Wendy’s(US:WEN)2024-05-02 11:19Revenue and Sales Performance - Revenue increased 1.1% to $534.8 million in Q1 2024 compared to $528.8 million in Q1 2023[109] - Global same-restaurant sales increased 0.9% in Q1 2024, with U.S. same-restaurant sales up 0.6% and international same-restaurant sales up 3.2% compared to Q1 2023[109] - Global same-restaurant sales increased 8.9% on a two-year basis[109] - Franchise royalty revenue increased by $3.5 million to $146.6 million, driven by $2.0 million from new restaurant development and a 1.1% increase in global franchise same-restaurant sales[121] - U.S. same-restaurant sales for company-operated locations decreased by 0.8%, while franchised locations saw a 0.7% increase[118] - Global systemwide sales increased by 2.6% in Q1 2024, compared to a 10.0% increase in Q1 2023[119] Profitability and Margins - Net income increased 5.5% to $42.0 million in Q1 2024 compared to $39.8 million in Q1 2023[109] - Global Company-operated restaurant margin was 14.7% in Q1 2024, an increase of 90 basis points compared to Q1 2023[109] - The company-operated restaurant margin in the U.S. improved to 15.3% in Q1 2024 from 14.7% in Q1 2023[116] - Cost of sales as a percentage of sales decreased to 85.3% in Q1 2024 from 86.2% in Q1 2023, primarily due to higher average check[125] Expenses and Costs - General and administrative expenses increased to $63.8 million in Q1 2024 from $62.3 million in Q1 2023, primarily due to higher share-based compensation and employee benefits[129] - Depreciation and amortization rose to $35.5 million in Q1 2024 from $33.5 million in Q1 2023, driven by asset additions for new and remodeled restaurants[130] - Amortization of cloud computing arrangements increased to $3.5 million in Q1 2024 from $1.6 million in Q1 2023, linked to the HCM system implementation[131] - Impairment of long-lived assets surged to $2.0 million in Q1 2024 from $0.4 million in Q1 2023, due to deteriorating performance of certain restaurants[135] Restaurant Development and Operations - During Q1 2024, the Company and its franchisees added eight net new restaurants across the Wendy's system[111] - The total number of restaurants increased to 7,248 by the end of Q1 2024, with a net addition of 21 restaurants during the quarter[120] - Company-operated restaurants comprised approximately 5% of the total Wendy's system as of March 31, 2024[99] Cash Flow and Financing - Cash provided by operating activities was $100.0 million in Q1 2024, up from $53.0 million in Q1 2023, mainly due to timing of payments for marketing expenses and vendor incentives[155] - The company expects capital expenditures of approximately $90.0 million to $100.0 million for the year, with Q1 2024 expenditures between $73.0 million and $83.0 million[154] - Net cash provided by financing activities improved to $(72.6) million in Q1 2024 from $(132.3) million in Q1 2023, reflecting better cash management[154] - Cash used in investing activities increased to $20.8 million in Q1 2024 from $12.1 million in Q1 2023, primarily due to a $5.1 million rise in capital expenditures and a $4.5 million increase in franchise development fund expenditures[156] - Cash used in financing activities decreased to $72.6 million in Q1 2024 from $132.3 million in Q1 2023, mainly due to a $31.8 million reduction in long-term debt repayments and a $29.4 million decrease in common stock repurchases[157] Dividends and Stock Repurchase - The company paid a quarterly cash dividend of $0.25 per share on March 15, 2024, totaling $51.4 million, with an estimated total cash requirement for dividends of approximately $153.9 million for the remainder of 2024[160] - As of March 31, 2024, the company had $302.8 million remaining under the $500 million stock repurchase program authorized in January 2023, having repurchased 0.4 million shares for $7.2 million in Q1 2024[161] Future Outlook and Challenges - The Company plans to fund approximately $27.0 million of incremental breakfast advertising in 2024 to drive same-restaurant sales[109] - The company expects to incur total costs of approximately $17 million to $19 million related to the Organizational Redesign Plan, with $5.6 million recognized in Q1 2024[112] - Inflationary pressures on labor impacted consolidated results in Q1 2024, with expectations for continued effects throughout 2024, managed through selective menu price increases[164] - The company anticipates that inherent volatility in commodity markets could significantly affect its results of operations in the future[164] - Wendy's restaurant operations are moderately seasonal, with higher average sales typically occurring in summer compared to winter months[165] Tax and Debt Management - The effective tax rate decreased to 26.9% in Q1 2024 from 28.0% in Q1 2023, primarily due to lower tax effects from foreign operations[141] - There were no material changes to the company's debt obligations since December 31, 2023, and it remained in compliance with its debt covenants as of March 31, 2024[159] - The company did not repurchase any long-term debt during Q1 2024, with future repurchases dependent on market conditions and liquidity requirements[158]