Wendy’s(WEN) - 2025 Q2 - Quarterly Results

Performance Summary The company reported modest global same-restaurant sales growth of 0.8% in Q2 2024, driven by international performance, while U.S. growth was nearly flat at 0.6%. Financially, total revenues increased slightly by 1.6% to $570.7 million, but operating profit and net income declined by 9.0% and 8.4% respectively, with reported diluted EPS decreasing to $0.27 from $0.28 in the prior year - CEO Kirk Tanner stated that the company delivered same-restaurant sales growth globally, holding steady with the QSR burger category, and will continue to focus on quality, innovation, and value[3] Q2 2024 Operational Highlights | Operational Highlights | Second Quarter 2024 | Second Quarter 2023 | Year-to-Date 2024 | Year-to-Date 2023 | | :--- | :--- | :--- | :--- | :--- | | Global Same-Restaurant Sales Growth | 0.8% | 5.1% | 0.9% | 6.5% | | U.S. Same-Restaurant Sales Growth | 0.6% | 4.9% | 0.6% | 6.0% | | International Same-Restaurant Sales Growth | 2.5% | 7.2% | 2.8% | 10.3% | | Global Systemwide Sales Growth | 2.6% | 6.9% | 2.6% | 8.4% | | Global Net Restaurant Openings | 13 | 20 | 21 | 20 | | Global Restaurant Count (End of Qtr) | 7,261 | 7,115 | 7,261 | 7,115 | Q2 2024 Financial Highlights (vs. Q2 2023) | Financial Metric | Q2 2024 ($ million) | Q2 2023 ($ million) | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenues | $570.7 | $561.6 | 1.6% | | Operating Profit | $99.5 | $109.3 | (9.0)% | | Net Income | $54.6 | $59.6 | (8.4)% | | Adjusted EBITDA | $143.1 | $144.5 | (1.0)% | | Reported Diluted EPS | $0.27 | $0.28 | (3.6)% | | Adjusted EPS | $0.27 | $0.28 | (3.6)% | Detailed Financial Analysis The analysis reveals that revenue growth was primarily driven by increased franchise royalty revenue from net new restaurant development and higher same-restaurant sales. However, profitability was negatively impacted by higher labor costs, customer count declines in the U.S., and an incremental investment in breakfast advertising. General and administrative expenses decreased due to lower incentive compensation accruals - Total revenue growth was primarily due to higher advertising funds revenue and franchise royalty revenue, which were boosted by net new restaurant openings and same-restaurant sales growth[9] - U.S. Company-operated restaurant margin decreased from 17.3% to 16.5%, mainly due to higher labor costs and declines in customer count, which were only partially offset by a higher average check[10] - Operating profit declined due to increased breakfast advertising investment, higher depreciation and amortization costs, and lower U.S. company-operated restaurant margin[12] - The decrease in Adjusted EBITDA was mainly caused by the incremental investment in breakfast advertising and a lower U.S. Company-operated restaurant margin[15] - Year-to-date Free Cash Flow decreased by 6.8% to $124.4 million, primarily due to the incremental breakfast advertising investment and an increase in capital expenditures[7][17] Capital Allocation The company maintained its commitment to shareholder returns by declaring a regular quarterly dividend of $0.25 per share. Additionally, it actively repurchased its own stock, buying back 1.6 million shares for $27.3 million in the second quarter, with approximately $260.0 million remaining under the current repurchase authorization - A regular quarterly cash dividend of $0.25 per share was declared, payable on September 17, 2024, to shareholders of record as of September 3, 2024[18] - In Q2 2024, the company repurchased 1.6 million shares for $27.3 million. As of July 25, 2024, approximately $260.0 million remains available under the share repurchase authorization expiring in February 2027[19] 2024 Full-Year Outlook Wendy's provided its financial outlook for the full year 2024, projecting global systemwide sales growth of 3% to 5%. The company expects to generate Adjusted EBITDA between $535 to $545 million and Adjusted EPS in the range of $0.98 to $1.02, with free cash flow anticipated to be between $275 to $285 million Full-Year 2024 Guidance | Metric | Expected Range | | :--- | :--- | | Global systemwide sales growth | 3% to 5% | | Adjusted EBITDA | $535 to $545 million | | Adjusted earnings per share | $0.98 to $1.02 | | Cash flows from operations | $365 to $385 million | | Capital expenditures | $90 to $100 million | | Free cash flow | $275 to $285 million | Financial Statements The condensed consolidated financial statements provide a detailed view of the company's financial position and performance. The Statement of Operations shows a decrease in net income for the second quarter to $54.6 million from $59.6 million year-over-year. The Balance Sheet indicates a decrease in total assets and stockholders' equity since year-end 2023. The Statement of Cash Flows shows an increase in net cash from operations year-to-date to $145.5 million Condensed Consolidated Statements of Operations Q2 2024 vs Q2 2023 Income Statement (in thousands) | Line Item | Three Months Ended 2024 ($) | Three Months Ended 2023 ($) | | :--- | :--- | :--- | | Total Revenues | $570,727 | $561,565 | | Operating Profit | $99,507 | $109,274 | | Income before income taxes | $74,823 | $78,884 | | Net Income | $54,643 | $59,632 | | Diluted EPS | $0.27 | $0.28 | Condensed Consolidated Balance Sheets Balance Sheet Summary (in thousands) | Line Item | June 30, 2024 ($) | December 31, 2023 ($) | | :--- | :--- | :--- | | Total Current Assets | $790,559 | $837,653 | | Total Assets | $5,088,165 | $5,182,826 | | Total Current Liabilities | $364,863 | $381,930 | | Total Liabilities | $4,814,412 | $4,873,047 | | Total Stockholders' Equity | $273,753 | $309,779 | Condensed Consolidated Statements of Cash Flows Year-to-Date Cash Flow Summary (in thousands) | Line Item | Six Months Ended 2024 ($) | Six Months Ended 2023 ($) | | :--- | :--- | :--- | | Net cash provided by operating activities | $145,463 | $141,504 | | Net cash used in investing activities | ($43,958) | ($28,944) | | Net cash used in financing activities | ($162,382) | ($246,276) | | Net decrease in cash | ($64,175) | ($131,555) | Non-GAAP Reconciliations This section provides detailed reconciliations of GAAP measures to their non-GAAP counterparts. It bridges Net Income to Adjusted EBITDA, Revenues to Adjusted Revenues, Net Income to Adjusted Income, Diluted EPS to Adjusted EPS, and Net Cash Provided by Operating Activities to Free Cash Flow, clarifying the adjustments made for items like advertising funds, system optimization, and reorganization costs Reconciliation to Adjusted EBITDA and Adjusted Revenues Q2 2024 Reconciliation of Net Income to Adjusted EBITDA (in thousands) | Line Item | Q2 2024 ($) | Q2 2023 ($) | | :--- | :--- | :--- | | Net Income | $54,643 | $59,632 | | Operating Profit | $99,507 | $109,274 | | Adjustments (Advertising funds, D&A, etc.) | $43,618 | $35,214 | | Adjusted EBITDA | $143,125 | $144,488 | Reconciliation to Adjusted Income and Adjusted EPS Q2 2024 Reconciliation of Net Income to Adjusted Income (in thousands) | Line Item | Q2 2024 ($) | Q2 2023 ($) | | :--- | :--- | :--- | | Net Income | $54,643 | $59,632 | | Total adjustments, net of income taxes | $2,003 | ($704) | | Adjusted Income | $56,646 | $58,928 | | Adjusted EPS | $0.27 | $0.28 | Reconciliation to Free Cash Flow YTD 2024 Reconciliation to Free Cash Flow (in thousands) | Line Item | Six Months Ended 2024 ($) | Six Months Ended 2023 ($) | | :--- | :--- | :--- | | Net cash provided by operating activities | $145,463 | $141,504 | | Capital expenditures | ($34,465) | ($30,164) | | Advertising funds impact | $13,353 | $22,117 | | Free Cash Flow | $124,351 | $133,457 | Important Disclosures This section contains critical legal and supplementary information. It outlines forward-looking statements and a comprehensive list of risk factors that could affect performance, such as competition, economic conditions, and supply chain issues. It also defines and justifies the use of non-GAAP financial measures (like Adjusted EBITDA and Free Cash Flow) and key business metrics (like same-restaurant sales), which are essential for understanding the company's results and internal performance evaluation Forward-Looking Statements and Risk Factors - The release contains forward-looking statements based on current expectations, which are subject to numerous risks and uncertainties[22] - Key risk factors include, but are not limited to: competition, adverse economic conditions, changes in consumer spending, food safety events, supply chain interruptions, increased labor costs, and risks associated with the company's predominantly franchised business model[23][25] Disclosure Regarding Non-GAAP Financial Measures - The company uses non-GAAP measures such as adjusted revenue, adjusted EBITDA, adjusted EPS, and free cash flow for internal performance measurement, benchmarking, and executive compensation[29][30] - These measures are believed to provide a meaningful perspective on underlying operating performance by eliminating items that vary period-to-period without correlation to core operations[30] Key Business Measures - The company tracks key business measures including same-restaurant sales, systemwide sales, and Company-operated restaurant margin[34] - Same-restaurant sales and systemwide sales are calculated on a constant currency basis, include both company and franchise restaurants, and exclude sales from Argentina due to its highly inflationary economy[35][37][38]