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DENN Nasdaq· Denny`s Corp
Earnings report Q3 2023

Denny's Corporation Reports Steady Revenue Growth in Latest Quarter

Segments of revenue

Denny's Corporation reported total operating revenue of $114.2 million for the quarter ended September 27, 2023, compared to $117.5 million in the same quarter of the prior year. This represents a slight decrease of $3.3 million or 2.8%. The company restaurant sales revenue amounted to $53.2 million, showing a modest increase of $0.9 million or 1.7% compared to the previous year's quarter. Franchise and license revenue, on the other hand, decreased by $4.2 million or 6.4% to $61 million.

Strengths

Despite the slight decline in total operating revenue, Denny's Corporation demonstrated resilience in its company restaurant sales segment. The increase of $0.9 million in company restaurant sales revenue can be attributed to a 2.1% growth in Denny's domestic franchise same-store sales during the quarter. This positive performance was driven by higher guest check averages resulting from price increases implemented to offset inflationary costs. Additionally, the acquisition made by the company in July 2022 contributed to a revenue increase of $0.3 million during the quarter.

Challenges

While Denny's Corporation experienced growth in company restaurant sales, its franchise and license revenue segment faced challenges. Franchise and license revenue decreased by $4.2 million, primarily due to a decline in initial and other fees. This decline resulted from a decrease in revenue from the sale of equipment to franchisees, as the company's kitchen modernization program neared completion. The decrease in revenue from initial and other fees amounted to $4.4 million for the quarter, representing a significant decline of 56.3%.

Noteworthy

Denny's Corporation witnessed a decrease in total costs of company restaurant sales as a percentage of company restaurant sales. This decrease indicates improved cost management, with costs amounting to 86.3% of company restaurant sales for the quarter, compared to 92.8% in the prior year's quarter. Additionally, product costs as a percentage of company restaurant sales decreased to 25.6% for the quarter, compared to 27.7% in the prior year's quarter. This decrease was primarily due to increased pricing and partially offset by higher commodity costs.

Summary

Denny's Corporation reported steady revenue growth in its company restaurant sales segment, driven by a 2.1% increase in domestic franchise same-store sales. However, the franchise and license revenue segment faced challenges, with a significant decline in initial and other fees. The company demonstrated effective cost management, resulting in a decrease in total costs of company restaurant sales. Overall, Denny's Corporation's performance in the latest quarter reflects its ability to navigate challenges while capitalizing on growth opportunities in the restaurant industry.

Source documents

Form 10-Q  filed on Oct 30, 2023
90 pages scanned

Reference data

Company financials Q3 revenue 115M
Analyst estimates Q3 EPS missed by -19.35%
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