Wingstop Inc. Reports Fiscal Second Quarter 2023 Financial Results
16.8% Domestic Same Store Sales Growth - Increases Outlook for Fiscal Year 2023
Wingstop Inc. (NASDAQ: WING) yesterday 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
"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."
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.
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.
About Wingstop
Founded in 1994 and headquartered in Dallas, TX, Wingstop Inc. (NASDAQ: WING) operates and franchises more than 2,000 locations worldwide.
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.
| WINGSTOP INC. AND SUBSIDIARIES | |||
| July 1, | December 31, | ||
| (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; | 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 | |
| WINGSTOP INC. AND SUBSIDIARIES | |||
| Thirteen Weeks Ended | |||
| July 1, | June 25, | ||
| (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. |
| WINGSTOP INC. AND SUBSIDIARIES | |||||||
| Thirteen Weeks Ended | |||||||
| July 1, 2023 | June 25, 2022 | ||||||
| In dollars | As a % of | In dollars | As a % of | ||||
| 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 % | |||
| WINGSTOP INC. AND SUBSIDIARIES | |||||||
| Thirteen Weeks Ended | |||||||
| July 1, | June 25, | ||||||
| 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 | |||||
| WINGSTOP INC. AND SUBSIDIARIES | |||||||
| Thirteen Weeks Ended | |||||||
| July 1, | June 25, | ||||||
| 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. |
| WINGSTOP INC. AND SUBSIDIARIES | |||
| Thirteen Weeks Ended | |||
| July 1, | June 25, | ||
| 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. |
SOURCE Wingstop Restaurants Inc.
