GlobeNewswire Inc | Jul 28, 2020 04:05PM EDT

July 28, 2020

SPARTANBURG, S.C., July 28, 2020 (GLOBE NEWSWIRE) -- Dennys Corporation (NASDAQ: DENN), franchisor and operator of one of America's largest franchised full-service restaurant chains, today reported results for its second quarter ended June24, 2020 and provided a business update on the impact of the COVID-19 pandemic on the Companys operations.

John Miller, Chief Executive Officer, stated, "Through enhanced health and safety training and protocols, Denny's team members continue to work together to protect our guests, employees, and suppliers to serve our communities. I am especially encouraged by their willingness to pivot to new operational standards with respect to our off-premise, curbside, outdoor dining, or dine-in channels, proving that 'We Love to Feed People' during both good and challenging times. These actions, coupled with easing dine-in restrictions, resulted in a sequential increase in sales over the course of the second quarter. Although many states have since reinstated dine-in restrictions due to an increase in COVID-19 cases, we have not experienced a significant drop in sales. We attribute our stabilization to our dedicated Denny's team members who are innovative and eager to adapt to their environment."

Miller continued, "During the second quarter, we provided additional financial relief to franchisees, while remaining focused on cost savings. Subsequent to the quarter, we closed on an opportunistic capital raise to further fortify what I believe is one of the strongest balance sheets in the industry. As we look ahead, we believe we are well-positioned to effectively navigate further impacts of the pandemic while preparing for eventual and future growth."

Second Quarter 2020 Highlights

-- Total Operating Revenue was $40.2 million. -- Domestic system-wide same-store sales** decreased 56.9%. -- Completed 3 remodels, including 2 at franchised restaurants. -- Operating Loss was $13.5 million. -- Franchise Operating Margin* was $9.8 million, or 39.1% of franchise and license revenue, and Company Restaurant Operating Margin* was ($4.5) million, or (29.6%) of company restaurant sales. -- Net Loss was $23.0 million, or $0.41 per diluted share. -- Adjusted Net Loss* was $13.7 million, or $0.25 per diluted share. -- Adjusted EBITDA* was ($5.1) million. -- Adjusted Free Cash Flow* was ($11.5) million.

Current Trends

Domestic system-wide same-store sales** sequentially improved on a weekly basis during the second quarter ended June 24, 2020, as compared to the equivalent weeks of 2019. During the second quarter, dine-in restrictions continued to ease with most restaurants operating with streamlined menus and reduced operating hours. Due to the recent significant increase in COVID-19 cases, various states reinstated dining room closures, and the Company experienced a slight decline in domestic system-wide same-store sales** in fiscal July.

In an effort to provide greater transparency due to COVID-19, Denny's is providing the following tables that present second and third quarter weekly results compared to the equivalent fiscal weeks in 2019:

Domestic System-Wide Same-Store Sales** for the Weeks Ended:

Fiscal April: (76%) Fiscal May: (65%) Fiscal June: (41%)4/01 4/08 4/15 4/22 4/29 5/06 5/13 5/20 5/27 6/03 6/10 6/17 6/24(79 %) (78 %) (76 %) (72 %) (72 %) (68 %) (63 %) (60 %) (55 %) (47 %) (39 %) (37 %) (29 %)

Fiscal July: (39%)^17/01 7/08 7/15 7/22^1(33%) (42%) (41%) (41%)

1. Preliminary results

Number of Domestic Restaurants Operating with Open Dining Rooms for the Weeks Ended:

Fiscal April Fiscal May Fiscal June4/01 4/08 4/15 4/22 4/29 5/06 5/13 5/20 5/27 6/03 6/10 6/17 6/247 2 2 2 11 339 521 646 967 1,116 1,234 1,355 1,424

Fiscal July7/01 7/08 7/15 7/221,430 1,124 1,032 1,035

Average unit volumes of off-premise sales have almost doubled from February 2020 to July 2020, supported by temporarily waived delivery fees, new Dine-Thru curbside service programs, and recently launched shareable family meal packs.

As of July 22, 2020, 97% of domestic Denny's restaurants were operating, most with take-out and delivery options, streamlined menus, and reduced operating hours, which impacted same-store sales** results. Also as of July 22, 2020, 55 Denny's restaurants remain temporarily closed, including 47 domestic franchise restaurants and 8 international franchise restaurants. Additionally, 1,035 domestic restaurants were operating with open dining rooms with capacity limitations across 28 states.

Liquidity

On July 6, 2020, the Company raised net proceeds of $69.6 million that were used to pay down its credit facility through the issuance and sale of 8.0 million shares of common stock. Subsequent to these two transactions, the Company had approximately $12.0 million of cash on hand and $237.0 million outstanding on the credit facility, or approximately $100 million of total available liquidity after considering the current liquidity covenant.

Pursuant to the underwriting agreement, the Company also granted the underwriters a 30-day option to purchase up to an additional 1.2 million shares of common stock, and currently expects the option will expire unexercised.

Second Quarter Results

Dennys total operating revenue was $40.2 million compared to $151.9 million in the prior year quarter. Franchise and license revenue was $25.0 million compared to $56.4 million in the prior year quarter. Company restaurant sales were $15.1 million compared to $95.4 million in the prior year quarter. These changes were primarily due to the impact of COVID-19 on sales, the Company's refranchising and development strategy which was substantially complete by the end of 2019, and the related $3.0 million royalty abatement in the second fiscal quarter of 2020.

Franchise Operating Margin* was $9.8 million, or 39.1% of franchise and license revenue, compared to $27.6 million, or 48.8%, in the prior year quarter. This margin decrease was primarily driven by the impact of COVID-19 on sales and the related $3.0 million royalty abatement, partially offset by an increase in occupancy margin from additional leases and subleases to franchisees as a result of the Company's refranchising and development strategy in 2019.

Company Restaurant Operating Margin* was ($4.5) million, or (29.6%) of company restaurant sales, compared to $15.6 million, or 16.4%, in the prior year quarter. This margin decrease was primarily due to the impact of COVID-19 on sales, as well as fewer equivalent units through the Company's refranchising and development strategy.

Total general and administrative expenses were $13.2 million, compared to $18.5 million in the prior year quarter. This change was due to reductions in performance-based incentive compensation, personnel costs, and share-based compensation expense, partially offset by market valuation changes in the Company's deferred compensation plan liabilities.

Interest expense, net was $4.9 million, compared to $5.4 million in the prior year quarter, primarily due to a reduction in financing leases. Dennys ended the quarter with $323.1 million of total debt outstanding, including $307.0 million of borrowings under its credit facility.

During the quarter, the Company recorded $11.5 million of other non-cash, nonoperating expenses related to the discontinuance of hedge accounting for a portion of its interest rate hedges. The expenses include a $7.4 million reclassification of amounts previously recorded in accumulated other comprehensive loss, net to expense, $3.8 million related to changes in fair value associated with the portion of interest rate hedges for which hedge accounting was discontinued, and $0.3 million of expense recognized related to amounts remaining in accumulated other comprehensive loss, net that will be recognized in other nonoperating expense (income), net over the remaining term of the interest rate hedges for which hedge accounting was discontinued.

The benefit from income taxes was $5.1 million, reflecting an effective tax rate of 18.1%. Approximately $0.1 million in cash taxes was paid during the quarter.

Net loss was $23.0 million, or $0.41 per diluted share, compared to net income of $34.2 million, or $0.55 per diluted share, in the prior year quarter. Adjusted Net Loss* per diluted share was $0.25 compared to Adjusted Net Income* per diluted share of $0.23 in the prior year quarter.

Adjusted Free Cash Flow* and Capital Allocation

Dennys Adjusted Free Cash Flow* in the quarter after investing $1.7 million in cash capital expenditures, including maintenance capital and remodels, was ($11.5) million.

Business Outlook

On March 16, 2020, the Company announced that it had withdrawn its guidance for the fiscal year ending on December 30, 2020. Given the dynamic and evolving impact of the COVID-19 pandemic on the Company's operations and substantial uncertainty about future performance, the Company cannot reasonably provide an updated business outlook at this time.

* Please refer to the Reconciliation of Net Income (Loss) to Non-GAAP Financial Measures, as well as the Reconciliation of Operating Income (Loss) to Non-GAAP Financial Measures included in the following tables.

** Same-store sales include sales at company restaurants and non-consolidated franchised and licensed restaurants that were open the same period in the prior year. 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

Dennys will provide further commentary on the results for the second quarter ended June24, 2020 on its quarterly investor conference call today, Tuesday, July28, 2020 at 4:30 p.m. Eastern Time. Interested parties are invited to listen to a live broadcast of the conference call accessible through the investor relations section of Dennys website at investor.dennys.com. A replay of the call may be accessed at the same location later in the day and will remain available for 30 days.

About Dennys

Denny's Corporation is the franchisor and operator of one of America's largest franchised full-service restaurant chains, based on the number of restaurants. As of June24, 2020, Dennys had 1,683 franchised, licensed, and company restaurants around the world including 147 restaurants in Canada, Puerto Rico, Mexico, the Philippines, New Zealand, Honduras, the United Arab Emirates, Costa Rica, Guam, Guatemala, the United Kingdom, El Salvador, Indonesia, and Aruba. For further information on Denny's, including news releases, links to SEC filings, and other financial information, please visit the Denny's investor relations website at investor.dennys.com.

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 Dennys 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 rapidly 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; competitive pressures from within the restaurant industry; 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 (including acts of war and terrorism); and other factors from time to time set forth in the Companys SEC reports and other filings, including but not limited to the discussion in Managements Discussion and Analysis and the risks identified in Item 1A. Risk Factors contained in the Companys Annual Report on Form 10-K for the year ended December 25, 2019 (and in the Companys subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K).

DENNY?S CORPORATIONCondensed Consolidated Balance Sheets(Unaudited) (In thousands) 6/24/20 12/25/19Assets Current assets Cash and cash equivalents $ 21,077 $ 3,372 Investments 2,240 3,649 Receivables, net 19,049 27,488 Assets held for sale 1,973 1,925 Other current assets 18,674 16,299 Total current assets 63,013 52,733 Property, net 93,759 97,626 Financing lease right-of-use assets, net 10,672 11,720 Operating lease right-of-use assets, net 149,169 158,550 Goodwill 36,884 36,832 Intangible assets, net 52,681 53,956 Deferred income taxes, net 28,597 14,718 Other noncurrent assets, net 33,928 34,252 Total assets $ 468,703 $ 460,387 Liabilities Current liabilities Current finance lease liabilities $ 1,987 $ 1,674 Current operating lease liabilities 18,479 16,344 Accounts payable 18,901 20,256 Other current liabilities 37,390 57,307 Total current liabilities 76,757 95,581 Long-term liabilities Long-term debt 307,000 240,000 Noncurrent finance lease liabilities 14,144 14,779 Noncurrent operating lease liabilities 146,080 152,750 Other 142,229 95,341 Total long-term liabilities 609,453 502,870 Total liabilities 686,210 598,451 Shareholders' deficit Common stock 1,097 1,094 Paid-in capital 600,936 603,980 Deficit (203,350 ) (189,398 ) Accumulated other comprehensive loss, net of tax (62,217 ) (33,960 ) Treasury stock (553,973 ) (519,780 ) Total shareholders' deficit (217,507 ) (138,064 ) Total liabilities and shareholders' deficit $ 468,703 $ 460,387 Debt Balances(In thousands) 6/24/20 12/25/19Credit facility revolver due 2022 $ 307,000 $ 240,000 Finance lease liabilities 16,131 16,453 Total debt $ 323,131 $ 256,453

DENNY?S CORPORATIONCondensed Consolidated Statements of Operations(Unaudited) Quarter Ended(In thousands, except per share amounts) 6/24/20 6/26/19Revenue: Company restaurant sales $ 15,128 $ 95,447 Franchise and license 25,033 56,437 revenue Total operating 40,161 151,884 revenueCosts of company restaurant sales, excluding 19,606 79,830 depreciation and amortizationCosts of franchise and license revenue, excluding 15,244 28,871 depreciation and amortizationGeneral and administrative expenses 13,153 18,453 Depreciation and amortization 4,058 5,048 Operating (gains), losses and other charges, net 1,627 (26,433 ) Total operating costs and expenses, 53,688 105,769 netOperating income (loss) (13,527 ) 46,115 Interest expense, net 4,947 5,382 Other nonoperating expense (income), net 9,565 (273 )Income (loss) before income taxes (28,039 ) 41,006 Provision for (benefit from) income taxes (5,074 ) 6,767 Net income (loss) $ (22,965 ) $ 34,239 Basic net income (loss) per share $ (0.41 ) $ 0.57 Diluted net income (loss) per share $ (0.41 ) $ 0.55 Basic weighted average shares outstanding 55,686 60,290 Diluted weighted average shares outstanding 55,686 62,082 Comprehensive income (loss) $ (18,550 ) $ 23,625 General and Administrative Expenses Quarter Ended(In thousands) 6/24/20 6/26/19Corporate administrative expenses $ 9,701 $ 12,436 Share-based compensation 1,511 2,713 Incentive compensation 1 2,919 Deferred compensation valuation adjustments 1,940 385 Total general and $ 13,153 $ 18,453 administrative expenses

DENNY?S CORPORATIONCondensed Consolidated Statements of Operations(Unaudited) Two Quarters Ended(In thousands, except per share amounts) 6/24/20 6/26/19Revenue: Company restaurant sales $ 57,419 $ 193,992 Franchise and license revenue 79,437 109,303 Total operating revenue 136,856 303,295 Costs of company restaurant sales, excluding 55,724 163,943 depreciation and amortizationCosts of franchise and license revenue, excluding 44,414 55,929 depreciation and amortizationGeneral and administrative expenses 20,895 37,264 Depreciation and amortization 8,204 11,281 Operating (gains), losses and other charges, net 3,100 (35,368 ) Total operating costs and expenses, net 132,337 233,049 Operating income 4,519 70,246 Interest expense, net 8,898 10,789 Other nonoperating expense (income), net 12,328 (1,696 )Income (loss) before income taxes (16,707 ) 61,153 Provision for (benefit from) income taxes (2,755 ) 11,424 Net income (loss) $ (13,952 ) $ 49,729 Basic net income (loss) per share $ (0.25 ) $ 0.82 Diluted net income (loss) per share $ (0.25 ) $ 0.79 Basic weighted average shares outstanding 55,993 60,970 Diluted weighted average shares outstanding 55,993 62,937 Comprehensive income (loss) $ (42,209 ) $ 26,962 General and Administrative Expenses Two Quarters Ended(In thousands) 6/24/20 6/26/19Corporate administrative expenses $ 21,482 $ 25,305 Share-based compensation (26 ) 4,966 Incentive compensation 15 5,457 Deferred compensation valuation adjustments (576 ) 1,536 Total general and administrative expenses $ 20,895 $ 37,264

DENNY?S CORPORATIONReconciliation of Net Income (Loss) 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 operating performance on a period-to-period basis.The Company uses Adjusted EBITDA, Adjusted Free Cash Flow, Adjusted Net Income (Loss) and Adjusted Net Income (Loss) Per Share internally as performance measures for planning purposes, including the preparation of annual operating budgets, and for compensation purposes, including bonuses for certain employees.Adjusted EBITDA is also used to evaluate the ability to service debt because the excluded charges do not have an impact on prospective debt servicing capability and these adjustments are contemplated in the Company's credit facility for the computation of its debt covenant ratios. The Company defines Adjusted Free Cash Flow for a given period as Adjusted EBITDA less the cash portion of interest expense net of interest income, capital expenditures, and cash taxes. Management believes that the presentation of Adjusted Free Cash Flow provides useful information to investors because it represents a liquidity measure used to evaluate, among other things, operating effectiveness and is used in decisions regarding the allocation of resources.However,each of these non-GAAP financial measures should be considered as a supplement to, not a substitute for, operating income (loss), net income (loss) or other financial performance and liquidity measures prepared in accordance with U.S. generally accepted accounting principles.

Quarter Ended Two Quarters Ended(In thousands, except per 6/24/20 6/26/19 6/24/20 6/26/19share amounts)Net income (loss) $ (22,965 ) $ 34,239 $ (13,952 ) $ 49,729 Provision for (benefit (5,074 ) 6,767 (2,755 ) 11,424 from) income taxesOperating (gains), losses 1,627 (26,433 ) 3,100 (35,368 )and other charges, netOther nonoperating expense 9,565 (273 ) 12,328 (1,696 )(income), netShare-based compensation 1,511 2,713 (26 ) 4,966 Deferred compensation plan 1,940 385 (576 ) 1,536 valuation adjustmentsInterest expense, net 4,947 5,382 8,898 10,789 Depreciation and 4,058 5,048 8,204 11,281 amortizationCash payments forrestructuring charges and (690 ) (629 ) (1,374 ) (1,380 )exit costsCash payments for ? ? (3,211 ) (3,531 )share-based compensationAdjusted EBITDA $ (5,081 ) $ 27,199 $ 10,636 $ 47,750 Cash interest expense, net (4,717 ) (5,122 ) (8,437 ) (10,270 )Cash paid for income taxes, (53 ) (11,625 ) (277 ) (11,992 )netCash paid for capital (1,658 ) (3,668 ) (4,476 ) (11,483 )expendituresAdjusted Free Cash Flow $ (11,509 ) $ 6,784 $ (2,554 ) $ 14,005 Quarter Ended Two Quarters Ended(In thousands, except per 6/24/20 6/26/19 6/24/20 6/26/19share amounts)Net income (loss) $ (22,965 ) $ 34,239 $ (13,952 ) $ 49,729 Losses on interest rate 11,466 ? 11,466 ? swap derivatives(Gains) losses on sales of 12 (26,839 ) (1,058 ) (36,314 )assets and other, netImpairment charges ? ? 2,181 ? Tax effect ^(1) (2,168 ) 6,935 (2,396 ) 9,384 Adjusted Net Income (Loss) $ (13,655 ) $ 14,335 $ (3,759 ) $ 22,799 Diluted weighted average 55,686 62,082 55,993 62,937 shares outstanding Diluted Net Income (Loss) $ (0.41 ) $ 0.55 $ (0.25 ) $ 0.79 Per ShareAdjustments Per Share $ 0.16 $ (0.32 ) $ 0.18 $ (0.43 )Adjusted Net Income (Loss) $ (0.25 ) $ 0.23 $ (0.07 ) $ 0.36 Per Share

Tax adjustments for the reclassification of losses related to derivatives are calculated using an effective tax rate of 25.7% for the quarter and year-to-date periods ended June 24, 2020. Tax adjustments for all other(1 ) items for the quarter and year-to-date periods ended June 24, 2020 are calculated using an effective rate of 5.4% and 8.8%, respectively. Tax adjustments for the gains on sales of assets and other, net for the quarter and year-to-date periods ended June 26, 2019 are calculated using an effective tax rate of 25.8%.

DENNY?S CORPORATIONReconciliation of Operating Income (Loss) 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 Total 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 Total 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. Total 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.

Total 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 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 (loss), net income (loss) or other financial performance measures prepared in accordance with U.S. generally accepted accounting principles. Total 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 Ended Two Quarters Ended(In thousands) 6/24/20 6/26/19 6/24/20 6/26/19Operating income (loss) $ (13,527 ) $ 46,115 $ 4,519 $ 70,246 General and 13,153 18,453 20,895 37,264 administrative expensesDepreciation and 4,058 5,048 8,204 11,281 amortizationOperating (gains),losses and other 1,627 (26,433 ) 3,100 (35,368 )charges, net Total Operating $ 5,311 $ 43,183 $ 36,718 $ 83,423 Margin Total Operating Margin consists of:Company Restaurant $ (4,478 ) $ 15,617 $ 1,695 $ 30,049 Operating Margin ^(1)Franchise Operating 9,789 27,566 35,023 53,374 Margin ^(2) Total Operating $ 5,311 $ 43,183 $ 36,718 $ 83,423 Margin

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

DENNY?S CORPORATIONOperating Margins(Unaudited) Quarter Ended(In thousands) 6/24/20 6/26/19Company restaurant operations: ^ (1) Company restaurant sales $ 15,128 100.0 % $ 95,447 100.0 % Costs of company restaurant sales: Product costs 4,305 28.5 % 23,363 24.5 % Payroll and benefits 8,039 53.1 % 36,866 38.6 % Occupancy 2,728 18.0 % 5,498 5.8 % Other operating costs: Utilities 1,098 7.3 % 3,106 3.3 % Repairs and maintenance 428 2.8 % 2,080 2.2 % Marketing 607 4.0 % 3,239 3.4 % Other direct costs 2,401 15.9 % 5,678 5.9 % Total costs of company $ 19,606 129.6 % $ 79,830 83.6 % restaurant sales Company restaurant operating $ (4,478 ) (29.6 ) $ 15,617 16.4 % margin (non-GAAP) ^(2) % Franchise operations: ^(3) Franchise and license revenue: Royalties $ 6,719 26.8 % $ 26,672 47.3 % Advertising revenue 7,232 28.9 % 19,884 35.2 % Initial and other fees 1,346 5.4 % 1,755 3.1 % Occupancy revenue 9,736 38.9 % 8,126 14.4 % Total franchise and license $ 25,033 100.0 % $ 56,437 100.0 % revenue Costs of franchise and license revenue: Advertising costs $ 7,232 28.9 % $ 19,884 35.2 % Occupancy costs 5,829 23.3 % 5,512 9.8 % Other direct costs 2,183 8.7 % 3,475 6.2 % Total costs of franchise and $ 15,244 60.9 % $ 28,871 51.2 % license revenue Franchise operating margin $ 9,789 39.1 % $ 27,566 48.8 % (non-GAAP) ^(2) Total operating revenue ^(4) $ 40,161 100.0 % $ 151,884 100.0 %Total costs of operating revenue 34,850 86.8 % 108,701 71.6 %^(4)Total operating margin (non-GAAP) $ 5,311 13.2 % $ 43,183 28.4 %^(4)(2) Other operating expenses: ^(4)(2) General and administrative $ 13,153 32.8 % $ 18,453 12.1 % expenses Depreciation and amortization 4,058 10.1 % 5,048 3.3 % Operating (gains), losses and 1,627 4.1 % (26,433 ) (17.4 ) other charges, net % Total other operating expenses $ 18,838 46.9 % $ (2,932 ) (1.9 ) % Operating income (loss) ^(4) $ (13,527 ) (33.7 ) $ 46,115 30.4 % % (1 ) As a percentage of company restaurant sales. 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(2 ) 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 (loss), net income (loss) or other financial measures prepared in accordance with U.S. generally accepted accounting principles.(3 ) As a percentage of franchise and license revenue.(4 ) As a percentage of total operating revenue.

DENNY?S CORPORATIONOperating Margins(Unaudited) Two Quarters Ended(In thousands) 6/24/20 6/26/19Company restaurant operations: ^(1) Company restaurant sales $ 57,419 100.0 % $ 193,992 100.0 % Costs of company restaurant sales: Product costs 14,435 25.1 % 47,268 24.4 % Payroll and benefits 25,145 43.8 % 76,698 39.5 % Occupancy 5,891 10.3 % 11,282 5.8 % Other operating costs: Utilities 2,534 4.4 % 6,478 3.3 % Repairs and maintenance 1,217 2.1 % 3,968 2.0 % Marketing 1,726 3.0 % 6,946 3.6 % Other direct costs 4,776 8.3 % 11,303 5.8 % Total costs of company $ 55,724 97.0 % $ 163,943 84.5 % restaurant sales Company restaurant operating $ 1,695 3.0 % $ 30,049 15.5 % margin (non-GAAP) ^(2) Franchise operations: ^(3) Franchise and license revenue: Royalties $ 30,566 38.5 % $ 51,912 47.5 % Advertising revenue 24,758 31.2 % 38,826 35.5 % Initial and other fees 3,043 3.8 % 2,894 2.6 % Occupancy revenue 21,070 26.5 % 15,671 14.3 % Total franchise and license $ 79,437 100.0 % $ 109,303 100.0 % revenue Costs of franchise and license revenue: Advertising costs $ 24,758 31.2 % $ 38,826 35.5 % Occupancy costs 13,238 16.7 % 10,761 9.8 % Other direct costs 6,418 8.1 % 6,342 5.8 % Total costs of franchise and $ 44,414 55.9 % $ 55,929 51.2 % license revenue Franchise operating margin $ 35,023 44.1 % $ 53,374 48.8 % (non-GAAP) ^(2) Total operating revenue ^(4) $ 136,856 100.0 % $ 303,295 100.0 %Total costs of operating 100,138 73.2 % 219,872 72.5 %revenue ^(4)Total operating margin $ 36,718 26.8 % $ 83,423 27.5 %(non-GAAP) ^(4)(2) Other operating expenses: ^(4) (2) General and administrative $ 20,895 15.3 % $ 37,264 12.3 % expenses Depreciation and 8,204 6.0 % 11,281 3.7 % amortization Operating (gains), losses 3,100 2.3 % (35,368 ) (11.7 )% and other charges, net Total other operating $ 32,199 23.5 % $ 13,177 4.3 % expenses Operating income ^(4) $ 4,519 3.3 % $ 70,246 23.2 % (1 ) As a percentage of company restaurant sales. 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(2 ) 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 (loss), net income (loss) or other financial measures prepared in accordance with U.S. generally accepted accounting principles.(3 ) As a percentage of franchise and license revenue.(4 ) As a percentage of total operating revenue.

DENNY?S CORPORATIONStatistical Data(Unaudited) Changes in Same-Store Quarter Ended Two Quarters EndedSales ^(1)(increase (decrease) vs. 6/24/20 6/26/19 6/24/20 6/26/19prior year) Company Restaurants (64.9 )% 4.4 % (35.9 )% 2.9 % Domestic Franchised (56.1 )% 3.7 % (28.4 )% 2.5 % Restaurants Domestic System-wide (56.9 )% 3.8 % (29.1 )% 2.5 % Restaurants Average Unit Sales Quarter Ended Two Quarters Ended(In thousands) 6/24/20 6/26/19 6/24/20 6/26/19 Company Restaurants $ 246 $ 612 $ 890 $ 1,193 Franchised Restaurants $ 183 $ 419 $ 589 $ 821 Franchised Restaurant Unit Activity Company & Licensed Total Ending Units March 25, 67 1,628 1,695 2020 Units Opened ? 3 3 Units Closed ? (15 ) (15 ) Net Change ? (12 ) (12 ) Ending Units June 24, 2020 67 1,616 1,683 Equivalent Units Second Quarter 2020 62 1,622 1,684 Second Quarter 2019 156 1,543 1,699 Net Change (94 ) 79 (15 ) Franchised Restaurant Unit Activity Company & Licensed Total Ending Units December 25, 68 1,635 1,703 2019 Units Opened ? 11 11 Units Closed (1 ) (30 ) (31 ) Net Change (1 ) (19 ) (20 ) Ending Units June 24, 2020 67 1,616 1,683 Equivalent Units Year-to-Date 2020 64 1,627 1,691 Year-to-Date 2019 163 1,539 1,702 Net Change (99 ) 88 (11 ) Same-store sales include sales at company restaurants and non-consolidated franchised and licensed restaurants that were open the same period in the prior year. Total operating revenue is limited to company restaurant sales and royalties, advertising revenue, fees and(1 ) 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.

Investor Contact:Curt Nichols877-784-7167

Media Contact:Hadas Streit, Allison+Partners646-428-0629