Hello, and welcome to the First Quarter 2021 Dine Brands Global Earnings Conference Call. My name is Christian, and I’ll be your conference operator today. After the speaker's presentation, there will be a question-and-answer session. But we ask that you please limit your question to one and one follow-up.

Please also note that today's conference is being recorded. I will now turn the call over to Mr. Ken Diptee, Executive Director of Investor Relations. Sir, you may begin..

Good morning, and welcome to Dine Brands First Quarter 2021 Conference Call. I'm joined by John Peyton, CEO; Allison Hall, Interim CFO and Controller; Jay Johns, President of IHOP; and John Cywinski, President of Applebee's. 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-Q filings. The forward-looking statements are as of today and assumes 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' website. With that, I'll turn the call over to John..

Thanks, Ken. Good morning, everyone, and thanks for joining us today. When we spoke last quarter, I shared my belief that the industry and our brands in particular were on the cusp of a restaurant renaissance. And our headline today is that the renaissance is here.

I love this notion of renaissance because it's all about resurgence and creativity and pushing beyond established boundaries. And that's exactly what we're doing at Dine Brands. We're changing the way people think and we are turbo-charging creativity and experimentation.

A willingness to learn and adapt is flourishing throughout our organization, I see it every day from our franchisees to our company staff to the restaurant teams, our general managers and our servers. And that's why I'm [Audio Dip] company and our franchisees.

I'm proud of our management team and I'm especially proud of the thousands of hardworking restaurant team members around the world. Now as I look back on the first quarter, it's remarkable how we continue to persevere and grow.

Our brands posted meaningful improvements during the first quarter and on this call, Allison, John, Jay and I will be comparing comp sales to the same period in 2019 due to the pandemic’s profound distortion of 2020 sales.

So let me share those results through the lens of store sales, total revenue and cash generation because obviously each one leads to the next. So first, sales. Average weekly sales at both IHOP and Applebee's exceeded pre-pandemic levels, several different times during the first quarter.

According to Black Box, and this is impressive, Applebee's increase in same-store sales for Q1 outperformed the casual dining segment.

Off-premise; in March, both IHOP and Applebee's off-premise sales reached absolute dollar levels higher than when the restaurants were 100% off-premise in 2020, indicating the staying power of this largely incremental business.

Revenue; we achieved revenue of $204.2 million and EBITDA $58.1 million, reflecting strong underlying performance across our business. Cash; we generated free cash flow of $30.7 million, which in part enabled us to repay our $220 million revolver in early March.

And also importantly, our franchisees opened 10 new restaurants during the quarter, indicating that they're beginning to pivot towards growth. We're very encouraged by our Q1 performance and we're certainly optimistic that economic tailwinds will sustain us throughout 2021. Contributing to that view is historically high consumer savings.

The federal spending that we've been enjoying as well as a new potential infrastructure bill, the unemployment rate is the lowest since the pandemic began. And with vaccinations rising, the economic growth that looks firming in the strength and resilience of our brands.

I'm confident that we'll build on the strong Q1 performance to drive market share gains and deliver profitable growth throughout the year. Now our fundamental strengths are something many CEOs would love to have. Number one, we are an asset-light 98% franchise model that is a significant generator of cash.

Second, we've got two iconic world-class brands that are number one in both the casual and family dining categories. And third, we've got the most talented, most resilient team members in the industry today, along with the next generation of workers still to be hired.

And as tough as the past year has been, the pandemic actually gave us new competitive competencies. Here's what we have today that no one could have even imagined pre-COVID. We've got significant incremental off-premise business in both brands.

Our teams moved quickly and aggressively to add the tech and operations capability needed to nurture and sustain this new business.

Second, we leaned heavily into ghost kitchens and virtual brands like Cosmic Wings and others on the horizon that offer new sources of revenue for dine in our franchisees, all of that due to the creativity and talent of our people. And we advanced our digital platform and loyalty programs that will increase our share of wallet.

So with COVID-19 vaccine appointments now more widely available and capacity restrictions being eased across the country, we are seeing increased traffic in our restaurants. A couple of questions that might be on your mind, first is about hiring, and that is certainly a challenge in the industry today and all around the country.

So I want you to know that we are aggressively working to help our franchisees recruit adequate staffing to accommodate the increase in demand. And this is a great example of where dine scale makes a big difference. We're launching national campaigns for two recruiting days next week.

Applebee's and IHOP are collaborating with their franchisees on the 17th and 19th with the goal of hiring more than 20,000 new team members. And we're making it easy to apply via text, email and in-person, and both brands are leveraging very creative social campaigns to generate interest. Your second question today might be around procurement.

And I want you to know that we're working to secure the continuity of our supply chain. During the past few months, the surge in guests going out to eat created demand that has outpaced supply, this is actually not a terrible problem to have, as we see it as just a moment in time.

Nonetheless, our purchasing co-op remains heavily engaged with both brands and we've adjusted our full year food forecast slightly upward due to generally higher commodity and input costs. However, we set prices to fall back to equilibrium as our suppliers adjust to the new demand forecast over the remainder of the year.

We want the world to know right now that Applebee’s and IHOP are open for business. So our marketing plans encompass national TV, digital media, social media platforms, and one-to-one marketing. And of course, as we welcome guests back, we remain focused on providing them with a welcoming and safe environment.

Both IHOP and Applebee's have standard operating procedures in place, and our employees have done a terrific job of adhering to best practices like QR code menus upon request, tables that aren't set until the guests is seated, the proper use of masks and enhanced cleaning protocols.

And so with safety in place, we're doubling down in innovation to fuel the renaissance. And specifically we've got five growth platforms that build on dine’s competitive advantage. Number one, we're developing and investing in new smaller restaurant prototypes for both brands, Flip'd is a good example of our new thinking.

Number two is off-premise and having technology like Flybuy. Number three, virtual brands think Cosmic Wings. Number four is ghost kitchens. For IHOP, we're up and running in Dubai, Kuwait and Saudi Arabia; and for Applebee's and Cosmic Wings, we're up and running in L.A., Philadelphia and coming soon in Miami.

And as always, we're focused on new culinary creations like IHOP’s Burritos & Bowls. So I know that you're waiting for our comprehensive long-term growth plan. And I can tell you that we're currently conducting a top to bottom strategic review of the business. And as part of that process, we're embracing a bigger, more holistic vision for our future.

But in the north – in the near-term, I can tell you that we've already decided to lean into three incremental investments that I know will make a difference and since we spoke last quarter. First is technology that enhances the guest experience. We’re accelerating the redesign of ihop.com and the IHOP app.

We're accelerating the Flip’d website and its app, as well as the platform needed to support our loyalty programs for IHOP and Applebee's. Second, we're leaning into Flip’d by IHOP. We'll increase investment to accelerate the launch of this IHOP sister brand. And on that topic, I can just say, stay tuned for some news coming soon.

And third, we're making investments to improve the guest experience in our portfolio of 69 company-owned Applebee's restaurants in the Carolinas, which by the way, consistently rank among the top performers in the domestic Applebee's system based on sales.

So these three investments that I just mentioned are largely an investment in CapEx, and they represent an additional $5 million in CapEx since we last spoke. We don't expect them to alter our previously issued G&A guidance. So I'm confident in our plans and very confident in our management team.

We've identified the building blocks for the restaurant renaissance, and we'll use those as a way for all of you to continue to follow the progress of our story. An important part of our story is a strong balance sheet because it enables us to create that future announcement.

And Allison now will give you an update on that as well as on our financial results..

Thank you, John. I mean, that’s a great overview of exciting things we’re going to do at Dine Brands as well as we’re currently doing. Good morning, everyone. I'll begin with an update on the business.

Our performance in the first quarter reflects pent-up consumer demand for our brands; vaccines being administered across the country; the distribution of government stimulus checks; and the gradual easing of dining room restrictions.

At the end of the first quarter, 99% of our domestic restaurants are opened for dining operations, with restrictions in some states I'm pleased to reiterate that we repaid the $220 million drawdown from our revolving credit facility in early March, 2021 as planned. We now expect to achieve an annual interest savings of approximately $5 million.

Our cash position remains strong. We ended the first quarter with total unrestricted cash of $179.6 million. This compares to unrestricted cash of $163.4 million for the fourth quarter of last year, and $220 million that was gone against our revolving credit facility, a 10% increase. Switching gears to our operating results.

I'll start with the income statement. For the first quarter, adjusted EPS was $1.75 compared to $1.45 for the same quarter of 2020.

The year-over-year improvement was primarily due to lower tax expense, as well as a higher gross profit driven by the increase in revenue from Applebee's company operating restaurants due to a higher average check and increased traffic.

We believe the distribution of the latest round of government stimulus check in March favorably impacted both traffic and average check. The increase in average check was also partially attributed to favorable product mix and daypart shifts.

Those profits for Applebee's company restaurants increased 5.9 percentage points to 9% for the first quarter compared to the same quarter in 2020. Rental segment revenue for the first quarter of 2021 was $26.1 million compared to $29 million for the same period last year.

The variance is primarily due to decrease in base rent, resulting from restaurants closures and lease buy-outs, and a decline of percentage of rental income based on franchisees' retail sales. Rental segment gross profit was 19.8% for the first quarter of 2021.

This represents sequential improvement of 12 percentage points compared to the fourth quarter of 2020, which is more heavily impacted by charges related to the planned closures of underperforming IHOP restaurants. Turning to our GAAP effective tax rate for the first quarter.

Our effective tax rate for the first quarter of 2021 was negative 6.6% compared to 23.2% for the same quarter of 2020. The change in effective tax rate was primarily due to one-time recognition of excess tax benefits on stock-based compensation related to the departure of our previous CEO. Switching gears to G&A.

G&A for the first quarter of 2021 was $39.9 million compared to $37.6 million for the same quarter of last year. The increase was primarily due to higher personnel costs associated with equity-based and other incentive compensation, partially offset by lower travel costs. We continue to view G&A as a significant lever for the organization.

Turning to the cash flow statement. Cash from operations for the first quarter of 2021 was $30.6 million compared to $29.6 million for the same quarter last year. The increase was primarily due to the recognition of excess tax benefits on stock-based compensation.

Our highly franchised model continue to generate strong, adjusted free cash flow of $30.7 million for the first quarter of 2021 compared to $27.5 million for the same quarter in the prior year. The variance was primarily due to the increase in cash from operations, just discussed, and lower CapEx compared to the first quarter of 2020.

We believe that our strong cash position, cash from operation, disciplined G&A management, and the ongoing improvement in our business will allow us to invest and grow as the recovery from the pandemic continues.

Regarding capital allocation and financial flexibility, our business decisions are driven by the improvements in our restaurant operations and industry conditions. As a result of our progressive recovery, we chose to repay the $220 million drawn against the revolver in early March.

We'll continue to evaluate our business performance, which will influence our decisions on capital allocation. Turning to our franchisees assistance program. As of March 31, 78% of the $61.9 million in royalty, advertising fees and rent payment deferrals that Dine Brands provided to 223 franchisees across both bands has been repaid.

Dine Brands started the year strong. Both Applebee's and IHOP posted a meaningful sequential improvement in comp sales. Average weekly sales in dollars for both brands increased to pre-pandemic levels in certain weeks during the first quarter.

We ended the first quarter with strong cash position, allowing us to make additional investments in our business. We're very pleased with our start to 2021, and we remain optimistic about the second half of the year.

Now you will hear more from our brand President, John Cywinski, who will tell you about the significant progress we're making at Applebee's.

John?.

Great job, Allison, thank you, and hello, everyone. After a year of navigating the pandemic, March and April represented an extraordinarily positive inflection point for the Applebee's brand. In fact, in more than four years as President of Applebee's, I honestly can't recall the brand being better position than it is at this very moment.

We just delivered the two highest monthly sales volumes Applebee's has achieved since the inception of dine-in in 2008. In fact, it's quite likely March and April represent two of our all-time highest volume months in the 40-year history of the brand, but I really can't confirm this as our database only goes back 13 years.

What I can confirm is that March comp sales were positive 6.1% versus 2019, reflecting the confluence of consumer stimulus, compelling marketing and most importantly operational excellence. Momentum continued to accelerate in April as Applebee's delivered a plus 11.4% comp sales result versus that same 2019 baseline.

While it's impossible to determine how much of this momentum can be attributed to government stimulus versus demand. It's very clear to me that America is dining out again in full-force. So here's the real story.

According to Black Box 2021 comp sales versus 2019 as John referenced, Applebee's has now significantly outperformed the casual dining category for 12 consecutive weeks. I get this an average of 560 basis points.

In many respects this is reminiscent of Q1 of last year, when we posted 10 consecutive weeks of positive comps before the emergence of COVID. Clearly Applebee's momentum has returned and it's returned in a very powerful way.

It's important to remember that this momentum started to emerge in the last week of February, well before stimulus checks, when we introduced our successful burgers and wings event. This message really resonated with Applebee's guests behind the enormously popular Chicken Fried lyrics from our friends at Zac Brown Band.

And April return of our signature Irresist-A-Bowls currently on air is the latest example of Applebee's providing big flavor and abundant value. This advertising was choreographed to the classic AC/DC rock anthem Back in Black, and it delivered breakthrough results.

This is just more evidence of Applebee's talented marketing team continuing to innovate around what I firmly believe to be the most enduring, memorable and likable ad campaign in the entire industry and frankly outside of the industry.

Of course, I'm talking about eating good in the neighborhood, something that's real point of pride for our franchise partners, the restaurant teams and our entire organization. We hear about our advertising all the time from our guests. And it always brings a smile to my face.

Equally important to our guests is the innovation our team continues to deliver behind Applebee's $5 Mucho Cocktails. As we begin to see the alcohol business steadily return to pre-COVID normalcy.

The easing of capacity constraints, the opening of bar seating and the re-emergence of our late night daypart represent clear incremental growth opportunities as we progress through the year.

And after scaling back media spending in January and February, our national media plan is now substantial and equally balanced throughout the remainder of the year with favorable Q2, Q3 and Q4 comparisons with each of the same quarters in 2019, which bodes very well for brand.

Additionally, there are other indicators that our performance isn't short-term in nature, Applebee's unaided brand awareness and advertising awareness continue to significantly outpace all casual dining competitors.

And key metrics such as affordability, menu variety, guest satisfaction, brand affinity and likelihood to visit consistently outperformed the category average. Now I'd like to share a few insights regarding our on-premise and off-premise business. For both March and April Applebee's restaurant sales averaged an impressive $54,000 per week.

As anticipated our on-premise business has steadily increased as dining restrictions have eased. It's worth noting here that our off-premise volume has held steady between $17,000 and $18,000 per week per restaurant reflecting the staying power of this off-premise business.

Without question Applebee's has significantly broadened its reach and relevance within this important convenience driven segment. For the month of April, Applebee's sales mix consisted of 67% dine-in, 20% car side To-Go and 13% delivery.

Included in this delivery segment is our new virtual brand Cosmic Wings and after about 10 weeks in market Cosmic Wings sales have averaged about $330 per restaurant per week with significant geographic variability reflecting Uber Eats coverage. For context, individual restaurants range from below $100 per week to a high of $2,000 per week.

Now, importantly, we add Postmates delivery this week and then expand to include DoorDash later this month, which will significantly enhance Cosmic Wings distribution, visibility and trial. After this expansion, I should be able to quantify the size of the Cosmic Wings opportunity.

In the meantime, you can use your imagination as to what the addition of DoorDash may mean for the business.

Now, with respect to restaurant operations, I'm very encouraged with the integration of handheld tablets in about 500 Applebee's restaurants, with staffing challenges across the country, these tablets provide a meaningful hedge against labor inflation while enabling our service to be far more efficient in taking care of the guests, bottom line the servers love these tablets because it makes their job easier and allows them to make more money.

Additionally, one of the positive outcomes of this past year was the approximate 33% reduction in our core menu and the simplification of our operation. The resulting food and labor benefits have had a favorable impact on restaurant margins as well as restaurant execution.

I should also reinforce that over the past year our teams have been quietly focused on building an awesome innovation pipeline of culinary beverage marketing and technology initiatives for future deployment.

So in wrapping up, it's quite evident to me that America trusts Applebee's as we're beginning to see the benefits, the goodwill that our franchise partners work so hard to create over this past year.

Virtually all of our restaurants are now open, royalty collections remain rock solid, our advertising fund is now comparable to what it was in 2019, and it's a big lever for us moving forward.

We have an exceptionally talented team who had been eagerly waiting this day, and franchisees are aligned behind our business plan and confident in our ability to not only perform, but to thrive in this environment.

For the first time in a long time, I now believe we control our own destiny and we are poised to unlock the full potential of this great brand. While I'm sure there'll be other challenges along the way, there always are. Applebee's has genuine momentum right now, and I couldn't be more optimistic about our future than I am right now. Thank you.

And with that I'm going to turn it to my partner, Jay..

John, you must be really proud of those results and what your team and franchisees are accomplishing right now. I know I'm very proud of it, so nice job. Good morning, everyone. Like Applebee's, we've made great progress this quarter, compared to where we were during the pandemic as well.

Our first quarter comp sales improved sequentially by 8.9 percentage points compared to the fourth quarter. As our business improved, our average weekly sales in dollars has grown significantly and surpassed pre-pandemic levels at times during the quarter as stimulus checks provided our guests with additional buying power.

Average weekly sales were approximately 26,000 for January and sequentially increased to just under 36,000 for March reaching a high for the quarter of approximately 40,000.

Regarding our domestic restaurant open for business, 97% of restaurants were open for dine-in service with restrictions in most States as of March 31 that compares to only 70% with dine-in as of December 31. With guests eager to return to in-restaurant dining we're pleased the California recently increased indoor restaurant capacity to 50%.

IHOP’s presence in California makes up approximately 13% of our domestic business. So we're optimistic about the potential lift overall there. To drive sustainable growth we're continuing to execute against four strategies. As I discussed with you in last quarter, these are focusing on our p.m.

dayparts, providing compelling value, maintaining our gains in off-premise sales and lastly, our development growth. Our plans have yielded tangible results, to provide some color on our first two strategies, focusing on that p.m.

dayparts in value we launched IHOPPY Hour in September last year to offer our guests a broad selection of value options during those non-peak daypart hours, mainly 2:00 PM to 10:00 PM. IHOPPY Hour continues to drive incremental sales, even as business improves across all of our dayparts.

Additionally, IHOPPY Hours traffic is two to three times higher than the rest of the day compared to September, 2020, when we launched it. This actually equates to a low-to-mid single digit lift in sales for the entire day. To further increase the appeal by IHOPPY Hour menu, which has been very well received by our guests.

We plan to update the menu items over time. We're continually innovating to maintain IHOPs category leading position in family dining. Our latest innovation is IHOPs new Steakhouse Premium Bacon, which is available on our new Bacon Obsession menu.

This makes IHOP the first national family dining restaurant chain to offer this type of thick cut premium bacon. The Bacon Obsession menu continues to solidify our position as the leader in breakfast and highlights our commitment to both innovation and value across all of our dayparts.

During 2020, we played both defense and offense to remain resilient during, and also prepare to thrive after the pandemic. We play defense by making operational changes and moving heavily or completely at times into off-premise occasions. But we also invested heavily in our menu and preparation for the recovery.

We wanted to be ready with a fresh and appealing menu for guests to enjoy when they return to our restaurants, but also accommodate guests who choose to dine on-premise. This culminated in the launches of IHOPPY Hour and our signature Burritos & Bowls, both have been very well received by our guests.

Burritos & Bowls perfectly fill the gap we had in our menu and it continues to capture 8% to 10% of total ticket order incidents since we launched it with really minimal promotion. Our overarching menu strategy underscores innovation and supports both breakfast and non-breakfast occasions while also being portable for guests on the go.

Now let's switch gears to our third strategy of maintaining our gains in off-premise sales, despite capacity restrictions generally being eased across the country in the first quarter, our off-premise sales held steady at 33.3% of total sales that's flat compared to the fourth quarter.

However, we've seen a steady increase in net off-premise sales in dollars. For the first quarter, our sales mix consists of 66.7% dine-in, 16.8% To-Go and 16.4% delivery.

We continue to believe that sustaining off-premise sales mix at a much higher rate is feasible in a post-pandemic environment and will strongly compliment the anticipated return of a dine-in business.

In fact, our weekly off-premise sales in March reached dollar levels higher than when we were a 100% off-premise last year, even at the height of the shutdowns. In the first quarter as the overall business increased so as To-Go business. The pandemic has certainly influenced consumer behavior and change how guests use IHOP.

We adapted to the changes in his behavior through innovation and developing highly portable items, such as Burritos & Bowls. We believe the convenience of takeout and delivery will remain appealing to our guests.

Turning to our fourth strategy, development, we have the benefit of being able to now provide our franchisees with four different development platforms. These includes our – include our traditional formats, non-traditional are first flipped by IHOP locations, which we plan to open in 2021 and a new small prototype that we intend to test this year.

In the first quarter, our franchisees opened eight new restaurants globally and for the remainder of the year, we expect to resume development that was paused due to the pandemic. Looking ahead, we have a plan in place for more robust development starting in 2022.

We believe the brand can potentially exceed its historical annual average of approximately 60 new restaurants opened over the last decade. As we begin to plan our growth for the next three years, we intend to have a blended mix between these four types of development vehicles. We made great progress over the last 12 months.

We're successfully executing against our four strategies and are seeing tangible results. IHOP remains in a position of strength and it's poised for long-term growth. I'm going to now turn the call back over to John Peyton for closing thoughts on how IHOP and Applebee's are positioned to thrive coming out of this pandemic.

John?.

Thanks, Jay and John, and Allison your leadership during all of 2020 is what led to a great quarter in Q1. And thanks for telling our story today. I can't say it enough to all of you on the call, that the restaurant renaissance is here and our Q1 performance is certainly evidence of that.

I've got so much confidence in our future, because I really believe that restaurants are an essential part of society and people want a place to gather and celebrate. And after 13 months of being locked in our houses, we Americans are ready to do that.

Our people, our teams, our franchisees, and the thousands of restaurant team members across the country are amazingly resilient. They've demonstrated this time and time again, and they're ready to welcome guests back into our restaurants.

I mentioned last time that I worked in my parents' restaurant when I was in high school and that's why I think the favorite part of my job is when I get to visit team members in the field, I've finally gotten to do that in the last couple of weeks. And it's truly energizing and invigorating.

And what impressed me the most on my recent visits to our restaurant is that even after 13 months of extreme challenge I was greeted with unbelievable enthusiasm and optimism about the future.

And every team member I met from the kitchen staff to servers, the hosts, our general managers told me they love our two brands and all they want to do with welcome guests back into the restaurants.

So as we transitioned to a post-pandemic environment, Dine will continue to invest in innovation and strategic platforms that we know will drive long-term sustainable growth. And with that, we are looking forward to taking your questions. And I will turn it back to the operator..

[Operator Instructions] And again, we ask that you please limit your question to one and one follow-up. Your first question is from Brian Mullan from Deutsche Bank..

Hey, thank you. Just a question about the development outlook at IHOP. In the prepared remarks, Jay, you outlined four different avenues for growth, traditional, non-traditional, Flip’d and small prototype.

But, John Peyton, it would be great to get your take, like when you add it all up, what is the right way to think about potential domestic net unit growth pace for this business over a multi-year period? Is this a 1% to 2% net unit growth business in a normalized year? Could it actually get to 3% to 4% if your initiatives take hold? Any thoughts would be great.

And if you want to layer in anything on maybe more near-term conversion opportunities, that would be helpful too..

So I think Jay will talk specifically about IHOP, and I'll come back on the second half of that question..

Yes. Brian, obviously, the way we're looking at this is where we think we can really ramp up development coming out of this pandemic. And to kind of answer your last question first, we're already seeing our franchisees bring us a lot of sites that are conversions and we're very good at conversions.

We have about a third of our system used to be something else. So while we develop new prototypes and do a lot of prototypical work, we do a lot of conversions as well. And I think that will ramp up in this environment coming out of the pandemic.

I think as we move forward, we'll probably initially see the heavier load of the development being more traditional and non-traditional keeps growing over the last couple of years. But as we get Flip’d, stood up and get results there, I think that will speed up. I think the small prototype we're testing will speed up as well.

And I think that in marrying those two thoughts, we're already seeing franchisees bring us smaller buildings as conversions as well.

And we're going to not only have new prototypical small prototypes we'll be testing, but we're going to be doing some conversions that includes applying the small prototype theories and philosophies into conversions as well..

Yes, Brian. And I want to be careful here, right? And I don't want to give specific guidance on where we think that the development growth for both brands will land. But I'll tell you where I think we have potential and I'll tell you the challenge that I've given to both Jay and to John when it comes to growth.

As you know, IHOP grows at about 40 to 50 new restaurants a year, has been at historical rates. As I look at the market, I say, look at the four different prototypes that Jay's discussed. My challenge to Jay is to double that pace. And we're looking to see if we can put plans together that get us there.

I think it's possible, but I think give us another quarter before we give you a forecast, but that's the challenge. When it comes to Applebee's, we've spent the last three years under John's leadership of cleaning up and tightening the portfolio.

We've reduced it by several hundred restaurants so that we now have a much tighter high-performing group of restaurants to move forward with. And we're at the pivot point now where we can focus – we can pivot from our effort on cleaning up the portfolio to growing it again. And that's the challenge that John has.

He’s working on a plan to grow the Applebee's with somewhere in the neighborhood of 10 to 15 new restaurants a year. And again, I want to be careful, I'm not giving you a forecast, but just the challenge that I think our brand leaders have and the potential that I think we have as we put our plans together over the next couple of months..

Okay. Thank you. And then just as my follow-up, pivoting over Applebee's. John, thank you for some of that color about Cosmic Wings in your prepared remarks.

After you add Postmates and DoorDash as partners, and you've had some time to evaluate, is there a threshold level of sales that you're looking to see where you will know that this is an initiative you want to stand behind over the long-term? And related to that, do you think the fact that Applebee's is a franchise system rather than company-owned? Does that make launching a virtual brand harder? I'd just be curious to hear your thoughts.

Thanks..

Hey, Brian. Good questions. We love Cosmic Wings. So business is incremental. It's not complicating our operation. Our franchisees love it as well. We're not going to go full potential until Postmates and DoorDash come online. That's our Phase 2 as I mentioned. On our next call, I'll be able to dimensionalize that pretty well.

As to whether it's more complicated within a franchise business versus a company-owned business, I can't comment on that other than to say we've got 30 exceptional partners. And anytime, we have a business case that represents incremental growth, they're aligned behind it. We do everything together here.

We're strategic and have had no issues in partnership with our franchisees. So I don't see a difference there from my perspective..

Thank you..

Thank you..

Your next question is from Jake Bartlett from Truist Securities..

Great. Thanks for taking the question. My first one is for Jay. And just looking at the performance of Applebee's in April, specifically versus IHOP, differential in the sales recovery, what are the main reasons for the difference as you see it? If there's anything, any way you can kind of quantify those.

And I imagine some is less late night business, but just things like that to help us understand why the recovery at IHOP is trailing Applebee's..

I think that's a great question, Jake. I think its a few different things and this is my mission when I get up every day to close that gap, and John has set a high bar for me to go after. So I actually appreciate that. It keeps me on my toes.

I think the big difference is as we've talked about before, the capacity restrictions hit us very hard on weekends. And I can see – if I just look at my sales trends without getting into specific numbers, we've been doing really, really well during the weekdays. And then I see my sales dip back off again on the weekend.

It is obvious that what's happening here is as we don't need the extra capacity, we’re doing great with ours. As that capacity squeezes off on the weekend, we're seeing that impact. I think the other big piece for us is we're typically a 24/7 type business.

And as franchisees are trying to get themselves staffed, we said about our recruiting days and it's very well-documented in the industry that staffing is an issue at the moment. But the franchisees are adding hours and days and overnight back online as they are capable of doing that.

And that's a little bit of a slow process, slower in places like California. So we're missing some of our sales in some of the day parts and hours that we used to have. That's going to take a little longer to come back as well. And then the third part, this is still an opportunity for us. This is obviously the new way.

As we talked about before, the new way people are working. They're working from home, they're not going out. They're not necessarily stopping for breakfast the way they used to. So the pattern of business is a little different. We've been able to fend some of that off with the off-premise and To-Go business. But I think those are the bigger pieces.

When we can get back to having absolute full capacity, absolute full hours of operation at all of our locations, I think we'll close that gap with Applebee's..

And on the weekends now, we have a new name for it. It's called the Adam Sandler effect. So if Adam can't get in on IHOP on a weekend, then we truly have capacity constraints..

Right. My next follow-up question is for John Cywinski. It’s just I wanted to better understand that the commentary on the average weekly sales trends in March and April. As I heard it, it sounded like average weekly sales was the same in both months. But it looks just from the same store sales that would have been improved in April.

So maybe just see if you can kind of clarify that. And then within that the mix of off-premise, you said, $17,000 to $18,000. I'm just trying to kind of gauge in April as you've seen the acceleration, just how well the off-premise business has held..

Yes, Jake. The off-premise business is terrific. That's a new core competency for us. Our restaurants are now – they were very good at it before, they’re now really great. And we see that in our guest satisfaction metrics that business has held in the $17,000 to $18,000 range.

So the mix has declined as dine-in has come back, if you look at it on a percentage basis. If you look at it on a dollar basis, it's held steady. Yes.

And the mix between To-Go and delivery is, it continues to be fluid in particular as restaurants have opened back up, but it's – think about 68% of our business being on-premise and the balance being off-premise with To-Go being the lion's share of that off-premise business..

Great. Thank you very much..

To answer your first question, Jake, $54,000 per month, very consistent in terms of average weekly dollar volume, and the reason you see a swing from 6% to 11% comps has to do with the base roll over from 2019..

Got it. I appreciate that..

Thank you..

Your next question is from Brian Vaccaro from Raymond James..

Thanks. Good morning. I wanted to just revisit on the average weekly sales on the IHOP side. Jay, could you just – I missed what you said. I heard a $360,000 and a $40,000 but I wasn't clear if that was $36,000 in March and $40,000 in April.

So could you just kind of clarify the average weekly sales dollars you're seeing in recent months?.

Yes. I believe what I said was that when we – I was doing it sequentially by month, basically. So I said in January, we were at $26,000, and by March, we were at $36,000. And we did have some weeks in there, we peaked out at $40,000..

Got it.

And could you share, as John did on the Applebee’s side where average weekly sales are here in April for IHOP?.

Well, I think that was in our release we put out. We – versus….

For the dollars. I'm sorry, the average weekly sales dollars..

We haven't disclosed that. It would be just the percentage. The percentage was down 4.7% in April..

Okay, got it. Got it. On the effective capacity side, I appreciated the details in the 10-Q and noted that more than I think it was around two-thirds of the units at both brands still at less than 50% capacity at the end of March.

I guess my question is how much progress have you made since then? Could you give maybe those buckets or an idea of what percent of units are now at a 100% or above 50%? Just trying to frame how much the April improvement you might attribute to the easing capacity restrictions? And then also obviously how much more of a benefit it could be in future months as restrictions ease further..

Liz, Jay, I guess I can start. I think this is very fluid. It changes all the time. So we've made a little bit of progress in places in California and had a few L.A. County change their color code today as a matter of fact I think. New York and New Jersey announced on the 19th of this month, they're going to go completely open.

So I think over the course of this month, this is just going to keep getting better. And I think on into June, there's been communities, as I said, by July, they're going to open up complete – by June there'll be opened up completely.

So I think on the IHOP side, this is just going to keep getting better, but it's not a light switch that just flips on overnight. It's a slow trickle and just keeps coming..

I concur with that, Jake, with Applebee's. We were far from fully optimized on capacity that represents headroom for both brands into the foreseeable future..

Understood. And then the last one, I just want to ask, you mentioned some investments to enhance the guest experience. Please expand on what specifically you're doing there.

Have these enhancements been made by other franchisees? And if not, what might the timeline look like for rolling it to the rest of the system?.

Jake, is that a reference to handheld tablets?.

Sorry, this is Brian Vaccaro..

Brian, sorry..

Well, the handheld, I guess John, I think John mentioned some investments in the company stores of 69 company stores, and then he mentioned the handheld. So I assume that was a part of it.

Is there other things that you're doing to enhance the experience? And then just kind of thinking broader across the system?.

Yes. With respect to the Carolina portfolio, and company-owned portfolio, we have some repair and maintenance work that candidly was deferred a bit with pandemic. We lost the 12-month period there. So we're investing in the assets, we're investing in the people. We loved our performance.

As John said, it's a top five performer out of our 30 franchise groups. And so all of the investments that you would expect in terms of people and asset and technology, you're taking place in the Carolinas..

Got it. I’ll pass it on. Thank you..

Your next question is from Eric Gonzalez from KeyBanc..

Hey, thanks for the question. Presumably with the comp growth in April at Applebee's up 11.4% and maybe down 7.4% at IHOP, that off-premise mix staying in the low to mid-30%s at both of your brands.

My math suggested that dine-in business is roughly down, I don't know, 10% to 15% versus 2019 levels at Applebee's and maybe 25% to 30% below at IHOP last month.

Is that in the ballpark?.

Well, I think on the IHOP side, if you look at my numbers, as a percentage, my off-premise business stayed exactly the same at 33% basically versus Q4. So as I said, in my message, what's happening is, yes, our total sales are going up, we’re making progress.

I'm moving almost in lockstep with each other, right? So my boats are floating up at the same rate. So as I'm getting more business on dine-in, I'm getting the same lists on To-Go simultaneously, which is why the mix is staying the same, even though the total sales are going up.

So I have not – no, long-term, I don't know how well that will hold when we're fully open and more people are willing to get out of the house and come out to eat. Maybe it's quite likely that the mix will drop at some point and not stay at 33%, but I'm looking at those dollar sales.

Those are important to me because if I can get back my full dine-in business, yet even if I've got 20%, 25% off-premise, that's way higher than what we did before the pandemic, that will all be incremental business and incremental flow-through for my franchisees on the backside of the pandemic.

So right now I'm going in lockstep as the things are improving that will probably vary at some point, but right now that's holding..

Just in terms of, I think this question was sort of asked, but maybe I'll ask in a different way.

The majority of that gap in the dine-in sales, do you think the majority that will be closed through traditional drivers to just marketing innovation or do you think it's really just a capacity issue and that's more of the low-hanging fruit towards getting back that dine-in business?.

I think – this is Jay again. I think it's two different answers, really, because I think if we can solve that – when you compare it versus 2019, which is what we're all doing right now to see if you're back to pre-pandemic levels. I think we can get there just with capacity and just with hours of operation.

Everything else is going to be incremental, it makes us go up. We do a great job with new menu items. We do a great job with innovation, great job with marketing. We're going to steal share and we're going to keep growing. That's all upside I think afterwards. I think we can get back to where we were and beyond just with the capacity and the hours..

Eric, on the Applebee's side, I've long believed there's been too much focus on off-premise that the dine-in segment of our business will become a core strength again. And think about our brand purpose. It's facilitating connection, emotional connection between folks over a meal and a drink, and they've been longing for that.

They're hungry to dine-out again. And so the convenience driven occasion has very clear drivers, but that dine-in occasion is about connection, it's about indulgence, it's about being served and being relaxed and a little escape from home. We love our position on that front..

Hey, Eric, it's John Peyton. There's one comment that I want to make on this that I think is important to pull out, which is the off-premise business and where it is right now for dine and for both brands, right? So pre-pandemic, both brands were slightly less than 10% in off-prem and now they're at about a third.

And to Jay's point, it's not just the third that we're focused on, it's at the absolute dollar value of that off-premise business is holding steady and has for months and months and months. So that looks like incremental business to us.

And at the same time that we're focused on welcoming our guests back to our restaurants, as John talked about, we are very focused on investing in and nurturing via technology and marketing that off-premise business.

Applebee's and IHOP, one could argue we're not significantly in the off-premise consideration set before the pandemic, and now they are. And we need to keep that..

Yes, I mean, that absolutely makes sense. Maybe if I could ask one on the labor side. You've heard some management teams saying that staffing will be a huge issue and others may be not as concerned as some others might be.

Do you see this as a temporary issue due to the supply, demand and balance for labor that exists due to the government unemployment benefits? Just really wondering what the house view is on the current state of labor market, whether it's temporary or you see it, this is a longer-term issue..

Yes, I'll take that. It's John Peyton again for both brands. And I would start by saying that that Applebee's and IHOP are both places where people want to work, right? They are restaurants that are in the center of their neighborhoods and they're aspirational for the people who work in those brands and they love working there.

And we've actually been hiring for the past couple of months, even though we're talking about 20,000 people who we need, we've been hiring consistently and we're leveraging the campaigns we have to do that. We think this is a point in time.

We think this is a point in time where the labor market is sorting itself out as we transitioned from the federal funding and support and stimulus and enhanced unemployment benefits to a post-pandemic economic environment.

And I think it's going to take, we think three to six months for us to get on the other side of what a steady state labor market looks like..

That's great. I'll pass it along..

Your next question is from Brett Levy from MKM Partners..

Great. Thanks. Appreciate the color. You talked about – you made a mention earlier of just the pressures that you're seeing on the inflationary side on the food cost as well as labor.

Could you share a little bit more color on that? And then also as it pertains to how you're thinking about messaging going forward there, whether you feel like there is a disconnect between the ability to take additional pricing as an offset while still focused on value as your key – as a key pillar, just the dynamics on both of those, if you wouldn't mind.

Thanks..

Yes. Brett it's John Peyton again. I'll take the commodity side of it. And then Jay or John might comment on the pricing and menu impact. As I mentioned during the last couple of months, there clearly has been disconnect between the volume of guests in our restaurants and take out versus what our suppliers were prepared to meet.

And I think like the labor issue it's a moment in time as the supply chain catches up. But it is putting pressure on food costs. To just give you a range, IHOP is looking at 1.2% to 1.6% food costs inflation, Applebee's at about 0.8% to 1.5%.

Both of them are driven generally by paper and packaging, pork and chicken and then IHOP pancake mix, which is specific to them. So, again, we see this as a market being in difficult equilibrium and as suppliers catch up to where we are with demand, we think it'll work itself out throughout the year.

When it comes to the way in which we reflect that in our menu pricing, John and Jay can comment on that..

I think the – Brett this is John, there are a couple of points here. We certainly have labor challenges, we have food cost challenges, but I mentioned a couple of initiatives that really have hedged against that. And there's one, I didn't mention.

The server tablets even though it's only in only one-third of our system at the moment, is at a very meaningful hedge. The fact that we've spent the past 12 or 13 months simplifying our menu, we did that early has led to very specific food and labor savings on our restaurant P&Ls, significant benefit there. We're not going to give that up.

And if you recall Brett, over the past three plus years, I've referenced our restaurant profit initiative, in particular the work we did with PWC early on, we captured a couple of hundred basis points of cost reduction.

Both brands are restarting that work, we candidly put it on the shelf during the pandemic, that'll start up again and that'll provide benefits in particular as we look at 2022..

This is Jay, on the IHOP side historically our franchisees take between 1% to 3% in price annually and I think it's a balancing act.

And they're going to take in their local markets what they think they need to take and the challenge always is how do you take price to help offset costs, but not lose traffic because the top line is the absolute most important thing IHOP franchisees can get right now.

If we can get our sales back, that helps your bottom line and your profitability more than anything.

So I'm sure they will be taking price, I'm sure they'll be in that 1% to 3% range in most cases, depending on where they are and what their particular situation is, we will dictate whether they're taking on the low-end of that and the high-end of that probably.

Value is a key pillar of ours, but that's the drive traffic, that's the drive people who need value to come to our restaurants.

The interesting thing about any value platform is if you do it well like our IHOPPY Hour platform, there's a percentage of people that buy that, but a lot of people that come with them, more than half will come with them are buying full price items, so the overall mixture of that value in with the other menu items help the franchisees maintain profitability.

So it's going to be a balancing act. I'm sure there'll be some price they will take. We don't want to lose traffic because of that though..

And the final point I'll make on that Brett, from an Applebee's perspective. We ranked number one on affordability and casual dining. We love that position and there are all sort of ways to convey value to a consumer beyond simply price..

Thank you..

Thank you..

Your next question is from Nick Setyan from Wedbush Securities..

Thank you. Obviously post-COVID there seem to be some of the changes that are permanent and beneficial.

You've talked about the year-over-year growth in marketing in Q2, Q3, Q4, how does the message change if at all? Yeah, historically there's been a very heavy focus on value, does the innovation and new menu introductions are they going to be higher versus say 2019? Any color there would be helpful?.

Nick, could you repeat? You said, will what be higher?.

New menu innovation..

Oh yeah. So on the Applebee's front we took a pause on innovation, we simplified, we reduced the menu as certain many brands have. So our messaging is we strike a balance between being welcoming and reassuring in this environment and being creative and having some fun and recognizing we're in the hospitality business.

Music is a very important part of our culture, we do leverage that. We don't take ourselves too seriously. And then innovation is critically important for us, always has been you'll see an elevated emphasis on that moving forward. It's always a fine balance between innovating and complicating, right the operation.

And so that's a partnership we have with our franchisees and understanding how to pace and sequence and do that well..

Hey, Nick this is Jay John, I think on the IHOP side, our mission right now, I have a new CMO as you're probably familiar with. And our mission right now is we unlock the love that our fans have for IHOP. We hear it all the time, how much they love the brand and love IHOP.

And we've got to make sure that our marketing, messaging syncs up to activate that brand love into this that's the bottom line..

And then as a follow-up, given the higher off premise mix, given the less complicated menu how should we think about sort of the medium-to-longer term margin implications as the dining room business comes back but we do have these incremental layers of sales?.

The – Nick, I think your question is capacity to satisfy that demand, is that the question?.

While capacity comes back and we have incremental layers of sales around off-premise. How does that change the margin dynamic around labor and now we have a less-complicated menu, so it's a lower food cost.

How does that permanently benefit the margin structure going forward?.

Well, one of the interesting dynamics out of the pandemic is we saw an off-premise average check really escalate and while it typically doesn't include the beverage component of the mix, we saw folks economizing and purchasing and placing additional food items in the refrigerator. So check has moved North, which is good.

The economic model is a little different for dine-in than it is for the off-premise business. But we find both very attractive and we look to satisfy our guests regardless of their need state and their occasion, this is very much a revenue game for us.

And when you see volumes like we've seen it late, it flows through very well off-premise and on-premise..

Yes, Nick this is Jay, same thing for IHOP franchisees, sales are king when it comes to making money. You give me a high volume restaurant, I'll give you a restaurant makes a lot of money. You give me one that doesn't have very good sales, they're going to struggle.

So you're – it's like a flywheel that goes and what ends up happening is as sales go up, productivity goes up. And any of these extra sales we can keep an increase our business compared to where we were pre-pandemic, I think that's going to help overall profitability there.

Sure, there are costs we have to overcome, you just heard us talk about food cost inflation.

But I think in the big picture, if we can get sales to maintain at higher level, thanks to this off-premise business and the demand being there when we come back, when we're fully open and we can get more people in our restaurants than we did before, that's all going to be positive for profitability, just because of the flow through from the top line..

And Nick I would reinforce on that off-premise business. And in particular, if you're asking about delivery, again we know that guest is willing to pay for that convenience, that's important to them and we pass that cost along to the guest.

Our objective has always been to be rather agnostic on on-premise off-premise and margin neutral, regardless of which channel you're talking about. So our franchisees are whole, they are with one exception they don't typically capture the beverage benefit that they would with a dine-in occasion..

Thank you very much..

Thank you.

Your next question is from Jeffrey Bernstein from Barclays..

Great. Thank you very much. Two questions, just one on the – it seems like we focused a lot on the sales side, I'm just wondering from a corporate cost standpoint.

You mentioned G&A as a significant leverage opportunity and as a 99% franchise system, the G&A being the biggest cost on your P&L, just wondering how much you think is the normalized spend that you're incurring.

I know you reiterated 2021s guidance, but how should we think about that as a lever going forward, whether you targeted dollars or as a percentage of revenues, what do you think that goes or the opportunities that is to lever that G&A line?.

As you mentioned, we really refer back to our guidance.

Our range is 160 million to 170 million we continue to believe that is what we're going to be in-line with for the full year and just to let you know, we did have more hiring kind of get back to pre-pandemic levels, we have some travel cost savings currently in the first part of the year, but that probably will ramp up as the business and the conditions out in the industry continue to improve.

So I would just look to the guidance for now..

Got it.

But is there any – in terms of an outlook as you look at 2022 and beyond whether or not there's opportunities to reduce that, or whether you have a target as a percentage of sales, or is it just go one-year at a time?.

Right now I would just say we – we're looking at to see what the industry conditions are. So I would just look at this year..

Yeah, Jeff its John Peyton, I would say that as I'm working with the team to conduct really at the top to bottom review of the company, that looks at our capital allocation, our opportunities for growth, we're also looking at our cost structure. So that's something that is a work in progress in terms of what I think is the long-term model for them..

Gotcha. And then you mentioned, the cash usage, obviously you did a big debt pay down in March, I think in the release you're now the way you calculate it, your leverage is sitting at roughly seven turns.

I'm just wondering where you target that to go in the short or long-term and you mentioned your allocation options, but just wondering how you prioritize one step pay down is at more desired levels. How would you prioritize the repurchase versus dividend versus other alternatives? Thank you..

We don't really have a quantitative goal. We're in a very strong cash position. We have challenges to free cash flow. So we're quite happy with where we are right now in terms of our financial flexibility..

Yes. Jeff it's John again, I would add that, dine-in generates a lot of cash we have historically, and we will continue to do so. As you alluded to, we've got a history of returning capital to shareholders through a robust dividend and share repurchase programs. And our intent is to return to some degree to that program.

Our first step deliberately was settling the revolver, which we've done and there's two things that we need to see to recommit to the dividend. For example, we're still in unprecedented times and we need to know that we've settled into the new normal. Each quarter now is unlike any other quarter.

And I'd like to see two sequential quarters that feel like the new steady state to us, where we're confident that we are on the other side of the pandemic implications.

And as I mentioned before, we're also looking at the overall view of the company and the overall capital plan that includes not only returning shareholders, but also the investments we need to make to grow as I've been mentioning. So those are the two lenses that I'm looking at it through..

Understood, but the seven times leverage is something you're comfortable with or is it planned to further pay that down before you consider those options?.

I think it's going to improve slightly during the year in terms of the long-term it's part of the analysis we're doing is with our capital allocation. So I'd like to take another quarter or two before I give you a target on that..

Yes, we will actually deliver – delever over time..

Okay. Thank you..

Your next question is from Todd Brooks from C.L. King & Associates..

Thanks for squeezing me in. Just a couple of questions, John Peyton, you've been talking about the renaissance starting to play out in the restaurant industry.

And I'm wondering if you either at the brand level or the franchise level can comment on if the case for survivor bias is playing out in some of these trends that you're seeing? Any updates on competitive closures as you look at the competitive set or that is a potential driver of the spike in business that we're seeing near term?.

Well, I'll interpret Todd survivor bias to a different way, which is I think strong brands win in both tough times and good times.

And I think because Applebee's and IHOP are iconic brands that resonate with consumers, I think because they both have strong franchisee networks that weathered the pandemic and are on board with our brands visions for how to emerge from the pandemic that's why they're doing well as we move forward.

Yes, there's been something like 17% of the restaurants in this country have closed mostly independence. But I think it's – I think it's the strength of our brand that we had a strong quarter..

Okay, great. And then a follow-up question on the alcohol side of the house John you were talking some about early signs of a comeback in the liquor bar component of the business.

Can you dimensionalize that at all for us? How is that unfolding as the consumers kind of rushing back out for normalized dining experiences and maybe where that liquor bar component is relative to fiscal 2019 levels would be helpful. Thank you..

Sure Todd. So think about, let's go back a year, there was a point in time where dining rooms were not open. We were a 100% off-premise and therefore alcohol and substance consumption was negligible, with the exception of some mutual cocktails to go, which is one of the kind of emerging opportunities coming out of the pandemic.

Our mix has historically recent history, alcohol been 14% to 15% of sales, when the off-premise business moved from 12% to north of 40% that took a hit. But when you look at just dine-in year-over-year, you'll see that that 14% to 15% to 16% mix holding very steady. And we've seen some indication I wouldn't call it a trend of indulgence.

As we come out of this pandemic with guests really enjoying their experience and things like alcoholic beverages and appetizers and desserts being ordered with some frequency now perhaps a special occasion that hasn't taken place in quite a while.

We look at the alcohol business and in particular, the late night day part, which was hardest hit in the pandemic as significant growth opportunity for us and perhaps others..

That's great, thank you..

Thank you..

Ladies and gentlemen, that is all the time we have for Q&A session. I'll now turn the call back to Mr. John Peyton for closing remarks..

Hey, thanks Christian and thanks guys for your questions, we appreciate it. I do want to correct one comment I made.

I mentioned that IHOP had ghost kitchens in the Middle East and I just want to clarify that that IHOP has ghost kitchens in Dubai and Applebee's has a ghost kitchen in Kuwait, just to be clear there's an Applebee's ghost kitchen in the Middle East as well. So thank you all for your questions. We appreciate it.

Thank you for staying a little bit past the hour, but it was important to us to make sure that we can answer as many questions as possible. And I will talk to you throughout the day and next quarter. Thanks so much. Take care..

Ladies and gentlemen, this concludes today's conference call. You may now disconnect..