Good day, and thank you for standing by. Welcome to the Q4 2021 Dine Brands Global, Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Ken Diptee, Executive Director, Investor Relations. Please go ahead.

Good morning, and welcome to Dine Brands fourth quarter and fiscal 2021 conference call. I'm joined by John Peyton, CEO; Vance Chang, CFO; John Cywinski, President of Applebee's; and Jay Johns, President of IHOP. Before I turn the call over to John, please remember our Safe Harbor regarding forward-looking information. During the call, management may discuss information that is forward-looking and involves known and unknown risks, uncertainties and other factors, which may cause the actual results to be different than those expressed or implied. Please evaluate the forward-looking information in the context of these factors, which are detailed in today's press release and 10-K filings. The forward-looking statements are as of today and assume no obligation to update or supplement these statements. We may also refer to certain non-GAAP financial measures, which are described in our press release and also available on Dine Brands' Investor Relations website. With that, I'll turn the call over to John.

Thanks, Ken, and good morning, everyone. On behalf of John, Jay and Vance, thanks for joining us. We're at a moment in time that reminds me of a Tale of Two Cities that I read in college. In our case, a Tale of Two Wins, it’s headwinds and tailwinds, both at the same time. Tailwinds because the guests are back in our restaurants and consumer intent to return is at its pandemic period high. Our new largely incremental off-premise business is holding steady at more than two times 2019, and restrictions are largely being rolled back across the country. Yet, at the same time, we're combating significant macroeconomic headwinds, inflation, the labor shortage, supply chain disruption, and now the war in Ukraine. That said, Dine is stronger than ever because we played both defense and offense over the past two years. Our investments in tech, menu simplification, and our off-premise business all position us for additional growth in 2022. COVID surprised us again late in Q4. Yet, despite the Omicron impact beginning in mid-December, we maintained our momentum in Q4 delivering another solid quarter. Today I'll share highlights of our Q4 and our full year results. I'll discuss the impact of Omicron and other macroeconomic challenges. I'll frame up the ways in which the past two years have made Dine stronger than ever before. And I'll recap our most important accomplishments of 2021. So, I'll begin by sharing the quarter’s highlights, including comp sales, EBITDA, cash flow, and development. First, for the second consecutive quarter, average weekly sales for IHOP and Applebee's both surpassed the comparable quarter for 2019. For the sixth consecutive quarter, Applebee's beat its comp set, while IHOP outperformed its category two out of four quarters last year. We recognized revenue of $229.6 million and EBITDA of $60 million, which reflects the momentum of our brands, our franchise model, and consumer commitment to returning to restaurants. For the full year, our brands opened 46 new restaurants globally and closed 96. That's our best net development performance since 2019, and an indication that franchisees are pivoting from defense back to offense. And for the 12 months ending December 2021, our asset-light model generated $191 million of adjusted free cash, that's an improvement of 79% compared to last year. So our Q4 and our full year results are impressive, particularly considering the virus and certain macroeconomic headwinds. Beginning in mid-December, Omicron briefly agitated staffing challenges and traffic before bouncing back in mid-February. At this point in time, the impact from Omicron is largely dissipated. We continue to see the impact of inflation on the cost of beef, poultry, pork products, oils, and eggs. In light of the situation in Ukraine, we're closely following energy costs. While we expect supply chain availability and pricing to moderate throughout 2022, the increases in cost of labor are likely to remain over the long term. Despite these headwinds, we are increasingly encouraged that we're at the beginning of the end of COVID. As we transition to the endemic phase of the virus, we're optimistic that the days of mask requirements, proof of vaccination, and capacity restrictions are behind us. Now let us focus on Dine and how we're emerging as stronger than ever from the past two years. And I think it's important to define what I mean by stronger. Strength is not only about the number of our brands' brick-and-mortar restaurants. Today, strength is all about in-restaurant technology, digital innovation, loyalty programs, and communicating and serving our guests on their terms, when, where, and how they prefer. In that context, I'll share examples of what we've done that has made us stronger. First, throughout the last two years, we've innovated the in-restaurant guest experience. For example, our hygiene and safety protocols are enhanced and will become the new standard. Guests can now put their names on our waitlist and pay their bills with their phones. Servers are now serving with handheld tablets, which help them with efficiency and speed of service. They also earn more money. This year we're rolling out IHOP's new point-of-sale system and Applebee's is projected to follow in 2023. The new POS includes a new kitchen management system and server tablet integration that provides a boost to front of house and back of house productivity, and improves guest service, helping servers earn more. The second reason we're stronger is because we've innovated the off-premise experience. Applebee's and IHOP grew takeout and delivery more than two times versus 2019. This is largely incremental business that we intend to nurture and grow. To-go packaging is also next-gen; it keeps food hot longer and it's designed to showcase our menu with supercharged technology investment and adoption. Throughout 2022, Applebees.com, ihop.com, flipd.com, and their associated mobile apps will all be brand new. We're changing back of house processes to better accommodate our higher off-premise volumes. For example, we've introduced Carside Express at Applebee's and curbside at IHOP. The Applebee's geofencing technology tracks guest proximity to the restaurants and shortens hand-off times. Importantly, we implemented a new CRM and digital platform that has vastly improved our digital marketing and marketing analytics, which serves as the foundation for our loyalty programs. Finally, we're stronger because we've streamlined operations and identified new sources of revenue that strengthen the financial performance of our franchisees. Today, our menus are streamlined by more than a third compared to pre-COVID. As a result, our kitchens are more efficient, there's less food waste, faster prep times, and improved quality and consistency of those items that remain. Second, our franchisees embraced outdoor dining and expanded their seating capacity with minimal investment in capital. Applebee's launched Cosmic Wings and IHOP is testing virtual brands Thrilled Cheese and Super Magazia in seven test markets, with even more markets coming online, providing incremental revenue to our franchisees. We work with our franchisees to expand our sales channels via ghost kitchens in the US and abroad. Most importantly, our asset-light model allows us to invest in what we do best: menu innovation, marketing, and technology, all for the benefit of our franchisees. So our scale is also uniquely Dine. Our IHOP and Applebee's purchasing co-op, for example, procures approximately $2 billion in goods and services annually, and this significant market footprint helps to mitigate to some extent supply chain availability and cost dynamics. Our scale enables us to invest more in technology than either Applebee's or IHOP could on their own. Finally, our world-class brands are also uniquely Dine. Applebee's and IHOP continue to gain share because guests trust us, love us and appreciate that we're focused on delivering delicious food at a great value while also providing experiences that are enjoyable and safe. I purposely focused my comments this morning on our results and our 2021 accomplishments. John, Jay, and Vance will do the same. That's because we're looking forward to sharing our plans for growth during our Investor and Analyst Day next Wednesday, March 9th at the Westin Grand Central in New York City or via our virtual broadcast. With that, I'll pass over to Vance, who will discuss our financial performance.

Thank you, John. As John mentioned, we're well positioned for growth, and I'm pleased to share with you our financial results. I'll start with a recap of our operating highlights and then provide a summary of capital allocation for 2021. Finally, I'll review our financial performance guidance for 2022. Starting with the income statement, franchise revenues for the fourth quarter were $162.9 million, compared to $134.8 million for the same period of 2020. That improvement was primarily due to an increase in royalty revenues, which reflects the significant recovery of our business over the last 12 months. Without advertising revenues, franchise revenues increased by 21%, mostly due to higher domestic franchise restaurant sales. Regarding our company restaurant operations, sales for the fourth quarter were $36.6 million, compared to $32.6 million for the same quarter last year. This was mainly due to an increase in customer traffic and average checks. Rental segment revenues for the fourth quarter were $29.1 million, compared to $27 million for the same quarter of 2020. The favorable variance was the result of an increase in percentage rental income based on franchisees' retail sales and a decline in level rent adjustments. Adjusted EPS for the fourth quarter was $1.32, compared to adjusted EPS of $0.39 for the same quarter last year. The improvement was from a 43% increase in gross profit, partially offset by higher G&A expenses. Now let me provide a little more detail on the increased G&A. As shared on our Q2 '21 call, we expect G&A to be higher in the second half relative to the first half of the year, mainly due to two factors. Number one, higher incentive compensation accrual; and number two, plans for burdened expenses for professional services and travel until the second half of 2021. Our Q4 G&A was $48.9 million, compared to $39.4 million for the fourth quarter of last year. Approximately 70% of the increase was due to our incentive compensation accrual. So now let's move to EBITDA. For 2021, consolidated adjusted EBITDA was $253.3 million, compared to $158.7 million in 2020. The increase was primarily due to improvements in our business, which led to increases in both total revenue and gross profit. Consolidated adjusted EBITDA for 2021 was also higher than our performance guidance. This was mainly due to lower than expected G&A expenses, a factor that we have built into our 2022 performance guidance. Now let's get to cash flow. We generated adjusted free cash flow of $191 million in 2021, comparing favorably to $106.6 million for 2020. Cash from operations for 2021 was $195.8 million, compared to $96.5 million for 2020. The improvement in both was primarily due to higher gross profit and favorable changes in working capital, partially offset by higher G&A expenses. It's important to note that as of December 31st, all of the remaining balance of $62 million of deferrals has been repaid to us by our franchisees in 2021. This includes royalties, advertising fees, and rent paid. This is a strong indication of the financial health of our franchisees. And of course, the collection of these deferred payments had a favorable impact on cash from operations. CapEx for 2021 was $16.8 million, compared to $10.9 million for 2020. Roughly half of our 2021 CapEx was in technology. Now let's go to the balance sheet. Our financial discipline has helped us maintain our strong cash position, giving us the flexibility we're looking for throughout the pandemic. We ended the fourth quarter with total unrestricted cash of $361.4 million. This compares favorably to unrestricted cash of $304.2 million at the end of the third quarter. Our leverage ratio also improved by half a turn. As of Q4, it was 3.86 times compared to 4.36 times in Q3. This represents Dine's lowest leverage ratio since the fourth quarter of 2015. Let me also share with you our inflation outlook at Dine. We continue to be impacted by inflationary pressures, just like the rest of the restaurant industry. For the fourth quarter of 2021, our year-over-year commodity inflation was approximately 17% on average across both brands. But looking ahead, we anticipate some moderation in commodity costs in the second half of this year. Based on current conditions and available information, we expect inflation for 2022 to be north of 10% for both brands compared to last year. As a reminder, it takes approximately 2% to 2.5% of menu price increases for our franchisees to cover about 10% of commodity inflation. Regarding capital allocation, we continue to create value for our shareholders. We do that by returning capital while investing in CapEx and G&A to unlock long-term growth. The steady improvement in our business in 2021 positions us to resume returning capital to shareholders. We paid the fourth quarter cash dividend of $0.40 per share or roughly $6.9 million in the aggregate on January 7th. We also repurchased 59,099 shares for approximately $4.5 million in the last 45 days of the year at a weighted average price of $75.81 per share. As of December 31st, there was approximately $66 million remaining on our current repurchase authorization. To build on that, so far in Q1 of this year, we have made two significant decisions for our shareholders. Number one, we stated last quarter that the $0.40 quarterly dividend represented a healthy starting point to grow from. As you can see from our financial results, our businesses are getting closer to a steady state. This enables us to approve a 15% increase in our quarterly cash dividend to $0.46 per share for the first quarter of 2022. The Board also approved the new share repurchase program, authorizing the company to repurchase up to $250 million of its common stock. The new authorization will replace the existing plan, which was approved in February of 2019. Lastly, I will review the highlights of our financial performance guidance for 2022, which assumes there are no further disruptions to our business due to COVID this year, other than the impact from Omicron in Q1. Please see the press release we issued today for complete details on our guidance. We believe that the current disruption in the restaurant landscape has created an opportunity for Dine to gain market share. We want to position ourselves to out-execute our peers. 2022 is an investment year; we are making upfront investments in technology, development, and new revenue channels for both brands. This will further position Dine for its long-term sustainable growth, even though the benefits of those investments may not be fully seen in this calendar year. For 2022, G&A is expected to range between approximately $188 million and $198 million, including non-cash stock-based compensation expenses and depreciation of approximately $30 million. We projected net unit development to range between 50 and 65 domestic restaurants. We expect unit development between five and 15 net new Applebee's restaurants, signifying the end of Applebee's plan, portfolio, and rationalization. Lastly, consolidated adjusted EBITDA for 2022 is expected to be between approximately $235 million and $250 million, inclusive of company and restaurant segment EBITDA. To close, our business has demonstrated strong improvement. The continued execution of our growth strategy and ability to consistently generate meaningful adjusted free cash flow makes us enthusiastic about the year ahead.

Hey, excuse me, one second, Vance. I'm going to jump in. There was a technical glitch. We understand that no one could hear you for about 30 seconds. Could you just cover that section again, because we missed you for about 30 seconds.

Sure. I think that was the number two, I said the Board also approved the new repurchase program, authorizing the company to repurchase up to $250 million of its common stock. The new authorization will replace the existing plan, which was approved in February of 2019. Lastly, I will review the highlights of our financial performance guidance for 2022, assuming there are no further disruptions to our business due to COVID this year, other than the impact from Omicron in Q1.

All right. Thanks. Good morning, everyone. 2021 was indeed an exceptional year for the Applebee's brand. After the pandemic briefly interrupted our momentum in Q1 of last year, Applebee's delivered comp sales increases of 10.5% in Q2, 12.5% in Q3, and 9.1% in Q4 versus our 2019 baseline. As with prior quarters, Q4 weekly results were very consistent with comp sales in the plus 9% to plus 13% range, except for the final two weeks of the year when Omicron's impact was quite evident. On a full-year basis, 2021 versus 2019, Applebee's posted a comp sales increase of 6.2%, representing our best performance under Dine ownership. This performance reflects weekly restaurant sales of $50,500, also our highest sales volume under Dine. While the brand retained record results on multiple fronts, I'm pleased to report that our company restaurant portfolio also delivered its best year in 2021, posting an 11% comp sales increase over 2019 and ranking number four among our 30 franchise partners. According to Black Box Intelligence, with the exception of only the first week of 2021, Applebee's outperformed the casual dining category for a remarkable 51 consecutive weeks last year by an average of 740 basis points. I should note that Applebee's also outperformed the category on a 2021 vs. 2020 basis by 960 basis points, with a comp sales increase of 38.2%. In addition to comp sales, Applebee's fundamentals remain rock solid as the brand continues to maintain category leadership on important attributes such as affordability, menu variety, convenience to go awareness, delivery awareness, and overall brand awareness. Now, on the off-premise front, Q4 weekly sales remained very stable at $13,800 per restaurant, more than double our pre-pandemic volume, accounting for 27% of total sales. Applebee's Q4 sales mix consisted of 73% Dine, 14% Carside To Go, and 13% delivery. With significant investments over the past few years and continued operational excellence, I'm now more convinced than ever that our off-premise business is a genuine core competency and a very leveragable point of difference for the Applebee's brand. In addition, we will soon be adding our third drive-thru pickup window, this one in Columbia, South Carolina, with plans for several more throughout the year. Although it’s a small sample size, preliminary results are very encouraging. On the delivery front, we started growing our Cosmic Wings virtual brands and DoorDash over the past several weeks on a market-by-market basis. At present, about 1,000 restaurants are now active on DoorDash, with the balance to follow this month. We anticipate completing Cosmic Wings delivery expansion in Q2 with the addition of GrubHub. Now on the development front, we closed 25 restaurants in 2021. That's our lowest closure total in five years, signifying the end of Applebee's planned portfolio rationalization. In addition, we opened five new traditional restaurants last year. We hope to double this number of new restaurant openings in 2022, with a combination of traditional and ghost kitchen units, marking the beginning of our development escalation moving forward. As we methodically reestablish our development pipeline, I expect to achieve net new unit growth beginning in 2023. As of the end of 2021, Applebee's had 15,078 restaurants in the US. Now, to help address very obvious ongoing labor challenges, we executed our second National Hiring Day on February 8th, with great success. In total, Applebee's secured more than 58,000 applications on a single day, surpassing our 40,000 total from last year. This, along with media muscle and supply chain expertise, represents just a few examples of how we are providing Applebee's with tremendous competitive advantage. Looking forward, we'll continue to leverage culinary, beverage, marketing, and media innovation as primary differentiators for the Applebee's brand. We closed out 2021 by driving awareness of our co-branded partnership with PepsiCo and Cheetos. And we kicked off 2022 by thanking our loyal guests for sticking with us throughout the pandemic. As we move through the year, you can expect a mix of targeted occasion-based messaging from Applebee's featuring noteworthy innovation and value propositions designed to reinforce our local presence. In total, I expect national media allocation to be very healthy this year and slightly favorable compared to last year from an absolute dollar perspective. To summarize, 2021 represents the culmination of our strategic brand optimization work over the past several years. As expected, 2021 provided us the opportunity to really unlock Applebee's full potential, providing a glimpse of what's possible moving forward. I'm proud of our team, and I'm very proud of our franchise partners. Applebee's is now exceedingly well-positioned to flourish on a sustained basis.

Thanks, John. Congratulations on another great quarter. Good morning, everyone. Average weekly unit sales improved each month of the fourth quarter. Sales remained strong, averaging approximately $37,500 per week, in line with the same quarter of 2019. Although IHOP's comp declined 3% in the fourth quarter, we view this as isolated and not a change in our solid fundamentals. There were several factors that adversely affected performance. The most impactful will include the surge in the Omicron variant in mid-December, along with standard operating hours in some restaurants due to labor shortages, rolling over the hugely successful tie-ins with MGM's animated film, Addams Family, which was IHOP's strongest promotion window during 2018 and 2019. Additionally, a four-week core menu print mismatch and weekday holiday mismatches for both Christmas and New Year's Day that fell on Saturdays in fiscal 2021, have significantly weighed on our performance. As mentioned earlier, COVID continues to affect the labor supply. With that said, IHOP remains approximately 85% to 90% staffed nationally. The percentage of our domestic restaurants that are open for standard operating hours improved by 3 percentage points at 86% compared to Q3, while approximately 26% are open and operating 24/7, which is consistent with our previous quarter. We believe that having any additional restaurants opened for standard operating hours could positively affect our dine-in business, which represents 76% of our sales mix for the fourth quarter. Our off-premise business remained steady, accounting for 24% of sales in Q4. Average weekly off-premise sales volumes for the fourth quarter of 2021 were approximately $9,300. This compares to sales volume of approximately $9,200 for Q4 of 2020. To enhance our one-to-one guest engagement, we will be launching our new loyalty program by the end of Q1 this year. It's a true earning-and-burning program that allows our guests to collect and redeem rewards when they dine with us. We believe this program will be a fun and appealing way to secure even stronger connections with our guests, build brand loyalty, and drive incremental visits. We've evolved our strategy to adapt to the changes in consumer behavior brought on by the pandemic. As a result, our plans to grow sales extend beyond traditional brick-and-mortar locations, expanding our presence through virtual brands out of our existing domestic restaurants, providing an opportunity to drive incremental sales with lower capital requirements. In the fourth quarter, we started setting two virtual brands in nine restaurants across Fort Worth, Phoenix, and Lexington, Kentucky. The early results are encouraging, and we recently launched a beta test in approximately 50 restaurants. These virtual brands, which intentionally do not compete with our breakfast day part business, require minimal new SKUs and some may necessitate new equipment to execute. We're enthusiastic about these flexible low-cost options to meet the convenience needs of our guests, and we look forward to providing updates on our progress. Turning to development, our franchisees opened 40 new restaurants globally in 2021, of which 37 were domestic openings. We remain confident in our ability to significantly expand our unit growth through our four development formats, which include traditional, non-traditional, a small prototype, and Flip by IHOP, all of which can be done in conversions. We opened our second Flip location in December in New York City, the unit is approximately 1,800 square feet with a seating capacity of about 20 seats. We'll provide more details on flips later in the year. In addition to growing our domestic presence, we're also focusing on key opportunities outside the US. We recently announced our first franchisee deal in the Caribbean. The first IHOP location in Nassau, The Bahamas, is scheduled to open in late 2022 through an agreement with Bahamas Limited, which calls for opening 59 IHOP restaurants over the next several years. Additionally, we announced a deal with status IHOP franchise in the US to develop both IHOP and Applebee's restaurants in the UAE. We also have IHOP's first ghost kitchen in North America in partnership with Ghost Kitchen brands. Our guests in Toronto can now enjoy a wide selection of portable menu items for off-premise consumption. To wrap up, I'm very proud of what we've accomplished in 2021. We outperformed our category in Q2 and Q3 by an average of 183 basis points relative to the comparable quarters of 2019, according to Black Box Intelligence. We adapted to the changes in consumer behavior by launching an array of highly portable items such as our new hand-crafted melts. We maintained a strong off-premise business even as guests returned to in-restaurant dining. We elevated our omni-channel approach to utilize our marketing resources better, and our franchisees opened 40 new restaurants, including the first two Flip by IHOP applications. I'd like to thank our team members and our franchisees for their valuable contributions in making all that happen. Looking ahead, I'm optimistic about strong unit growth potential and expanding our presence through virtual vehicles. Lastly, we're optimistic that new cases of COVID-19 will start to decline and staffing will return to pre-pandemic levels.

Thanks, Jay. Appreciate it. Great quarter for both IHOP and Applebee's. Before we have closing comments, I believe we're going to take some questions.

Our first question comes from the line of Brian Mullan from Deutsche Bank. Your line is now open.

Hey, thank you. Just in reference to the 2022 guidance. I appreciate you're not guiding same-store sales by brand today. But I think it would be helpful to understand the underlying assumptions on the top line that might lead one to either the high end or the low end of that EBITDA guidance. Whatever you'd like to talk about that would be helpful, either average weekly sales in relation to 2019 or any other ways that would help people know the underlying revenue assumptions that you're making?

Thanks, Brian. As you pointed out, we're not guiding on comps, but what goes into our guidance reflects the initiatives that we're working on: comp growth, development growth, and new revenue channels. I think margin expansion will happen over time beyond 2023 after some of these initiatives are realized, but it is an investment year for us. That's why we're not specifically guiding on comp performance. Having said that, we are seeing Omicron mostly behind us, so anything beyond Q1 is focused on growth for our restaurant going forward.

Okay, thank you. And then just a question on IHOP. It sounds like the percentage of locations that were open 24/7 didn't change much from the third quarter to the fourth quarter, if I heard you right, Jay, in the prepared remarks. So just wondering if you could update us on your current thinking on that topic today? I imagine as a franchisor, you want to get that fully restored. What is the franchisee perspective right now? And how are those conversations going?

Well, I'm confident we'll get back to the pre-pandemic level, but I just can't give you an answer to exactly when that will be. Clearly, the pandemic is waning. I think that staffing is improving slowly, and we're getting back to full standard operating hours as you heard me say that improved 3%. It is slowly getting better. Once we get to the full operating hours of the standard business, you'll have franchisees that will start opening more and more. Historically, our franchisees tend to start at standard hours, then they’ll move to what we call 24/2.

And Brian, it's John Peyton. I'll add that on a national basis, the last two quarters, Q3 and Q4 of last year, we indicated that our franchisees were about 85% staffed versus what was needed. What we're hearing now from our franchisees as we end the first quarter this year is that we're now approaching 90%, even a little bit better. So we are seeing an improvement in staffing nationally after stalling last year.

Understood. Thank you very much.

Thank you. Our next question comes from the line of Jack Corrigan from Truist Securities. Your line is now open.

Good morning, guys. Thanks for taking the questions. My first question is on G&A and the guidance for 2022. Can you just give a little more detail on the drivers of that? And maybe if there's anything unique in 2022 that might ease in 2023 and going forward? Also within that, could you quantify any level of permanent savings that you found during the pandemic?

Hey, Jack, it's John. I'll take it at a high level, and then I'll turn it over to Vance for a bit more specifics on the numbers. When it comes to G&A in '22, there are a couple of things we want to invest in, and we believe these investments will pay off over the long-term. They're not a permanent increase to our G&A, but they're certainly investments we think are necessary right now in 2022. One of them is technology, whether it's restaurant-based technology, back-of-house, or front-of-house. We have ambitious plans for the consumer-facing technology that we want our guests to be able to use on their phones.

Yeah. I think the 2022 guidance really reflects the appropriate level of infrastructure we need to unlock the growth potential of our brand. We do not anticipate another big increase in G&A beyond what we currently plan for this year. We'll cover more of this on our Investor Day next week. Ultimately, as I mentioned earlier, we do see margin expansion over time as a result of the expected growth from comp, development, and new revenue channels that we are investing in.

Great. Thanks. That's really helpful color. My second question is really on the health of your franchisees. Could you talk about what the franchisee store-level profitability was in 2021 versus pre-COVID?

I’ll start by addressing the inflation topic. As I noted earlier, we expect the average inflation for the year to exceed 10%, specifically around 13% for Applebee's and 9.5% for IHOP. We anticipate some moderation in the latter half of the year compared to the first half. To assess the financial health of our franchisees, we can highlight that all deferred payments have been repaid, indicating a return to growth in their development.

Jack, this is John Cywinski. I would state very clearly, Applebee's franchisee financial health is better than at any point in my five-year tenure here, coming back a second time. They had a terrific year. With respect to covering inflation, they're smart and strategic, and they will be very responsible on pricing. I view this as a market share opportunity going forward.

Great. Thank you.

Thank you. Our next question comes from the line of Nick Setyan from Wedbush. Your line is now open.

Thank you, congrats on a solid Q4. But I think the EBITDA guidance is a bit of a concern because you're going down year-over-year. And understanding it's a year of investment, can you give us a sneak peek of your longer-term expectations around EBITDA growth beyond 2022, if that's possible?

Hi Nick, this is Vance. We will cover a lot more of this at our Investor Day. But as I said, 2022 is an investment year for us. The reason why the margin is down year-over-year is because we're making upfront investments in the business while the benefits of these initiatives happen over time. So it's more of a timing mismatch. We believe 2023 and beyond is more reflective of our run rate business. We think this year is a year to be aggressive with how we think about the future for the next few years, setting ourselves up for long-term sustainable growth.

Understood. Have you purchased any shares year-to-date?

We have an active repurchase program that's been previously approved, which we initiated in late Q4 of last year, and we continue to do so this year. We obviously announced the new $250 million share repurchase program that will be coming up, and we'll continue to do so. It's a big part of our capital return program and part of our overall strategy to increase our earnings per share over time.

Okay. And then you talked about 2% to 2.5% menu price across the system, if I understood correctly. Do you think that will be higher as the year progresses, just given the inflation that you're talking about?

Hey, Nick, John Cywinski here. I don't see this as a fluid environment. Our franchise partners tend to be very strategic and disciplined in their pricing, viewing this as a market share opportunity. I don't see an overreach on that part, but I see some point moderation in pricing. It would be hard to forecast at this point.

Thank you.

Thank you. Our next question comes from the line of Eric Gonzalez from KeyBanc Capital. Your line is now open.

Hey, if I can follow up on some of the G&A and CapEx investments. I'm wondering about the technology side of it. Is there a way that you're planning to recoup that investment in terms of fees charged to franchisees or any type of transaction fee in the future?

Yeah. Hey, Eric, I'll take that. It's John Peyton. The answer is no. The value that we add as a franchisor is the tech platform that we've built. Generally speaking, the cost of building the platform is ours, and the annual service fees and maintenance once we roll it out are the franchisees'. We view this as part of our value proposition, which is the investments we make in tech on their behalf. Because Applebee's and IHOP are part of Dine, we can do more for both brands than either brand could do on their own when it comes to investments in tech.

Okay. Fair enough. And then on the inflation commentary, I think you said maybe slightly higher than 10%. Can you comment on what you might have locked in for the year and how much visibility you have on that 10% compared to prior years?

So on the inflation point, prior year, I think in 2021, what we saw was about close to 7% for Applebee's and 6% for IHOP. We don't control menu pricing for our franchisees; they do so independently. It’s a fluid situation. The best example I can give is in my prepared remarks: 2% to 2.5% of menu pricing increase covers about 10% of inflation cost. Our franchisees are aware of the math and will take a very disciplined approach to menu pricing increases going forward.

Eric, this is John Cywinski. I'd argue that both brands are extraordinarily well-positioned to navigate an inflationary environment given our scale.

All right. Thanks.

Thank you. Our next question comes from the line of Jeffrey Bernstein from Barclays. Your line is now open.

Great. Thank you very much. First, I wanted to follow up on that last comment about the 2% to 2.5% price. Clearly, that's the math of what it takes to mitigate, I guess, 10% basket inflation. Just wondering if you could share what the actual pricing is? I know the franchisees get to make their own decisions, and like you said, they are encouraged to be disciplined and strategic. But what's the pricing perhaps in the first quarter of '22 looking like for each brand?

Yeah. Hey, Jeff, it's John Peyton. We haven't seen Q1 yet for this year, but typically, franchisees in both brands raise prices by 1% to 3% a year. Last year, particularly in the back half, it was 3% to 4%. So they did increase 100 basis points or so compared to what they had historically done. Importantly, both of our brands are value brands. While our franchisees independently make pricing decisions, they are aligned on balancing a tightrope between maintaining value for our customers and protecting their margins as best they can.

Understood. A couple of questions just on the cash usage. One relates to the CapEx spend; it looks like guidance is to roughly double versus 2021. I'm just wondering what the biggest components of the incremental spend are in '22? Whether that's some components of the technology or the company-operated side of the business? Just trying to gauge the increase in CapEx guidance.

Yeah. The key investment areas for CapEx are on-premise and off-premise technology to improve guest experience and operational efficiency. That's probably the bigger piece. We're spending money on our loyalty program, on CRM infrastructure, and then there's a part that's on our company-owned restaurants.

Got it. Lastly, as it relates to cash usage beyond CapEx, I know you mentioned your leverage, I think you said it’s the lowest since 2015. So with that as a backdrop, just wondering what your outlook is for that? And specifically, I know you raised the dividend, and you got a share repurchase program. I'm just wondering whether this is now the more normal steady-state dividend we should expect or whether you think there's further upside to go on that dividend?

Sure. We've said this before, our disciplined approach to cash utilization is our objective over the next few quarters to evaluate and balance our capital allocation strategy based on: one, investment in business and technology; two, returning capital to shareholders; making sure our leverage level is appropriate; and fourth, maintaining financial flexibility to address any remaining uncertainty from the pandemic or inflation in labor and supply chain issues that we're seeing right now. We increased our cash dividends by 15% last quarter. We currently have about a 2% to 3% dividend yield, depending on the stock price we used for that calculation. We believe this is an attractive yield relative to our peers, but we have plans to further increase our dividends over time. Our level of annual repurchases will be opportunistic and based on our view of the company’s intrinsic value and the trading environment.

And Jeff, it's John Peyton. I'll just put a little bit of a bow on that if I can. I think what's implied in the question is, is $400-plus million the cash balance that we intend to sit on long-term. The answer is no; this is just a moment in time. We were accumulating cash during the two years of the crisis to make sure that we had what we needed, not knowing what the future would bring. Last year, the recovery happens much more quickly than the industry anticipated. So we had a good year last year as well. Over the next couple of quarters, we're now looking to take a very holistic but balanced approach to how we work with that cash balance.

Great. Thank you for taking my question. Building on Jeff's question there, as you think about the initiatives and the investments. How should we think about what kind of savings and contributions we can see from some of these tech investments, especially as it relates to labor and what kind of drivers we could see from some of your initiatives that you discussed, whether it's on or off-premise?

The labor initiatives will impact the franchisee financials, and we're putting better interest into making sure that the health of our franchisees is taken care of. You probably won't see that in Dine's financials. But the result of these investments will happen over time. Ghost kitchens and the virtual plans we're working on will happen throughout the year. Comp will continue and all will continue. So that's where the growth of our investment will come in hopefully over the next 12 to 18 months. I mentioned earlier that the 2022 calendar year guidance looks down because we're making upfront investments from the start.

And Brett, it's John Peyton. I'd like to add that technology is meant to do two things. Vance was clear that at the franchisee level and at the restaurant level, it's certainly going to help with costs by making back-of-house and front-of-house more efficient. The benefit to Dine is on the top line. We're helping franchisees grow their business, which obviously helps us grow our franchise revenue. For example, the technology investment to support IHOP's soon-to-be-announced loyalty program is expected to drive traffic and benefit us.

Thank you.

Hey, good morning, everybody. I just want to go back. I think the call cut out in a different spot than maybe John, where you reset it to. For us, on this and it cut out as soon as Vance started talking about G&A, $188 million to $198 million. I didn't know if you wanted to take a second here to get that into the transcript of the call here?

Yeah. I was saying G&A is $188 million, $198 million, including non-cash stock-based comp and depreciation of approximately $30 million. I mentioned that the range is inclusive of G&A related to the company restaurant segment. Our projection also includes some G&A spend from 2021 that was pushed to 2022. That was the comment I made on G&A. CapEx, I said we're expecting to raise between $33 million and $38 million, reflecting the additional investments in the business that we discussed earlier.

Okay, great. Thanks, Vance. Can you quantify for us that amount that slid out of Q4 '21 and into '22 as we're evaluating? Maybe what the component of the jump is that you intended to spend this year, but weren't able to?

It’s open positions in different departments that were planned for 2021 that we still plan to pursue in 2022. It’s not a material amount but does contribute to the 2022 guidance.

Okay, great. And then John, on Cosmic Wings, I know you spoke to the rollout, I think, on the second platform in Q2. So I just guess what will the presence be across the two platforms when that's completed? And just thoughts and I'm sure you'll share more details next week on what type of sales layer Cosmic could be for after this?

The rollout is tough to gauge right now because we encountered a supply interruption on the wings front, so we couldn't put that to metal. We started with Uber, then we began deployments with DoorDash. By the time we get into Q2, we will have full deployment across all three of the largest delivery providers. At that point, we'll have a clear view of the potential of Cosmic Wings in terms of average weekly sales and the sustained incremental impact on the business.

Okay. Fair enough. And then Jay, just a quick question. Can you walk through loyalty timing again, and maybe a little on the structure of the program, how the customer gains points? And when we should start to see whatever revenue benefit we would see from loyalty hitting IHOP? Thank you.

Yeah. Thanks, Todd. The program should launch by the end of Q1. We're very close to that. It'll be a true earning-and-burning program, allowing guests to collect rewards based on their spending. We believe this will create stronger connections with our guests, build brand loyalty, and drive incremental visits. There will be months where we expect to see meaningful traffic increase from this, and we'll provide more specific updates on revenue impact at our conference next week.

Okay, perfect. Look forward to seeing you all next week. Take care.

Thank you.

Thank you. Our next question comes from the line of Brian Vaccaro from Raymond James. Your line is now open.

Thanks, and good morning. I was hoping you could clarify back to the G&A and CapEx guidance. Thinking about the increase in each, is there a way to ballpark how much of the increase is related to corporate infrastructure investments versus direct co-investments at the store level, whether it be helping to pay for new POS or other equipment?

The CapEx guidance does not include incentive program. We're not paying for the hardware costs, like tablets or POS hardware themselves.

Okay. Got it. And just lastly, regarding your leverage, do your targets differ at all from the company's historical leverage sort of in that five times debt to EBITDA? I know you're a little lower than that now. Just remind us when the make-whole expires on your existing notes? Is there an opportunity to refinance at some point moving through '22?

Our 2024 bonds become non-callable at par, and at par our 2026 bond becomes callable at 101 in June of 2022. We have a one-year window for us to exercise the call option, and we'll monitor it closely. We think we're at the right leverage level right now. Our DSCR is 4.7 times this year, and we're doing just well.

Thanks so much. Thanks, everybody, for joining our call today. A big thank you to our management team on the call today and across the country, to our franchisees and team members for their hard work to deliver another strong quarter. We're looking forward to our entire leadership team being in New York next week. We'll have members of our Board there and some leaders from our franchisee community. I look forward to spending time with you, telling you our story about the future at our Investor Conference in New York City and also sharing with you some of the best of IHOP and Applebee's cuisine, so come for breakfast and lunch as well. Thanks very much, and we look forward to seeing you next week.

This concludes today's conference call. Thank you for participating. You may now disconnect.