted comp sales of positive 0.3%, driven by positive traffic. So now I'll share some updates across our portfolio, starting with Applebee's. In 2025, Applebee's returned to positive sales growth as we sharpened our focus on value, marketing, and the guest experience. While the environment remained competitive, performance was in line with our expectations, underscoring our confidence in the strategy and momentum that we're building. In the fourth quarter, the 2-4 platform represented approximately 22% of transactions, supporting both off-premise demand and check growth. The new grilled cheese cheeseburger launched in Q4 was our highest-selling standalone burger ever and our highest-selling 2-4 burger of all time, reinforcing the strength of the platform. Also, our Ultimate Trio, which we launched in August, remained the best-selling appetizer of Q4, representing approximately 11.5% of transactions. In January, we launched our OM Cheeseburger, available on both the 2-4 platform and also individually at $11.99. This new burger was an instant hit and is now the newest highest-selling burger of all time on our 2-4 platform. These launches highlight the momentum of our only at Applebee's menu innovation strategy and reflect strong guest demand for menu offerings that can't be replicated at home. Off-premise was a source of growth in 2025, as guests increasingly chose the convenience of eating with us outside the restaurant. In the fourth quarter and full year, off-premise comp sales increased 6.2% and 6.5% respectively, with delivery up 10.5% for the year. On the digital marketing and social media front, Applebee's delivered year-over-year growth across key platforms in 2025, outperforming our organic social growth targets. Social media accelerated throughout the year, highlighted by an 84% increase in posting cadence and 107% lift in engagement in the back half of the year compared to the front half. Additionally, Club Applebee's, our data-driven personalization program, is driving higher engagement among members. Looking ahead to 2026, we'll focus on core fundamentals that directly enhance the guest experience and drive profitability. Specifically, we're emphasizing manager visibility in the dining room, which is linked to higher guest satisfaction and more consistent execution, and improved off-premise order accuracy, a key lever for cost reduction and repeat business. We're confident that the Applebee's strategy is working and will continue to build on this progress. Since the start of the year, we've seen positive sales trends, despite the severe weather, which position us well as we look to carry 2025's momentum into 2026. And now for IHOP. In 2025, IHOP's back-to-basics strategy delivered meaningful progress, and traffic is the clear highlight. Traffic improved throughout the year, and in the fourth quarter, IHOP delivered positive traffic and sales, outperforming BlackBox in both metrics. Notably, This performance came during a year when the family dining segment remained under pressure. IHOP outperformed Black Box in traffic every month of the year, and that outperformance accelerated meaningfully in the fourth quarter. This is a strong signal that guests are responding positively to IHOP's approach and breakthrough marketing. In September, we launched the IHOP Value Menu, an expanded and rebranded version of House Faves, now available seven days a week. This gives guests greater confidence that they can access meaningful value any day of the week while preserving a balanced menu mix. At IHOP, value is designed to drive traffic, not replace full margin items, and that's exactly what we're seeing. The value menu is drawing guests into the restaurant, and once they're here, guests are also choosing premium offerings such as our Breck Feast, combos, and LTOs, like our pumpkin spice and coffee cake pancakes. As a result, average check comp improved 150 basis points during Q3 to Q4. Off-premise also contributed to IHOP's steady sales growth and a positive 4.5% comp sales increase in Q4. Targeted promotions through third-party supported delivery, resulting in delivery comps that reached low double digits throughout much of the quarter. These efforts extended the reach of our platform through digital channels and allowed us to meet guests where they are. Marketing and digital engagement also kept IHOP top of mind for our guests throughout the year. Social impressions and views increased significantly, and overall engagement increased over 300% year over year. These results reinforce IHOP's relevance with younger guests and reflect the effectiveness of our investments in social media to reach broader audiences. Operationally, we remain focused on strengthening the fundamentals, And in partnership with our franchisee committees, we are constantly evaluating different ways to improve efficiency and execution. Recall that at IHOP, we completed a full rollout of our new POS and handhelds in 2024. These tech enhancements, combined with process improvements, supported better throughput and guest flow, delivering a roughly 7-minute or 12% improvement in table turn times versus 2024. At the same time, guest complaints declined for the second consecutive year, underscoring progress in the in-restaurant experience. And although we ended the year slightly below our comp sales expectations, the positive trajectory for IHOP continued into January, despite the impact from the winter storm. As we move into 2026, our focus at IHOP is on disciplined, consistent execution, driving traffic through accessible value and culture-driven marketing, protecting margins through balanced menu mix, and continuing to improve restaurant operations to deliver an incredible guest experience every day. Now at Fuzzy's, we saw encouraging progress beginning in Q3 that extended into Q4 and rolled into 2026 as different initiatives around our key priorities, improving the technology, engineering a more profitable menu, and enhancing the in-restaurant experience started to gain traction. Enhancements to our off-premise offerings, including a revamped online ordering platform and expanded third-party delivery partnerships contributed to modest improvements in sales and traffic, with the brand outperforming the black box comp set in sales every month in Q4. Additionally, Fuzzy's expanded its Houston footprint by opening two additional Fuzzy's Taco and Marg's Fast Casual Plus prototypes. This new hospitality service model is already encouraging higher beverage attachment and driving a noticeable shift toward premium taco category orders. And now, turning to international, we ended the year with 32 international dual brand restaurants, an increase of 14 for the full year. Dual brands are proven to be an effective, capital-efficient way to expand our footprint and introduce our brand into new markets. With meaningful white space across our core international regions of Canada, Mexico, Latin America, and the Middle East, we see our dual brand platform as an opportunity to drive international growth over time. And to speak more about development, we accelerated the pace of total gross new openings with 80 new restaurants globally in 2025 versus 68 in the prior year. Restaurant openings remain a key growth lever as we head into 2026. From dual brands and the Applebee's Looking Good remodel program to targeted investments in our company-owned portfolio, we're working to strengthen the physical experience of our brands and improve unit-level performance. So I'd like to provide an update on dual brands. As we discussed last quarter, dual brands represent a meaningful long-term opportunity for net unit growth. In 2025, we established the foundation, proving out the model, refining the operating playbook, and building confidence with our franchisees. The results further reinforce our conviction on the importance of dual brands. As of today, we've opened 32 dual brand restaurants in the U.S., including three company-owned locations, with an additional nine dual brands under construction. These restaurants continue to outperform single brand locations, delivering approximately 1.5 to 2.5 times higher revenue. We continue to see evidence that the dual brand concept is highly complementary, with balanced performance by both brands across all four day parts. At the same time, we're identifying opportunities to streamline operations, including reducing table turn times and refining kitchen layouts that improve throughput and efficiency. Based on feedback from our franchisees, we continue to expect payback periods of less than three years. Franchisee interest remains strong and the pipeline is expanding as operators see the benefits of the model firsthand. Based on our current pipeline, we expect to achieve at least an incremental 50 dual brand openings in 2026, bringing us close to 80 domestic dual brand restaurants by the end of this year. As we move into 2026, our focus with dual brands is on disciplined expansion, scaling thoughtfully, applying what we've learned, and ensuring we can deliver consistent results as the concept grows. Dual brands are not the right solution for every market, but where they make sense, they are powerful incremental unit growth and profit drivers for us as well as the franchisees. Beyond dual brands, we also made meaningful progress with the Applebee's Lookin' Good remodel program. We ended the year with 103 remodeled restaurants, more than our initial goal. and early results are encouraging with, on average, mid-single-digit lists and sales when remodels are combined with marketing, as well as improvements in operations and the overall guest experience. Refreshing the physical environment remains an important part of improving brand relevance and guest experience. Based on this progress, the remodel program continues in 2026 with the goal of remodeling another 100, if not more, locations this year. Development is an increasingly important part of our growth story. The progress we made in 2025 strengthens our foundation and positions us well to drive steady, disciplined growth in 2026 and beyond. And so now I'll turn the call over to Vance.