Wingstop Inc. Reports Fiscal Second Quarter Financial Results – QNT Press Release

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Delivers Unit Growth of 14.4% and Reiterates Full Year Financial Outlook

DALLAS, July 28, 2022 /PRNewswire/ — Wingstop Inc. ("Wingstop" or the "Company") (NASDAQ:WING) today announced financial results for the fiscal second quarter ended June 25, 2022.

Highlights for the fiscal second quarter 2022 compared to the fiscal second quarter 2021:

• System-wide sales increased 7.5% to $633.6 million
• 67 net new openings in the fiscal second quarter 2022
• Domestic same-store sales decreased 3.3%
• Three-year domestic same-store sales increased 30.7%
• Domestic restaurant AUV of $1.6 million
• Digital sales of 60.5% of sales
• Total revenue increased 13.2% to $83.8 million
• Net income increased 17.6% to $13.3 million, or $0.44 per diluted share, compared to net income of $11.3 million, or $0.38 per diluted share in the prior fiscal second quarter. Adjusted net income and adjusted earnings per diluted share, both non-GAAP measures, increased 20.1% to $13.6 million, or $0.45 per diluted share, compared to $11.3 million, or $0.38 per diluted share in the prior fiscal second quarter
• Adjusted EBITDA, a non-GAAP measure, increased 3.4% to $23.7 million, compared to adjusted EBITDA of $22.9 million in the prior fiscal second quarter.

Adjusted EBITDA, adjusted net income, adjusted earnings per diluted share, and cost of sales excluding pre-opening expenses are non-GAAP measures. Reconciliations of adjusted EBITDA, adjusted net income, adjusted earnings per diluted share, and cost of sales excluding pre-opening expenses 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 results demonstrate the resiliency and underlying strength of the Wingstop brand as the unit economics have continued to strengthen throughout 2022, fueling another record number of net new openings this quarter," commented Michael Skipworth, President & Chief Executive Officer. "We are in a unique position for the back half of 2022 where we are benefiting from meaningful deflation in bone-in wings, have a proven playbook, along with sales-driving levers that give us confidence in our ability to deliver on our outlook for 2022."

Key operating metrics for the fiscal second quarter 2022 compared to the fiscal second quarter 2021:

 

Fiscal second quarter 2022 financial results

Total revenue for the fiscal second quarter 2022 increased to $83.8 million from $74.0 million in the fiscal second quarter last year. Royalty revenue, franchise fees and other increased $2.9 million primarily due to 229 net franchise restaurant openings since June 26, 2021, partially offset by a domestic same-store sales decline of 3.3%. Advertising fees increased $6.4 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, as well as a 7.5% increase in system-wide sales in the fiscal quarter ended June 25, 2022 compared to the fiscal quarter ended June 26, 2021. Company-owned restaurant sales increased $0.5 million related to the addition of six net new company-owned restaurants compared to the prior year comparable period, partially offset by a 4.9% decline in company-owned same store sales, which was driven by a decline in transactions.

Cost of sales increased to $14.9 million from $14.2 million in the fiscal second quarter of the prior year, and included $0.2 million in pre-opening expenses in the fiscal quarter ended June 25, 2022. As a percentage of company-owned restaurant sales, cost of sales (excluding pre-opening expenses) increased to 78.5% from 77.6% in the prior year comparable period. Since the prior year period, we have opened six restaurants in the New York City market, which have higher labor costs, rent and other operating costs. Additionally, labor costs increased due to increases in company-owned restaurant wages and hiring and training costs as a result of the competitive labor market during the fiscal quarter ended June 25, 2022. These increases were partially offset by a decrease in food, beverage and packaging costs primarily driven by an 18.8% decrease in the cost of bone-in chicken wings as compared to the prior year period.

Selling, general & administrative expense ("SG&A") decreased $2.1 million to $13.9 million from $16.1 million in the fiscal second quarter of the prior year. The decrease of SG&A expense was primarily due to a decrease of $4.1 million in stock based compensation expense related to stock awards forfeited during the fiscal second quarter 2022. This was partially offset by an increase of $0.9 million in professional fees to support the Company's strategic initiatives and an increase of $0.5 million in travel expense as compared to the prior year period.

Interest expense, net was $6.0 million in the fiscal second quarter of 2022, an increase of $2.3 million compared to $3.7 million in the prior fiscal period. The increase was due to the securitized financing transaction completed on March 9, 2022, which increased our outstanding debt by $250 million.

Income tax expense was $3.1 million in the fiscal second quarter of 2022, yielding an effective tax rate of 18.7%, compared to an effective tax rate of 25.5% in the prior year period. The decrease in the effective tax rate was primarily due to the impact of stock awards forfeited during the fiscal second quarter of 2022.

Financial Outlook

The Company is reiterating guidance for 2022, which is a 53-week fiscal year:

• Low-single digit domestic same store sales growth;
• SG&A of between $70.0 – $72.0 million;
• Stock-based compensation expense of between $7.5 – $8.5 million;
• Depreciation and amortization of between $10.5 – $11.5 million;
• Interest expense of approximately $23.5 million; and
• Diluted earnings per share of between $1.55 to $1.57.

Additionally, the Company is updating its guidance for net system-wide restaurant openings from 220+ to between 220 and 235.

Restaurant Development

As of June 25, 2022, there were 1,858 Wingstop restaurants system-wide. This included 1,639 restaurants in the United States, of which 1,600 were franchised restaurants and 39 were company-owned, and 219 franchised restaurants in international markets. During the fiscal second quarter 2022, there were 67 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 July 27, 2022, our board of directors approved an increase in the quarterly dividend payable to Wingstop stockholders from $0.17 to $0.19 per share of common stock, resulting in a total dividend of approximately $5.7 million. This dividend will be paid on September 2, 2022 to stockholders of record as of August 12, 2022.

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 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 reflect the change in year-over-year sales for the comparable restaurant base. We define the comparable 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.

System-wide sales represents net sales for all of our company-owned and franchised restaurants, as reported by franchisees.

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 refinancing transactions, transaction costs, costs and fees associated with investments in our strategic initiatives, gains and losses on the disposal of assets, and stock-based compensation expense.

Adjusted net income is defined as net income adjusted for losses on debt extinguishment and refinancing transactions, transaction costs, costs and fees associated with investments in our strategic initiatives, gains and losses on the disposal of assets, and related tax adjustments.

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

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

Conference Call and Webcast

The Company will host a conference call today to discuss the fiscal second quarter 2022 financial results at 10:00 AM Eastern Time. The conference call can be accessed live by dialing 1-877-259-5243 or 1-412-317-5176 (international). 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 5140987. The replay will be available through Thursday, August 4, 2022.

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 1,850 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 and tenders, 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 2021, Wingstop's system-wide sales increased 20.2% year-over-year to approximately $2.3 billion, marking the 18th 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 1,858 as of June 25, 2022.

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 2021, the Company was ranked #1 on Technomic 500's "Fastest Growing Franchise" and #22 on Entrepreneur Magazine's "Franchise 500," maintained its certification as a Great Place to Work, was named as a finalist for The Innovation SABRE Award's Best New Product/Brand Launch category for its Thighstop campaign, and 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.

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