Wingstop [WING] Conference call transcript for 2022 q1
2022-05-04 21:16:11
Fiscal: 2022 q1
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Operator: 00:03 Good morning ladies and gentlemen, and thank you for standing by. Welcome to the Wingstop Inc. Fiscal First Quarter 2022 Earnings Conference Call. All participants will be in listen-only mode. Please note that this conference is being recorded today, Wednesday, May 4, 2022. 00:26 I would now like to turn the conference over to Susana Arevalo, Vice President of FP&A and Investor Relations. Please go ahead.
Susana Arevalo: 00:35 Thank you, and welcome to the Fiscal First Quarter 2022 Earnings Conference Call for Wingstop. On the call today are Michael Skipworth, President and Chief Executive Officer; and Alex Kaleida, Senior Vice President and Chief Financial Officer. 00:52 Our fiscal first quarter 2022 results were published earlier this morning and are available under the investor relations tab on our investor relations website at ir.wingstop.com. Our discussion today includes forward-looking statements. These statements are not guarantees of future performance, and are subject to numerous risks and uncertainties that could cause our actual results to differ materially from what we currently expect. 01:23 Our SEC filings describe various risks that could affect our future operating results and financial condition. We use certain non-GAAP financial measures that we believe can be useful in evaluating our performance. Presentation of such information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. Reconciliations to comparable GAAP measures are contained in our earnings release. 01:52 Lastly, for the Q&A session, we ask that you please each keep to one question and a follow-up to allow as many participants as possible to ask a question. 02:03 With that, I would like to turn the call over to Michael.
Michael Skipworth: 02:07 Thank you Susana and good morning. It is truly an exciting time to be a part of Wingstop and I am humbled by the opportunity to be hosting the call today as President and CEO of this incredible brand that I've now had the opportunity to be a part of for almost eight years. I've now been in my new role for almost two months and during this time, one of the most common questions I've been asked is whether I plan to fundamentally change anything around Wingstop strategic growth priorities? 02:39 The short answer is no. The strategy at Wingstop, one I have had the opportunity to help shape and build over the years have staying power and positions us well to execute the long-term growth opportunity for Wingstop. We will remain focused on sustaining same store sales growth, maintaining best in class returns and accelerating development as we build Wingstop into a Top 10 global restaurant brand. 03:06 We have carefully constructed our strategies with a technology forward and growth oriented mindset and that is precisely what has enabled the success of the model and our industry leading growth. It is what has driven 18 consecutive years of domestic same store sales growth. A feet that few, if any, restaurant peers can lay claim to. 03:29 It is also what's fueled our culture. How we behave and the core values that are at the forefront of every decision at Wingstop. Our strategy is built upon a foundation rooted in both living the Wingstop way and investing in people as our competitive advantage. This enables our core growth pillars so preserving our culture is key. 03:51 Our first core pillar in our strategy is sustaining same store sales growth. Building brand awareness continues to be a big opportunity for Wingstop as we have a large gap to other national brands. We have made good progress over the years on closing this gap, but there remains a meaningful opportunity for us to continue to attack. 04:12 In a span of a few years, we have doubled the size of our national ad fund going from less than $60 million in 2019 to what we anticipate will be over $120 million in 2022, giving us the firepower to build our awareness as we continue to close the gap to national brands. 04:32 2022 provides another inflection point in our national advertising where beginning in the second quarter we will consolidate the local 1% advertising spend into the national ad fund taking the national ad fund contribution rate to 5%, which will deliver more efficient advertising and allow for premium placement, while deploying an always on media approach. 04:58 Another component of our same store sales growth is our digital business, which has sustained mix levels of more than 60% and has allowed us to grow our database to over 27 million guests. We continue to invest in technology to advance our best in class digital platform. 05:17 We are working to transform our digital marketing with data rich strategies and scalable global platforms. These new insights will further improve our customer targeting guest acquisition, new guest retention levels and frequency among our core. We are in the early stages of this transformation and are excited about the growth opportunities we anticipate for our brand in coming years. 05:43 The next core element of our strategy is maintaining our best in class returns. As you have seen over the years, wings are a highly volatile commodity. While we are currently enjoying meaningful deflation in wings, we remain committed to our supply chain strategy. We believe that mitigating long-term cost volatility for our restaurants will further accelerate our pace of restaurant development. 06:08 We will also continue to find tune our model and explore ways we can shrink the size of the box, change the workflow, and adapt new technologies or areas of innovation that can help enhance our unit economics. We believe our strategies of sustaining same store sales growth and maintaining best in class returns translates to an acceleration in unit growth. 06:31 One we are already seeing with the record Q1 openings of 60 net and an increase in our unit outlook for this year of 220 plus net new restaurants. With only 1,791 restaurants today, and line of sight to 7,000 plus global restaurants in the future, we are just getting started with the global growth opportunity for Wingstop. 06:56 Our first quarter performance is a strong demonstration of the excitement of our brand partners to grow with Wingstop and highlights the unit growth potential, despite coming out of a year with record inflation in 2021, we posted a record unit development year and entered 2022 with one of the strongest development pipelines we've ever had. This was showcased by a record first quarter with 60 net new restaurants. 07:23 We find ourselves in a unique position in 2022, while most in our industry are facing inflationary headwinds and margin pressures, we anticipate significant deflation in our core commodity bone-in wings. While we will see some level of inflation in our business, we expect this will be more than offset by the deflation we are seeing in wings. 07:45 To provide some context, the spot market for wings hit a record $3.22 per pound in 2021. And as we sit here today, the spot market is at $1.64 per pound. This significant deflation in wing prices as we exited the first quarter has bolstered restaurant level cash flows to the tune of delivering a payback of less than two years on an initial investment to build out a Wingstop. 08:15 These factors support our confidence, as well as that of our brand partners and we are increasing our unit guidance to 220 plus global net new restaurants for 2022, which translates to accelerated growth of over 12.5% and another record year. While we see a lot of strength in the underlying fundamentals of our domestic business, this is only half of the long-term growth story. 08:41 We have an international business that is supercharged for growth. Sales for our international markets are now at or exceeding pre-pandemic levels. In fact, in the first quarter, international same store sales growth was 23.8%. Our UK market is a clear demonstration of the power of our international growth strategy. One focused on a heavy off-premise digital business with premium positioning. 09:08 Our UK brand partner now operates 20 restaurants with 15 openings slated for 2022. The AUVs in the UK are $2 million, despite the market just opening in late 2018. This market provides us with a solid playbook and a blueprint for success as we accelerate our global growth as a brand. This past quarter, we celebrated the opening of our 200th international restaurant, a proof point for the portability of our brand and the strength of our business model. 09:40 And just last week, we announced a new development agreement for Indonesia. A new agreement is expected to take the market from its current restaurant count of 50 to 120. We couldn't be more excited for the Wingstop brands long term potential in the Asia Pacific region and continue to be encouraged by business development conversations in key growth markets. 10:03 Our domestic business delivered 1.2% same store sales growth for the quarter or 32% on a three-year stacked basis, resulting in AUVs now exceeding $1.6 million and further strengthening the unit economic model. As we entered 2022, the first two months were delivering on our expectations and was consistent with our growth rate as we exited 2021. And that's despite challenges associated with the Omicron variant. 10:34 However, this trend changed in March driven by the combination of very strong comps in the year ago period fueled by stimulus and a shift in consumer behaviors. In March, we observed an industry data, a significant amount of pent-up demand for dine-in occasions as cases associated with Omicron variant subsided to some degree. 10:57 We believe this resulted in a near term – a near end acceleration in dine-in on-premise occasions. We saw this as the right time to reopen our dining rooms, which we did at the end of March. If you recall, pre-pandemic, our dine-in sales mix was approximately 20% and this represents an opportunity to capture our share of these dine-in occasions, which we believe are highly incremental. 11:22 That said, history tells us that one of the first areas consumers will pull back on spending when navigating sustained inflation is dining out. What we believe we will continue to grow as we build awareness of the availability of this occasion within our restaurants, we will remain focused on investing behind our digital and off-premise businesses, which was successful pre-pandemic and will be so in the future 11:51 We also saw a shift to consumer sentiment as a result of the Russian invasion of Ukraine, the high inflation including $4 gas prices that created an immediate and measurable impact to disposable income for many consumer segments, particularly those in lower income demographics. 12:09 Like many others, we saw an initial pullback in spending, but this is not the first time in our history where we have observed these behaviors. We have a playbook that's proven to be successful in times like these and has allowed us to navigate environments like this and growth same store sales for 18 consecutive years. 12:30 We can showcase value across our variety of menu options and drive consideration that preserves Wingstop as an indulgent occasion and we have started to execute these tactics. As an example, we recently launched a bundle that includes 20 boneless wings, 4 flavors, and 2 dips, all for only 15.99. 12:52 Without TV support, the bundle is driving transactions and achieving mixed levels above 5%. We are very pleased with these early results. There's no question the industry will be faced with some volatility of the remainder of this year and recognizing this, we have updated our domestic same store sales guidance to low single digits. 13:14 Despite this volatile backdrop, we have confidence in our strategies and our ability to deliver a 19th consecutive year of same store sales growth and when coupled with our increase in unit development for 2022, we believe we are well-positioned to deliver another industry leading year. 13:33 As I mentioned earlier, our growth strategy is unchanged and long term algorithm remains intact. We are focused on sustaining same store sales growth, maintaining best in class returns, and accelerating development. These strategies have same power and position us well to execute the long term growth opportunity for Wingstop. 13:54 Before I turn it over to Alex, I would like to thank our brand partners, team members, and shareholders for their support as we continue to drive long-term growth and deliver against our vision of becoming a Top 10 global restaurant brand. It is an exciting time to be at Wingstop and we look forward to seeing many of you at our upcoming Investor Day on May 17th. 14:16 With that, I'll turn the call over to Alex.
Alex Kaleida: 14:21 Thank you, Michael. As you saw in our press release and heard from Michael today, we continue to build upon the top line acceleration in our business over the last couple of years and sustain momentum with an acceleration in global restaurant development. We grew royalties, franchise fees, and other revenue by $3.5 million in the first quarter. This was driven by same store sales growth of 1.2% and 208 net franchise openings since the prior year comparable period, a record for the brand. 14:58 Our new restaurants are producing average unit volumes of $1.3 million as they enter the comp base. To put this in perspective, the 2019 vintage generated year one average volumes just over $900,000 while the average initial investment has remained relatively the same in the low $400,000 range. 15:23 Advertising fees totaled $22.5 million, an increase of $1 million from the comparable period prior year, due primarily to higher domestic system sales. As Michael mentioned, we shifted a 1% local advertising requirement to a national advertising contribution this year, which took effect in the second quarter. Not only will this change enable and always on national media approach and help close our gap and awareness to top national brands. 15:59 We also believe we can invest these dollars 40% to 50% more efficiently than the prior local advertising investments. In the first quarter, company-owned restaurant sales increased by $1 million due primarily to four net new restaurants and same store sales growth of 2.1%, which is especially strong given AUVs for comparable company-owned restaurants average more than $2.2 million. 16:30 Cost of sales as a percentage of company-owned restaurant sales increased by 870 basis points, compared to the first quarter last year, driven primarily by increased labor investments, pre-opening expenses and to a lesser extent . 16:48 During the quarter, with the ongoing pandemic, we had elevated wages, higher overtime and training expenses to ensure our restaurants were properly staffed that impact the cost of labor, as well as enhanced COVID sick pay. The combination of these elevated labor expenses drove an additional 3.5 percentage points above our historical run rate. 17:13 We have continued to make training investments to develop our presence in Manhattan where we now operate five restaurants with plans to operate approximately 10 by the end of the year. The effective year-over-year increase in the price we paid for wings was 14% as we lapped lower wing prices in the early part of the quarter, but as we exited the quarter, wing prices have declined dramatically and continue to provide a tailwind. 17:42 The combination of adequate frozen inventory levels for wings and record level prices for breast meat suggests a favorable commodity backdrop for wings in 2022. We are excited by the improvement in restaurant margins as we exited the quarter and since our peak in 2021, food costs are 800 basis points lower. SG&A in the first quarter increased $4.3 million to $18.1 million, mainly due to investments in talent to support the growth of the business, investments in our strategic initiatives and additional travel, compared to the prior year as we lapped a period with limited global travel. 18:25 With the acceleration we've experienced in our business during the last couple of years, we intend to continue to invest in people which is foundational to our strategies. Adjusted EBITDA, a non-GAAP measure was $22.1 million for the first quarter, a decrease of 7.6%. Adjusting for non-recurring items, we recorded adjusted earnings per diluted share, a non-GAAP measure of $0.34. 18:55 In March, we completed a securitized financing transaction, which included the issuance of a new series of $250 million securitized notes and a $200 million variable funding note facility. In connection with this transaction, we recorded $1.1 million in debt extinguishment and financing transaction costs, including $300,000 that were recorded in SG&A. 19:24 With this additional debt level, we expect interest expense of approximately $23.5 million for 2022. We're pleased with the execution and pricing associated with this deal, which allowed us to return capital to shareholders in the form of a $4 special dividend, while reserving funds to support our strategic initiative that take greater control of our supply chain. 19:49 We have a variety of options when it comes to executing our strategic supply chain initiatives whether that be our whole bird strategy, shared investments with suppliers, or other mechanisms. While this capital enables us to be opportunistic to pursue key strategic supply chain alternatives, when or if they become available, we would execute our strategy in a manner that allows us to preserve our asset light business model. 20:18 We remain committed to driving shareholder value and returning capital to shareholders through quarterly dividends, which are targeted at approximately 40% of free cash flow. Our Board of Directors has declared a dividend of $0.17 per share of common stock. This dividend totaling approximately $5.1 million paid on June 10 to stockholders of record as of May 20, 2022. 20:45 In addition to updating guidance for same store sales growth to low single digits and increasing net new unit guidance to 220 plus, we lowered 2022 SG&A to be between $70 million and $72 million compared to prior guidance of $73 million and $76 million. This change is due primarily to our lower guidance for stock-based compensation expense in connection with our CEO transition announced in March. 21:14 We now anticipate stock-based compensation expense to be between $7.5 million and $8.5 million compared to prior guidance of $12 million and $13 million. We do not provide quarterly guidance, but as for the cadence throughout the year, we expect SG&A to be lower in the second quarter due to the adjustments and stock based compensation expense and then expect a more normalized run rate in the second half of the year. 21:42 We also introduced guidance for diluted earnings per share of between $1.55 to $1.57. This reinforces our clarity and confidence in delivering another strong year for Wingstop. As we look ahead to the balance of 2022 and beyond, we believe we are well-positioned to deliver on our growth targets and continue to make progress towards our vision of becoming a Top 10 global restaurant brand. 22:12 With that, let's turn to Q&A. Operator, please open the line for questions.
Operator: 22:17 Thank you. Our first question comes from David Tarantino from Baird. Please go ahead.
David Tarantino: 22:51 Hi, good morning. Michael, I just wanted to ask about the same store sales trajectory. You mentioned sort of slowing pretty significantly in March and attributing that largely to external factors, I guess one question I had is, is there anything internal to the business that you're seeing that might help to explain some of the softening or are you more convinced that this is just generally related to the macro environment? And then I do have a follow up.
Michael Skipworth: 23:27 Hey, David. Good morning. Good to hear your voice, and thanks for the question. As it relates to the cadence throughout quarter you're right. We started out pretty consistent with how we exited 2021 and then as we saw the Omicron variant subside to some degree, it clearly demonstrated that there was some pent-up demand around dining out and obviously, a lot of these restaurants dining rooms weren't open for the last couple of years. And so, it provided an opportunity for consumers to get out and dine-out. 24:00 And as we mentioned on the call, our dining rooms weren't open during this time period. And so we did see that impact our trend. And then obviously, if you layer on top of that, the reality that we were going up against some really strong compares from the stimulus money from 2021 and both as well as the fourth period of the year for us. And so, it's large demonstrated through external factors from what we've seen. 24:29 We do have a subset of restaurants David that represent roughly about 300 restaurants that did not take as much pricing as the rest of the system in 2021. And we didn't see a difference in performance or behavior of those restaurants in the rest of the system, which led us to believe that this is a lot of macroeconomic or macro environment factors that really impacted our trend.
David Tarantino: 24:55 Great. Thank you. And then my follow up is about how you expect comps to progress as the year goes on? It seems like your comparison in the second quarter, if I look at it on a multi-year growth basis is the most difficult. So, wondering if you wanted to comment about what your expectation might look like directionally for the second quarter, and then how that plays out as the year progresses? And then maybe if you could, some kind about what you're doing, I guess specifically to drive the comps in the short run in addition to that bundle you mentioned? Is there anything related to, kind of concentrated advertising or anything like that in the second quarter versus the rest of the year? Thanks.
Michael Skipworth: 25:50 Yes. Certainly, David. I think you said it well, the compares are strong in the second quarter and so we do anticipate a softer comp that you will maybe something that's roughly flat in the second quarter, when you factor in the compares, but I think if you take a step back, David, it feels like the reality is, we're maybe a year ahead of most other brands in that. We benefited from strong consumer a lot of stimulus last year and we were faced with inflation last year, record inflation in our core commodity and took the appropriate amount of pricing to manage our business and then we find ourselves here today where consumer behavior has shifted to dine-in. The consumer on average is still in a really good shape. 26:41 However, you look at the other brands that are facing inflation this year that they have to manage and balance, and manage through margins and that pressure that puts on their business and likely will have to take price as we continue to monitor this record level of inflation and the impact on consumers. And it really puts us in a unique spot David to where we can take some of this meaningful deflation that we're experiencing right now and give that back to consumers in the form of value. And so that's a real opportunity for us. 27:13 I think it's to lean into value. We've seen this type of behavior change if you will in our business before. Different facts and circumstances, but I go back to 2016 and we were able to deploy this playbook and lean into value and drive growth in the business. But I think in addition to that, we have obviously our dine-in business that is an occasion that we can capture and we'll be opportunistic there and I think that will benefit the business. 27:41 We referenced; we're starting to collect the 1% of local advertising into in Q2. Another inflection point for our brand from a national advertising perspective, we continue to have our first party database that's 28 million users strong that we can tap into and really target and influence consumer behaviors in an impactful way that will drive the business. And then obviously we continue to have opportunities around menu innovation, whether it's through flavor or other proteins as an idea to look into and explore, but a lot of levers for us to pull. 28:16 So, if I take a step back and look at, Wingstop is potentially a leading indicator for what's kind of coming down the pipe for other brands. I think we're in a pretty good spot, the 1.2% comp is something that we're happy with in-light of everything, particularly when you look at our AUVs, the three-year north of 30%. AUV is at $1.6 million and our food cost is sitting at really sweet spot. 28:44 Brand partners cash flows are really strong and we're sitting here in an environment where we have levers to pull, we're confident we can drive the top line, but most importantly, we're in a very favorable commodity environment for our brand, which will seal development and gives us confidence to raise our unit growth target for the year of over 220 restaurants. And so, we feel really good about the position we're in and where we are as a brand.
David Tarantino: 29:08 Great. Thank you for the detail.
Operator: 29:12 The next question comes from Jeffrey Bernstein from Barclays. Please go ahead.
Jeffrey Bernstein: 29:17 Great. Thank you. First, just wanted to follow-up on that last question in terms of the comps and it does seem like the three-year trend clearly huge, but decelerate over the past couple of quarters. Just wondering whether the magnitude of that, whether do you think that was all driven by March and then any comment? I think you said you thought the second quarter would be flattish, which that would actually be a re-acceleration in that three-year which would be encouraging. So, just trying to get a gauge for the magnitude of the March slowdown and any thoughts on the outlook for the rest of the year?
Michael Skipworth: 29:54 Yes, Jeff, I think we said it in our prepared remarks, but we started the year where we expect it to be and then we did clearly see a marked change in consumer behavior in March, post kind of that Omicron variant period, if you will. And that did obviously impact our trends, but, and we expect the compares to be similar in April as they were in March and therefore, we would expect a similar trend in the April, but then as you get beyond April, the compares get much easier, but at the same time we're starting to pull some of those growth levers that I referenced to. 30:37 So, we would expect to see the comp trend improve as we move through the cadence of the balance of the year.
Jeffrey Bernstein: 30:45 Got it. And then the menu pricing, I think you had previously told us is going to be roughly 10%, it's interesting now that you're seeing such significant wing price easing, so perhaps benefiting on both ends, but just wondering if you can give a little bit more color on your insight into whether the consumer might shift their mix shift or it might impact traffic? I think you gave – you mentioned a pretty good example of some units that took less price than others, maybe you could provide some more color on that just to demonstrate that it's really not a lower income consumer, perhaps feeling pressure from the outsized menu pricing?
Michael Skipworth: 31:22 Yes, Jeff, we alluded in our last call that we expected to see about the net effect of pricing from 2021 into 2022 in the first quarter to be about 5%, that takes into effect menu mix shift trade down, , anything like that. And so that is pretty much what we saw flow through the comp in the first quarter. 31:54 And so, we expect the pricing element to tell off as we progress through the year. But as I mentioned earlier, those subset of restaurants that took much less pricing than that targeted 10% that we shared before didn't behave any differently, which gives us confidence that the change in trend if you will, the consumer sentiment, is really more of a macro issue than anything related to the pricing that we took in 2021. 32:16 And one of the things that's unique about our brand is, we're able to lean into our menu and the flexibility with our group packs and group occasions to really demonstrate value, kind of in our everyday menu and that's an opportunity I think we can lean in when we see that resonate well with guests.
Jeffrey Bernstein: 32:34 Got it. And just lastly I, don't want to spoil the Investor Day, but any color in terms of, I think you mentioned some of that investing alongside your suppliers or whole bird strategy is there any kind of update on your ability to further contract or perhaps mitigate some of the win cost volatility that you've referred to in the past? Thank you.
Michael Skipworth: 32:55 Of course. Yes, we're in a really good spot today with the deflation that we've seen in Wings and the leading indicators whether that's frozen inventories for wings or if you look at the spot market price for breast meat, which is at record highs, all look to support a very favorable commodity environment for us in 2022. But that being said, that doesn't mean we're going to sit back and slow on some of the work we're doing around our supply chain strategy. 33:26 And we do believe there is an opportunity for us to lean in and take more control of our supply and ultimately deliver a more predictable landed cost for our brand partners minimizing that volatility that we've seen over the years, which we know if we're able to deliver on that, it will turn this development engine into a flywheel. 33:46 And so at our Investor Day, we will go a little bit deeper into the supply chain strategy, what that means for a model for the unit economics, but one thing that we want to make sure is clear is the alternatives that we’re exploring around this strategy doesn't impact our asset light model that we enjoy today.
Jeffrey Bernstein: 34:06 Thank you.
Michael Skipworth: 34:08 You’re Welcome.
Operator: 34:10 The next question comes from Andrew Charles from Cowen and Company. Please go ahead.
Andrew Charles: 34:15 Great. Thanks. Michael, I think I get the message that essentially, there was a snap obviously in March from macro perspective and that essentially the guidance for flattish in 2Q and then low single-digit for the remainder for the year implies kind of these three-year trends remain intact, but can you talk a little bit more, if I kind of fast forward that in 2023, the domestic business can return to mid-single digit comps over the medium-term?
Michael Skipworth: 34:43 Andrew great question. I appreciate the forward look and long approach here. And I think you're right. We have a lot of growth levers here in the brand. I can remember like yesterday a few short years ago, talking to this group about our vision to getting to 1.5 million in AUV, when we were just at 1 million and pointing to the growth drivers we had in front of us as a brand and it's no different as we sit here today. 35:12 We still have a lot of levers we can pull and we're confident that we're going to be able to continue to drive this top line growth that will deliver back on that three-year to five-year outlook that you referenced. And so, we're excited about what's in front of us as a brand.
Andrew Charles: 35:27 Okay, great. And then just want to come back to the comments that obviously over the decade of positive comps, great tracker that you guys have. And so can we talk a little about kind of a 2008, 2009 experience, you know I would love to learn more about the best practice from that time, and how that can really help drive sales. So, for instance on the value side, you guys historically have focused on value platforms that are higher ticket and higher margin just given nature of the bundle, is that still kind of the right way to promote value and any other kind of lessons from 12 years ago or so, or sorry, 14 years ago that really, kind of help you navigate kind of the current backdrop?
Michael Skipworth: 36:07 Yes, Andrew, it's a great question. We've been able to lean into value before and really demonstrate I think compelling value for consumers. And our bundle that we referenced in our prepared remarks, the boneless mill deal with 20 wings, 4 flavors, 2 dips, and a large fry for 15.99 is really strong value. But I think the thing that's really important to think about and what allows us to grow and navigate some of these periods where the consumer is concerned about value is how guests engage with us. 36:45 Our frequency on average is 3x a quarter. And so what you tend to see, particularly in some of those time periods you referenced back in 2008 or 2010 is that a consumer will more likely pull back from there 4x to 5x QSR visit a week, but be less likely to pull that from that indulging occasion with Wingstop once a month. And so they've earned that, they've saved their money and they want to splurge and they want to indulge. 37:15 So, that's really where we lean into. It's not only just presenting them with value, but talk about the unique experience, the flavor experience at Wingstop. How it's cooked to order. The uniqueness of our sauces. Our dips made from scratch. Our French Fries hand-cut from potatoes in the restaurant every day. And so that allows us to be uniquely positioned to navigate an environment like that.
Andrew Charles: 37:40 Thank you for answering my questions as well as make me hungry.
Michael Skipworth: 37:46 My pleasure.
Operator: 37:48 The next question comes from John Glass from Morgan Stanley. Please go ahead.
John Glass: 37:52 Thanks much. Michael, can you just update us on where the demographics of the brands stand today, maybe by household income cohorts? And I know it's, I know it's changed over time, so maybe what those changes have been? And in this quarter, did you see a difference in the behavior of your digital customers versus non-digital? In other words, maybe that gives some insights into how different customer cohorts are behaving differently during this period of time?
Michael Skipworth: 38:20 Hey, John. Thanks for the question. We, yes, we absolutely have made really great progress in diversifying our customer base, and if you recall back a few years ago, we were really targeting that heavy QSR user, which is a little bit more affluent, a little bit less ethnically diverse consumer, and we've made a lot of good progress on that front. That being said, as we sit here today, that lower income, a little bit more ethnic consumer it's no longer 50% of our customer base, but it's still a decent size and we did see that the reality of this unnecessary war combined with $4 gas prices impact their frequency. 39:11 And obviously that's an area where we will lean in and drive that value message. That said, we also saw similarly that more affluent, a little bit less ethnically diverse consumer who's a little bit more financially healthy and balance sheet is a little bit stronger, we did see a little bit of a pullback in their frequency as it related to the dining element that we referenced earlier. 39:36 And so we saw kind of a near term if you will pullback back in both cohorts, but obviously we have a game plan and a playbook on how to address that.
John Glass: 39:47 And the change in behavior, was that both reflected in change in check meaning, a lower check because of lower price point value items or was it just driven by traffic in check didn't really change during this period of time? Excluding pricing benefits of check?
Michael Skipworth: 40:05 Yes, John, we did not see a change really in check through the quarter.
John Glass: 40:11 Okay. Thank you.
Michael Skipworth: 40:13 You're welcome.
Operator: 40:15 The next question comes from Andy Barish from Jefferies. Please go.
Andy Barish: 40:22 Hey, Michael, wondering on product innovation, obviously size were big deal last year. Wondering if you can kind of give us an update in terms of where that product stands in mixing and kind of part of the strategy as wing prices have obviously come down a ton?
Michael Skipworth: 40:42 Yes, Andy. We continue to be excited about size. And I think it really comes from the perspective of how it plays into our whole bird strategy, our supply chain strategy and overall mitigating the volatility that we see in wing cost, but as we sit here today, the side product is still mixing at that low single digit range that we've referenced before and continues to be able to play a nice role and how we're thinking about and executing that supply chain strategy. But we've been here today with wing prices at and with our $1.6 million AUVs food costs in that mid-30s range. 41:29 Cash flows for our brand partners are extremely strong right now. And I've recently spent a bit of time out in market visiting with brand partners and hearing the sentiment and the excitement about growing with Wingstop was extremely encouraging and gives us a lot of confidence in what's in front of us and the ability to deliver a record development here in 2022.
Andy Barish: 41:56 Thanks. And then just one more quick one if I could on sort of investment in labor as you talked about, you know franchise systems are sometimes different, sometimes they run labor a lot tighter, sometimes there's more investment in labor versus company-owned stores. How do you, kind of perceive your brand partners in terms of that continuum? Are they coming up to curve? Do they have to invest more? And then also, is there any near term costs just in terms of reopening dining rooms or is that really a reallocation of labor?
Michael Skipworth: 42:37 Yes, you hit on Andy. The beauty of our model is, we don't really have to staff our restaurants for the dining room. And so this is purely incremental occasion that we can capture there. But I would say, from our brand partners perspective and labor, they've made similar investments that you've seen throughout the industry and you've seen in our company-owned restaurants they're lower than where we are in our company-owned restaurants, which I think as you alluded to is not abnormal in a franchise environment, but the Wingstop roster is one that's smaller than a typical restaurant company. 43:18 I think the average roster can be in the mid-teens to 20 and you can run a Wingstop with as few as three team members in the restaurant. And so the labor element in our model can get as we continue to grow AUVs can almost become fixed to some degree and you can get some nice leverage on that line in the P&L, which just further enhance those unit economics.
Andy Barish: 43:43 Thank you.
Michael Skipworth : 43:47 You’re welcome.
Operator: 43:48 The next question comes from Chris O’Cull from Stifel. Please go ahead.
Chris O’Cull: 43:54 Yeah, thank you. I have a clarifying question, then a follow. Michael, you mentioned that April was similar to March, but I also believe you mentioned the new bundled offer boosted traffic, and I think that new promotion started in early to mid-April. So, I'm just trying to reconcile those comments.
Michael Skipworth: 44:13 Yes, thanks, Chris. I think we would expect – at a macro level, we would expect April to be pretty similar to March. When you think about the similar compares, as well as some of the levers we're pulling you're right, the bundle did launch in April, but it launched without TV support and early on, we saw it mix at 5%, a little bit above that level, which we're really excited about. 44:40 So, I think that will demonstrate that it's going to resonate really well with guests, particularly guests who are looking for value and that indulge in occasion. So, we're excited about that lever we have to pull.
Chris O’Cull: 44:51 It’s helpful. And then I'm wondering why the company doesn't choose to balance its value offerings with more product innovation. Would just seem you could increase the frequency of introducing new flavors as maybe a call to action message or even developing new products that might broaden the brand appeal?
Michael Skipworth: 45:10 Yes, Chris, I think you hit the nail in the head there and that we – the area where we do innovate on the menu in particular is around flavor. We launched a unique flavor on April 20, that really performed quite well, mixed really high for us from an LTL perspective and then just here this week, we launched some flavor remix. And so, I do think that's an area where we lean in and can create new news if you will for guests, and drive-in occasion and give them a reason to come into Wingstop and enjoy that unique flavor experience that we offer in. 45:48 So, that is an area that we will lean in and you'll see more of that from us for the balance of this year.
Chris O’Cull: 45:54 Great. Thanks guys.
Operator: 45:59 The next question comes from Jon Tower from Citi. Please go ahead.
Jon Tower: 46:04 Great. A few questions if I may. Just in terms of thinking about the incremental marketing spend that's coming through with the move – the 1% move in national, are you targeting certain mediums or customers specifically with this incremental dollar meaning, are you going after the dine-in occasion? Are you focusing more on a delivery side, digital obviously being a piece, will you be focusing more on value than in the past? Just curious to kind of get some color there? And then some additional questions.
Michael Skipworth: 46:37 Yes, John, great question. Appreciate it. I wouldn't say that our targets are really changing necessarily. We're still leaning into that. It's pretty broad, but that heavy QSR user as well as speaking to our core consumer as well, but what I would say is, what we're doing with these extra dollars is you're going to see us show up in more premium placement as well as more weeks on television. And so that would be from, kind of what you'll notice would be the biggest change from prior year. 47:11 That said, we continue to lean into to performance media, our digital advertising there as well and leverage that first party database that we have and really get targeted around new guest acquisition, as well as retention and then obviously driving frequency.
Jon Tower: 47:30 Got it. And in terms of the mix side of the equation, as these dining rooms reopen, I think you said about 20% of the business pre-Covid was a dine-in occasion. How should we think about the potential headwind coming from mix where I'm assuming you're getting smaller check orders as individuals come to stores versus larger bundles through delivery and off-premise?
Michael Skipworth: 47:56 Yes, John I think we've obviously seen our average share grow quite nicely over the last two years. And I would say that delta that existed pre-pandemic, it's gotten a little bit smaller, but it's still there today. Obviously, it's early, having just reopened our dining rooms, but we are seeing somewhere around a $4 to $5 smaller average check on that dine-in occasion.
Jon Tower: 48:24 Got it. And then just last one from me. I'm great to see that the unit growth guidance for the year has been picked up, but in terms of, and it doesn't appear to be the case so far, but we've heard it certainly from others in the industry that permitting has been a headwind for new store openings and even some equipment supply chain challenges. Anything you're hearing or seeing in the marketplace today that's giving you any bit of hesitancy in terms of meeting that 220 plus number?
Michael Skipworth: 48:56 Yes, I definitely have heard the challenges around permitting. There's no question about that. And we did see some challenges around some elements in supply chain last year, but I think even if you look back to 2021, we delivered another record year of development and so we feel confident as we sit here, particularly when you think about the strength of the cash flows for our brand partners today and the reality that at $1.6 million AUVs, they're looking at a little bit less than a two-year payback on their initial investment for Wingstop. 49:36 And so, we've factored in and thought about the current environment, whether it's permitting or supply chain when we leaned in and we feel really confident about the opportunity to deliver over 220 restaurants this year. And I think one element to highlight or call out John is that one thing that we're really excited about and that’s included in that number is our international business, which we believe as we sit here, largely on the other side of the pandemic volumes have returned to or exceeding pre-pandemic levels, we've seen incredible success in the UK where our AUVs are $2 million and we have 20 restaurants today, a real proof case of the strength of our model and how the brand performs outside of the U.S. 50:25 We're sitting here looking at what is shaping up to be a record year for development for our international business and excited about that becoming a bigger part of this long-term growth story here we have in front of us.
Jon Tower: 50:39 Great. I'll see you in a couple of weeks. Thanks.
Michael Skipworth: 50:43 Thanks John.
Operator: 50:44 The next question comes from Jeff Farmer from Gordon Haskett. Please go ahead.
Jeff Farmer: 50:49 Good morning and thank you. Just shifting gears here a little bit, I'm curious what impact, the fortressing development strategy has had on your same store sales in recent quarters? And would you expect the magnitude of that impact to either increase or decrease as you move forward here?
Michael Skipworth: 51:11 Hey, Jeff. Appreciate the question. I wouldn't call out, as we've looked at markets how they’ve performed, we've looked at different geographies. I would say the one thing that has impacted the difference in how – in the first quarter and how some markets performed over others, it was how long ago those markets largely reopened. 51:34 We saw less of an impact of kind of that shift to consumer behavior in Q1 and some of the markets that had opened up earlier, then maybe those that just recently opened up in March. And so, from a perspective, we continue to see that strength in overall brand awareness in those markets. 51:52 We continue to see those markets perform strongly, but nothing I would call out materially different from a top perspective between those markets and others.
Jeff Farmer: 52:03 Okay. And then just to follow up you, you just touched on this, but as it relates to the international development, specifically in China and Western Europe. Sounds like things are going well there, but are you any closer to reaching what I would consider, sort of a development tipping point where you would see pretty material acceleration in unit development as we get into 2023 and 2024?
Michael Skipworth: 52:27 Yes, I think we are getting closer to that. And we obviously have some really great momentum in our markets around the U.S. today. We announced just last week a re-up if you will, with our partner in Indonesia to double the size of that agreement. We have obviously the success I alluded to earlier in the UK. We have Canada coming online later in the second quarter, and then we have some really strong progress in our business development pipeline. And so, as more of these markets come online, you're exactly right. We're going to start see that part of the growth story play a bigger role and see some acceleration in our international growth.
Jeff Farmer: 53:12 Alright. Thank you.
Operator: 53:15 Our next question comes from Michael Tamas from Oppenheimer & Company. Please go ahead.
Michael Tamas: 53:21 Hi, thanks, good morning. You talked about on-premise across the industry as a headwind of same store sales and margin. I think premise across the industry and specifically in casual dining still pretty well below pre-COVID levels, which suggest the headwinds can remain in place for a little while. So, I know you're excited to have your own dining rooms open, but can you just help understand some of those dynamics? And then does your research show you that your consumers want to get back in and actually dine-in your restaurants with all the gains you've made with off-premise over the last couple years? Thanks.
Michael Skipworth: 53:54 Yes, I know, I think it's a good question and you've obviously have seen a lot of growth in on-premise dine-in and for some of those brands, you're right, they're not back at 2019 levels. That said, if you remember our dine-in business was almost 20% pre-pandemic. And so we know that's an opportunity for us to capture there and those occasions to capture. And the fact that we grew through the pandemic and our off-premise grew, a lot of that was through new guest acquisition and some of what I talked about earlier around that little bit less ethnically diverse, a little bit more that we have been targeting that heavy QSR user. 54:41 And so, those behaviors will remain and we'll continue to engage with them and drive them into the brand, but there is an opportunity out there for us to capture some dine-in occasions and what we've seen early on is those occasions are highly incremental for our business. And so it made a lot of sense for us to open up our dining rooms at this point. 55:02 We have looked at a subset of restaurants, just a little over 200 that had their dining rooms open throughout the first quarter, and they did outperform the rest of the system. So, we do see that as an opportunity in front of us. But I do think the reality is, we have to think through the inflation we have in front of us and I'll reference back to my comments earlier about Wingstop potentially being a year ahead of a lot of other brands and how consumers behavior is changing and how the implications will play out around inflation and whether or not history will repeat itself and consumers will pull back on dining out. But if that does happen, obviously, we’re well-positioned to navigate that environment with our off-premise business leaning into value, which I talked about earlier.
Michael Tamas: 55:55 Thanks. And then just a follow up, I think in response to an earlier question, you mentioned that food costs are in the mid-30% range, is that the right way to think about the second quarter and then the rest of the year? Thanks.
Michael Skipworth: 56:08 Yes. I'm actually referencing a lot of the comments I've heard from my brand partners over some recent travels throughout markets, but if you look at our company-owned restaurants as an example, we have a little bit lower boneless mix. So, our food cost typically runs a little bit higher than the rest of the nation, if you will. And our franchisees that said, even at where we're running our corporate restaurants and high AUVs produced really strong cash flow, but as we sit here today, the commodity environment and most leading indicators look extremely favorable. 56:45 It's tough to forecast in this environment, whether or not you'll see the price of wings follow its traditional seasonal curve or whether or not will kind of continue to stay where we are today, which is in that $1.60 for a pound range. And regardless, if it moves up even a little bit from here, the cash flows for our brand partners are continue to be really strong, particularly coupled with the AUV growth we've enjoyed over the last few years, yielding over a $1.6 million AUV today.
Michael Tamas: 57:22 Great. Thanks. Appreciate it.
Operator: 57:25 The next question comes from Nick Setyan from Wedbush Securities. Please go ahead.
Nick Setyan: 57:33 Thank you. You referenced the national contribution starting in Q2 in terms of, you know, 1%. Can you talk about just the weight of marketing spend in Q2, Q3, Q4 versus Q1 year-over-year, whether it's just going to be much higher going forward? And then just given where our bone-in win costs are, why not leaning a little bit more on bone-in value versus boneless bundles?
Michael Skipworth: 58:06 Yes. I think as it relates to marketing, if you recall in Q2 of last year, was a year where we had carried over a lot of surplus in our ad fund from 2020, and we knew we were lapping some really strong numbers. And so, we deployed a lot of that surplus in Q2 of 2021 to help navigate some of those compares. And so as you look at 2022 versus 2021 for the second quarter, I think I would expect our ad spend even in consideration of that additional 1% to be relatively flat year-over-year. 58:46 That said, you will see an increase commensurate with, if you will, the overall increase in system sales and that 1% for the back half of the year, which gives us confidence in navigating some of this near term choppiness that we see, an environment that we see and leaning into some of the growth levers we have over the back half of the year.
Nick Setyan: 59:10 And do we have any visibility into whether we can use bone-in as a value driver versus just the boneless bundles?
Michael Skipworth: 59:19 I think that's always an option in front of us, particularly when you look at this favorable commodity environment that we have. And I think it plays to my comment earlier of putting us in a really unique situation in 2022 where other brands are navigating inflation and margin pressure are likely going to be taking price and we are experiencing meaningful deflation. 59:43 We do have the opportunity to lean into that and give some of that back to consumers in the form of value. And so, those are all things that we're exploring as we continue to lean-in and drive growth through the balance of the year.
Nick Setyan: 59:58 Thank you.
Operator: 60:00 The next question comes from Brian Mullan from Deutsche Bank. Please go ahead.
Brian Mullan: 60:06 Thank you. Last call you talked about new customers that have come into the brand over the last year and a half, you've been able to retain those at a frequency level that's better than what you've experienced in the past. So, just wondering could you confirm that this still remains the case today even with some of these recent changes, the consumer behavior that's been discussed on this call and then, assuming the answer is yes, is there something unique about these newer guest worth mentioning or is it perhaps just something going on with your own efforts? Any insights would be great?
Michael Skipworth: 60:37 Yes. I think it's a good question and what I would really point to is how we've been able to sustain our digital sales mix. And I think that really illustrates the stickiness, if you will of our growth with those new digital guests that we've acquired and it really speaks to the power of our first party data and how with the insights we can gather from that and understand who to target, how to retain them, and then how to drive their frequency? 61:05 And so, we're really encouraged by the early results if you will, that we're seeing leveraging this first party data and we think that is an opportunity where we do plan to lean-in, continue to invest, and drive top line growth and continue to drive AUVs for the brand.
Brian Mullan: 61:25 Okay, thanks. And then just question on New York. I know it's early days, but can you speak to how that market is going, maybe call an item or two that has you particularly encouraged both on the street locations, as well as the ghost kitchens, and then conversely is there anything more cautious that you've seen there or that perhaps is going a bit differently than what you had anticipated?
Michael Skipworth: 61:47 We're really excited about Manhattan. And the progress we've made there, the restaurants are performing very consistent with how new restaurants perform on that trajectory, if you will, encouraged by that. I was actually in that market with the team a few weeks ago and had the opportunity to visit each one of our restaurants and meet our team members that are working in the restaurant and that's what I would highlight is how engaged our team was. 62:17 I was really encouraged to see how excited they were about working for Wingstop, being in the restaurant, and serving Manhattan flavor, and it it's exciting. So, I think there's a ton of potential in front of us and we're going to continue to drive the brand there and excited about that opportunity.
Brian Mullan: 62:37 Thank you.
Operator: 62:40 The next question comes from Chris Carril from RBC Capital Markets. Please go ahead.
Chris Carril: 62:47 Hi, good morning. Michael, you mentioned the advantage for Wingstop and having that more insulated indulge in occasion, but curious can comment on perhaps, like, layering in that more frequent occasion as well? Is there an opportunity from a menu perspective that can also drive frequency to complement that more indulge occasion?
Michael Skipworth: 63:12 Yes, it's a good question, Chris, and I think you really have to think about the consumer behavior, they're spending and how frequently they do intend to actually eat and dine with a restaurant. And so, it is something that I think we play well in. And if we look back into history, it may not be as much around increasing frequency when we've navigated time periods like this, but really just retaining the frequency we have and that indulge occasion and that's where we will focus. 63:44 And then also, we still have the opportunity, if you look at Wingstop just from a brand awareness perspective, we still have a meaningful gap to other national brands, which is a huge opportunity for us to continue to close that gap and bring more guest in. And so there's a lot of new guests that we can bring in and introduce to the brand during this time period and create that indulge in occasion if you will for them. And so, we feel like we're well positioned to navigate this environment.
Chris Carril: 64:15 Got it. Okay. Thank you. And then I guess just following up on just the commentary around costs and margins here. Just drilling down maybe a little bit more specifically on the EPS guide for the year. You gave us clear guidance on top line and G&A, but just curious if you could comment a little bit more specifically about restaurant margins and the cadence of that over the course of the year. You've got the shifting dynamics around more favorable wing prices than you have labor dynamics, the layering in of the Manhattan stores. So, just curious about how we should think about margins, particularly for the back half of the year?
Michael Skipworth: 64:53 Yes, I think a good way to look at that is obviously in Q1, we had some moving pieces with wings as we did see a little bit of pricing difference year-over-year, but obviously that's materially changed since the end of the first quarter to our benefit, but then even in the labor line we had a little bit of inefficiencies if you will to the tune of 350 basis points around the impact of Omicron and just navigating that environment. But I think if you normalize for those things, and I would expect to see an environment that's pretty similar from a margin perspective to 2021 with the opportunity as we continue to see improvements in the price of wings to get better from there. 65:44 And that obviously layers in additional restaurant openings within Manhattan, which are at a little bit lower AUV’s than the rest of our kind of core company-owned restaurants and have a different margin profile.
Chris Carril: 65:58 Got it. Alright. Thanks for all the detail.
Michael Skipworth: 66:01 Welcome.
Operator: 66:03 The next question comes from Jared Garber from Goldman Sachs. Please go ahead.
Jared Garber: 66:11 Good morning. Thanks for taking the question. Michael, just wanted to maybe switch gears a little bit and get a sense of how you are thinking about automation playing a role in Wingstop’s restaurants, you know, maybe you have some insights from your recent travels, otherwise you are so meeting with franchisees, but I think the brand and the simplicity of the operations, in my view at least, sort of lend itself to some incremental automation, maybe even potentially ahead of some of your peers. So, just wondering what your thoughts are on that and how we may see some of that start to play out in the Wingstop restaurants?
Michael Skipworth: 66:47 Yes, I think innovation is clearly something that we've been focused on over the years. The early investments we've made in technology positioned us extremely well for the shift in consumer behavior as we navigated the pandemic and we continue to lean-in in the areas of innovation. 67:06 I think examples really all ladder up to improving the unit economics and helping us continue to make progress against our aspiration of digitizing a 100% of our transactions or north of 60% today that's in-line with Big Pizza and some of the other brands who have been at it a lot longer than we have and we're going to continue to lean-in there. I think there's opportunities as it relates to phone orders that are still in front of us and how can we make that a digital transaction and take pressure off of the front counter and get the team member off of the phone. 67:42 And so, that would be an example, I would point to in areas that will lean in and look to innovate in automate areas in the four walls of the restaurant, as well as continue to advance to 100% digital.
Operator: 68:03 The next question comes from Brian Vaccaro from Raymond James. Please go ahead.
Brian Vaccaro: 68:08 Thanks and morning. In trying to better understand the recent change in behaviors, I'm curious if you're seeing more of a change in weekend versus weekday business or perhaps delivery versus pickup, any other dynamics that might be worth highlighting?
Michael Skipworth: 68:26 No, it's a good question. I would say the area I would maybe point to that we've seen is really that dinner occasion, where consumers seem to be more prone and more excited about just, kind of getting out and dining out. And that's kind of what we saw in April or in March, if you will.
Brian Vaccaro: 68:47 Okay. Great. And I know we don't want to get too focused on monthly comps, but since there was such a meaningful change I was hoping you could just clarify, so we're all in the same page. And I interpret your comments to suggest that March comps were perhaps down, say in the mid-single digit range. And then did I hear right, Q2, you guided flat and that includes April down a similar amount with May and June expected to improve, is that accurate?
Michael Skipworth: 69:15 Yeah, I think that's accurate.
Brian Vaccaro: 69:18 Alright. That's great. And then last one from me clarifying on the COGS ratio Alex, I heard down 800 basis points, but I wasn't clear on what base you were talking about. So, maybe you could speak directly to, sort of where that COGS ratio was currently running? Is it in that 35, 36s? Sorry, I was just a little confused about the base you were looking at.
Alex Kaleida: 69:41 Hi, Brian. Yes, what we anchored to is that or I anchored to that comment was our peak in quarter three of 2021 where our COGS was about 48%. So, to Michael's point, we've since progressed into that upper 30 range on COGS for the restaurants. And so that was the difference in my remarks .
Brian Vaccaro : 70:03 Perfect. Thank you very much.
Operator: 70:08 The next question comes from Peter Saleh from BTIG. Please go ahead.
Peter Saleh: 70:14 Great. Thanks and thanks for taking the question. I want to come back to the conversation around the national ad spending, can you just remind us if – did the franchisees continue spending the 100 basis points on local ads in the first quarter? And also, what exactly are spending those ad dollars on? I'm just trying to understand what you're trading the national ads in exchange for, once this shift finally occurs? Thanks.
Michael Skipworth: 70:45 Yes. I think if you reference back to the latter part of 2021, we use that as this was an opportunity to help our brand partners navigate some of that record inflation. And so, we actually were able to give some of the surplus that we had in our ad fund back to them. And as we moved into 2022, we were working through the administrative elements of making this change from 1% local to 1% national and so we didn't require them or enforce them to spend that 1% in the first quarter. 71:28 And what I would say, it's historically with the exception of two or three markets, which would spend this 1% on a local TV buy during windows when we weren't on National TV. The majority of it was spent in, kind of paid social paid search advertising, maybe some radio, but I think the opportunity that we've described before is when we consolidate this to national and lean into our scale and buying power at the national level, we're able to deliver the same level of advertising at $0.60 on the dollar, which creates an unlock of some meaningful efficiencies there that we can go spend and continue to drive top line drive brand awareness and improve AUVs. 72:19 And so this is again, what we believe to be another inflection point for us as a brand to drive same store sales growth and what we believe puts us on track for our 19th consecutive year of positive same store sales.
Peter Saleh: 72:37 Great. Just as a follow-up, just for clarity, has that begun yet the transition in the investment in the National Media or is that coming later this quarter?
Michael Skipworth: 72:49 As we alluded to in our prepared remarks, we've started that at the beginning of second quarter. So, it started, yes.
Peter Saleh: 72:53 Great. Thank you very much.
Michael Skipworth: 72:55 You're welcome.
Operator: 72:56 This concludes our question-and-answer session. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
