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DENNY'S Corp (DENN)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered modest top-line growth with total operating revenue of $117.7M (+1.5% YoY) and adjusted EPS of $0.09; GAAP diluted EPS was $0.05 . Against Wall Street, DENN slightly missed on revenue ($117.657M vs $118.087M*) and EPS ($0.09 vs $0.108*) as consumer choppiness and pressure in key DMAs weighed on comps (Denny’s domestic system-wide SSS -1.3%) . Values retrieved from S&P Global.*
  • Management reiterated full-year guidance across SSS, openings/closures, G&A, adjusted EBITDA ($80–$85M), and share repurchases ($15–$25M), with CFO pointing to the low-end outcome and plans to resume buybacks in Q4 following expected refinancing by the Q3 call .
  • What worked: off-premise and digital remained a differentiator (21% mix; +150bps SSS impact), LTO value (BOGO then 4 Slams < $10) drove profitable traffic and return visits, and Keke’s comps rose +4% with strong new-market momentum .
  • What challenged: macro volatility and outsized pressure in Los Angeles, San Francisco, Houston, and Phoenix (nearly 30% of comp base) drove a sequential drag; company margins faced near-term headwinds from egg costs (easing), legal/medical reserves, and new café ramp inefficiencies .
  • Near-term stock catalysts: launch of the new points-based loyalty CRM late Q3 (targeting +50–100bps traffic over time), continued remodels with proven 6.5% traffic lift, and Q4 buybacks post-refinancing .

What Went Well and What Went Wrong

What Went Well

  • Off-premise and digital: Off-premise held at 21% of sales and contributed ~150bps to same-restaurant sales in Q2, supported by stronger digital conversion, third-party promotions, and virtual brands (including Nathan’s at ~70% of company restaurants) .
    “Our off premise business remains strong… smart investments in digital increased traffic to our website, improved conversion rates, and more effective promotions on third party platforms” .
  • Value strategy traction: March BOGO drove significant new and lapsed-user trial (70%+ of BOGO transactions from new/lapsed in Q1) and was extended through June 8; the summer “4 Slams under $10” continued to attract traffic and kept margins positive .
  • Keke’s momentum: System-wide SSS +4.0% with strong new-market performance (Nashville AUVs ~15% higher than system average; improving margin trajectory towards upper-teens), eight Q2 openings, and first-ever system-wide promotion that boosted weekday traffic .

What Went Wrong

  • Macro and DMA exposure: Denny’s domestic system-wide SSS declined (1.3%) as the top four DMAs (LA, SF, Houston, Phoenix) faced outsized pressure and reduced SSS by ~30bps; management expects moderation over time but remains cautious .
  • Company margin headwinds: Adjusted company restaurant margin was 11.5%, pressured by higher egg prices (~80bps product cost impact), legal/medical reserve adjustments (~115bps), and inefficiencies from multiple new café openings; normalized, margins would have been ~14% .
  • YOY profit compression: Adjusted EBITDA of $18.8M fell YoY from $20.0M, and adjusted EPS of $0.09 vs $0.13 in Q2 2024, reflecting margin pressures and fewer Denny’s equivalent units .

Financial Results

MetricQ4 2024Q1 2025Q2 2025
Total operating revenue ($USD Millions)$114.674 $111.637 $117.657
Operating income ($USD Millions)$14.454 $5.210 $8.572
Net income ($USD Millions)$6.796 $0.326 $2.470
Diluted EPS ($USD)$0.13 $0.01 $0.05
Adjusted net income ($USD Millions)$7.550 $4.195 $4.794
Adjusted EPS ($USD)$0.14 $0.08 $0.09
Adjusted EBITDA ($USD Millions)$22.151 $16.815 $18.787
Revenue ComponentsQ2 2024Q1 2025Q2 2025
Company restaurant sales ($USD Millions)$54.348 $53.900 $58.395
Franchise & license revenue ($USD Millions)$61.579 $57.737 $59.262
Total operating revenue ($USD Millions)$115.927 $111.637 $117.657
MarginsQ4 2024Q1 2025Q2 2025
Adjusted company restaurant operating margin (%)11.3% 9.1% 11.5%
Adjusted franchise operating margin (%)51.2% 50.9% 50.7%
Restaurant-level operating margin (%)32.3% 29.8% 30.7%
KPIsQ4 2024Q1 2025Q2 2025
Denny’s domestic system-wide SSS (%)1.1% (3.0%) (1.3%)
Denny’s company SSS (%)0.0% (0.9%) 0.0%
Denny’s domestic franchise SSS (%)1.2% (3.2%) (1.4%)
Keke’s domestic system-wide SSS (%)3.0% 3.9% 4.0%
Keke’s company SSS (%)N/A0.5% 3.4%
Keke’s franchise SSS (%)N/A4.9% 4.2%
Off-premise sales mix (% of sales)21% 22% 21%
Value incidence (% of sales)~19% ~20% just over 20%
Average guest check change (% YoY)+6.5% +2% +3%
Estimates vs Actuals (Q2 2025)ConsensusActual
Primary EPS Consensus Mean ($USD)0.108*0.09*
Revenue Consensus Mean ($USD)118,087,310*117,657,000*
Primary EPS - # of Estimates5*—
Revenue - # of Estimates5*—

Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Denny’s domestic system-wide SSSFY 2025(2.0%) to 1.0% (2.0%) to 1.0% Maintained
Consolidated restaurant openingsFY 202525 to 40 25 to 40 Maintained
Consolidated closuresFY 202570 to 90 70 to 90 Maintained
Commodity inflationFY 20253.0% to 5.0% 3.0% to 5.0% Maintained
Labor inflationFY 20252.5% to 3.5% 2.5% to 3.5% Maintained
Total G&AFY 2025$80M to $85M $80M to $85M Maintained
Corporate & admin (incl. 53rd week)FY 2025$60M–$62M; ~$1M related to 53rd week $60M–$62M; ~$1M related to 53rd week Maintained
Incentive compensationFY 2025$6M–$9M $6M–$9M Maintained
Share-based comp (non-EBITDA)FY 2025~$14M ~$14M Maintained
Adjusted EBITDAFY 2025$80M–$85M; includes ~$2M 53rd week $80M–$85M; includes ~$2M 53rd week Maintained; CFO guiding to low end
Share repurchasesFY 2025$15M–$25M $15M–$25M; resume in Q4 post-refinance Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024 and Q1 2025)Current Period (Q2 2025)Trend
Value promotions$2/$4/$6/$8 launched Aug-2024; strong performance; Q1 BOGO drove trial with ~70% new/lapsed users; April comps approx flat BOGO extended through June 8; summer “4 Slams under $10” maintained profitable traffic; value mix just over 20% Continuing; LTO value to offset macro
Off-premise & virtual brandsBanda Burrito +70bps SSS; off-premise 21% in Q4; digital enhancements boosted conversion Off-premise 21%; +150bps SSS; Nathan’s virtual brand added ~50bps at company restaurants Sustained strength
Loyalty CRMNew program targeted for back half 2025 Launch “late this quarter” (Q3); 1:1 personalization; expected +50–100bps traffic over time Near-term catalyst
RemodelsDiner 2.0 delivers ~6.5% traffic lift; 23 remodels in 2024 14 remodels in Q2; franchise ramping; more planned in 2H Accelerating
Commodities/eggsCommodity inflation ~3% in Q4 Egg pressure eased by Q2; commodity inflation held ~5%; expect abatement Moderating vs Q1 peak
Macro/DMAsStabilization in Q4; choppy start to 2025; tariffs/inflation pressure lower-income cohorts Top four DMAs (~30% comp base) faced outsized pressure, dragging overall SSS; management expects moderation Still choppy; cautious outlook

Management Commentary

  • “We have continued to stay nimble, innovate, and meet the guests where they are… Denny’s innovating its value platform… Keke’s expanded its portfolio 7% YTD… Despite near-term choppiness, we… delivered corporate administrative expense savings of approximately 3.5%… and refranchised three Keke’s company cafes” .
  • “Off-premise sales contributed a 1.5% improvement in same-restaurant sales during Q2… launch a new points-based loyalty program during the back half of this year… deliver between 50 to a 100 basis points in traffic over time” .
  • “We believe this initiative can deliver up to 200 basis points of savings over the next twelve to eighteen months” (cost savings across supplier negotiations, specs, recipes, packaging) .
  • “We intend to resume share repurchases in the fourth quarter… and ultimately achieve… $15–$25M” following refinancing targeted before the Q3 call .

Q&A Highlights

  • Guidance stance: Sales remain choppy, but management sees a path to the low end of SSS and EBITDA guidance through value, remodels, and CRM launch; July volatility noted but near-term trends improving .
  • Value mix and everyday vs LTO: Value incidence ~20%; LTOs (BOGO, Slams) drove sufficient traffic to offset discount drag; ongoing work to refresh everyday value platform while pulsing LTOs .
  • Pricing and mix: ~3% pricing largely rollover; BOGO mix ~4–5% with ~$0.30 check impact, net mix drag <50bps, offset by traffic .
  • Keke’s refranchising: Three Florida cafés refranchised (not via Seed & Feed), optimizing oversight; broader Seed & Feed still maturing with Nashville and Dallas pacing towards refranchising windows .
  • Margin bridge: Q2 company margins impacted by eggs, legal/medical reserves (~115bps), and new café ramp costs; normalized margin ~14%; G&A savings to accelerate in 2H .

Estimates Context

  • Q2 2025 results vs consensus: Revenue $117.657M vs $118.087M* (slight miss); EPS $0.09 vs $0.108* (miss). The miss reflects macro-driven comp softness in key DMAs and near-term company margin headwinds from commodities and new café ramps . Values retrieved from S&P Global.*
  • Implications: Street models may modestly trim near-term margin and comp assumptions, while keeping full-year ranges anchored to low end given reiterated guidance and identified 2H levers (CRM launch, remodels, off-premise strength) .

Key Takeaways for Investors

  • Off-premise and digital durability remains a competitive edge (21% mix; +150bps SSS), cushioning dine-in volatility and supporting margin resilience via late-night virtual brand economics .
  • Value cadence is working: BOGO and “4 Slams < $10” are pulling new and lapsed guests back; expect continued barbell merchandising to protect check while driving transactions .
  • Near-term margin headwinds are transitory: egg costs have eased, reserve items are non-structural, and new café inefficiencies fade as units mature; normalized Q2 company margin estimated ~14% .
  • Keke’s growth is accelerating: strong comps, brand sentiment, and new market AUVs support upper-teens margin targets; refranchising activity and expansion broaden the runway .
  • Guidance is intact; expect bias to low end: CFO reiterated ranges and flagged Q4 buybacks post-refinancing—a potential support to EPS and sentiment in 2H .
  • 2H catalysts: Loyalty CRM (late Q3), remodel-driven traffic lift (~6.5%), and continued digital/off-premise growth should improve comps and margins vs 1H .
  • Watch macro/geography: outsized exposure to CA/TX/AZ metros creates sensitivity to regional consumer pressure; continued monitoring of DMAs and cohort behavior remains prudent .

Additional References

  • Seasonal/Promotional PRs: Extension of BOGO and launch of summer 4 Slams under $10 .
  • Non-GAAP definitions and reconciliations: Adjusted EBITDA, adjusted net income/ EPS, and restaurant-level margins detailed; non-recurring items include legal settlements, pre-opening, other adjustments with tax effects .