GlobeNewswire Inc | Nov 2, 2021 04:05PM EDT

November 02, 2021

SPARTANBURG, S.C., Nov. 02, 2021 (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 third quarter ended September29, 2021 and provided a business update on the Companys operations.

John Miller, Chief Executive Officer, stated, "Our third quarter domestic system-wide same-store sales** were impacted due to increasing COVID-19 case counts during the period, however we are encouraged to see sales returning in October as cases have improved. Additionally, we gained great momentum through the launch of our revamped Dennys.com website and Denny's mobile app, our multicultural recruitment tour and the successful refinancing of our credit facility. Looking ahead, we are excited about initiating the next phase of our technology transformation with the rollout out of a new restaurant technology platform, in addition to beginning our new kitchen modernization initiative that will propel our menu innovation."

Third Quarter 2021 Highlights

-- Total operating revenue increased 44.9% to $103.8 million, primarily due to the COVID-19 recovery as compared to the prior year quarter. -- Domestic system-wide same-store sales** decreased 0.1% compared to the equivalent fiscal period in 2019, including a 0.3% decrease at domestic franchised restaurants and a 1.9% increase at company restaurants. -- Domestic system-wide same-store sales** increased 50.2% compared to the equivalent fiscal period in 2020. -- Opened seven franchised restaurants, including four international locations. -- Operating income was $17.7 million compared to $3.2 million in the prior year quarter. -- Franchise Operating Margin* was $29.9 million, or 52.1% of franchise and license revenue, and Company Restaurant Operating Margin* was $7.9 million, or 17.0% of company restaurant sales. -- Net income was $12.3 million, or $0.19 per diluted share. -- Adjusted Net Income* was $10.5 million, or $0.16 per share. -- Adjusted EBITDA* was $24.4 million compared to $8.0 million in the prior year quarter. -- Cash provided by (used in) operating, investing, and financing activities was $19.9 million, ($1.9) million, and ($18.6) million, respectively. -- Adjusted Free Cash Flow* was $14.3 million compared to $2.1 million in the prior year quarter. -- Provided guidance for full year 2021.

Current Trends

As COVID-19 cases subsided in fiscal October, domestic system-wide same-store sales** returned to pre-pandemic levels. However, labor availability continues to impact the Company's effective operating hours with approximately 45% of domestic restaurants currently open 24/7. Off-premise sales have remained strong at approximately 23% of total sales, compared to the pre-pandemic trend of 12%, supported by our two new virtual brands, The Burger Den and The Meltdown.

In an effort to provide greater transparency due to the COVID-19 pandemic, Denny's is providing the following tables that present monthly results for 2021 compared to the equivalent fiscal periods in 2019:

Domestic System-Wide Same-Store Sales** Compared to 2019 Fiscal Periods and Domestic Average Units for 2021 Fiscal Periods

Domestic System-Wide Same-Store Sales** System Year-to-Date October 2021^ 1: (6%) Jan Feb Mar Apr May Jun Jul Aug Sep Oct ^ 1System (31%) (25%) (9%) (2%) (3%) 1% 3% (2%) (1%) 1% 24/7 Units (20%) (16%) 2% 11% 11% 14% 15% 9% 9% 10%Limited Hour Units (38%) (32%) (16%) (11%) (12%) (8%) (7%) (10%) (10%) (9%) 1.October results are preliminary.



Domestic Average Units Jan Feb Mar Apr May Jun Jul Aug Sep Oct ^1System 1,504 1,501 1,501 1,499 1,498 1,497 1,495 1,493 1,495 1,494 24/7 Units 519 532 569 566 561 566 576 590 626 665Limited Hour Units 939 928 912 920 926 920 909 894 861 822 Temporary Closures 46 41 20 13 11 11 10 9 8 7 1. October results are preliminary.

Third Quarter Results

Dennys total operating revenue increased 44.9% to $103.8 million compared to $71.6 million in the prior year quarter. Franchise and license revenue was $57.3 million compared to $43.8 million in the prior year quarter. Company restaurant sales were $46.5 million compared to $27.8 million in the prior year quarter. These changes were primarily due to dine-in restrictions related to the COVID-19 pandemic in the prior year quarter.

Franchise Operating Margin* was $29.9 million, or 52.1% of franchise and license revenue, compared to $19.7 million, or 45.0%, in the prior year quarter. This margin increase was primarily due to the improvement in sales performance at franchised restaurants, partially offset by fewer equivalent units.

Company Restaurant Operating Margin* was $7.9 million, or 17.0% of company restaurant sales, compared to $0.5 million, or 1.7%, in the prior year quarter. This margin increase was primarily due to improvements in sales performance and the leveraging benefit of lower staffing at company restaurants.

Total general and administrative expenses were $16.5 million, compared to $13.7 million in the prior year quarter. This change was primarily due to increases in both performance-based incentive compensation and share-based compensation expense in addition to temporary cost reductions during the prior year quarter. These increases were partially offset by market valuation changes in the Company's deferred compensation plan liabilities compared to the prior year quarter.

The provision for income taxes was $4.1 million, compared to $0.8 million in the prior year quarter, reflecting an effective tax rate of 25.0%. Approximately $3.7 million in cash taxes were paid during the quarter.

Net income was $12.3 million, or $0.19 per diluted share, compared to $6.5 million, or $0.10 per diluted share, in the prior year quarter. Adjusted Net Income* per share was $0.16 compared to $0.01 in the prior year quarter.

Dennys ended the quarter with $184.8 million of total debt outstanding, including $170.0 million of borrowings under its credit facility.

Adjusted Free Cash Flow* and Capital Allocation

Dennys generated $14.3 million of Adjusted Free Cash Flow* after investing $2.2 million in cash capital expenditures, including maintenance capital.

In August 2021, the Company announced it had refinanced its amended and restated $350 million revolving credit facility to a new five-year $400 million credit facility. With the enhanced flexibility provided by the new credit facility, the Company relaunched its multi-year share repurchase program and allocated $6.6 million to share repurchases during the quarter.

Between the end of the third quarter and October 29, 2021, the Company allocated an additional $6.8 million to share repurchases resulting in approximately $235 million remaining under its existing repurchase authorization.

Technology Transformation and Kitchen Modernization Initiatives

Recently, the Company announced the next phase of its technology transformation, which included a revamped Dennys.com website and Denny's mobile app, bringing a more personalized and seamless digital experience with smart upsell and cross-sell capabilities. In addition, the Company intends to initiate the rollout of a new cloud-based restaurant technology platform throughout the domestic system which will allow for enhancements such as waitlist and table management, as well as lay the foundation for future technology initiatives to further enhance the guest experience. The rollout is expected to begin during the first half of 2022 and be substantially completed by the end of 2023.

The Company intends to upgrade and improve its kitchen equipment throughout the domestic system. The rollout is expected to begin during the first quarter of 2022 and be substantially completed by the end of 2022. This investment is expected to yield long-term benefits through menu enhancements across all dayparts but especially the dinner daypart with new comfort food offerings. The new equipment is also expected to provide immediate benefits through increased kitchen efficiency and productivity while also reducing food waste.

The total estimated domestic franchise investment for both the cloud-based restaurant technology platform and the kitchen equipment package is approximately $65 million. To assist franchisees, the Company has committed to investing approximately $10 million towards the cost and installation and has also negotiated favorable financing terms on behalf of its franchisees for the remaining cost.

Business Outlook

The following full year 2021 estimates reflect management's expectations that the current economic environment will not change materially:

-- Domestic system-wide same-store sales** decline of approximately 5% compared to 2019. -- Total general and administrative expenses between $67 million and $69 million, including approximately $13.5 million related to share-based compensation. -- Adjusted EBITDA* between $84 million and $86 million.

*Please refer to the Reconciliation of Net Income (Loss) and Net Cash Provided by (Used In) Operating Activities to Non-GAAP Financial Measures, as well as the Reconciliation of Operating Income (Loss) 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 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

Dennys will provide further commentary on the results for the third quarter ended September29, 2021 on its quarterly investor conference call today, Tuesday, November2, 2021 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.

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 September29, 2021, Dennys had 1,647 franchised, licensed, and company restaurants around the world including 153 restaurants in Canada, Puerto Rico, Mexico, the Philippines, New Zealand, Honduras, the United Arab Emirates, Costa Rica, Guam, Guatemala, El Salvador, Indonesia, and the United Kingdom. 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, social and political conditions that impact consumer confidence and spending with respect to social unrest and the COVID-19 pandemic; competitive pressures from within the restaurant industry; the level of success of the Companys 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 30, 2020 (and in the Companys subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K).

DENNYS CORPORATIONCondensed Consolidated Balance Sheets(Unaudited)

(In thousands) 9/29/21 12/30/20Assets Current assets Cash and cash equivalents $ 10,203 $ 3,892 Investments 2,082 2,272 Receivables, net 16,903 21,349 Inventories 1,230 1,181 Assets held for sale 1,627 1,125 Prepaid and other current assets 14,550 18,847 Total current assets 46,595 48,666 Property, net 81,897 86,154 Financing lease right-of-use assets, net 9,403 9,830 Operating lease right-of-use assets, net 131,616 139,534 Goodwill 36,884 36,884 Intangible assets, net 50,559 51,559 Deferred financing costs, net 3,123 2,414 Deferred income taxes, net 18,069 23,210 Other noncurrent assets 32,878 32,698 Total assets $ 411,024 $ 430,949 Liabilities Current liabilities Current finance lease liabilities $ 2,016 $ 1,839 Current operating lease liabilities 15,907 16,856 Accounts payable 15,152 12,021 Other current liabilities 56,985 46,462 Total current liabilities 90,060 77,178 Long-term liabilities Long-term debt 170,000 210,000 Noncurrent finance lease liabilities 12,825 13,530 Noncurrent operating lease liabilities 129,409 137,534 Liability for insurance claims, less current 9,037 10,309 portionOther noncurrent liabilities 89,330 112,844 Total long-term liabilities 410,601 484,217 Total liabilities 500,661 561,395 Shareholders' deficit Common stock 642 640 Paid-in capital 132,436 123,833 Deficit (159,896 ) (194,514 ) Accumulated other comprehensive loss, net (56,256 ) (60,405 ) Treasury Stock (6,563 ) ? Total shareholders' deficit (89,637 ) (130,446 ) Total liabilities and shareholders' deficit $ 411,024 $ 430,949 Debt BalancesCredit facility revolver due 2026 $ 170,000 $ 210,000 Finance lease liabilities 14,841 15,369 Total debt $ 184,841 $ 225,369

DENNYS CORPORATIONCondensed Consolidated Statements of Operations(Unaudited)

Quarter Ended(In thousands, except per share amounts) 9/29/21 9/23/20Revenue: Company restaurant sales $ 46,470 $ 27,849 Franchise and license revenue 57,324 43,795 Total operating revenue 103,794 71,644 Costs of company restaurant sales, excluding 38,569 27,370 depreciation and amortizationCosts of franchise and license revenue, 27,469 24,073 excluding depreciation and amortizationGeneral and administrative expenses 16,497 13,694 Depreciation and amortization 3,822 4,048 Operating (gains), losses and other charges, (215 ) (781 ) netTotal operating costs and expenses, net 86,142 68,404 Operating income 17,652 3,240 Interest expense, net 3,671 4,422 Other nonoperating income, net (2,368 ) (8,477 ) Income before income taxes 16,349 7,295 Provision for income taxes 4,084 818 Net income $ 12,265 $ 6,477 Basic net income per share $ 0.19 $ 0.10 Diluted net income per share $ 0.19 $ 0.10 Basic weighted average shares outstanding 65,447 63,793 Diluted weighted average shares outstanding 65,829 64,027 Comprehensive income $ 13,089 $ 7,489 General and Administrative Expenses Corporate administrative expenses $ 11,157 $ 9,820 Share-based compensation 3,352 1,998 Incentive compensation 1,893 1,290 Deferred compensation valuation adjustments 95 586 Total general and administrative expenses $ 16,497 $ 13,694

DENNYS CORPORATIONCondensed Consolidated Statements of Operations(Unaudited)

Three Quarters Ended(In thousands, except per share amounts) 9/29/21 9/23/20Revenue: Company restaurant sales $ 127,611 $ 85,268 Franchise and license revenue 162,924 123,232 Total operating revenue 290,535 208,500 Costs of company restaurant sales, excluding 106,546 83,094 depreciation and amortizationCosts of franchise and license revenue, 79,962 68,487 excluding depreciation and amortizationGeneral and administrative expenses 50,992 34,589 Depreciation and amortization 11,380 12,252 Operating (gains), losses and other charges, 204 2,319 netTotal operating costs and expenses, net 249,084 200,741 Operating income 41,451 7,759 Interest expense, net 12,014 13,320 Other nonoperating expense (income), net (16,165 ) 3,851 Income (loss) before income taxes 45,602 (9,412 ) Provision for (benefit from) income taxes 10,984 (1,937 ) Net income (loss) $ 34,618 $ (7,475 ) Basic net income (loss) per share $ 0.53 $ (0.13 ) Diluted net income (loss) per share $ 0.53 $ (0.13 ) Basic weighted average shares outstanding 65,413 59,350 Diluted weighted average shares outstanding 65,814 59,350 Comprehensive income (loss) $ 38,767 $ (34,720 ) General and Administrative Expenses Corporate administrative expenses $ 32,374 $ 31,302 Share-based compensation 10,212 1,972 Incentive compensation 7,011 1,305 Deferred compensation valuation adjustments 1,395 10 Total general and administrative expenses $ 50,992 $ 34,589

DENNYS CORPORATIONReconciliation of Net Income (Loss) and Net Cash Provided by (Used in) 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 (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 incentive compensation for certain employees. Adjusted EBITDA is also used in the calculation of financial covenant ratios in accordance with the Companys credit facility. Adjusted Free Cash Flow is also used as a non-GAAP liquidity measure by Management to assess the Companys ability to generate cash and plan for future operating and capital actions. Management believes that the presentation of Adjusted EBITDA, Adjusted Net Income (Loss), Adjusted Net Income (Loss) Per Share and Adjusted Free Cash Flow provide useful information to investors and analysts about the Companys 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 (loss), net income (loss), net cash provided by (used in) operating activities, or other financial performance and liquidity measures prepared in accordance with U.S. generally accepted accounting principles.

Quarter Ended Three Quarters Ended(In thousands) 9/29/21 9/23/20 9/29/21 9/23/20Net income (loss) $ 12,265 $ 6,477 $ 34,618 $ (7,475 ) Provision for (benefit 4,084 818 10,984 (1,937 ) from) income taxesOperating (gains),losses and other (215 ) (781 ) 204 2,319 charges, netOther nonoperating (2,368 ) (8,477 ) (16,165 ) 3,851 expense (income), netShare-based 3,352 1,998 10,212 1,972 compensation expenseDeferred compensationplan valuation 95 586 1,395 10 adjustmentsInterest expense, net 3,671 4,422 12,014 13,320 Depreciation and 3,822 4,048 11,380 12,252 amortizationCash payments forrestructuring charges (274 ) (1,032 ) (1,548 ) (2,406 ) and exit costsCash payments forshare-based ? (13 ) (1,565 ) (3,224 ) compensationAdjusted EBITDA $ 24,432 $ 8,046 $ 61,529 $ 18,682

DENNYS CORPORATIONReconciliation of Net Income (Loss) and Net Cash Provided by (Used in) Operating Activities to Non-GAAP Financial Measures(Unaudited)

Quarter Ended Three Quarters Ended(In thousands) 9/29/21 9/23/20 9/29/21 9/23/20Net cash provided by(used in) operating $ 19,858 $ (3,652 ) $ 63,229 $ (11,610 ) activitiesCapital expenditures (2,213 ) (1,000 ) (5,321 ) (5,476 ) Cash payments forrestructuring (274 ) (1,032 ) (1,548 ) (2,406 ) charges and exitcostsCash payments forshare-based ? (13 ) (1,565 ) (3,224 ) compensationDeferredcompensation plan 95 586 1,395 10 valuationadjustmentsOther nonoperatingexpense (income), (2,368 ) (8,477 ) (16,165 ) 3,851 netGains on investments 14 26 11 117 Gains (losses) onearly termination of (20 ) 10 52 (43 ) debt and leasesAmortization ofdeferred financing (258 ) (251 ) (946 ) (591 ) costsGains (losses) andamortization on 2,265 7,281 14,771 (4,185 ) interest rate swapderivatives, netInterest expense, 3,671 4,422 12,014 13,320 netCash interest (4,195 ) (4,698 ) (13,236 ) (13,135 ) expense, net ^(1)Deferred income tax (1,502 ) (1,200 ) (3,713 ) 2,505 (expense) benefitProvision for(benefit from) 4,084 818 10,984 (1,937 ) income taxesIncome taxes paid, (3,696 ) (268 ) (5,638 ) (545 ) netChanges in operatingassets and liabilitiesReceivables (3,425 ) 1,877 (4,182 ) (7,465 ) Inventories (49 ) (90 ) 49 (265 ) Other current assets 2,381 1,272 (4,296 ) 3,865 Other noncurrent (296 ) (368 ) 1,021 (474 ) assetsOperating leaseassets and 329 538 1,150 (1,231 ) liabilitiesAccounts payable (740 ) 8,003 (6,360 ) 8,540 Accrued payroll 530 (2,780 ) (1,462 ) 8,739 Accrued taxes (819 ) (1,683 ) (1,253 ) (971 ) Other accrued (1,241 ) (39 ) (5,890 ) 6,512 liabilitiesOther noncurrent 2,197 2,798 4,233 5,625 liabilitiesAdjusted Free Cash $ 14,328 $ 2,080 $ 37,334 $ (474 ) Flow

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,(1) respectively. Includes cash interest expense, net and cash payments of approximately $0.6 million and $1.1 million for dedesignated interest rate swap derivatives for the quarter and year-to-date periods ended September 23, 2020, respectively.

DENNYS CORPORATIONReconciliation of Net Income (Loss) and Net Cash Provided by (Used in) Operating Activities to Non-GAAP Financial Measures(Unaudited)

Quarter Ended Three Quarters Ended(In thousands, except 9/29/21 9/23/20 9/29/21 9/23/20per share amounts)Adjusted EBITDA $ 24,432 $ 8,046 $ 61,529 $ 18,682 Cash interest expense, (4,195 ) (4,698 ) (13,236 ) (13,135 ) net ^(1)Cash paid for income (3,696 ) (268 ) (5,638 ) (545 ) taxes, netCash paid for capital (2,213 ) (1,000 ) (5,321 ) (5,476 ) expendituresAdjusted Free Cash Flow $ 14,328 $ 2,080 $ 37,334 $ (474 ) Net income (loss) $ 12,265 $ 6,477 $ 34,618 $ (7,475 ) (Gains) losses andamortization on (2,265 ) (7,281 ) (14,771 ) 4,185 interest rate swapderivatives, net(Gains) losses on salesof assets and other, (93 ) (1,202 ) (1,100 ) (2,260 ) netImpairment charges ? 338 ? 2,519 Tax effect ^(2) 636 2,093 3,825 (1,142 ) Adjusted Net Income $ 10,543 $ 425 $ 22,572 $ (4,173 ) (Loss) Diluted weightedaverage shares 65,829 64,027 65,814 59,350 outstanding Diluted Net Income $ 0.19 $ 0.10 $ 0.53 $ (0.13 ) (Loss) Per ShareAdjustments Per Share $ (0.03 ) $ (0.09 ) $ (0.19 ) $ 0.06 Adjusted Net Income $ 0.16 $ 0.01 $ 0.34 $ (0.07 ) (Loss) Per Share

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,(1) respectively. Includes cash interest expense, net and cash payments of approximately $0.6 million and $1.1 million for dedesignated interest rate swap derivatives for the quarter and year-to-date periods ended September 23, 2020, respectively. Tax adjustments for the quarter and year-to-date periods ended September(2) 29, 2021 reflect an effective tax rate of 27.0% and 24.1%, respectively. Tax adjustments are calculated using an effective tax rate of 25.7% for the quarter and year-to-date periods ended September 23, 2020.

DENNYS CORPORATIONReconciliation 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 (loss) 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 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. 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 Ended Three Quarters Ended(In thousands) 9/29/21 9/23/20 9/29/21 9/23/20Operating income $ 17,652 $ 3,240 $ 41,451 $ 7,759 General andadministrative 16,497 13,694 50,992 34,589 expensesDepreciation and 3,822 4,048 11,380 12,252 amortizationOperating(gains), losses (215 ) (781 ) 204 2,319 and othercharges, netRestaurant-level $ 37,756 $ 20,201 $ 104,027 $ 56,919 Operating Margin Restaurant-levelOperating Margin consists of:CompanyRestaurant $ 7,901 $ 479 $ 21,065 $ 2,174 Operating Margin^(1)FranchiseOperating Margin 29,855 19,722 82,962 54,745 ^(2)Restaurant-level $ 37,756 $ 20,201 $ 104,027 $ 56,919 Operating Margin

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

DENNYS CORPORATIONOperating Margins(Unaudited)

Quarter Ended(In thousands) 9/29/21 9/23/20Company restaurant operations: ^(1)Company restaurant $ 46,470 100.0 % $ 27,849 100.0 %salesCosts of company restaurant sales:Product costs 11,430 24.6 % 7,106 25.5 %Payroll and benefits 17,404 37.5 % 11,925 42.8 %Occupancy 3,013 6.5 % 2,638 9.5 %Other operating costs: Utilities 1,660 3.6 % 1,281 4.6 %Repairs and maintenance 722 1.6 % 711 2.6 %Marketing 1,239 2.7 % 1,045 3.8 %Other direct costs 3,101 6.7 % 2,664 9.6 %Total costs of company $ 38,569 83.0 % $ 27,370 98.3 %restaurant salesCompany restaurantoperating margin $ 7,901 17.0 % $ 479 1.7 %(non-GAAP) ^(2) Franchise operations: ^ (3)Franchise and license revenue:Royalties $ 27,336 47.7 % $ 17,896 40.9 %Advertising revenue 18,215 31.8 % 13,927 31.8 %Initial and other fees 1,442 2.5 % 1,890 4.3 %Occupancy revenue 10,331 18.0 % 10,082 23.0 %Total franchise and $ 57,324 100.0 % $ 43,795 100.0 %license revenue Costs of franchise and license revenue:Advertising costs $ 18,216 31.8 % $ 13,927 31.8 %Occupancy costs 6,445 11.2 % 6,858 15.7 %Other direct costs 2,808 4.9 % 3,288 7.5 %Total costs offranchise and license $ 27,469 47.9 % $ 24,073 55.0 %revenueFranchise operating $ 29,855 52.1 % $ 19,722 45.0 %margin (non-GAAP) ^(2) Total operating revenue $ 103,794 100.0 % $ 71,644 100.0 %^(4)Total costs of 66,038 63.6 % 51,443 71.8 %operating revenue ^(4)Restaurant-leveloperating margin $ 37,756 36.4 % $ 20,201 28.2 %(non-GAAP) ^(4)(2) Other operating expenses: ^(4)(2)General and $ 16,497 15.9 % $ 13,694 19.1 %administrative expensesDepreciation and 3,822 3.7 % 4,048 5.7 %amortizationOperating (gains),losses and other (215 ) (0.2 ) % (781 ) (1.1 ) %charges, netTotal other operating $ 20,104 19.4 % $ 16,961 23.7 %expenses Operating income ^(4) $ 17,652 17.0 % $ 3,240 4.5 %

(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.

DENNYS CORPORATIONOperating Margins(Unaudited)

Three Quarters Ended(In thousands) 9/29/21 9/23/20Company restaurant operations: ^ (1)Company restaurant sales $ 127,611 100.0 % $ 85,268 100.0 %Costs of company restaurant sales: Product costs 31,149 24.4 % 21,541 25.3 %Payroll and benefits 47,339 37.1 % 37,070 43.5 %Occupancy 8,707 6.8 % 8,529 10.0 %Other operating costs: Utilities 4,275 3.4 % 3,815 4.5 %Repairs and maintenance 1,890 1.5 % 1,928 2.3 %Marketing 3,571 2.8 % 2,771 3.2 %Other direct costs 9,615 7.5 % 7,440 8.7 %Total costs of company restaurant $ 106,546 83.5 % $ 83,094 97.5 %salesCompany restaurant operating $ 21,065 16.5 % $ 2,174 2.5 %margin (non-GAAP) ^(2) Franchise operations: ^(3) Franchise and license revenue: Royalties $ 75,297 46.2 % $ 48,462 39.3 %Advertising revenue 50,926 31.3 % 38,685 31.4 %Initial and other fees 5,346 3.3 % 4,933 4.0 %Occupancy revenue 31,355 19.2 % 31,152 25.3 %Total franchise and license $ 162,924 100.0 % $ 123,232 100.0 %revenue Costs of franchise and license revenue:Advertising costs $ 50,927 31.3 % $ 38,685 31.4 %Occupancy costs 19,863 12.2 % 20,096 16.3 %Other direct costs 9,172 5.6 % 9,706 7.9 %Total costs of franchise and $ 79,962 49.1 % $ 68,487 55.6 %license revenueFranchise operating margin $ 82,962 50.9 % $ 54,745 44.4 %(non-GAAP) ^(2) Total operating revenue ^(4) $ 290,535 100.0 % $ 208,500 100.0 %Total costs of operating revenue ^ 186,508 64.2 % 151,581 72.7 %(4)Restaurant-level operating margin $ 104,027 35.8 % $ 56,919 27.3 %(non-GAAP) ^(4)(2) Other operating expenses: ^(4)(2) General and administrative $ 50,992 17.6 % $ 34,589 16.6 %expensesDepreciation and amortization 11,380 3.9 % 12,252 5.9 %Operating (gains), losses and 204 0.1 % 2,319 1.1 %other charges, netTotal other operating expenses $ 62,576 21.5 % $ 49,160 23.6 % Operating income ^(4) $ 41,451 14.3 % $ 7,759 3.7 %

(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.

DENNYS CORPORATIONStatistical Data(Unaudited)

Changes in Same-Store Sales ^(1) Quarter Ended Three Quarters Endedvs. 2019(Increase (decrease)) 9/29/21 9/29/21 Company Restaurants 1.9 % (6.4 ) % Domestic Franchised Restaurants (0.3 ) % (6.7 ) % Domestic System-wide Restaurants (0.1 ) % (6.7 ) % Changes in Same-Store Sales ^(1) Quarter Ended Three Quarters Endedvs. Prior Year(Increase (decrease)) 9/29/21 9/23/20 9/29/21 9/23/20Company Restaurants 67.7 % (40.2 ) % 54.1 % (37.4 ) %Domestic Franchised Restaurants 48.9 % (33.1 ) % 37.2 % (30.1 ) %Domestic System-wide Restaurants 50.2 % (33.6 ) % 38.3 % (30.7 ) % Average Unit Sales Quarter Ended Three Quarters Ended(In thousands) 9/29/21 9/23/20 9/29/21 9/23/20Company Restaurants $ 717 $ 423 $ 1,974 $ 1,313 Franchised Restaurants $ 424 $ 282 $ 1,166 $ 868 Franchised Restaurant Unit Activity Company & Licensed Total Ending Units June 30, 2021 65 1,580 1,645 Units Opened ? 7 7 Units Closed ? (5 ) (5 ) Net Change ? 2 2 Ending Units September 29, 2021 65 1,582 1,647 Equivalent Units Third Quarter 2021 65 1,578 1,643 Third Quarter 2020 66 1,608 1,674 Net Change (1 ) (30 ) (31 ) Franchised Restaurant Unit Activity Company & Licensed Total Ending Units December 30, 2020 65 1,585 1,650 Units Opened ? 13 13 Units Closed ? (16 ) (16 ) Net Change ? (3 ) (3 ) Ending Units September 29, 2021 65 1,582 1,647 Equivalent Units Year-to-Date 2021 65 1,581 1,646 Year-to-Date 2020 65 1,620 1,685 Net Change ? (39 ) (39 )

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(1) 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.

Investor Contact:Curt Nichols877-784-7167

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