Wendy’s(WEN) - 2026 Q2 - Quarterly Results

Q2 2025 Earnings Release Overview Performance Summary & Highlights In Q2 2025, Wendy's experienced a global systemwide sales decline of 1.8%, driven by a 3.3% drop in the U.S. market, which was partially offset by strong international growth of 8.7%. Despite the sales dip, the company reported a 7.4% increase in both reported and adjusted diluted EPS to $0.29 and continued its global expansion by adding 44 new restaurants - Interim CEO Ken Cook highlighted strong momentum in the International business (8.7% systemwide sales growth) and acknowledged the need to improve U.S. performance by strengthening franchisee relationships, marketing effectiveness, and customer experience[3] Q2 2025 Operational Highlights (vs. Q2 2024) | Operational Highlights | US | Intl | Global | | :--- | :--- | :--- | :--- | | Systemwide Sales Growth | (3.3)% | 8.7% | (1.8)% | | Same-Restaurant Sales Growth | (3.6)% | 1.8% | (2.9)% | | Net Restaurant Openings | 9 | 17 | 26 | Q2 2025 Key Financial Highlights (vs. Q2 2024, in millions) | Financial Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Total Revenues | $560.9M | $570.7M | (1.7)% | | Operating Profit | $104.3M | $99.5M | 4.8% | | Net Income | $55.1M | $54.6M | 0.9% | | Adjusted EBITDA | $146.6M | $143.1M | 2.5% | | Reported Diluted EPS | $0.29 | $0.27 | 7.4% | | Adjusted EPS | $0.29 | $0.27 | 7.4% | Detailed Financial Analysis (Q2 2025) The decline in total revenues was primarily due to lower U.S. restaurant sales and franchise royalties. Operating profit increased by 4.8% to $104.3 million, benefiting from lower advertising spend and G&A expenses, which offset margin pressures from commodity and labor inflation in U.S. company-operated restaurants. Adjusted EPS grew to $0.29, aided by share repurchases - The decrease in total revenues was mainly caused by lower U.S. Company-operated restaurant sales, reduced franchise royalty revenue, and lower advertising funds revenue[8] - U.S. Company-operated restaurant margin decreased from 16.5% to 16.2% due to commodity and labor inflation and a decline in traffic, which were partially offset by a higher average check and labor efficiencies[9] - Operating profit grew primarily due to a decrease in the Company's investment in advertising spend, lower reorganization costs, and reduced general and administrative expenses[11] - The increase in Adjusted EPS was driven by fewer outstanding shares from the company's share repurchase program and an increase in Adjusted EBITDA[15] Capital Allocation In Q2 2025, the company returned $88.7 million to shareholders through dividends and share repurchases. A quarterly dividend of $0.14 per share was declared, and 4.8 million shares were repurchased for $61.9 million during the quarter - The company declared a regular quarterly cash dividend of $0.14 per share, payable on September 16, 2025[16] - Wendy's repurchased 4.8 million shares for $61.9 million in Q2 2025. As of August 1, approximately $40.2 million remained available under the current share repurchase authorization[17] Full-Year 2025 Outlook Wendy's reaffirmed its global net unit growth forecast of 2-3% but revised its full-year 2025 guidance downwards for several key metrics. The company now expects global systemwide sales to decline by 3.0% to 5.0% and adjusted EPS to be in the range of $0.82 to $0.89, a reduction from previous forecasts Updated Full-Year 2025 Guidance (in millions, where applicable) | Metric | Current Outlook | Previous Outlook | | :--- | :--- | :--- | | Global systemwide sales growth | (5.0)% to (3.0)% | (2.0)% to flat | | Adjusted earnings per share | $0.82 to $0.89 | $0.92 to $0.98 | | Adjusted EBITDA | $505M to $525M | $530M to $545M | | Free cash flow | $160M to $175M | $185M to $205M | - The company reaffirmed its guidance for Global net unit growth at 2% to 3% and Capital expenditures plus franchise development fund investments at $165 million to $175 million[18] Financial Statements & Reconciliations Condensed Consolidated Statements of Operations For the second quarter of 2025, total revenues decreased to $560.9 million from $570.7 million in the prior year. However, operating profit increased to $104.3 million from $99.5 million, and net income rose slightly to $55.1 million, resulting in a diluted EPS of $0.29 Q2 2025 Statement of Operations (in thousands) | Line Item | Three Months Ended 2025 | Three Months Ended 2024 | | :--- | :--- | :--- | | Total Revenues | $560,929 | $570,727 | | Operating profit | $104,260 | $99,507 | | Income before income taxes | $75,900 | $74,823 | | Net income | $55,110 | $54,643 | | Diluted net income per share | $0.29 | $0.27 | Condensed Consolidated Balance Sheets As of June 29, 2025, Wendy's reported total assets of $4.89 billion, a decrease from $5.03 billion at the end of 2024. The decline was primarily driven by a reduction in cash and cash equivalents. Total liabilities remained relatively stable at $4.78 billion, while total stockholders' equity decreased significantly to $112.9 million from $259.4 million, largely due to treasury stock repurchases Balance Sheet Summary (in thousands) | Account | June 29, 2025 | December 29, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $281,226 | $450,512 | | Total current assets | $600,446 | $736,140 | | Total assets | $4,894,148 | $5,034,843 | | Total liabilities | $4,781,260 | $4,775,491 | | Total stockholders' equity | $112,888 | $259,352 | Condensed Consolidated Statements of Cash Flows For the six months ended June 29, 2025, net cash provided by operating activities was stable at $146.0 million. Net cash used in investing activities increased to $52.3 million due to higher capital expenditures. Financing activities used a significant $272.7 million, primarily for common stock repurchases ($186.5 million) and dividends ($76.2 million), leading to a net decrease in cash Six-Month Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended 2025 | Six Months Ended 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $146,008 | $145,463 | | Net cash used in investing activities | ($52,264) | ($43,958) | | Net cash used in financing activities | ($272,687) | ($162,382) | | Net decrease in cash | ($173,506) | ($64,175) | Non-GAAP Reconciliations This section provides reconciliations from GAAP measures to non-GAAP measures used by management, including Adjusted EBITDA, Adjusted Revenues, Adjusted Income, Adjusted EPS, and Free Cash Flow. These adjustments primarily remove the effects of advertising funds, system optimization, and other non-recurring items to provide a clearer view of core operating performance Reconciliation of Net Income to Adjusted EBITDA and Revenues to Adjusted Revenues For Q2 2025, Net Income of $55.1 million was reconciled to an Adjusted EBITDA of $146.6 million. Total Revenues of $560.9 million were reconciled to Adjusted Revenues of $449.6 million, primarily by excluding advertising funds revenue Q2 2025 Reconciliation Summary (in thousands) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net income | $55,110 | $54,643 | | Adjusted EBITDA | $146,639 | $143,125 | | Revenues | $560,929 | $570,727 | | Adjusted revenues | $449,564 | $455,663 | Reconciliation of Net Income to Adjusted Income and Adjusted EPS In Q2 2025, GAAP Net Income of $55.1 million was adjusted to $56.1 million for Adjusted Income. Both GAAP Diluted EPS and Adjusted EPS were $0.29 for the quarter, as the per-share impact of adjustments was negligible Q2 2025 EPS Reconciliation (in thousands) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net income (in thousands) | $55,110 | $54,643 | | Adjusted income (in thousands) | $56,072 | $56,646 | | Diluted earnings per share | $0.29 | $0.27 | | Adjusted earnings per share | $0.29 | $0.27 | Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow For the first six months of 2025, Net Cash Provided by Operating Activities of $146.0 million was reconciled to a Free Cash Flow of $109.5 million. This calculation subtracts capital expenditures and franchise development fund investments and adjusts for the impact of advertising funds Six-Month Free Cash Flow Reconciliation (in thousands) | Line Item | Six Months Ended 2025 | Six Months Ended 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $146,008 | $145,463 | | Capital expenditures | ($39,050) | ($34,465) | | Franchise development fund | ($16,518) | ($11,477) | | Free cash flow | $109,505 | $112,874 | Disclosures & Definitions Forward-Looking Statements This section contains the standard safe harbor statement, cautioning that forward-looking statements regarding future performance are subject to numerous risks and uncertainties. It lists 26 specific risk factors, including competition, economic conditions, consumer spending, supply chain issues, and the company's predominantly franchised business model, that could cause actual results to differ materially from expectations - The release contains forward-looking statements based on current expectations, which are subject to various risks and uncertainties that could cause actual results to differ[22] - Key risk factors include competition, adverse economic conditions, changes in consumer spending, food safety events, ability to achieve growth strategy, changes in operating costs, labor shortages, and risks associated with the company's franchised business model[23] Disclosure Regarding Non-GAAP Financial Measures The company explains its use of non-GAAP financial measures such as adjusted revenue, adjusted EBITDA, adjusted EPS, and free cash flow. These measures are used internally for performance evaluation and benchmarking, as they exclude items that may not be indicative of core operating performance, providing investors with a supplemental perspective on business trends - The company uses non-GAAP measures like adjusted revenue, adjusted EBITDA, and adjusted EPS as internal metrics to evaluate operating performance and for executive compensation goals[27] - Free cash flow is defined as cash flows from operations minus capital expenditures, franchise development fund expenditures, and the net change in restricted advertising fund assets and liabilities[28] Key Business Measures This section defines the key business measures used by Wendy's to track performance, including same-restaurant sales, systemwide sales, and U.S. Company-operated restaurant margin. It clarifies that sales growth metrics are calculated on a constant currency basis and exclude Argentina due to its highly inflationary economy - Key business measures include same-restaurant sales, systemwide sales, and Company-operated restaurant margin[32] - Same-restaurant sales and systemwide sales growth are calculated on a constant currency basis to provide better year-over-year comparability and exclude sales from Argentina[35][36] - U.S. Company-operated restaurant margin is defined as sales from U.S. Company-operated restaurants less cost of sales (food, paper, labor, occupancy, advertising, other operating costs) divided by those sales[37]