Denny’s(DENN) - 2025 Q1 - Quarterly Report

Financial Performance - Total operating revenue for the quarter ended March 26, 2025, was $111.637 million, a 1.5% increase from$ 109.974 million in the prior year period[79] - Net income for the quarter ended March 26, 2025, was $326,000, a significant decrease from$ 4.691 million in the prior year period[79] - Company same-restaurant sales decreased by 0.9% compared to the prior year, while domestic franchise same-restaurant sales decreased by 3.2%[81] - Operating income was $5.2 million for the current quarter, down from$ 10.0 million in the prior year period[99] Revenue Breakdown - Company restaurant sales increased by $1.6 million, or 3.0%, for the quarter ended March 26, 2025, primarily due to an increase of 11 Keke's equivalent units[85] - Franchise and license revenue for the quarter ended March 26, 2025, was$ 57.737 million, a slight increase of 0.2% from $57.632 million in the prior year[89] - Royalties decreased by$ 1.5 million, or 5.0%, primarily due to a 3.2% decrease in Denny's domestic franchise same-restaurant sales[89] - Initial and other fees increased by $1.1 million, or 58.3%, primarily due to the collection of a$ 0.6 million early franchise termination fee[91] Cost Analysis - Total costs of company restaurant sales as a percentage of company restaurant sales were 92.8% for the quarter ended March 26, 2025, compared to 91.9% for the prior year[85] - Occupancy costs as a percentage of company restaurant sales increased to 9.4% for the quarter ended March 26, 2025, from 8.7% in the prior year[87] - Franchise and license revenue costs increased by $1.0 million, or 3.6%, resulting in costs representing 49.1% of franchise and license revenue for the quarter ended March 26, 2025, up from 47.5% in the prior year[92] - General and administrative expenses decreased by$ 1.2 million to $20.0 million for the quarter ended March 26, 2025, primarily due to a$ 1.0 million decrease in deferred compensation valuation adjustments[94] - Total depreciation and amortization expense increased to $4.1 million for the quarter ended March 26, 2025, primarily due to new Keke's units[95] Cash Flow and Investments - Net cash provided by operating activities was$ 5.0 million for the quarter ended March 26, 2025, compared to $0.2 million for the same period last year[105] - Net cash flows used in investing activities were$ 7.2 million for the quarter ended March 26, 2025, including capital expenditures of $9.1 million[106] - The company recorded impairment charges of$ 3.2 million during the quarter, primarily related to closed franchise restaurants[97] - The company is investing approximately $4 million in a new cloud-based restaurant technology platform, with rollout expected to continue through 2026[114] Debt and Taxation - As of March 26, 2025, the company had outstanding revolver loans of$ 266.0 million and outstanding letters of credit of $16.1 million under its credit facility[111] - The effective tax rate for the quarter was 47.4%, compared to 24.6% for the prior year period, with an expected fiscal year effective tax rate between 22% and 26%[101] - As of March 26, 2025, the company's ratio of fixed rate debt increased from 4% to 89% of total debt due to swaps[119] - A hypothetical change of 100 basis points in interest rates would result in a$ 0.2 million change in annual cash flow and income before taxes[119] Market Risks - There have been no material changes in quantitative and qualitative market risks since the prior reporting period, except for fluctuations in the fair values of interest rate swaps[120] Company Overview - The Denny's brand consisted of 1,491 restaurants as of March 26, 2025, with 1,430 being franchised/licensed and 61 company-operated[76]