Wingstop(WING) - 2024 Q1 - Quarterly Results

Executive Summary Fiscal First Quarter 2024 Highlights Wingstop Inc delivered strong Q1 FY2024 performance with significant growth in system-wide sales and total revenue | Metric | Q1 FY2024 | Q1 FY2023 | Change | | :--- | :--- | :--- | :--- | | System-Wide Sales | $1.1 Billion | $822 Million | +36.8% | | New Restaurant Openings | 65 | - | - | | Domestic Same-Store Sales Growth | 21.6% | 20.1% | +1.5 pp | | Domestic Restaurant AUV | $1.9 Million | $1.662 Million | +$0.256 Million | | Digital Sales Mix | 68.3% | - | - | | Total Revenue | $145.8 Million | $108.7 Million | +34.1% | | Net Income | $28.7 Million | $15.669 Million | +83.5% | | Diluted Earnings Per Share | $0.98 | $0.52 | +$0.46 | | Adjusted Net Income | $28.7 Million | $17.771 Million | +61.8% | | Adjusted EBITDA | $50.3 Million | $34.584 Million | +45.3% | CEO Commentary The CEO highlighted the brand's strong momentum and effective strategy, driven by transaction-led same-store sales growth - Domestic same-store sales grew 21.6%, driven almost entirely by transaction growth[4] - Domestic AUV surpassed $1.9 million, strengthening brand partner returns and the development pipeline[4] - The company is confident in its path to becoming a Top 10 Global Restaurant Brand[4] Financial Performance Analysis Total Revenue Breakdown Total revenue grew 34.1% to $145.8 million, driven by royalty, franchise fee, and advertising revenue growth | Revenue Source | Q1 FY2024 (in millions) | Q1 FY2023 (in millions) | Change (in millions) | | :--- | :--- | :--- | :--- | | Royalty revenue, franchise fees and other | $67.1 | $48.2 | +$18.9 | | Advertising fees | $50.1 | $37.5 | +$12.7 | | Company-owned restaurant sales | $28.5 | $23.1 | +$5.5 | | Total Revenue | $145.8 | $108.7 | +$37.1 | - Royalty revenue, franchise fees and other increased by $18.9 million, with $9.4 million from 21.6% domestic same-store sales growth and $7.2 million from new franchise restaurant development[8] - Advertising fees increased by $12.7 million, primarily due to a 36.8% increase in system-wide sales in Q1 FY2024[8] - Company-owned restaurant sales increased by $5.5 million, mainly due to 7 net new restaurants and a 6.2% same-store sales growth[8] Cost and Expense Analysis Cost of sales and SG&A expenses increased, with higher bone-in chicken wing costs impacting margins | Metric | Q1 FY2024 (in millions) | Q1 FY2023 (in millions) | Change (in millions) | | :--- | :--- | :--- | :--- | | Cost of sales | $21.3 | $16.7 | +$4.6 | | Cost of sales as % of company-owned restaurant sales | 74.5% | 72.4% | +2.1 pp | | Selling, general & administrative | $25.2 | $23.6 | +$1.6 | | Depreciation and amortization | $3.4 | $3.0 | +$0.4 | | Total Costs and Expenses | $103.1 | $83.0 | +$20.1 | - Cost of sales as a percentage of company-owned restaurant sales increased from 72.4% to 74.5%, primarily due to higher bone-in chicken wing costs[9] - SG&A expenses increased by $1.5 million, driven by a $2.1 million increase in personnel-related expenses, a $1.4 million increase in professional service fees, and a $0.5 million increase in performance-based stock compensation[10] - The increase in SG&A was partially offset by the absence of $2.8 million in non-recurring consulting fees from the prior year period[10] Profitability Metrics Wingstop achieved substantial growth in operating income, net income, and diluted earnings per share in Q1 FY2024 | Metric | Q1 FY2024 (in thousands) | Q1 FY2023 (in thousands) | Change (in thousands) | | :--- | :--- | :--- | :--- | | Income from operations | $42,738 | $25,672 | +$17,066 | | Net income | $28,747 | $15,669 | +$13,078 | | Diluted earnings per share | $0.98 | $0.52 | +$0.46 | | Adjusted EBITDA | $50,263 | $34,584 | +$15,679 | | Adjusted net income | $28,747 | $17,771 | +$10,976 | Operational Performance System-wide Sales and Same Store Sales Growth The company reported strong system-wide sales growth and a significant increase in domestic average unit volume | Metric | Q1 FY2024 | Q1 FY2023 | Change | | :--- | :--- | :--- | :--- | | System-Wide Sales | $1,124 Million | $822 Million | +36.8% | | Domestic AUV | $1,918 Thousand | $1,662 Thousand | +$256 Thousand | | Domestic Same-Store Sales Growth | 21.6% | 20.1% | +1.5 pp | | Company-Owned Domestic Same-Store Sales Growth | 6.2% | 10.3% | -4.1 pp | | Digital Sales Mix | 68.3% | - | - | - Domestic same-store sales growth of 21.6% was primarily driven by an increase in transactions[4][15] - Domestic AUV reached $1.918 million, an increase from $1.662 million in the prior year comparable period[6] Restaurant Development and Unit Growth Wingstop's global restaurant count reached 2,279 with 65 net new openings, showing continued expansion | Metric | March 30, 2024 | April 1, 2023 | Change | | :--- | :--- | :--- | :--- | | Total System-Wide Restaurants | 2,279 | 1,996 | +283 | | Domestic Franchised | 1,924 | 1,710 | +214 | | Domestic Company-Owned | 50 | 43 | +7 | | International Franchised | 305 | 243 | +62 | | Net New Openings This Quarter | 65 | 40 | +25 | - The quarter saw 47 net domestic franchised openings, 1 net domestic company-owned opening, and 17 net international franchised openings[37] Financial Outlook & Capital Allocation 2024 Financial Guidance The company updated its FY2024 guidance, projecting low double-digit domestic same-store sales growth and 275-295 net new units - Domestic same-store sales growth: Low double-digits[11] - Global net new units: 275 to 295[11] - SG&A expense: Approximately $111 million[11] - Stock-based compensation expense: Approximately $20 million[11] - Depreciation and amortization: $18 million to $19 million[11] Quarterly Dividend The Board of Directors declared a quarterly dividend of $0.22 per share, reflecting strong cash flow generation | Metric | Amount | | :--- | :--- | | Dividend per common share | $0.22 | | Total dividend payment | Approx $6.5 Million | | Payment date | June 7, 2024 | | Record date | May 17, 2024 | Company Information & Non-GAAP Measures About Wingstop Wingstop Inc, founded in 1994, is a global restaurant operator and franchisor with over 2,250 locations worldwide - Founded in 1994 and based in Dallas, TX, Wingstop operates and franchises more than 2,250 locations worldwide[22] - In fiscal year 2023, system-wide sales grew 27.1% to approximately $3.5 billion, marking the 20th consecutive year of same-store sales growth[23] - The company's vision is to become a Top 10 Global Restaurant Brand, with approximately 98% of its restaurants owned and operated by independent franchisees as of March 30, 2024[23] Non-GAAP Financial Measures Explanation The company utilizes non-GAAP measures like Adjusted EBITDA to supplement GAAP financials and enhance investor understanding - Domestic Average Unit Volume (AUV): Represents the average annual sales of all restaurants open for 52 weeks or more, used to assess the economic viability of restaurants[14] - Domestic Same-Store Sales: Reflects the change in year-over-year sales for the comparable restaurant base (open for at least 52 full weeks), used to measure existing restaurant performance[15] - System-Wide Sales: Represents the net sales for all company-owned and franchised restaurants, used to evaluate royalty revenue, store performance, brand health, and market position[16] - Adjusted EBITDA: EBITDA adjusted for loss on debt extinguishment, transaction costs, strategic investment costs, and stock-based compensation expense[17] - Adjusted Net Income: Net income adjusted for loss on debt extinguishment, transaction costs, strategic investment costs, and related tax adjustments[18] - Adjusted Diluted Earnings Per Share: Adjusted Net Income divided by weighted average diluted shares outstanding[19] Financial Statements Consolidated Balance Sheets Total assets increased to $412.3 million as of March 30, 2024, with total liabilities at $846.6 million | Item | March 30, 2024 (in thousands) | Dec 30, 2023 (in thousands) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $108,305 | $90,216 | | Restricted cash | $11,444 | $11,444 | | Advertising fund assets, restricted | $33,710 | $25,328 | | Total current assets | $170,876 | $144,344 | | Property and equipment, net | $99,345 | $91,292 | | Goodwill | $67,708 | $67,708 | | Total Assets | $412,251 | $377,825 | | Liabilities and Stockholders' Deficit | | | | Total current liabilities | $78,829 | $71,004 | | Long-term debt, net | $712,790 | $712,327 | | Total Liabilities | $846,630 | $835,191 | | Total Stockholders' Deficit | ($434,379) | ($457,366) | Consolidated Statements of Operations Q1 FY2024 saw significant growth in total revenue and net income, reflecting strong operational profitability | Item | March 30, 2024 (in thousands) | April 1, 2023 (in thousands) | | :--- | :--- | :--- | | Total revenues | $145,789 | $108,721 | | Cost of sales | $21,271 | $16,695 | | Advertising expenses | $53,192 | $39,643 | | Selling, general and administrative | $25,178 | $23,645 | | Income from operations | $42,738 | $25,672 | | Net income | $28,747 | $15,669 | | Diluted earnings per share | $0.98 | $0.52 | | Dividends per share | $0.22 | $0.19 | Supplemental Information - Cost of Sales Margin Analysis The cost of sales as a percentage of company-owned restaurant sales rose to 74.5%, driven by higher food costs | Cost of Sales Component | March 30, 2024 (in thousands) | % of Company-Owned Restaurant Sales | April 1, 2023 (in thousands) | % of Company-Owned Restaurant Sales | | :--- | :--- | :--- | :--- | :--- | | Food, beverage and packaging costs | $9,903 | 34.7% | $7,486 | 32.4% | | Labor costs | $6,675 | 23.4% | $5,517 | 23.9% | | Other restaurant operating expenses | $5,410 | 19.0% | $4,226 | 18.3% | | Vendor rebates | ($717) | (2.5)% | ($534) | (2.3)% | | Total cost of sales | $21,271 | 74.5% | $16,695 | 72.4% | - Food, beverage, and packaging costs as a percentage of sales increased from 32.4% to 34.7%, primarily due to higher bone-in chicken wing costs[9][35] Supplemental Information - Restaurant Count The global restaurant count reached 2,279 by the end of Q1 2024, with a net increase of 65 units during the quarter | Restaurant Type | March 30, 2024 | April 1, 2023 | | :--- | :--- | :--- | | Domestic franchised, end of period | 1,924 | 1,710 | | Domestic company-owned, end of period | 50 | 43 | | International franchised, end of period | 305 | 243 | | Total system-wide restaurants, end of period | 2,279 | 1,996 | | System-wide net openings during the period | 65 | 40 | Non-GAAP Reconciliations EBITDA and Adjusted EBITDA Adjusted EBITDA grew significantly to $50.3 million in Q1 FY2024, benefiting from higher net income | Item | March 30, 2024 (in thousands) | April 1, 2023 (in thousands) | | :--- | :--- | :--- | | Net income | $28,747 | $15,669 | | Interest expense, net | $4,544 | $4,573 | | Income tax expense | $9,750 | $5,242 | | Depreciation and amortization | $3,410 | $2,989 | | EBITDA | $46,451 | $28,473 | | Consulting fees adjustment | — | $2,766 | | Stock-based compensation expense adjustment | $3,812 | $3,345 | | Adjusted EBITDA | $50,263 | $34,584 | - Adjusted EBITDA increased 45.3% to $50.3 million, benefiting from the absence of $2.8 million in non-recurring consulting fees from the prior year period[5][39] Adjusted Net Income and Adjusted EPS Adjusted net income and adjusted diluted EPS saw substantial increases, aligning with GAAP results for the quarter | Item | March 30, 2024 (in thousands) | April 1, 2023 (in thousands) | | :--- | :--- | :--- | | Net income | $28,747 | $15,669 | | Consulting fees adjustment | — | $2,766 | | Tax effect of adjustments | — | ($664) | | Adjusted net income | $28,747 | $17,771 | | Diluted weighted average shares | 29,478 | 30,031 | | Adjusted diluted earnings per share | $0.98 | $0.59 | - Adjusted net income increased 61.8% to $28.7 million, and adjusted diluted EPS was $0.98 compared to $0.59 in the prior year period[5][41] Additional Information Conference Call and Webcast Details The company held a conference call on May 1, 2024, to discuss Q1 FY2024 financial results - The conference call was held on May 1, 2024, at 10:00 AM Eastern Time[20] - A replay of the call is available by telephone or via the company's investor relations website[20][21] Forward-Looking Statements This press release contains forward-looking statements regarding future operations and performance, which are subject to risks - Forward-looking statements include the outlook for FY2024 domestic same-store sales growth, global net new units, SG&A, stock-based compensation, and depreciation and amortization[27] - These statements are subject to risks, uncertainties, and other factors that could cause actual results to differ materially from those projected[27] - The company undertakes no obligation to update or revise any forward-looking statements, except as required by law[28] Contacts Media and investor contact information is provided for inquiries - Media Contact: Maddie Lupori (Media@wingstop.com)[29] - Investor Contact: Kristen Thomas (IR@wingstop.com)[29]