Dine Brands Global, Inc. (DIN) Earnings Call Transcript & Summary

Hello, and welcome to the Annual Meeting of Stockholders of Dine Brands Global, Inc. Please note that today's meeting is being recorded. [Operator Instructions] It is now my pleasure to turn today's meeting over to Richard Dahl, Chairman of the Board of Directors of Dine Brands Global, Inc. Mr. Dahl, the floor is yours.

Thank you. Good morning, ladies and gentlemen. I am Richard Dahl, Chairman of the Board of Directors of Dine Brands. I would like to welcome each of our stockholders and invited guests to our annual meeting and express our appreciation for your attendance. Due to the unprecedented COVID-19 pandemic, we are holding this meeting virtually this year for the safety of our stockholders and invited guests. This virtual meeting is a first for Dine Brands. We hope you are all well and safe. Joining me on the line today are Steve Joyce, our Chief Executive Officer; and Bryan Adel, our Senior Vice President, General Counsel and Corporate Secretary. Bryan will assist me in the formal business to be brought before this meeting, and Steve will provide closing remarks. Please refer to the agenda, which sets out the order of business for today's meeting. I will first introduce the Board of Directors and the executive team. We will then move on to the formalities of the meeting, open the polls for voting and provide preliminary voting results. After the formalities of the annual meeting are done, we will adjourn the formal portion of the meeting, and Steve will provide closing remarks. Our stockholders in attendance may submit questions at any time via the virtual meeting notice interface. We will also conclude the meeting with a short Q&A session. Now I would like to recognize the members of the Board of Directors based on their length of service. They are in attendance virtually today also. Present today are Larry Kay, Larry is a private investor; Caroline Nahas, Caroline is the Senior Adviser to Korn/Ferry International and also serves as the Chair of the Nominating and Corporate Governance Committee; Gil Ray, Gil is a retired partner of the law firm of O’Melveny & Myers; Howard Berk, Howard is a partner at MSD Capital; Dan Brestle, Dan is the Senior Adviser of GF Capital Management and is retired Chief Executive Officer of Estee Lauder, Dan is the Chair of the Compensation Committee; Doug Pasquale, Doug is the Chief Executive Officer of Capstone Enterprises and Chair of our Audit Committee; Lilian Tomovich, Lilly is the former Chief Experience Officer and Chief Marketing Officer for MGM Resorts; and Sue Collyns, Sue is the President and Chief Financial Officer of Beachbody LLC. Now I would like to introduce the members of our team who are also in attendance: Tom Song, our Chief Financial Officer; Jay Johns, President of our IHOP Business Unit; John Cywinski, President of our Applebee's Business Unit; Greg Bever, Senior Vice President, Chief People Officer; and Steve Joyce and Bryan Adel, who I introduced earlier. Clearly, the focus of the company, the management and the Board is the crisis brought on by the coronavirus pandemic. The well-being of our guests, employees, franchisees and investors is of utmost importance and concern. I wish to assure you that the Board and management are working closely, ever so closely, to ensure that everyone's expertise is brought to bear on this crisis. I'm sure you have all read our first quarter earnings announcement. We have made some very tough decisions, and the Board is completely supportive of these actions. We appreciate and respect the strength and the can-do attitude of our team members, our franchisees and our vendors, knowing that together, we will succeed. I am proud to be a part of this company and this team. I thank them and all of you for your support. Now we will turn to the formalities of the meeting. I will act as the Chairman and Presiding Officer of the meeting, and Bryan will act as secretary. Mark Cano, a representative of Computershare, who is in attendance today, will act as the inspector of election. With that, this meeting is called to order. I will now turn the meeting over to Bryan. Bryan?

Good morning. We will now turn to item 2 of the agenda, the proof of Notice of the Meeting and the report on quorum. Computershare, the corporation's transfer agent, has presented a certified list of the corporation's stockholders as of March 18, 2020, the record date set for stockholders entitled to vote at this meeting. The list is available for inspection on the virtual meeting website. A certificate of the number of shares of common stock eligible to vote at this meeting has also been presented. Notice of this Meeting was given as of April 1, 2020, by mail along with instructions on how to access the corporation's proxy statement and annual report. Notice that this meeting was to be held virtually given via press release posted on the corporation's website and on the SEC's EDGAR database as of April 28, 2020. Computershare has reported that as of the record date, there were 16,593,808 shares of common stock of the corporation issued outstanding and entitled to vote. The inspector of election has confirmed that a majority of the shares eligible to vote are represented at this meeting, and I recognize the presence of a quorum. We now turn to item 3 on the agenda, the presentation of the annual meeting proposals. Proposal 1 is the election of Class 1 and Class 2 directors. The Board's nominees are: Howard Berk, Dan Brestle, Caroline Nahas, Gil Ray, Susan Collyns, Larry Kay and Doug Pasquale. These nominees are listed in our proxy statement along with a brief summary of their experience. The corporation received no other nominations. So I hereby declare the Board's nominees have been nominated. Proposal 2 is the ratification of the selection of Ernst & Young as the corporation's independent auditor for the 2020 fiscal year. Marc Roberts from Ernst & Young is on the call today. Proposal 3 is the approval on an advisory basis of the compensation of the named executive officers of the corporation. And Proposal 4 is a stockholder proposal to engage an investment banking firm to effectuate a spin-off of the corporation's IHOP business unit. I will open the polls for voting on proposals 1, 2, 3. If you've already voted, you do not need to vote again. If you would like to vote now or change your vote, please do so by following instructions provided on the virtual meeting portal. [Voting]

The polls are now closed for proposals 1, 2, 3. We have all of the votes. I have been advised that the inspector of election has completed the preliminary vote count for proposals 1, 2, 3 and that the votes cast at the meeting did not alter the results of the preliminary vote. I am pleased to announce that all directors have been elected, and proposals 2 and 3 have received at least the majority of the votes present or represented by proxy and entitled to vote. The inspector of election will make a final report of the precise vote for proposals 1, 2, 3, which will be included as part of the record of this meeting and filed with the Securities and Exchange Commission. Proposal 4, a stockholder proposal to engage an investment banking firm to effectuate a spin-off of the corporation's IHOP business unit was proposed by JCP Investment Partnership, LP. In light of the virtual meeting format, I will now present this proposal by reading the proposed resolution and supporting statement exactly as received by the corporation and included in the corporation's proxy statement. Please note that these were written by JCP Investment Partnership and reflects only their views. They are the sole responsibility of JCP Investment Partnership and do not reflect the views of management or the Board of Directors. Resolved, that the stockholders of Dine Brands Global, Inc. hereby request that the Board of Directors and Management act expeditiously, consistent with effective tax considerations, to engage an investment banking firm to effectuate a spin-off of the company's IHOP business segment into a separately traded public company. The supporting statement of JCP Investment Partnership reads as follows. We believe that the market significantly undervalues the company due to its segments, IHOP and Applebee's Grill & Bar, having vastly different growth opportunities. Based on the company's 2018 annual report filed on Form 10-K, the key performance indicators of IHOP's same-store sales and net unit growth have outpaced those of Applebee's by a material amount over the past 5 years. Based on its performance metrics, we believe that a stand-alone IHOP will be valued and classified as a growth company, which would allow IHOP to trade at a materially higher multiple than the company currently trades. Today, the company's valuation multiple is significantly discounted relative to its peers. Separating the IHOP and Applebee's businesses would allow the market to value each business as a pure play, in line with peer trading multiples in their respective sectors and allow the respective management teams to focus on each company's growth. We believe that the valuation increase and potential earnings increase for IHOP would vastly outweigh the existing synergies associated with keeping IHOP and Applebee's together. At the JPMorgan Gaming, Lodging, Restaurant & Leisure Conference on March 14, 2019, the company acknowledged that its valuation differs from peers. Even if improvements in operating metrics were to materialize, we believe the company would still trade at a discount relative to its potential value due to the widely divergent growth opportunities of its businesses. Further, a spin-off of IHOP would be similar to actions taken by a number of major restaurant companies over the last decade, including Brinker International's sale of On The Border and Darden Restaurant's sale of Red Lobster. Notably, both companies have experienced significant share price appreciation since such dispositions. We believe that a spin-off of IHOP into a separately traded public company could create significant stockholder value and urge stockholders to vote for this proposal. That concludes the supporting statement of JCP Investment Partnership. I will open the polls for voting on Proposal 4, a stockholder proposal to engage an investment banking firm to effectuate a spin-off of the corporation's IHOP business unit. If you have already voted, you do not need to vote again. If you'd like to vote now or change your vote, please do so by following the instructions provided for the virtual meeting portal. [Voting]

The polls are now closed for proposal 4. We have all of the votes. I have been advised that the inspector of election has completed the preliminary vote count for proposal 4, and that the votes cast at the meeting did not alter the results of the preliminary vote. Proposal 4 has not received a majority of the votes present or represented by proxy and entitled to vote. The inspector of election will make a final report of the precise vote for proposal 4, which will be included as part of the record of this meeting and filed with the Securities and Exchange Commission. Since the formal business of our meeting is now completed, I declare the formal portion of the annual meeting adjourned. It is my pleasure to now turn the meeting over to Steve Joyce for closing remarks.

Thank you, Bryan, and good morning, shareholders and stockholders. I hope everyone participating on the call is safe and doing well. We are just coming off our Dine Brands' quarterly earnings and investor calls where I provided, alongside my executive team, a comprehensive update on our current state of the business. I encourage you, if you did not listen on the call, to visit our website where you can download a recording of the call. This will give you a very detailed view of our latest business performance and insight into the current conditions we are facing. These are truly unprecedented times for our business. The physical distancing measures and government mandates, require restaurants to close dining rooms while only allowing for off-premise to go and delivery, has had a significant impact on our industry as a whole. I am tremendously proud of the resiliency, focus and commitment of our teams, our franchisees and the thousands of restaurant team members across the country in the communities in which we serve, each who have stepped up to work tirelessly on behalf of the company and brands during these trying times. I've truly seen the best of our people. Our response to the impact of the coronavirus is ongoing. And while the situation remains fluid, we will continue to work very closely with our franchisees on support measures and operational changes as states begin to reopen, allowing our restaurants to resume normal operations. As our brand presidents reported on the earnings call, we are pleased with the early dining room reopenings that have occurred in those states that have already opened in accordance with local regulations and in strict adherence to safety, sanitation and social distancing parameters as well as our new service protocols. As even more states prepare to reopen in the coming days and weeks, our franchisees and teams are continuing to apply best practice learning as we roll out measured and sequenced expansion across the country, and all activity will remain contingent upon activities taken by state and local governments. We continue to monitor the virus around the clock, making up-to-the minute decisions on how best to stay safe in our work and in our restaurants while also keeping critical operations running. Dine and our 2 strong brands are prepared to safely navigate the road ahead, and we look forward to welcoming guests back into our restaurants across America. To close, I want to say thank you to our shareholders for your continued investment in Dine Brands, to our guests for your continued support of our restaurants and to the entire system for all you do every day to serve guests and neighbors in communities around the world. With that, Susan, I'll turn it over to you to open up for Q&A.

And at this time, we do have one question in the queue. Our first question today comes from [ Pat Zerega ]. She says, we appreciate the steps that Dine Brands has taken to protect its workers and customers during these uncertain times. As states and businesses begin to reopen and resume operations, how will Dine Brands continue to ensure the health and safety of workers and customers, including will Dine continue to provide paid sick leave to all employees? Steve, do you mind taking that question?

Not at all. So obviously, an important consideration in today's times. Let me start by saying the obvious. Safety is our primary objective, safety for our team members in the restaurants, safety for our guests visiting those restaurants or doing off-premise dining and safety for all the Dine associates involved in those activities. We have done an unprecedented level of study to protect and save -- and serve all of those guests and our teammates in as safe a way as possible. We are changing and have changed procedures in the restaurants to ensure that we are using the most appropriate, up-to-date disinfectants and cleaning supplies to make sure that we have done everything we can to eliminate any trace of anything that could eventually harm a guest or a team member. We are mandating use of masks and gloves by all of our team members. We are practicing safe social distancing amongst those team members within the restaurant and the kitchen. We are pacing the parking lot as well as guests entering the restaurant, and we are doing everything we can to live up to not only the state and local mandates but the mandates of our brands as we see fit. Our franchisees are enormously concerned with delivering a great product but in a safe manner, and we have a full cooperation from everyone involved. In terms of sick leave, I'd remind the caller that we are mostly a franchise company, so the sick leave is mostly provided by their franchisees and they have their own set of policies but also have many long-term employees. So in a lot of cases, we do know they are providing health insurance. For our associates and team members in our restaurants, we continue to offer sick leave for anyone affected by the coronavirus. With that, I think that's the answer that I wanted to give, and I'm hoping that that responds to your question.

Thank you, Steve, for that. And at this time, we have no additional questions in the queue. So with that, we can conclude this call today. And Sydney, I will turn it back over to you.

The business portion of this meeting has been conducted. This concludes the meeting. You may now disconnect. Everyone, have a good day.