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Published: 2022-11-01 00:00:00 ET
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DENNY’S CORPORATION REPORTS RESULTS FOR THIRD QUARTER 2022


SPARTANBURG, S.C., November 1, 2022 - Denny’s Corporation (the "Company") (NASDAQ: DENN), owner and operator of Denny's Inc. ("Denny's") and Keke's Inc. ("Keke's") today reported results for its third quarter ended September 28, 2022 and provided a business update on the Company’s operations.

Kelli Valade, Chief Executive Officer, stated, "We were pleased with our solid performance as our long-standing commitment to everyday value resonated in this complex and challenging environment. The positive consumer response to our Summer Slamcation and recently launched All Day Diner Deals value menus drove incremental traffic at Denny's in the quarter and induced new customer trial."

Third Quarter 2022 Highlights

•Acquired Keke's on July 20, 2022 for $82.5 million.
•Total operating revenue grew 13.2% to $117.5 million compared to the prior year quarter.
•Denny's domestic system-wide same-store sales** grew 1.5% compared to the equivalent fiscal period in 2021, including a 1.1% increase at domestic franchised restaurants and a 7.1% increase at company restaurants.
•Opened eight franchised restaurants, including one international location and one Keke's location.
•Completed 19 remodels, including 16 franchised restaurants.
•Operating income was $15.8 million compared to $17.7 million in the prior year quarter.
•Franchise Operating Margin* was $30.7 million, or 47.0% of franchise and license revenue, and Company Restaurant Operating Margin* was $3.8 million, or 7.2% of company restaurant sales.
•Net income was $17.1 million, or $0.29 per diluted share.
•Adjusted Net Income* and Adjusted Net Income Per Share* were $7.1 million and $0.12, respectively.
•Adjusted EBITDA* was $19.2 million, which included $1.6 million in legal settlement expense.
•Cash provided by (used in) operating, investing, and financing activities was $15.3 million, ($77.3) million, and $64.9 million, respectively.
•Adjusted Free Cash Flow* was $8.7 million.
•Repurchased $7.9 million of common stock.












1

Third Quarter Results

Total operating revenue increased 13.2% to $117.5 million compared to $103.8 million in the prior year quarter.

Franchise and license revenue was $65.2 million compared to $57.3 million in the prior year quarter. This increase was primarily driven by $5.6 million related to the kitchen modernization rollout and $1.1 million of Keke's franchise revenue in the current quarter.

Company restaurant sales were $52.2 million compared to $46.5 million in the prior year quarter. This increase is comprised of benefits from Denny's price increases and changes in product mix compared to the prior year quarter and $2.7 million of Keke's company restaurant sales in the current quarter.

Franchise Operating Margin* was $30.7 million, or 47.0% of franchise and license revenue, compared to $29.9 million, or 52.1%, in the prior year quarter. The margin rate was impacted by approximately 440 basis points as kitchen modernization equipment is sold to franchisees at cost.

Company Restaurant Operating Margin* was $3.8 million, or 7.2% of company restaurant sales, compared to $7.9 million, or 17.0%, in the prior year quarter. This margin change was primarily due to commodity and labor inflation and $1.6 million in legal settlement expense, partially offset by the improvement in sales performance at company restaurants.

The provision for income taxes was $5.5 million, reflecting an effective tax rate of 24.3%. Approximately $1.5 million in cash taxes were paid during the quarter.

Net income was $17.1 million, or $0.29 per diluted share, compared to $12.3 million, or $0.19 per diluted share, in the prior year quarter. Adjusted Net Income* per share was $0.12 compared to $0.16 in the prior year quarter.

The Company ended the quarter with $278.2 million of total debt outstanding, including $266.5 million of borrowings under its credit facility.

Adjusted Free Cash Flow* and Capital Allocation

Adjusted Free Cash Flow* in the quarter was $8.7 million after investing $5.1 million in cash capital expenditures, including the remodel of three company restaurants, facilities maintenance, and the acquisition of a Denny's franchise restaurant.

During the quarter, the Company allocated $7.9 million to share repurchases resulting in approximately $160 million remaining under its existing repurchase authorization.











2

Business Outlook

The following expectations for the fiscal fourth quarter ending December 28, 2022 reflect management's expectations that the current consumer and economic environment will not change materially.
•Denny's domestic system-wide same-store sales** between 1% and 3%.
•Consolidated total general and administrative expenses between $17 million and $18 million, including approximately $2 million related to share-based compensation expense.
•Consolidated Adjusted EBITDA* between $21 million and $23 million.

*    Please refer to the Reconciliation of Net Income and Net Cash Provided by (Used In) Operating Activities to Non-GAAP Financial Measures, as well as the Reconciliation of Operating Income to Non-GAAP Financial Measures included in the following tables. The Company is not able to reconcile the forward-looking non-GAAP estimates set forth above to their most directly comparable U.S. generally accepted accounting principles (GAAP) estimates without unreasonable efforts because it is unable to predict, forecast or determine the probable significance of the items impacting these estimates, including gains, losses and other charges, with a reasonable degree of accuracy. Accordingly, the most directly comparable forward-looking GAAP estimates are not provided.

** Same-store sales include sales at company restaurants and non-consolidated franchised and licensed restaurants that were open during the comparable periods noted. Total operating revenue is limited to company restaurant sales and royalties, advertising revenue, fees and occupancy revenue from non-consolidated franchised and licensed restaurants. Accordingly, domestic franchise same-store sales and domestic system-wide same-store sales should be considered as a supplement to, not a substitute for, the Company's results as reported under GAAP.

Conference Call and Webcast Information

The Company will provide further commentary on the results for the third quarter ended September 28, 2022 on its quarterly investor conference call today, Tuesday, November 1, 2022 at 4:30 p.m. Eastern Time. Interested parties are invited to listen to a live broadcast of the conference call accessible through the Company's investor relations website at investor.dennys.com.

About Denny's Corporation

Denny’s Corporation is one of America’s largest full-service restaurant chains based on number of restaurants. As of September 28, 2022, the Company consisted of 1,666 restaurants, 1,592 of which were franchised and licensed restaurants and 74 of which were company operated.

Denny's Corporation consists of the Denny’s brand and the Keke’s brand. Keke’s was acquired on July 20, 2022. As of September 28, 2022, the Denny's brand consisted of 1,613 global restaurants, 1,547 of which were franchised and licensed restaurants and 66 of which were company operated. At September 28, 2022, the Keke's brand consisted of 53 restaurants, 45 of which were franchised restaurants and 8 of which were company operated.

For further information on Denny's Corporation, including news releases, links to SEC filings, and other financial information, please visit investor.dennys.com.








3


Cautionary Language Regarding Forward-Looking Statements

The Company urges caution in considering its current trends and any outlook on earnings disclosed in this press release. In addition, certain matters discussed in this release may constitute forward-looking statements. These forward-looking statements, which reflect management's best judgment based on factors currently known, are intended to speak only as of the date such statements are made and involve risks, uncertainties, and other factors that may cause the actual performance of Denny’s Corporation, its subsidiaries, and underlying restaurants to be materially different from the performance indicated or implied by such statements. Words such as “expect”, “anticipate”, “believe”, “intend”, “plan”, “hope”, "will", and variations of such words and similar expressions are intended to identify such forward-looking statements. Except as may be required by law, the Company expressly disclaims any obligation to update these forward-looking statements to reflect events or circumstances after the date of this release or to reflect the occurrence of unanticipated events. Factors that could cause actual performance to differ materially from the performance indicated by these forward-looking statements include, among others: the evolving COVID-19 pandemic and related containment measures, including the potential for further operational disruption from government mandates affecting restaurants; economic, public health and political conditions that impact consumer confidence and spending, including COVID-19; commodity and labor inflation; the ability to effectively staff restaurants; the Company's ability to maintain adequate levels of liquidity for its cash needs, including debt obligations, payment of dividends, planned share repurchases and capital expenditures as well as the ability of its customers, suppliers, franchisees and lenders to access sources of liquidity to provide for their own cash needs; competitive pressures from within the restaurant industry; the Company's ability to integrate and derive the expected benefits from our acquisition of Keke's Breakfast Cafe; the level of success of the Company’s operating initiatives and advertising and promotional efforts; adverse publicity; health concerns arising from food-related pandemics, outbreaks of flu viruses or other diseases; changes in business strategy or development plans; terms and availability of capital; regional weather conditions; overall changes in the general economy (including with regard to energy costs), particularly at the retail level; political environment and geopolitical events (including acts of war and terrorism); and other factors from time to time set forth in the Company’s SEC reports and other filings, including but not limited to the discussion in Management’s Discussion and Analysis and the risks identified in Item 1A. Risk Factors contained in the Company’s Annual Report on Form 10-K for the year ended December 29, 2021 (and in the Company’s subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K).


Investor Contact:
Curt Nichols
877-784-7167

Media Contact:
Hadas Streit, Allison+Partners
646-428-0629
4

DENNY’S CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
($ in thousands)9/28/2212/29/21
Assets
Current assets
Cash and cash equivalents$4,346 $30,624 
Investments1,763 2,551 
Receivables, net24,513 19,621 
Inventories9,018 5,060 
Assets held for sale1,061 — 
Prepaid and other current assets9,709 11,393 
Total current assets50,410 69,249 
Property, net95,547 91,176 
Finance lease right-of-use assets, net6,879 7,709 
Operating lease right-of-use assets, net130,650 128,727 
Goodwill72,740 36,884 
Intangible assets, net95,465 50,226 
Deferred financing costs, net2,496 2,971 
Deferred income taxes, net— 11,502 
Other noncurrent assets43,481 37,083 
Total assets$497,668 $435,527 
Liabilities
Current liabilities
Current finance lease liabilities$1,833 $1,952 
Current operating lease liabilities15,831 15,829 
Accounts payable12,248 15,595 
Other current liabilities62,768 64,146 
Total current liabilities92,680 97,522 
Long-term liabilities  
Long-term debt266,500 170,000 
Noncurrent finance lease liabilities9,884 10,744 
Noncurrent operating lease liabilities127,620 126,296 
Liability for insurance claims, less current portion7,514 8,438 
Deferred income taxes, net7,890 — 
Other noncurrent liabilities30,210 87,792 
Total long-term liabilities449,618 403,270 
Total liabilities542,298 500,792 
Shareholders' deficit
Common stock650 642 
Paid-in capital140,234 135,596 
Deficit(54,500)(116,441)
Accumulated other comprehensive loss, net(43,303)(54,470)
Treasury stock(87,711)(30,592)
Total shareholders' deficit(44,630)(65,265)
Total liabilities and shareholders' deficit$497,668 $435,527 
Debt Balances
Credit facility revolver due 2026$266,500 $170,000 
Finance lease liabilities11,717 12,696 
Total debt$278,217 $182,696 
5

DENNY’S CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited)
Quarter Ended
($ in thousands, except per share amounts)9/28/229/29/21
Revenue:
Company restaurant sales$52,211 $46,470 
Franchise and license revenue65,245 57,324 
Total operating revenue117,456 103,794 
Costs of company restaurant sales, excluding depreciation and amortization48,451 38,569 
Costs of franchise and license revenue, excluding depreciation and amortization34,579 27,469 
General and administrative expenses16,607 16,497 
Depreciation and amortization3,914 3,822 
Operating (gains), losses and other charges, net(1,897)(215)
Total operating costs and expenses, net101,654 86,142 
Operating income15,802 17,652 
Interest expense, net3,691 3,671 
Other nonoperating income, net(10,461)(2,368)
Income before income taxes22,572 16,349 
Provision for income taxes5,489 4,084 
Net income$17,083 $12,265 
Net income per share - basic$0.29 $0.19 
Net income per share - diluted$0.29 $0.19 
Basic weighted average shares outstanding59,020 65,447 
Diluted weighted average shares outstanding59,040 65,829 
Comprehensive income$20,061 $13,089 
General and Administrative Expenses
Corporate administrative expenses$13,758 $11,157 
Share-based compensation1,947 3,352 
Incentive compensation1,187 1,893 
Deferred compensation valuation adjustments(285)95 
Total general and administrative expenses$16,607 $16,497 
6

DENNY’S CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited)
Three Quarters Ended
($ in thousands, except per share amounts)9/28/229/29/21
Revenue:
Company restaurant sales$145,354 $127,611 
Franchise and license revenue190,226 162,924 
Total operating revenue335,580 290,535 
Costs of company restaurant sales, excluding depreciation and amortization131,904 106,546 
Costs of franchise and license revenue, excluding depreciation and amortization100,513 79,962 
General and administrative expenses50,188 50,992 
Depreciation and amortization11,052 11,380 
Operating (gains), losses and other charges, net(1,051)204 
Total operating costs and expenses, net292,606 249,084 
Operating income42,974 41,451 
Interest expense, net9,529 12,014 
Other nonoperating income, net(49,871)(16,165)
Income before income taxes83,316 45,602 
Provision for income taxes21,375 10,984 
Net income$61,941 $34,618 
Net income per share - basic$1.01 $0.53 
Net income per share - diluted$1.00 $0.53 
Basic weighted average shares outstanding61,558 65,413 
Diluted weighted average shares outstanding61,686 65,814 
Comprehensive income$73,108 $38,767 
General and Administrative Expenses
Corporate administrative expenses$38,303 $32,374 
Share-based compensation9,467 10,212 
Incentive compensation4,945 7,011 
Deferred compensation valuation adjustments(2,527)1,395 
Total general and administrative expenses$50,188 $50,992 

7

DENNY’S CORPORATION
Reconciliation of Net Income and Net Cash Provided by Operating Activities to Non-GAAP Financial Measures
(Unaudited)

The Company believes that, in addition to GAAP measures, certain non-GAAP financial measures are appropriate indicators to assist in the evaluation of operating performance and liquidity on a period-to-period basis. The Company uses Adjusted EBITDA, Adjusted Free Cash Flow, Adjusted Net Income and Adjusted Net Income Per Share internally as performance measures for planning purposes, including the preparation of annual operating budgets, and for compensation purposes, including incentive compensation for certain employees. Adjusted EBITDA is also used in the calculation of financial covenant ratios in accordance with the Company’s credit facility. Adjusted Free Cash Flow is also used as a non-GAAP liquidity measure by Management to assess the Company’s ability to generate cash and plan for future operating and capital actions. Management believes that the presentation of Adjusted EBITDA, Adjusted Net Income, Adjusted Net Income Per Share and Adjusted Free Cash Flow provide useful information to investors and analysts about the Company’s operating results, financial condition or cash flows. However, each of these non-GAAP financial measures should be considered as a supplement to, not a substitute for, operating income, net income, net income per share, net cash provided by operating activities, or other financial performance and liquidity measures prepared in accordance with GAAP.
Quarter EndedThree Quarters Ended
($ in thousands)9/28/229/29/219/28/229/29/21
Net income$17,083 $12,265 $61,941 $34,618 
Provision for income taxes5,489 4,084 21,375 10,984 
Operating (gains), losses and other charges, net
(1,897)(215)(1,051)204 
Other nonoperating income, net(10,461)(2,368)(49,871)(16,165)
Share-based compensation expense1,947 3,352 9,467 10,212 
Deferred compensation plan valuation adjustments(285)95 (2,527)1,395 
Interest expense, net3,691 3,671 9,529 12,014 
Depreciation and amortization3,914 3,822 11,052 11,380 
Cash payments for restructuring charges and exit costs
(284)(274)(665)(1,548)
Cash payments for share-based compensation
— — (5,147)(1,565)
Adjusted EBITDA$19,197 $24,432 $54,103 $61,529 

8

DENNY’S CORPORATION
Reconciliation of Net Income and Net Cash Provided by Operating Activities
to Non-GAAP Financial Measures Continued
(Unaudited)
Quarter EndedThree Quarters Ended
($ in thousands)9/28/229/29/219/28/229/29/21
Net cash provided by operating activities$15,341 $19,858 $24,950 $63,229 
Capital expenditures(4,375)(2,213)(10,146)(5,321)
Acquisition of restaurant(1)
(750)— (750)— 
Cash payments for restructuring charges and exit costs(284)(274)(665)(1,548)
Cash payments for share-based compensation— — (5,147)(1,565)
Deferred compensation plan valuation adjustments(285)95 (2,527)1,395 
Other nonoperating income, net(10,461)(2,368)(49,871)(16,165)
Gains (losses) on investments(66)14 (289)11 
Gains (losses) on early termination of debt and leases53 (20)29 52 
Amortization of deferred financing costs(158)(258)(475)(946)
Gains and amortization on interest rate swap derivatives, net10,754 2,265 52,678 14,771 
Interest expense, net3,691 3,671 9,529 12,014 
Cash interest expense, net (2)
(3,823)(4,195)(10,998)(13,236)
Deferred income tax expense(4,903)(1,502)(15,669)(3,713)
Provision for income taxes5,489 4,084 21,375 10,984 
Income taxes paid, net(1,517)(3,696)(6,161)(5,638)
Changes in operating assets and liabilities, excluding acquisitions and dispositions
Receivables1,369 (3,425)4,788 (4,182)
Inventories(3,282)(49)3,866 49 
Other current assets1,880 2,381 (1,683)(4,296)
Other noncurrent assets2,936 (296)(3,189)1,021 
Operating lease assets and liabilities94 329 560 1,150 
Accounts payable1,574 (740)3,115 (6,360)
Accrued payroll(2,336)530 3,385 (1,462)
Accrued taxes(2,264)(819)(1,926)(1,253)
Other accrued liabilities(2,979)(1,241)2,024 (5,890)
Other noncurrent liabilities3,034 2,197 9,245 4,233 
Adjusted Free Cash Flow$8,732 $14,328 $26,048 $37,334 
(1)For quarter and year-to-date periods ended September 28, 2022, amounts include cash paid for the acquisition of a Denny's franchise restaurant and exclude capital paid for the acquisition of Keke's.
(2)Includes cash interest expense, net and cash payments of approximately $0.3 million and $2.0 million for dedesignated interest rate swap derivatives for the quarter and year-to-date periods ended September 28, 2022, respectively. Includes cash interest expense, net and cash payments of approximately $0.8 million and $2.3 million for dedesignated interest rate swap derivatives for the quarter and year-to-date periods ended September 29, 2021, respectively.

9

DENNY’S CORPORATION
Reconciliation of Net Income and Net Cash Provided by Operating Activities
to Non-GAAP Financial Measures Continued
(Unaudited)
Quarter EndedThree Quarters Ended
($ in thousands, except per share amounts)9/28/229/29/219/28/229/29/21
Adjusted EBITDA$19,197 $24,432 $54,103 $61,529 
Cash interest expense, net (1)
(3,823)(4,195)(10,998)(13,236)
Cash paid for income taxes, net(1,517)(3,696)(6,161)(5,638)
Cash paid for capital expenditures (2)
(5,125)(2,213)(10,896)(5,321)
Adjusted Free Cash Flow$8,732 $14,328 $26,048 $37,334 
Net income$17,083 $12,265 $61,941 $34,618 
Gains and amortization on interest rate swap derivatives, net(10,754)(2,265)(52,678)(14,771)
Gains on sales of assets and other, net(3,066)(93)(3,311)(1,100)
Impairment charges697 — 963 — 
Tax effect (3)
3,163 636 14,142 3,825 
Adjusted Net Income$7,123 $10,543 $21,057 $22,572 
Diluted weighted average shares outstanding59,040 65,829 61,686 65,814 
Net Income Per Share - Diluted$0.29 $0.19 $1.00 $0.53 
Adjustments Per Share$(0.17)$(0.03)$(0.66)$(0.19)
Adjusted Net Income Per Share$0.12 $0.16 $0.34 $0.34 
(1)Includes cash interest expense, net and cash payments of approximately $0.3 million and $2.0 million for dedesignated interest rate swap derivatives for the quarter and year-to-date periods ended September 28, 2022, respectively. Includes cash interest expense, net and cash payments of approximately $0.8 million and $2.3 million for dedesignated interest rate swap derivatives for the quarter and year-to-date periods ended September 29, 2021, respectively.
(2)For quarter and year-to-date periods ended September 28, 2022, amounts include cash paid for capital expenditures and the acquisition of a Denny's franchise restaurant, and exclude capital paid for the acquisition of Keke's.
(3)Tax adjustments for the quarter and year-to-date periods ended September 28, 2022 reflect an effective tax rates of 24.1% and 25.7%, respectively. Tax adjustments for the quarter and year-to-date periods ended September 29, 2021 reflect an effective tax rate of 27.0% and 24.1%, respectively.
10

DENNY’S CORPORATION
Reconciliation of Operating Income to Non-GAAP Financial Measures
(Unaudited)

The Company believes that, in addition to GAAP measures, certain other non-GAAP financial measures are appropriate indicators to assist in the evaluation of restaurant-level operating efficiency and performance of ongoing restaurant-level operations. The Company uses Restaurant-level Operating Margin, Company Restaurant Operating Margin and Franchise Operating Margin internally as performance measures for planning purposes, including the preparation of annual operating budgets, and these three non-GAAP measures are used to evaluate operating effectiveness.

The Company defines Restaurant-level Operating Margin as operating income excluding the following three items: general and administrative expenses, depreciation and amortization, and operating (gains), losses and other charges, net. Restaurant-level Operating Margin is presented as a percent of total operating revenue. The Company excludes general and administrative expenses, which include primarily non-restaurant-level costs associated with support of company and franchised restaurants and other activities at their corporate office. The Company excludes depreciation and amortization expense, substantially all of which is related to company restaurant-level assets, because such expenses represent historical sunk costs which do not reflect current cash outlays for the restaurants. The Company excludes special items, included within operating (gains), losses and other charges, net, to provide investors with a clearer perspective of its ongoing operating performance and a more relevant comparison to prior period results.

Restaurant-level Operating Margin is the total of Company Restaurant Operating Margin and Franchise Operating Margin. The Company defines Company Restaurant Operating Margin as company restaurant sales less costs of company restaurant sales (which include product costs, company restaurant level payroll and benefits, occupancy costs, and other operating costs including utilities, repairs and maintenance, marketing and other expenses) and presents it as a percent of company restaurant sales. The Company defines Franchise Operating Margin as franchise and license revenue (which includes franchise royalties and other non-food and beverage revenue streams such as initial franchise and other fees, advertising revenue and occupancy revenue) less costs of franchise and license revenue and presents it as a percent of franchise and license revenue.

These non-GAAP financial measures provide a meaningful comparison between periods and enable investors to focus on the performance of restaurant-level operations by excluding revenues and costs unrelated to food and beverage sales in addition to corporate general and administrative expense, depreciation and amortization, and operating (gains), losses and other charges, net. However, each of these non-GAAP financial measures should be considered as a supplement to, not a substitute for, operating income, net income or other financial performance measures prepared in accordance with GAAP. Restaurant-level Operating Margin, Company Restaurant Operating Margin and Franchise Operating Margin do not accrue directly to the benefit of shareholders because of the aforementioned excluded items and are not indicative of the overall results for the Company.

Quarter EndedThree Quarters Ended
($ in thousands)9/28/229/29/219/28/229/29/21
Operating income$15,802 $17,652 $42,974 $41,451 
General and administrative expenses16,607 16,497 50,188 50,992 
Depreciation and amortization3,914 3,822 11,052 11,380 
Operating (gains), losses and other charges, net(1,897)(215)(1,051)204 
  Restaurant-level Operating Margin$34,426 $37,756 $103,163 $104,027 
Restaurant-level Operating Margin consists of:
 Company Restaurant Operating Margin (1)
$3,760 $7,901 $13,450 $21,065 
 Franchise Operating Margin (2)
30,666 29,855 89,713 82,962 
  Restaurant-level Operating Margin$34,426 $37,756 $103,163 $104,027 

(1)Company Restaurant Operating Margin is calculated as operating income plus general and administrative expenses; depreciation and amortization; operating (gains), losses and other charges, net; and costs of franchise and license revenue, excluding depreciation and amortization; less franchise and license revenue.
(2)Franchise Operating Margin is calculated as operating income plus general and administrative expenses; depreciation and amortization; operating (gains), losses and other charges, net; and costs of company restaurant sales, excluding depreciation and amortization; less company restaurant sales.
11

DENNY’S CORPORATION
Operating Margins
(Unaudited)
Quarter Ended
($ in thousands)9/28/229/29/21
Company restaurant operations: (1)
Company restaurant sales$52,211 100.0 %$46,470 100.0 %
Costs of company restaurant sales, excluding depreciation and amortization:
Product costs14,462 27.7 %11,430 24.6 %
Payroll and benefits20,176 38.6 %17,404 37.5 %
Occupancy4,294 8.2 %3,013 6.5 %
Other operating costs:
Utilities1,984 3.8 %1,660 3.6 %
Repairs and maintenance1,089 2.1 %722 1.6 %
Marketing1,340 2.6 %1,239 2.7 %
Legal settlements1,567 3.0 %237 0.5 %
Other direct costs3,539 6.8 %2,864 6.2 %
Total costs of company restaurant sales, excluding depreciation and amortization$48,451 92.8 %$38,569 83.0 %
Company restaurant operating margin (non-GAAP) (2)
$3,760 7.2 %$7,901 17.0 %
Franchise operations: (3)
Franchise and license revenue:
Royalties$28,992 44.4 %$27,336 47.7 %
Advertising revenue18,950 29.0 %18,215 31.8 %
Initial and other fees7,749 11.9 %1,442 2.5 %
Occupancy revenue9,554 14.6 %10,331 18.0 %
Total franchise and license revenue$65,245 100.0 %$57,324 100.0 %
Costs of franchise and license revenue, excluding depreciation and amortization:
Advertising costs$18,950 29.0 %$18,216 31.8 %
Occupancy costs5,910 9.1 %6,445 11.2 %
Other direct costs9,719 14.9 %2,808 4.9 %
Total costs of franchise and license revenue, excluding depreciation and amortization$34,579 53.0 %$27,469 47.9 %
Franchise operating margin (non-GAAP) (2)
$30,666 47.0 %$29,855 52.1 %
Total operating revenue (4)
$117,456 100.0 %$103,794 100.0 %
Total costs of operating revenue (4)
83,030 70.7 %66,038 63.6 %
Restaurant-level operating margin (non-GAAP) (4)(2)
$34,426 29.3 %$37,756 36.4 %
Other operating expenses: (4)(2)
General and administrative expenses$16,607 14.1 %$16,497 15.9 %
Depreciation and amortization3,914 3.3 %3,822 3.7 %
Operating (gains), losses and other charges, net(1,897)(1.6)%(215)(0.2)%
Total other operating expenses$18,624 15.9 %$20,104 19.4 %
Operating income (4)
$15,802 13.5 %$17,652 17.0 %
(1)As a percentage of company restaurant sales.
(2)Other operating expenses such as general and administrative expenses and depreciation and amortization relate to both company and franchise operations and are not allocated to costs of company restaurant sales and costs of franchise and license revenue. As such, operating margin is considered a non-GAAP financial measure. Operating margins should be considered as a supplement to, not as a substitute for, operating income, net income or other financial measures prepared in accordance with GAAP.
(3)As a percentage of franchise and license revenue.
(4)As a percentage of total operating revenue.

12

DENNY’S CORPORATION
Operating Margins
(Unaudited)
Three Quarters Ended
($ in thousands)9/28/229/29/21
Company restaurant operations: (1)
Company restaurant sales$145,354 100.0 %$127,611 100.0 %
Costs of company restaurant sales, excluding depreciation and amortization:
Product costs38,874 26.7 %31,149 24.4 %
Payroll and benefits55,598 38.3 %47,339 37.1 %
Occupancy11,316 7.8 %8,707 6.8 %
Other operating costs:
Utilities5,211 3.6 %4,275 3.4 %
Repairs and maintenance2,803 1.9 %1,890 1.5 %
Marketing3,877 2.7 %3,571 2.8 %
Legal settlements4,223 2.9 %1,144 0.9 %
Other direct costs10,002 6.9 %8,471 6.6 %
Total costs of company restaurant sales, excluding depreciation and amortization$131,904 90.7 %$106,546 83.5 %
Company restaurant operating margin (non-GAAP) (2)
$13,450 9.3 %$21,065 16.5 %
Franchise operations: (3)
Franchise and license revenue:
Royalties$84,276 44.3 %$75,297 46.2 %
Advertising revenue56,642 29.8 %50,926 31.3 %
Initial and other fees20,035 10.5 %5,346 3.3 %
Occupancy revenue29,273 15.4 %31,355 19.2 %
Total franchise and license revenue$190,226 100.0 %$162,924 100.0 %
Costs of franchise and license revenue, excluding depreciation and amortization:
Advertising costs$56,642 29.8 %$50,927 31.3 %
Occupancy costs18,351 9.6 %19,863 12.2 %
Other direct costs25,520 13.4 %9,172 5.6 %
Total costs of franchise and license revenue, excluding depreciation and amortization$100,513 52.8 %$79,962 49.1 %
Franchise operating margin (non-GAAP) (2)
$89,713 47.2 %$82,962 50.9 %
Total operating revenue (4)
$335,580 100.0 %$290,535 100.0 %
Total costs of operating revenue (4)
232,417 69.3 %186,508 64.2 %
Restaurant-level operating margin (non-GAAP) (4)(2)
$103,163 30.7 %$104,027 35.8 %
Other operating expenses: (4)(2)
General and administrative expenses$50,188 15.0 %$50,992 17.6 %
Depreciation and amortization11,052 3.3 %11,380 3.9 %
Operating (gains), losses and other charges, net(1,051)(0.3)%204 0.1 %
Total other operating expenses$60,189 17.9 %$62,576 21.5 %
Operating income (4)
$42,974 12.8 %$41,451 14.3 %
(1)As a percentage of company restaurant sales.
(2)Other operating expenses such as general and administrative expenses and depreciation and amortization relate to both company and franchise operations and are not allocated to costs of company restaurant sales and costs of franchise and license revenue. As such, operating margin is considered a non-GAAP financial measure. Operating margin should be considered as a supplement to, not as a substitute for, operating income, net income or other financial measures prepared in accordance with GAAP.
(3)As a percentage of franchise and license revenue.
(4)As a percentage of total operating revenue.

13

DENNY’S CORPORATION
Statistical Data
(Unaudited)
Denny's
Keke's (2)
Changes in Same-Store Sales (1) vs. Prior Year
Quarter EndedThree Quarters EndedQuarter EndedThree Quarters Ended
(Increase (decrease))9/28/229/29/219/28/229/29/219/28/229/29/219/28/229/29/21
Company Restaurants7.1 %67.7 %12.1 %54.1 %N/AN/AN/AN/A
Domestic Franchise Restaurants1.1 %48.9 %7.6 %37.2 %N/AN/AN/AN/A
Domestic System-wide Restaurants1.5 %50.2 %7.9 %38.3 %N/AN/AN/AN/A
Denny's
Keke's (2)
Average Unit SalesQuarter EndedThree Quarters EndedQuarter EndedThree Quarters Ended
($ in thousands)9/28/229/29/219/28/229/29/219/28/229/29/219/28/229/29/21
Company Restaurants$766 $717 $2,209 $1,974 $334 N/A$334 N/A
Franchised Restaurants$435 $424 $1,281 $1,166 $349 N/A$349 N/A
(1)Same-store sales include sales at company restaurants and non-consolidated franchised and licensed restaurants that were open during the comparable periods noted. Total operating revenue is limited to company restaurant sales and royalties, advertising revenue, fees and occupancy revenue from non-consolidated franchised and licensed restaurants. Accordingly, domestic franchise same-store sales and domestic system-wide same-store sales should be considered as a supplement to, not a substitute for, the Company's results as reported under GAAP.
Keke's comparable same-store sales will not be reported for the first year following the acquisition.
(2)
Effective July 20, 2022, the Company acquired Keke's, as such the data represents post-acquisition results.
Denny's
Keke's
FranchisedFranchised
Restaurant Unit ActivityCompany & LicensedTotalCompany& LicensedTotal
Ending Units June 29, 202265 1,566 1,631 — — — 
Units Opened— 7 7 — 1 1 
Units Acquired (3)
— — — 8 44 52 
Units Reacquired1 (1)— — — — 
Units Closed — (25)(25)— — — 
Net Change1 (19)(18)8 45 53 
Ending Units September 28, 202266 1,547 1,613 8 45 53 
Equivalent Units
Third Quarter 202265 1,560 1,625 6 34 40 
Third Quarter 202165 1,578 1,643 — — — 
Net Change— (18)(18)6 34 40 
Denny's
Keke's
FranchisedFranchised
Restaurant Unit ActivityCompany& LicensedTotalCompany& LicensedTotal
Ending Units December 29, 202165 1,575 1,640 — — — 
Units Opened— 16 16 — 1 1 
Units Acquired (3)
— — — 8 44 52 
Units Reacquired1 (1)— — — — 
Units Closed— (43)(43)— — — 
Net Change1 (28)(27)8 45 53 
Ending Units September 28, 202266 1,547 1,613 8 45 53 
Equivalent Units
Year-to-Date 202264 1,566 1,630 2 11 13 
Year-to-Date 202165 1,581 1,646 — — — 
Net Change(1)(15)(16)2 11 13 
(3)
Effective July 20, 2022, the Company acquired Keke's, consisting of 8 company operated restaurants and 44 franchised restaurants.
14