Wendy’s(US:WEN)2024-08-01 11:14Financial Performance - Revenue increased 1.6% to $570.7 million in Q2 2024 compared to $561.6 million in Q2 2023[118] - Net income decreased 8.4% to $54.6 million in Q2 2024 compared to $59.6 million in Q2 2023[118] - Operating profit decreased by 9.8% to $99.5 million in Q2 2024, compared to $109.3 million in Q2 2023[125] - Global Company-operated restaurant margin was 15.8% in Q2 2024, a decrease of 70 basis points compared to Q2 2023[118] - Total revenues for Q2 2024 were $570.7 million, a 2.0% increase from $561.6 million in Q2 2023[125] - Global same-restaurant sales increased 0.8% in Q2 2024, with U.S. same-restaurant sales up 0.6% and international same-restaurant sales up 2.5%[118] - U.S. same-restaurant sales for company-operated locations decreased by 1.1% in Q2 2024, while franchised locations saw a 0.7% increase[128] - Global systemwide sales increased by 2.6% in Q2 2024, compared to a 6.9% increase in Q2 2023[129] Digital and Advertising - Digital sales as a percent of global systemwide sales increased from approximately 12.7% in the first six months of 2023 to approximately 16.9% in the first six months of 2024[120] - The Company plans to fund approximately $22.0 million of incremental breakfast advertising in 2024 to drive same-restaurant sales[119] - Advertising funds revenue rose by 5.3% to $115.1 million in Q2 2024, up from $109.8 million in Q2 2023[125] - The company expects advertising funds expense to exceed advertising funds revenue by approximately $22.0 million for 2024, reflecting planned incremental breakfast advertising[139] Costs and Expenses - Total cost of sales for Q2 2024 was $199.9 million, a slight decrease from $201.0 million in Q2 2023[126] - Cost of sales as a percentage of sales increased to 84.2% in the second quarter of 2024, up from 83.5% in 2023, mainly due to higher restaurant labor costs[135] - General and administrative expenses decreased to $61.5 million in the second quarter of 2024, down from $62.7 million in 2023, primarily due to lower incentive compensation accruals[140] - Franchise support and other costs increased to $16.2 million in the second quarter of 2024, up from $13.8 million in 2023, due to higher costs for IT services provided to franchisees[137] Restaurant Development - Wendy's added 21 net new restaurants across the system during the six months ended June 30, 2024[121] - Franchise royalty revenue and fees increased by 4.5% to $157.6 million in Q2 2024, compared to $153.1 million in Q2 2023[125] - Franchise rental income rose to $60.6 million in the second quarter of 2024, an increase of $2.6 million compared to $58.0 million in 2023[133] - Franchise royalty revenue increased by $4.2 million to $136.3 million in the second quarter of 2024, driven by net new restaurant development and a 1.0% increase in global franchise same-restaurant sales[131] Cash Flow and Capital Expenditures - Operating cash flow for the first six months of 2024 was $145.5 million, up from $141.5 million in 2023, reflecting a $4.0 million increase[165] - Cash used in investing activities increased to $44.0 million in 2024 from $28.9 million in 2023, primarily due to a $11.1 million increase in franchise development fund expenditures and a $4.3 million rise in capital expenditures[166] - Cash used in financing activities decreased to $162.4 million in 2024 from $246.3 million in 2023, mainly due to a $52.7 million reduction in stock repurchases and a $31.8 million decrease in long-term debt repayments[167] - The company anticipates capital expenditures of approximately $90.0 million to $100.0 million for the year, with cash dividends expected to total around $101.6 million for the remainder of 2024[167][170] Tax and Compliance - The effective tax rate for Q2 2024 was 27.0%, up from 24.4% in Q2 2023, influenced by variations in income before income taxes and changes in foreign operations tax effects[153] - The company reported a provision for income taxes of $20.2 million in Q2 2024, compared to $19.3 million in Q2 2023[125] - The company has not made any debt repurchases during the first half of 2024 and remains in compliance with its debt covenants[168][169] - There were no material changes to the company's debt obligations since December 31, 2023[169] Market Conditions - Inflationary pressures on labor are expected to continue impacting operations throughout 2024, with potential effects from commodity price volatility in beef, chicken, pork, cheese, and grains[172] - Wendy's restaurant operations are moderately seasonal, with higher average sales typically occurring in the summer months compared to winter[173]