Wingstop Inc. Reports Fiscal First Quarter 2023 Financial Results
20.1% Domestic Same Store Sales Growth - Digital Sales Mix Achieved Record Level of 65.2%
Wingstop Inc. (NASDAQ: WING) yesterday announced financial results for the fiscal first quarter ended April 1, 2023.
Highlights for the fiscal first quarter 2023 compared to the fiscal first quarter 2022:
- System-wide sales increased 30.4% to $821.6 million
- 37 net new openings in the fiscal first quarter 2023, resulting in an increase in unit count of 11.4%
- Domestic same store sales increased 20.1%
- Domestic restaurant AUVs increased to $1.7 million
- Digital sales increased to 65.2%
- Total revenue increased 42.7% to $108.7 million
- Net income increased 80.6% to $15.7 million, or $0.52 per diluted share, compared to net income of $8.7 million, or $0.29 per diluted share in the prior fiscal first quarter. Adjusted net income and adjusted earnings per diluted share, both non-GAAP measures, increased 81.1% to $17.8 million, or $0.59 per diluted share, compared to $9.8 million, or $0.33 per diluted share in the prior fiscal first quarter.
- Adjusted EBITDA, a non-GAAP measure, increased 59.8% to $34.6 million, compared to adjusted EBITDA of $21.6 million in the prior fiscal first quarter
"Our strong first quarter results reflect the continued momentum and strength of the Wingstop brand as we delivered 20.1% domestic same store sales growth, driven by transaction growth," said Michael Skipworth, President and Chief Executive Officer. "With this underlying strength, we believe that our strategies we are executing against can deliver our 20th consecutive year of same store sales growth and another record year of unit growth for Wingstop."
Key operating metrics for the fiscal first quarter 2023 compared to the fiscal first quarter 2022:
| Thirteen Weeks Ended | |||
| April 1, 2023 | March 26, 2022 | ||
| Number of system-wide restaurants open at end of period | 1,996 | 1,791 | |
| Number of domestic franchise restaurants open at end of period | 1,710 | 1,551 | |
| Number of international franchise restaurants open at end of period | 243 | 203 | |
| System-wide sales (in millions) | $ 822 | $ 630 | |
| Domestic AUV (in thousands) | $ 1,662 | $ 1,602 | |
| Domestic same store sales growth | 20.1 % | 1.2 % | |
| Company-owned domestic same store sales growth | 10.3 % | 2.1 % | |
| Net income (in thousands) | $ 15,669 | $ 8,676 | |
| Adjusted net income (in thousands) | $ 17,771 | $ 9,815 | |
| Adjusted EBITDA (in thousands) | $ 34,584 | $ 21,645 | |
Fiscal first quarter 2023 financial results
Total revenue for the fiscal first quarter 2023 increased to $108.7 million from $76.2 million in the fiscal first quarter last year. Royalty revenue, franchise fees and other increased $13.1 million primarily due to domestic same store sales growth of 20.1% and 199 net franchise restaurant openings since March 26, 2022. Advertising fees increased $14.9 million due to an increase in the national advertising fund contribution rate to 5% from 4% effective the first day of the fiscal second quarter 2022, and a 30.4% increase in system-wide sales in the fiscal first quarter 2023. Company-owned restaurant sales increased $4.5 million due to an increase of $2.9 million related to the addition of six net new company-owned restaurants since the prior fiscal first quarter, as well as a 10.3% increase in company-owned same store sales driven by an increase in transactions.
Cost of sales increased to $16.7 million from $15.7 million in the fiscal first quarter of the prior year. As a percentage of company-owned restaurant sales, cost of sales decreased to 72.4% from 84.3% in the prior year comparable period. The decrease was primarily driven by food, beverage and packaging costs benefiting from a 52.8% decrease in the cost of bone-in chicken wings as compared to the prior fiscal first quarter.
Selling, general & administrative ("SG&A") increased $5.6 million to $23.6 million from $18.1 million in the fiscal first quarter of the prior year. The increase in SG&A was due to an increase of $2.8 million related to consulting fees associated with the Company's strategic initiatives, a $1.6 million increase in incentive compensation and performance-based stock compensation expense recognized related to the Company's performance, and a $0.6 million increase in headcount related expenses to support the growth in our business.
Interest expense, net was $4.6 million in the fiscal first quarter of 2023, an increase of approximately $0.4 million, or 9.1%, compared to $4.2 million in the fiscal first quarter of the prior year. The increase was due to an additional $1.8 million in interest expense relating to the securitized financing transaction completed on March 9, 2022, which increased our outstanding debt by $250 million. This was partially offset by an increase of $1.4 million in interest income earned on our cash balances during the thirteen weeks ended April 1, 2023.
Financial Outlook
Based on fiscal first quarter results, the Company is providing updated guidance for 2023, which is a 52-week fiscal year:
- High-single digit domestic same store sales growth;
- SG&A of between $85.5 - $87.5 million, which includes $2.8 million in consulting projects to support the Company's strategic initiatives, previously $82.0 - $84.0 million; and
- Stock-based compensation expense of approximately $12.0 - $13.0 million, previously $11.5 - $12.5 million.
- Additionally, the Company is reiterating the following guidance for 2023:
- Approximately 240 global net new units; and
- Depreciation and amortization of between $14.0 - $15.0 million.
Restaurant Development
As of April 1, 2023, there were 1,996 Wingstop restaurants system-wide. This included 1,753 restaurants in the United States, of which 1,710 were franchised restaurants and 43 were company-owned, and 243 franchised restaurants were in international markets. During the fiscal first quarter 2023, there were 37 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 May 2, 2023, our board of directors authorized and declared a quarterly dividend of $0.19 per share of common stock, resulting in a total dividend of approximately $5.7 million. This dividend will be paid on June 9, 2023 to stockholders of record as of May 19, 2023.
About Wingstop
Founded in 1994 and headquartered in Dallas, TX, Wingstop Inc. (NASDAQ: WING) operates and franchises more than 1,950 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, our system is comprised of independent franchisees, or brand partners, who account for approximately 98% of Wingstop's total restaurant count of 1,996 as of April 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 stakeholders.
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.
| WINGSTOP INC. AND SUBSIDIARIES | |||
| April 1, | December 31, | ||
| (Unaudited) | |||
| Assets | |||
| Current assets | |||
| Cash and cash equivalents | $ 196,198 | $ 184,496 | |
| Restricted cash | 13,281 | 13,296 | |
| Accounts receivable, net | 10,137 | 9,461 | |
| Prepaid expenses and other current assets | 3,061 | 4,252 | |
| Advertising fund assets, restricted | 26,725 | 15,167 | |
| Total current assets | 249,402 | 226,672 | |
| Property and equipment, net | 71,518 | 66,851 | |
| Goodwill | 62,514 | 62,514 | |
| Trademarks | 32,700 | 32,700 | |
| Customer relationships, net | 8,696 | 9,015 | |
| Other non-current assets | 26,467 | 26,438 | |
| Total assets | $ 451,297 | $ 424,190 | |
| Liabilities and stockholders' deficit | |||
| Current liabilities | |||
| Accounts payable | $ 6,848 | $ 5,219 | |
| Other current liabilities | 38,438 | 34,726 | |
| Current portion of debt | 7,300 | 7,300 | |
| Advertising fund liabilities | 26,725 | 15,167 | |
| Total current liabilities | 79,311 | 62,412 | |
| Long-term debt, net | 705,483 | 706,846 | |
| Deferred revenues, net of current | 27,667 | 27,052 | |
| Deferred income tax liabilities, net | 3,380 | 4,180 | |
| Other non-current liabilities | 15,246 | 14,561 | |
| Total liabilities | 831,087 | 815,051 | |
| Commitments and contingencies | |||
| Stockholders' deficit | |||
| Common stock, $0.01 par value; 100,000,000 shares authorized; | 300 | 300 | |
| Additional paid-in-capital | 809 | 2,797 | |
| Retained deficit | (380,409) | (393,321) | |
| Accumulated other comprehensive loss | (490) | (637) | |
| Total stockholders' deficit | (379,790) | (390,861) | |
| Total liabilities and stockholders' deficit | $ 451,297 | $ 424,190 | |
| WINGSTOP INC. AND SUBSIDIARIES | |||
| Thirteen Weeks Ended | |||
| April 1, | March 26, | ||
| (Unaudited) | (Unaudited) | ||
| Revenue: | |||
| Royalty revenue, franchise fees and other | $ 48,188 | $ 35,070 | |
| Advertising fees | 37,463 | 22,539 | |
| Company-owned restaurant sales | 23,070 | 18,596 | |
| Total revenue | 108,721 | 76,205 | |
| Costs and expenses: | |||
| Cost of sales (1) | 16,695 | 15,674 | |
| Advertising expenses | 39,643 | 23,167 | |
| Selling, general and administrative | 23,645 | 18,086 | |
| Depreciation and amortization | 2,989 | 2,227 | |
| Loss on disposal of assets | 77 | 444 | |
| Total costs and expenses | 83,049 | 59,598 | |
| Operating income | 25,672 | 16,607 | |
| Interest expense, net | 4,573 | 4,192 | |
| Loss on debt extinguishment | — | 814 | |
| Other expense | 188 | 65 | |
| Income before income tax expense | 20,911 | 11,536 | |
| Income tax expense | 5,242 | 2,860 | |
| Net income | $ 15,669 | $ 8,676 | |
| Earnings per share | |||
| Basic | $ 0.52 | $ 0.29 | |
| Diluted | $ 0.52 | $ 0.29 | |
| Weighted average shares outstanding | |||
| Basic | 29,947 | 29,851 | |
| Diluted | 30,031 | 29,974 | |
| Dividends per share | $ 0.19 | $ 4.17 | |
| (1) | Cost of sales includes all operating expenses of company-owned restaurants, including advertising expenses, and excludes depreciation and amortization, which are presented separately. |
| WINGSTOP INC. AND SUBSIDIARIES | |||||||
| Thirteen Weeks Ended | |||||||
| April 1, 2023 | March 26, 2022 | ||||||
| In dollars | As a % of | In dollars | As a % of | ||||
| Cost of sales: | |||||||
| Food, beverage and packaging costs | $ 7,486 | 32.4 % | $ 7,967 | 42.8 % | |||
| Labor costs | 5,517 | 23.9 % | 4,807 | 25.8 % | |||
| Other restaurant operating expenses | 4,226 | 18.3 % | 3,307 | 17.8 % | |||
| Vendor rebates | (534) | (2.3) % | (407) | (2.2) % | |||
| Total cost of sales | 16,695 | 72.4 % | 15,674 | 84.3 % | |||
| WINGSTOP INC. AND SUBSIDIARIES | |||
| Thirteen Weeks Ended | |||
| April 1, | March 26, | ||
| Domestic Franchised Activity: | |||
| Beginning of period | 1,678 | 1,498 | |
| Openings | 32 | 56 | |
| Closures | — | (3) | |
| Restaurants end of period | 1,710 | 1,551 | |
| Domestic Company-Owned Activity: | |||
| Beginning of period | 43 | 36 | |
| Openings | — | 1 | |
| Closures | — | — | |
| Restaurants end of period | 43 | 37 | |
| Total Domestic Restaurants | 1,753 | 1,588 | |
| International Franchised Activity: | |||
| Beginning of period | 238 | 197 | |
| Openings | 8 | 7 | |
| Closures | (3) | (1) | |
| Restaurants end of period | 243 | 203 | |
| Total System-wide Restaurants | 1,996 | 1,791 | |
| WINGSTOP INC. AND SUBSIDIARIES | |||
| Thirteen Weeks Ended | |||
| April 1, | March 26, | ||
| Net income | $ 15,669 | $ 8,676 | |
| Interest expense, net | 4,573 | 4,192 | |
| Income tax expense | 5,242 | 2,860 | |
| Depreciation and amortization | 2,989 | 2,227 | |
| EBITDA | $ 28,473 | $ 17,955 | |
| Additional adjustments: | |||
| Loss on debt extinguishment and financing | — | 1,124 | |
| Consulting fees (b) | 2,766 | 375 | |
| Stock-based compensation expense (c) | 3,345 | 2,191 | |
| Adjusted EBITDA | $ 34,584 | $ 21,645 | |
| (a) | Represents costs and expenses related to our 2022 securitized financing facility and payment of a special dividend, as well as the extinguishment of our 2020 variable funding note facility; all transaction costs are included in Loss on debt extinguishment and financing transactions during the year ended March 26, 2022, with the exception of $310,000 that is included in Selling, general and administrative on the Consolidated Statements of Operations. |
| (b) | Represents costs and expenses related to consulting projects to support the Company's strategic initiatives, which are included in Selling, general and administrative on the Consolidated Statements of Operations. |
| (c) | Includes non-cash, stock-based compensation. |
| WINGSTOP INC. AND SUBSIDIARIES | |||
| Thirteen Weeks Ended | |||
| April 1, | March 26, | ||
| Numerator: | |||
| Net income | $ 15,669 | $ 8,676 | |
| Adjustments: | |||
| Loss on debt extinguishment and financing | — | 1,124 | |
| Consulting fees (b) | 2,766 | 375 | |
| Tax effect of adjustments (c) | (664) | (360) | |
| Adjusted net income | $ 17,771 | $ 9,815 | |
| Denominator: | |||
| Weighted-average shares outstanding - diluted | 30,031 | 29,974 | |
| Adjusted earnings per diluted share | $ 0.59 | $ 0.33 | |
| (a) | Represents costs and expenses related to our 2022 securitized financing facility and payment of a special dividend, as well as the extinguishment of our 2020 variable funding note facility; all transaction costs are included in Loss on debt extinguishment during the thirteen weeks ended March 26, 2022, with the exception of $310,000 during the fiscal year that is included in Selling, general and administrative on the Consolidated Statements of Operations. |
| (b) | Represents costs and expenses related to consulting projects to support the Company's strategic initiatives, which are included in Selling, general and administrative on the Consolidated Statements of Operations. |
| (c) | 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 April 1, 2023 and March 26, 2022, 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.