Wingstop Inc. Reports Fiscal Second Quarter 2023 Financial Results
16.8% Domestic Same Store Sales Growth
Increases Outlook for Fiscal Year 2023
Dallas, August 2, 2023 - (PR NEWSWIRE) - Wingstop Inc. (NASDAQ: WING) today announced financial results for the fiscal second quarter ended July 1, 2023.
Highlights for the fiscal second quarter 2023 compared to the fiscal second quarter 2022:
▪System-wide sales increased 27.8% to $809.8 million
▪50 net new openings in the fiscal second quarter 2023
▪Domestic same store sales increased 16.8%
▪Domestic restaurant AUVs exceeded $1.7 million
▪Digital sales increased to 65.2%
▪Total revenue increased 27.9% to $107.2 million
▪Net income increased 21.6% to $16.2 million, or $0.54 per diluted share, compared to net income of $13.3 million, or $0.44 per diluted share in the prior fiscal second quarter
▪Adjusted net income and adjusted earnings per diluted share, both non-GAAP measures, increased 27.4% to $17.0 million, or $0.57 per diluted share, compared to $13.3 million, or $0.45 per diluted share in the prior fiscal second quarter
▪Adjusted EBITDA, a non-GAAP measure, increased 47.1% to $34.4 million, compared to adjusted EBITDA of $23.3 million in the prior fiscal second quarter
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 second quarter demonstrated the continued strength and staying power of our strategies. We exceeded $1.7 million AUVs fueled by 16.8% growth in domestic same store sales, which was primarily due to transaction growth,” said Michael Skipworth, President and Chief Executive Officer. “We opened 50 net new restaurants for the quarter and surpassed 2,000 restaurants globally. And yet, we’re just getting started as we work toward our 20th consecutive year of same store sales growth and our vision of becoming a Top 10 Global Restaurant Brand.”
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Key operating metrics for the fiscal second quarter 2023 compared to the fiscal second quarter 2022:
Thirteen Weeks Ended
July 1, 2023
June 25, 2022
Number of system-wide restaurants open at end of period
2,046
1,858
Number of domestic franchise restaurants open at end of period
1,749
1,600
Number of international franchise restaurants open at end of period
252
219
System-wide sales (in millions)
$
810
$
634
Domestic AUV (in thousands)
$
1,704
$
1,581
Domestic same store sales growth
16.8
%
(3.3)
%
Company-owned domestic same store sales growth
5.7
%
(4.9)
%
Net income (in thousands)
$
16,181
$
13,307
Adjusted net income (in thousands)
$
17,005
$
13,345
Adjusted EBITDA (in thousands)
$
34,350
$
23,344
Fiscal second quarter 2023 financial results
Total revenue for the fiscal second quarter 2023 increased to $107.2 million from $83.8 million in the fiscal second quarter last year. Royalty revenue, franchise fees and other increased $11.9 million primarily due to domestic same store sales growth of 16.8% and 182 net new franchise restaurants since June 25, 2022. Advertising fees increased $7.6 million due to a 27.8% increase in system-wide sales in the fiscal second quarter 2023. Company-owned restaurant sales increased $3.8 million due to an increase of $2.9 million related to the addition of six net new company-owned restaurants since the prior fiscal second quarter, as well as a 5.7% increase in company-owned same store sales driven by an increase in transactions.
Cost of sales increased to $16.6 million from $14.9 million in the fiscal second quarter of the prior year. As a percentage of company-owned restaurant sales, cost of sales decreased to 73.7% from 79.5% in the prior year comparable period. The decrease was primarily driven by food, beverage and packaging costs benefiting from a 39.6% decrease in the cost of bone-in chicken wings as compared to the prior fiscal second quarter.
Selling, general & administrative (“SG&A”) increased $8.2 million to $22.1 million from $13.9 million in the fiscal second quarter of the prior year. The prior fiscal second quarter was impacted by the benefit of $4.1 million of stock awards forfeited during the quarter. In addition, incentive compensation and performance-based stock compensation expense increased $2.2 million related to the Company’s current fiscal year performance, headcount related expenses increased $1.2 million to support the growth in our business, and consulting fees increased $1.1 million associated with the Company’s strategic initiatives.
Interest expense, net was $4.2 million, a decrease of $1.7 million compared to $6.0 million of interest expense, net in the comparable period in 2022. The decrease was driven by $1.6 million in interest income earned on our cash balances during the thirteen weeks ended July 1, 2023.
Financial Outlook
Based on year-to-date results, the Company is providing updated guidance for 2023, which is a 52-week fiscal year:
•10% to 12% domestic same store sales growth, previously high-single digits;
•240 to 250 global net new units, previously 240 global net new units;
•SG&A of between $91.0 - $93.0 million, which includes $3.9 million in consulting projects to support the Company’s strategic initiatives, previously $85.5 - $87.5 million; and
•Stock-based compensation expense of approximately $14.0 - $15.0 million, reflecting an increase in incentive based compensation based on company performance, previously $12.0 - $13.0 million.
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Additionally, the Company is reiterating guidance for depreciation and amortization of between $14.0 - $15.0 million for 2023.
Restaurant Development
As of July 1, 2023, there were 2,046 Wingstop restaurants system-wide. This included 1,794 restaurants in the United States, of which 1,749 were franchised restaurants and 45 were company-owned, and 252 franchised restaurants were in international markets. During the fiscal second quarter 2023, there were 50 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 August 1, 2023, our board of directors approved an increase in the quarterly dividend payable to Wingstop stockholders from $0.19 to $0.22 per share of common stock, resulting in a total dividend of approximately $6.6 million. This dividend will be paid on September 8, 2023 to stockholders of record as of August 18, 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.
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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 second 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 4190850. The replay will be available through Wednesday, August 9, 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 2,000 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 2,046 as of July 1, 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”)
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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
Media@wingstop.com
Investor Contact
Kristen Thomas
IR@wingstop.com
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WINGSTOP INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(amounts in thousands, except share and per share data)
July 1, 2023
December 31, 2022
(Unaudited)
Assets
Current assets
Cash and cash equivalents
$
188,500
$
184,496
Restricted cash
11,444
13,296
Accounts receivable, net
10,747
9,461
Prepaid expenses and other current assets
5,548
4,252
Advertising fund assets, restricted
21,944
15,167
Total current assets
238,183
226,672
Property and equipment, net
78,570
66,851
Goodwill
65,175
62,514
Trademarks
32,700
32,700
Customer relationships, net
8,378
9,015
Other non-current assets
28,211
26,438
Total assets
$
451,217
$
424,190
Liabilities and stockholders' deficit
Current liabilities
Accounts payable
$
6,112
$
5,219
Other current liabilities
30,732
34,726
Current portion of debt
—
7,300
Advertising fund liabilities
21,944
15,167
Total current liabilities
58,788
62,412
Long-term debt, net
711,411
706,846
Deferred revenues, net of current
28,296
27,052
Deferred income tax liabilities, net
3,150
4,180
Other non-current liabilities
14,923
14,561
Total liabilities
816,568
815,051
Commitments and contingencies
Stockholders' deficit
Common stock, $0.01 par value; 100,000,000 shares authorized; 29,977,614 and 29,932,668 shares issued and outstanding as of July 1, 2023 and December 31, 2022, respectively
300
300
Additional paid-in-capital
2,038
2,797
Retained deficit
(367,327)
(393,321)
Accumulated other comprehensive loss
(362)
(637)
Total stockholders' deficit
(365,351)
(390,861)
Total liabilities and stockholders' deficit
$
451,217
$
424,190
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WINGSTOP INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(amounts in thousands, except per share data)
Thirteen Weeks Ended
July 1, 2023
June 25, 2022
(Unaudited)
(Unaudited)
Revenue:
Royalty revenue, franchise fees and other
$
47,984
$
36,044
Advertising fees
36,596
28,987
Company-owned restaurant sales
22,593
18,746
Total revenue
107,173
83,777
Costs and expenses:
Cost of sales (1)
16,642
14,899
Advertising expenses
38,729
29,685
Selling, general and administrative
22,128
13,949
Depreciation and amortization
3,218
2,547
Loss on disposal of assets
—
323
Total costs and expenses
80,717
61,403
Operating income
26,456
22,374
Interest expense, net
4,244
5,986
Other (income) expense
(46)
26
Income before income tax expense
22,258
16,362
Income tax expense
6,077
3,055
Net income
$
16,181
$
13,307
Earnings per share
Basic
$
0.54
$
0.45
Diluted
$
0.54
$
0.44
Weighted average shares outstanding
Basic
29,972
29,882
Diluted
30,049
29,914
Dividends per share
$
0.19
$
0.17
(1) Cost of sales includes all operating expenses of company-owned restaurants, including advertising expenses, and excludes depreciation and amortization, which are presented separately.
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WINGSTOP INC. AND SUBSIDIARIES
Unaudited Supplemental Information
Cost of Sales Margin Analysis
(amounts in thousands)
Thirteen Weeks Ended
July 1, 2023
June 25, 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
$
7,264
32.2
%
$
7,376
39.3
%
Labor costs
5,520
24.4
%
4,328
23.1
%
Other restaurant operating expenses
4,408
19.5
%
3,607
19.2
%
Vendor rebates
(550)
(2.4)
%
(412)
(2.2)
%
Total cost of sales
$
16,642
73.7
%
$
14,899
79.5
%
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WINGSTOP INC. AND SUBSIDIARIES
Unaudited Supplemental Information
Restaurant Count
Thirteen Weeks Ended
July 1, 2023
June 25, 2022
Domestic Franchised Activity:
Beginning of period
1,710
1,551
Openings
42
49
Closures
(1)
—
Acquired by Company
(2)
—
Restaurants end of period
1,749
1,600
Domestic Company-Owned Activity:
Beginning of period
43
37
Openings
—
2
Closures
—
—
Acquired by Company
2
—
Restaurants end of period
45
39
Total Domestic Restaurants
1,794
1,639
International Franchised Activity:
Beginning of period
243
203
Openings
9
16
Closures
—
—
Restaurants end of period
252
219
Total System-wide Restaurants
2,046
1,858
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WINGSTOP INC. AND SUBSIDIARIES
Non-GAAP Financial Measures - EBITDA and Adjusted EBITDA
(Unaudited)
(amounts in thousands)
Thirteen Weeks Ended
July 1, 2023
June 25, 2022
Net income
$
16,181
$
13,307
Interest expense, net
4,244
5,986
Income tax expense
6,077
3,055
Depreciation and amortization
3,218
2,547
EBITDA
$
29,720
$
24,895
Additional adjustments:
Consulting fees (a)
1,084
50
Stock-based compensation expense (b)
3,546
(1,601)
Adjusted EBITDA
$
34,350
$
23,344
(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 June 25, 2022 include third-party consulting fees incurred relating to a strategic initiative to consider the development of a business plan and financial model for potential vertical integration of a poultry complex, which review was completed in fiscal year 2022. The costs incurred in the thirteen weeks ended July 1, 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 these two strategic review initiatives that are not expected to recur in the foreseeable future, the Company considers the incremental consulting fees incurred with respect to the initiatives not reflective of the ongoing costs to operate its business.
(b) Includes non-cash, stock-based compensation.
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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
July 1, 2023
June 25, 2022
Numerator:
Net income
$
16,181
$
13,307
Adjustments:
Consulting fees (a)
1,084
50
Tax effect of adjustments (b)
(260)
(12)
Adjusted net income
$
17,005
$
13,345
Denominator:
Weighted-average shares outstanding - diluted
30,049
29,914
Adjusted earnings per diluted share
$
0.57
$
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 June 25, 2022 include third-party consulting fees incurred relating to a strategic initiative to consider the development of a business plan and financial model for potential vertical integration of a poultry complex, which review was completed in fiscal year 2022. The costs incurred in the thirteen weeks ended July 1, 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 these two strategic review initiatives that are not expected to recur in the foreseeable future, the Company considers the incremental consulting fees incurred with respect to the initiatives 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 periods ended July 1, 2023 and June 25, 2022, which includes provisions for U.S. federal income taxes, and assumes the respective statutory rates for applicable state and local jurisdictions.
