Le Lézard
Classified in: Business
Subjects: ERN, ERP

Wingstop Inc. Reports Fiscal Third Quarter 2023 Financial Results


Increases Same-Store Sales Outlook to Approximately 16% for Fiscal Year 2023

DALLAS, Nov. 1, 2023 /PRNewswire/ -- Wingstop Inc. (NASDAQ: WING) today announced financial results for the fiscal third quarter ended September 30, 2023.

Highlights for the fiscal third quarter 2023 compared to the fiscal third quarter 2022:

Adjusted EBITDA, adjusted net income, and adjusted earnings per diluted share are non-GAAP measures. Reconciliations of adjusted EBITDA, adjusted net income, and adjusted earnings per diluted share to the most directly comparable financial measure presented in accordance with accounting principles generally accepted in the United States ("GAAP") are set forth in the schedule accompanying this release. See "Non-GAAP Financial Measures."

"Our third quarter results showcase the multi-year strategies we are executing against, delivering 15.3% domestic same-store sales growth in the quarter, primarily driven by transaction growth. We are measuring record levels in brand health metrics, demonstrating the underlying momentum at Wingstop, and putting us on a path to deliver our 20th consecutive year of domestic same-store sales growth," said Michael Skipworth, President and Chief Executive Officer. "This consistent growth, coupled with the strength of our unit economics, gives us the confidence in our 2023 global development outlook and our long-term vision of scaling Wingstop into a Top 10 Global Restaurant Brand."

Key operating metrics for the fiscal third quarter 2023 compared to the fiscal third quarter 2022:


Thirteen Weeks Ended


September 30, 2023


September 24, 2022

Number of system-wide restaurants open at end of period

2,099


1,898

Number of domestic franchise restaurants open at end of period

1,791


1,631

Number of international franchise restaurants open at end of period

262


225

System-wide sales (in millions)

$                              885


$                              700

Domestic AUV (in thousands)

$                           1,755


$                           1,591

Domestic same store sales growth

15.3 %


6.9 %

Company-owned domestic same store sales growth

6.0 %


4.3 %

Net income (in thousands)

$                        19,511


$                        13,368

Adjusted net income (in thousands)

$                        20,499


$                        13,368

Adjusted EBITDA (in thousands) 

$                        38,483


$                        28,155

Fiscal third quarter 2023 financial results 

Total revenue for the fiscal third quarter 2023 increased to $117.1 million from $92.7 million in the fiscal third quarter last year. Royalty revenue, franchise fees and other increased $12.8 million due to domestic same store sales growth of 15.3% and net new franchise development. Advertising fees increased $7.8 million due to a 26.5% increase in system-wide sales in the fiscal third quarter 2023. Company-owned restaurant sales increased $3.8 million due to an increase of $2.1 million related to the addition of four net new company-owned restaurants since the prior fiscal third quarter, as well as a 6.0% increase in company-owned same store sales driven primarily by an increase in transactions.

Cost of sales increased to $17.6 million from $15.7 million in the fiscal third quarter of the prior year. As a percentage of company-owned restaurant sales, cost of sales decreased to 73.6% from 78.0% in the prior year comparable period. The decrease was primarily driven by food, beverage and packaging costs benefiting from a 13.5% decrease in the cost of bone-in chicken wings as compared to the prior fiscal third quarter.

Selling, general & administrative ("SG&A") increased $6.4 million to $23.0 million from $16.7 million in the fiscal third quarter of the prior year. The increase in SG&A expense was driven by an increase in incentive compensation and performance-based stock compensation expense of $2.8 million primarily related to the Company's current fiscal year performance, an increase in headcount related expenses of $1.7 million to support the growth in our business, and an increase in consulting fees of $1.3 million associated with the Company's strategic initiatives.

Interest expense, net was $4.5 million, a decrease of $1.2 million compared to $5.7 million of interest expense, net in the comparable period in 2022. The decrease was driven by $1.0 million in additional interest income earned during the thirteen weeks ended September 30, 2023.

As previously announced, during the fiscal third quarter of 2023, our board of directors approved a share repurchase program with authorization to purchase up to $250.0 million of our outstanding shares of common stock. Pursuant to that program, the Company also entered into an accelerated share repurchase agreement (the "ASR Agreement") to repurchase $125.0 million of its common stock.

During the fiscal third quarter of 2023, the Company made an initial payment of $125.0 million and received and retired 567,151 shares of its common stock under the ASR Agreement, representing an estimated 75% of the total shares expected to be delivered under the ASR Agreement, based on the closing price on the date of initial delivery of $165.30. The delivery of any remaining shares will occur at the final settlement of the transactions under the ASR Agreement, which is scheduled in the fiscal fourth quarter of 2023. As of September 30, 2023, the Company had a total remaining authorized amount for share repurchases under the program of approximately $125.0 million.

Financial Outlook

Based on year-to-date results, the Company is providing updated guidance for 2023, which is a 52-week fiscal year:

Additionally, the Company is reiterating the following guidance for 2023:

Restaurant Development

As of September 30, 2023, there were 2,099 Wingstop restaurants system-wide. This included 1,837 restaurants in the United States, of which 1,791 were franchised restaurants and 46 were company-owned, and 262 franchised restaurants were in international markets. During the fiscal third quarter 2023, there were 53 net system-wide Wingstop restaurant openings.

Quarterly Dividend

In recognition of the Company's strong cash flow generation and our commitment to returning value to stockholders, on October 31, 2023, our board of directors approved a quarterly dividend payable to Wingstop stockholders of $0.22 per share of common stock, resulting in a total dividend of approximately $6.5 million. This dividend will be paid on December 8, 2023 to stockholders of record as of November 17, 2023.

The following definitions apply to these terms as used in this release:

Domestic average unit volume ("AUV") consists of the average annual sales of all restaurants that have been open for a trailing 52-week period or longer. This measure is calculated by dividing sales during the applicable period for all restaurants being measured by the number of restaurants being measured. Domestic AUV includes revenue from both company-owned and franchised restaurants. Domestic AUV allows management to assess our domestic company-owned and franchised restaurant economics. Changes in domestic AUV are primarily driven by increases in same store sales and are also influenced by opening new restaurants.

Domestic same store sales reflects the change in year-over-year sales for the same store restaurant base. We define the same store restaurant base to include those restaurants open for at least 52 full weeks. This measure highlights the performance of existing restaurants, while excluding the impact of new restaurant openings and permanent closures. We review same store sales for domestic company-owned restaurants as well as system-wide domestic restaurants. Domestic same store sales growth is driven by increases in transactions and average transaction size. Transaction size increases are driven by price increases or favorable mix shift from either an increase in items purchased or shifts into higher priced items.

System-wide sales represents net sales for all of our company-owned and franchised restaurants, as reported by franchisees. This measure allows management to better assess changes in our royalty revenue, our overall store performance, the health of our brand and the strength of our market position relative to competitors. Our system-wide sales growth is driven by new restaurant openings as well as increases in same store sales.

Adjusted EBITDA is defined as net income before interest expense, net, income tax expense (benefit), and depreciation and amortization (EBITDA), further adjusted for losses on debt extinguishment and financing transactions, transaction costs, costs and fees associated with investments in our strategic initiatives, and stock-based compensation expense. Beginning in the first quarter of 2023, gains and losses on disposal of assets are no longer presented as an adjustment to EBITDA, in our calculation of Adjusted EBITDA. Prior period amounts have been excluded from EBITDA adjustments to conform to the current presentation.

Adjusted net income is defined as net income adjusted for losses on debt extinguishment and financing transactions, transaction costs, costs and fees associated with investments in our strategic initiatives, and related tax adjustments that management believes are not indicative of the Company's core operating results or business outlook over the long-term.

Adjusted earnings per diluted share is defined as adjusted net income divided by weighted average diluted share count.

We caution investors that amounts presented in accordance with our definitions above may not be comparable to similar measures disclosed by our competitors because not all companies and analysts calculate certain non-GAAP measurements in the same manner.

Conference Call and Webcast

The Company will host a conference call today to discuss the fiscal third quarter 2023 financial results at 10:00 AM Eastern Time. The conference call can be joined telephonically by dialing 1-877-259-5243 or 1-412-317-5176 (international) and asking for the Wingstop conference call. A replay will be available two hours after the call and can be accessed by dialing 1-877-344-7529 or 1-412-317-0088 (international), then entering the replay code 8628191. The replay will be available through Wednesday, November 8, 2023.

The conference call will also be webcast live and later archived on the investor relations section of Wingstop's corporate website at ir.wingstop.com under the 'News & Events' section.

About Wingstop

Founded in 1994 and headquartered in Dallas, TX, Wingstop Inc. (NASDAQ: WING) operates and franchises more than 2,050 locations worldwide. The Wing Experts are dedicated to Serving the World Flavor through an unparalleled guest experience and use of a best-in-class technology platform, all while offering classic and boneless wings, tenders, and chicken sandwiches, always cooked to order and hand sauced-and-tossed in fans' choice of 11 bold, distinctive flavors. Wingstop's menu also features signature sides including fresh-cut, seasoned fries and freshly-made ranch and bleu cheese dips.

In fiscal year 2022, Wingstop's system-wide sales increased 16.8% to approximately $2.7 billion, marking the 19th consecutive year of same store sales growth. With a vision of becoming a Top 10 Global Restaurant Brand, Wingstop's system is comprised of independent franchisees, or brand partners, who account for approximately 98% of Wingstop's total restaurant count of 2,099 as of September 30, 2023.

A key to this business success and consumer fandom stems from The Wingstop Way, which includes a core value system of being Authentic, Entrepreneurial, Service-minded, and Fun. The Wingstop Way extends to the brand's environmental, social and governance platform as Wingstop seeks to provide value to all guests.

Rounding out a strong year in 2022, the Company made Technomic 500's "Fastest Growing Franchise" list, was ranked #16 on Entrepreneur Magazine's "Franchise 500," won Fast Casual's Excellence in Food Safety award, and was named to Fast Company's "The World's Most Innovative Companies" list ranking #4 in the dining category.

For more information visit www.wingstop.com or www.wingstop.com/own-a-wingstop and follow @Wingstop on Twitter, Instagram, Facebook, and TikTok. Learn more about Wingstop's involvement in its local communities at www.wingstopcharities.org.

Non-GAAP Financial Measures

To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use non-GAAP financial measures, including those indicated above. By providing non-GAAP financial measures, together with a reconciliation to the most comparable GAAP measure, we believe we are enhancing investors' understanding of our business and our results of operations, as well as assisting investors in evaluating how well we are executing our strategic initiatives. These measures are not intended to be considered in isolation or as substitutes for, or superior to, financial measures prepared and presented in accordance with GAAP. The non-GAAP measures used in this press release may be different from the measures used by other companies. A reconciliation of each measure to the most directly comparable GAAP measure is available in this news release. In addition, the Current Report on Form 8-K furnished to the Securities and Exchange Commission (the "SEC") concurrent with the issuance of this press release includes a more detailed description of each of these non-GAAP financial measures, together with a discussion of the usefulness and purpose of such measures.

Forward-looking Statements

This news release includes statements of our expectations, intentions, plans and beliefs that constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are intended to come within the safe harbor protection provided by those sections. These statements, which involve risks and uncertainties, relate to the discussion of our business strategies and our expectations concerning future operations, margins, profitability, trends, liquidity and capital resources and to analyses and other information that are based on forecasts of future results and estimates of amounts not yet determinable. These forward-looking statements can generally be identified by the use of forward-looking terminology, including the terms "may," "will," "should," "expect," "intend," "plan," "outlook,"  "guidance," "anticipate," "believe," "think," "estimate," "seek," "predict," "can," "could," "project," "potential" or, in each case, their negative or other variations or comparable terminology, although not all forward-looking statements are accompanied by such terms. Examples of forward-looking statements in this news release include, but are not limited to, our 2023 fiscal year outlook for domestic same store sales growth, SG&A expense, stock-based compensation expense, depreciation and amortization, and unit growth. These forward-looking statements are made based on expectations and beliefs concerning future events affecting us and are subject to uncertainties, risks, and factors relating to our operations and business environments, all of which are difficult to predict and many of which are beyond our control, that could cause our actual results to differ materially from those matters expressed or implied by these forward-looking statements. Please refer to the risk factors discussed in our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, which can be found at the SEC's website www.sec.gov. The discussion of these risks is specifically incorporated by reference into this news release.

When considering forward-looking statements in this news release or that we make in other reports or statements, you should keep in mind the cautionary statements in this news release and future reports we file with the SEC. New risks and uncertainties arise from time to time, and we cannot predict when they may arise or how they may affect us. Any forward-looking statement in this news release speaks only as of the date on which it was made. Except as required by law, we assume no obligation to update or revise any forward-looking statements for any reason, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, even if new information becomes available in the future.

Media Contact
Maddie Lupori
[email protected]

Investor Contact
Kristen Thomas
[email protected]

WINGSTOP INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(amounts in thousands, except share and per share data)



September 30,
2023


December 31,
2022


(Unaudited)



Assets




Current assets




Cash and cash equivalents

$                77,983


$              184,496

Restricted cash

11,444


13,296

Accounts receivable, net

11,951


9,461

Prepaid expenses and other current assets

5,907


4,252

Advertising fund assets, restricted

25,558


15,167

Total current assets

132,843


226,672

Property and equipment, net

84,344


66,851

Goodwill

65,175


62,514

Trademarks

32,700


32,700

Customer relationships, net

8,059


9,015

Other non-current assets

28,555


26,438

Total assets

$              351,676


$              424,190

Liabilities and stockholders' deficit




Current liabilities




Accounts payable

$                  5,104


$                  5,219

Other current liabilities

36,670


34,726

Current portion of debt

?


7,300

Advertising fund liabilities

25,558


15,167

Total current liabilities

67,332


62,412

Long-term debt, net

711,867


706,846

Deferred revenues, net of current

28,769


27,052

Deferred income tax liabilities, net

2,980


4,180

Other non-current liabilities

16,170


14,561

Total liabilities

827,118


815,051

Commitments and contingencies




Stockholders' deficit




Common stock, $0.01 par value; 100,000,000 shares authorized;
29,414,920 and 29,932,668 shares issued and outstanding as of
September 30, 2023 and December 31, 2022, respectively

294


300

Additional paid-in-capital

1,238


2,797

Retained deficit

(476,413)


(393,321)

Accumulated other comprehensive loss

(561)


(637)

Total stockholders' deficit

(475,442)


(390,861)

Total liabilities and stockholders' deficit

$              351,676


$              424,190

 

WINGSTOP INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(amounts in thousands, except per share data)



Thirteen Weeks Ended


September 30,
2023


September 24,
2022


(Unaudited)


(Unaudited)

Revenue:




Royalty revenue, franchise fees and other

$                53,200


$                40,363

Advertising fees

39,951


32,146

Company-owned restaurant sales

23,953


20,163

Total revenue

117,104


92,672

Costs and expenses:




Cost of sales (1)

17,622


15,724

Advertising expenses

42,381


33,106

Selling, general and administrative

23,047


16,686

Depreciation and amortization

3,384


2,836

Loss on disposal of assets

18


239

Total costs and expenses

86,452


68,591

Operating income

30,652


24,081

Interest expense, net

4,520


5,742

Other (income) expense

(19)


290

Income before income tax expense

26,151


18,049

Income tax expense

6,640


4,681

Net income

$                19,511


$                13,368





Earnings per share




Basic

$                    0.66


$                    0.45

Diluted

$                    0.65


$                    0.45





Weighted average shares outstanding




Basic

29,750


29,915

Diluted

29,818


29,967





Dividends per share

$                    0.22


$                    0.19


(1) Cost of sales includes all operating expenses of company-owned restaurants, including advertising expenses,
     and excludes depreciation and amortization, which are presented separately.

 

 

WINGSTOP INC. AND SUBSIDIARIES

Unaudited Supplemental Information

Cost of Sales Margin Analysis

(amounts in thousands)



Thirteen Weeks Ended


September 30, 2023


September 24, 2022


In dollars


As a % of
company-owned
restaurant sales


In dollars


As a % of
company-owned
restaurant sales

Cost of sales:








Food, beverage and packaging costs

$                7,910


33.0 %


$                7,504


37.2 %

Labor costs

5,646


23.6 %


4,652


23.1 %

Other restaurant operating expenses

4,645


19.4 %


4,009


19.9 %

Vendor rebates

(579)


(2.4) %


(441)


(2.2) %

Total cost of sales

$             17,622


73.6 %


$             15,724


78.0 %

 

WINGSTOP INC. AND SUBSIDIARIES

Unaudited Supplemental Information

Restaurant Count



Thirteen Weeks Ended


September 30,
2023


September 24,
2022

Domestic Franchised Activity:




Beginning of period

1,749


1,600

Openings

42


32

Closures

?


?

Acquired by Company

?


(1)

Restaurants end of period

1,791


1,631





Domestic Company-Owned Activity:




Beginning of period

45


39

Openings

1


2

Closures

?


?

Acquired by Company

?


1

Restaurants end of period

46


42





Total Domestic Restaurants

1,837


1,673





International Franchised Activity:




Beginning of period

252


219

Openings

13


9

Closures

(3)


(3)

Restaurants end of period

262


225





Total System-wide Restaurants

2,099


1,898

 

WINGSTOP INC. AND SUBSIDIARIES

Non-GAAP Financial Measures - EBITDA and Adjusted EBITDA

(Unaudited)

(amounts in thousands)



Thirteen Weeks Ended


September 30,
2023


September 24,
2022

Net income

$             19,511


$             13,368

Interest expense, net

4,520


5,742

Income tax expense

6,640


4,681

Depreciation and amortization

3,384


2,836

EBITDA

$             34,055


$             26,627

Additional adjustments:




Consulting fees (a)

1,300


?

Stock-based compensation expense (b)

3,128


1,528

Adjusted EBITDA

$             38,483


$             28,155


(a)     Represents non-recurring consulting fees that are not part of our ongoing operations and are incurred to execute discrete,
          project-based strategic initiatives, which are included in Selling, general and administrative on the Consolidated Statements
          of Operations. The costs incurred in the thirteen weeks ended September 30, 2023 include consulting fees relating to a
          comprehensive review of our long-term growth strategy for our domestic business to explore potential future initiatives, and
          which review is expected to be completed in fiscal year 2023. Given the magnitude and scope of the strategic review initiative
          that is not expected to recur in the foreseeable future, the Company considers the incremental consulting fees incurred with
          respect to the initiative not reflective of the ongoing costs to operate its business.

(b)      Includes non-cash, stock-based compensation.

 

WINGSTOP INC. AND SUBSIDIARIES

Non-GAAP Financial Measures - Adjusted Net Income and Adjusted EPS

(Unaudited)

(amounts in thousands, except per share data)



Thirteen Weeks Ended


September 30,
2023


September 24,
2022

Numerator:




Net income

$          19,511


$          13,368

Adjustments:




Consulting fees (a)

1,300


?

Tax effect of adjustments (b)

(312)


?

Adjusted net income

$          20,499


$          13,368





Denominator:




Weighted-average shares outstanding - diluted

29,818


29,967





Adjusted earnings per diluted share

$               0.69


$               0.45


(a)       Represents non-recurring consulting fees that are not part of our ongoing operations and are incurred to execute discrete,
          project-based strategic initiatives, which are included in Selling, general and administrative on the Consolidated Statements
          of Operations. The costs incurred in the thirteen weeks ended September 30, 2023 include consulting fees relating to a
          comprehensive review of our long-term growth strategy for our domestic business to explore potential future initiatives, and
          which review is expected to be completed in fiscal year 2023. Given the magnitude and scope of the strategic review initiative
          that is not expected to recur in the foreseeable future, the Company considers the incremental consulting fees incurred with
          respect to the initiative not reflective of the ongoing costs to operate its business.

(b)      Represents the tax effect of the aforementioned adjustments to reflect corporate income taxes at an assumed effective tax rate
          of 24% for the period ended September 30, 2023, which includes provisions for U.S. federal income taxes, and assumes the
          respective statutory rates for applicable state and local jurisdictions.

 

SOURCE Wingstop Restaurants Inc.


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