Q3 2024 Wingstop Inc Earnings Call
Speaker Change: Good morning ladies and gentlemen and thank you for standing by.
Speaker Change: Welcome to the Wingstop Fiscal 3rd Quarter 2024 earnings conference call.
Speaker Change: All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key, followed by zero.
Speaker Change: Please note that this conference is being recorded today Wednesday, October 30, 2024. On the call today, our Michael Skipworth, President and Chief Executive Officer, and Alex Kaleida, Senior Vice President and Chief Financial Officer.
Speaker Change: I would now like to turn on the conference over to Alex, please go ahead.
Alex Kaleida: Thank you and welcome to our fiscal third quarter 2024, our name is Conference Call for Wingstop. Our results were published earlier this morning and are available on our Investor Relations website at IR. Wingstop.com.
Alex Kaleida: are discussing today includes forward-looking statements. These statements are not guaranteed of future performance and are subject to numerous risk and uncertainties that could cause our actual results to differ materially from what we currently expect.
Alex Kaleida: RCC violence described various risks that could affect our future operating results in financial condition.
Alex Kaleida: We used certain non-gap financial measures that we believe can be useful in a valuable way in our performance.
Alex Kaleida: Presentation of such information should not be considered in isolation, or as a substitute for results prepared in accordance with GAP. Frequent affiliations to comparable GAP measures are contained in our earnings release.
Speaker Change: Lastly, for the Q&A session, we ask that you please each keep the one question and a follow-up to allow as many participants as possible to ask a question. With that, I would like to turn the call over to Michael.
Michael Skipworth: Before I dive into our results, I want to acknowledge that these results could not have been achieved without the tremendous effort by the entire Wingstop team.
Michael Skipworth: I want to thank team members in the restaurants and in our global support center, our brand partners, and our supplier partners for their relentless focus on executing our long-term strategy that has translated into another record quarter.
Michael Skipworth: Q3, domestic same-source sales growth was 20.9%, which continues to be primarily driven by transaction growth.
Michael Skipworth: putting us well on our way to our 21st consecutive year of same-store sales growth, an unprecedented track record.
Michael Skipworth: The AUV for our restaurants has now surpassed $2.1 million.
Michael Skipworth: This compares to $2 million just last quarter and $1.8 million in the prior year quarter, fueling our confidence in our ability to scale AUVs to $3 million over time.
Michael Skipworth: This AUV growth, combined with our supply chain strategy, continues to strengthen our industry-leading unit economics.
Michael Skipworth: The average investment to open a Wingstop remains at around $500,000 and our brand partners are seeing unlevered cash-on-cash returns in excess of 70%.
Michael Skipworth: This overall strength in the Wingstop business has translated to a record level of demand for growth from our brand partner community.
Michael Skipworth: And as we saw that excitement come to life in the third quarter, where we had a record Q3 for new restaurant development.
Michael Skipworth: We opened over 100 restaurants in the third quarter, delivering a unit growth rate of 17%. Truly remarkable.
Michael Skipworth: We are also seeing new unit productivity come out of the gates well ahead of the prior year vintage, which was already strong at roughly $1.6 million AUVs in the first year.
Michael Skipworth: This has translated into the strongest development pipeline on record for the brand.
Michael Skipworth: We now expect to open between 320 to 330 net new restaurants in 2024.
Michael Skipworth: Last quarter, we shared new targets for system AUVs and our total global restaurant opportunity. I'll spend a few minutes today discussing our path to achieving those targets, starting with our new AUV target of $3 million.
Michael Skipworth: While we have delivered some pretty remarkable growth over the past couple of years, we have incredible confidence in our long-term strategies as we look to the runway in front of us.
Michael Skipworth: These strategies consist of scaling brand awareness, menu innovation, expanding our delivery channel, data-driven marketing, and our digital transformation.
Michael Skipworth: Brand awareness remains a huge opportunity for Wingstop.
Michael Skipworth: As we work toward our opportunity to scale brand awareness, we are leaning into our media strategy focused on live sports and a very targeted approach in streaming and online video placements combined with breakthrough creative that is proving to be highly effective.
Michael Skipworth: You've seen us show up in major events, including the start of the NFL and NBA seasons, as well as Thursday Night Football and Amazon Prime's Pre Game Show. These media placements are helping us increase brand awareness and have contributed to record levels of new guest acquisition.
Michael Skipworth: While we've delivered industry-leading same-store sales growth through the first three quarters of 2024, we have only moved brand awareness by a couple percentage points, highlighting the opportunity and potential we have in front of us.
Michael Skipworth: As we look to close out 2024, we're going to continue to invest our advertising dollars to expand our reach across platforms such as the NFL and NBA.
Michael Skipworth: We'll be on a lot more NFL and NBA games this year, and we're finding new ways to partner.
Michael Skipworth: Wingstop is now the official chicken partner and the official wing of the NBA. This is our first official sponsorship with a major professional sports league.
Michael Skipworth: The past quarter marked our first full quarter with our proprietary tech stack, MyWingstock, which launched earlier this year.
Michael Skipworth: While we're still in the early days, I couldn't be more excited by what we're seeing in the results.
Michael Skipworth: Since the launch, we have introduced greater operational capabilities for our brand partners that increase visibility into their digital business and provide advanced analytics platform that drives insights across a variety of KPIs to drive restaurant-level profitability.
Michael Skipworth: I'm proud of the team and how seamless this transition was for our restaurants.
Michael Skipworth: My Wingstop also included enhancements to the guest experience that focused on many of the insights we've developed over the years.
Michael Skipworth: We've made investments in our first party database, building out rich guest profiles that allow us to unlock a whole new level of hyper personalization.
Michael Skipworth: We're now beginning to welcome guests on our website and app with relevant, personalized, and optimized content that will only further improve over time.
Michael Skipworth: During the quarter, we hit a record level of app downloads in user sessions, both within our app and website. We measured a 10% improvement in order efficiency times.
Michael Skipworth: I highlighted a couple of examples that give us confidence in our path to $3 million AUVs, which will just further strengthen our industry-leading unit economics.
Michael Skipworth: We also have made tremendous progress with our supply chain strategy in 2024 to mitigate the volatility in our core commodity. This is the first full year that strategy has taken effect.
Michael Skipworth: Historically, we had been anchored to a weekly spot market purchase for classic bone-in-wings, and the spot market this year experienced a peak inflation window of nearly 200%.
Michael Skipworth: Our restaurants have been able to avoid that level of inflation and are seeing food costs within our targeted range of mid-30%. And we have line of sight into wing pricing into 2025 and 2026 as we continue to execute our strategy.
Michael Skipworth: This, coupled with our AUVs exceeding $2.1 million, has translated into record cash flows for our brand partners.
Michael Skipworth: And as a result, we're experiencing an unprecedented pace of growth for Wingstop. U3 showcased this with a record 106 net new restaurants.
Michael Skipworth: Our international business also continues to be on fire. We recently capitalized on an opportunity to make our global presence known in France during the Olympics.
Michael Skipworth: showcasing our flavor in a big way by opening a pop-up restaurant that we called House of Flavor.
Michael Skipworth: We gave away nearly a half a million wings in just 10 days With long lines of flavor fans wrapping around the venue Waiting to get into the pop-up to experience Wingstop for the first time
Speaker Change: The opportunity in France is as large, if not greater, than what we're building towards in the UK.
Speaker Change: And when we combine our opportunity to expand France with other markets recently signed, we believe we can deliver over 750 restaurants across these new international markets alone.
Speaker Change: It's pretty incredible to see the demand for growth from our brand partner community as well as how guests are responding to the brand as we expand our footprint across the globe.
Speaker Change: Before I turn the call over to Alex, I'm excited to announce a new partnership for Wingstop.
Speaker Change: During the month of October, 100% of contributions received from our Roundup program will be donated to St. Jude's Children's Research Hospital. As our business continues to drive industry-leading growth, our obligation to give back grows as well.
Speaker Change: The work that is happening at St. Jude's is remarkable, and we believe our brand partners, team members, and fans will embrace the opportunity to contribute to St. Jude's life-saving mission, finding a cure for childhood cancer.
Speaker Change: 2024 is shaping up to be another record year for Wingstop, but yet we feel like we are just getting started.
Speaker Change: Our strategies have proven staying power, and we are laser focused on execution as we scale Wingstop into a top 10 global restaurant brand. It is truly an exciting time at Wingstop.
Speaker Change: With that, I'd like to turn the call over to Alex.
Alex Kaleida: Thank you and good morning. The momentum and the amount of growth in front of us here at Wingstop is incredibly energizing. Our third quarter results are another proof point in Wingstop's Category of One positioning.
Alex Kaleida: Domestic AUVs increased to 2.1 million dollars in Q3, driven by a 20.9 percent increase in domestic same-source sales, primarily driven by transaction growth.
Alex Kaleida: This translates to a 36.2% comp on a two-year basis, which also includes a majority of the growth driven by transactions.
Alex Kaleida: A true demonstration of the underlying health and strength of the Wingstop brand.
Alex Kaleida: This same store sales growth combined with opening over 350 restaurants in the last 12 months delivered 39.4% system-wide sales growth in the third quarter.
Alex Kaleida: This top-line growth gives us the fuel in our advertising fund to work against a double-digit gap in brand awareness when benchmarked to more mature QSR brands.
Alex Kaleida: What we continue to hear from consumers is they will prioritize restaurants that offer both high quality and value in their experience. And we believe Wingstop is clearly delivering as our quality and value scores are an outlier relative to industry trends.
Alex Kaleida: Our best-in-class unit economics continue to strengthen which is driving the pace of our growth and has surpassed our expectations this year.
Alex Kaleida: We opened 106 net new restaurants, achieving a record for Q3, which follows records set in each of the prior four quarters.
Alex Kaleida: Our brand partners are leveraging the cash generated from our best-in-class unit economics and are eager to invest in more Wingstops.
Alex Kaleida: Brand partner excitement is apparent as
Alex Kaleida: A great testament to the strength of our returns is that we continue to see 95% of our store openings coming from existing brand partners.
Alex Kaleida: The visibility we have into our pipeline today gives us the confidence to raise our development outlook to a range of 320 to 330 net new restaurants, which was previously set at 285 to 300 net new restaurants for 2024.
Alex Kaleida: Royalty revenues, franchise fees, and other revenue increased by 21.2 million dollars in Q3, driven primarily by net franchise restaurant opening since the prior year comparable period and same-source sales growth of 20.9%.
Alex Kaleida: Company-owned restaurant sales total 31.3 million dollars in Q3, an increase of 7.4 million dollars, primarily due to 10 net new restaurants and a 7.3 percent increase in company-owned same-source sales, driven by transaction growth versus the prior year comparable period.
Speaker Change: Over the past couple of years, we've been discussing our supply chain strategy. And 2024 marked our first full year to showcase the impact it's having on our unit economics.
Speaker Change: As a reminder, our strategy is centered around creating predictability and minimizing volatility in food costs.
Speaker Change: In the past, as the spot market price for bone-in wings reached north of $2 per pound, and when inflation was over 100%, just as what happened in the market this year, food costs could have surged well into the 40% range.
Speaker Change: However, today with the execution of our supply chain strategy, we are providing our brand partners with predictability and food costs, further strengthening our unit economics.
Speaker Change: Due to the effectiveness of this strategy, we also have visibility into system-wide average food costs to be in the mid 30% range into 2025.
Speaker Change: The excitement and confidence in our strategies among our brand partners continues to fuel a record demand in our development pipeline.
Speaker Change: Now shifting to SG&A.
Speaker Change: SG&A increased by $9.2 million versus the prior year comparable period, to a total of $32.3 million.
Speaker Change: primarily driven by an increase in performance-based stock compensation based on our industry-leading performance and also by investments in headcount related expenses as we position the company for this next phase of growth.
Speaker Change: We continue to make progress this year and have $61.1 million remaining under the current authorization at the end of the third quarter.
Speaker Change: Since the inception of our share repurchase program, we have repurchased just over 815,000 shares at a weighted average price of $276.
Speaker Change: This dividend totaling approximately $7.9 million will be paid on December 6, 2024 to stockholders of record as of November 15, 2024.
Speaker Change: We remain committed to enhancing shareholder returns through a combination of our share repurchases and our regular quarterly dividend program.
Speaker Change: Moving to our Outlook for 2024.
Speaker Change: We are reiterating domestic same-source sales growth guidance of approximately 20%.
Speaker Change: In addition to the update for net new restaurants I discussed earlier, we are updating our estimates for SG&A guidance to be between $117.5 and $118.5 million, previously between $114 and $116 million.
Speaker Change: The increase in SG&A guidance is primarily driven by stock-based compensation as a result of performance in our business.
Speaker Change: Our third quarter results showcase the sustained power of our strategies and gives us the confidence to achieve another record year for Wings Up.
Speaker Change: I would like to thank our Global Support Center team members, restaurant team members, brand partners, and supplier partners for continuing to serve fans our flavor while providing a best-in-class guest experience.
Speaker Change: I'd like to now turn to Q&A. Operator, please open the line for questions.
Speaker Change: We will now begin the question and answer session.
Speaker Change: To ask a question, you can press star then 1 on your telephone keypad.
Speaker Change: If you are using a speakerphone, please pick up the handset before pressing the keys.
Speaker Change: To withdraw your question, please press Star then 2.
Speaker Change: Our first question today is from Jeffrey Bernstein with Barclays. Please go ahead.
Jeffrey Bernstein: Great, thank you very much. My first question is just on the comp trends.
Jeffrey Bernstein: Another strong third quarter, north of 20 percent, but the reiteration of the 20 percent for the full year does seem to imply, and obviously it could be in a range, but something closer to 10 percent in the fourth quarter.
Jeffrey Bernstein: which would be a deceleration on a two-year basis, which you had been holding. So I'm just wondering, you know, maybe you could share some October quarter-to-day trends or to what you might attribute what could be a comp slowdown, whether it's something internally you could be doing different or the competition or the macro or capacity issues, just trying to get a sense.
Speaker Change: Again, 20% comp is incredible, driven by traffic, but obviously investors are questioning the potential fourth quarter implications, and then I had one follow-up.
Speaker Change: We are not.
Speaker Change: Managing our strategies or the business to solve for a quarter and if you take a if you take a step back You know, we're we're managing the business for the long term
Speaker Change: And we believe we are executing against proven strategies that have multi-year benefits.
Speaker Change: And again, if you think about it, Q4 will mark the first of four consecutive quarters where we will be lapping same-store sales growth of over 20%.
Speaker Change: And so as we look at it on a two-year basis, to be able to scale our comps, our AUVs, by a stack same-store sales growth that's north of 30% is pretty remarkable.
Speaker Change: And a couple other data points that I think just speak to the effectiveness of our strategies and the overall health of the brand is year-to-date in 2024, we've experienced double-digit same-store sales growth across every single vintage.
Speaker Change: which is pretty remarkable. And so this AUV growth that now sits at $2.1 million is creating incredibly strong cash flows for our brand partners. Combine that with our supply chain strategy, you're seeing it show up in a pretty exciting way from a development perspective.
Speaker Change: Q3 was a pretty exciting quarter for us from a development front. We opened over 100% more units this year than last year at 106 delivering a 17% unit growth rate which at our size and scale is pretty remarkable.
Speaker Change: Understood.
Speaker Change: And then my follow-up, which is my preferred question, because, again, I agree with you on the short-term comp focus. But as you think about the unit growth side of things...
Speaker Change: He upticked the openings for 24, now it looks like mid-teens growth.
Speaker Change: Well beyond kind of your 10% long-term promise and would seem like just based on what you did in the third quarter the demand
Speaker Change: It would seem like with a franchise system.
Speaker Change: Hey, Jeff. Thank you for the question. I appreciate it. And, you know, obviously we are navigating the law of large numbers, but you nailed it. The unit economics continue to strengthen. The demand for growth is extremely strong from our brand partner community. We referenced that our pipeline is the strongest one we've ever had on record for development.
Speaker Change: And so the pipeline's there to support continued industry-leading growth, but we're very focused on responsible and sustainable growth. And so you'll see us continue to be disciplined.
Speaker Change: But we like to take a step back and think about our guide for this year. It really represents the fact that we're opening a small chain on an annual basis, which is something we're pretty proud of.
Speaker Change: Thank you.
Speaker Change: The next question is from David Tarantino with Baird. Please go ahead.
David Tarantino: Good morning. Michael, I wanted to follow up on the question about the comps in Q4, and I know you can look at it relative to a year ago comparisons or two years ago comparisons, and you can slice it a lot of different ways, but
David Tarantino: What I wanted to ask is, in your mind, does the implied guidance that you're giving for Q4 represent a big change or material change in the trajectory of the business or not? I guess, you know, the comparisons are making that a difficult question to answer.
Michael Skipworth: Yeah David, I know it's difficult to look at stack same-source sales growth on a two-year basis when we're delivering growth that's north of 20% and the way we've actually kind of looked at it is more on a three-year basis.
Speaker Change: We're continuing to showcase healthy transaction growth in our business as we continue to acquire record levels of new guests.
Speaker Change: And we continue to see an uptick in frequency across every single cohort, which we're pretty excited to see about. So the overall fundamentals and health of our business are extremely strong.
Speaker Change: Yep, thank you for that clarification and then I think you reference
Speaker Change: 750 unit opportunity in some new markets in Europe. So I was hoping you could.
Speaker Change: elaborate on on which markets that applies to because I think you had previously laid out
Speaker Change: a target that was lower than that for Western Europe. So I just wanted to maybe understand why you're more bullish now and which markets are included in that number.
Speaker Change: Yeah, David just to clarify that number is it includes some new markets We signed that are outside of Western Europe but we're super excited about and we've talked about it over the last couple of quarters how the pipeline of
Michael Skipworth: New Brand Partner interest in the brand has just continued to strengthen and we're excited to report a handful of signings that, as we mentioned, aggregate to an opportunity of over 750 restaurants long term. But that includes France, it includes
Michael Skipworth: several Gulf Coast countries where we actually have a presence in that region with 30 restaurants already that perform pretty similar to our domestic business and then we also have Australia as another new market that we sign but in aggregate these opportunities roll up to the potential for over 750 restaurants
Michael Skipworth: which are pretty exciting.
Speaker Change: Great. Thank you.
Speaker Change: Thank you. The next question is from
Speaker Change: Great, thank you. Sticking on the theme of comps, you know, Michael, very helpful context on the way that you guys do this on a three-year basis.
Speaker Change: If I kind of roll these three-year trends that you saw in 3Q that were great, through 4Q and then 2025.
Speaker Change: It suggests that the mid-single digit comps for next year should be on track. Just to make sure that I am thinking about this in the right way, after the great few years that you have seen here, mid-single digits are still the right way to think about 2025 and beyond.
Speaker Change: Andrew, I appreciate the question. I think what I would point to is...
Speaker Change: whether it's continuing to gain our fair share of chicken sandwich occasions, continuing to expand the delivery channel. And then we talked about the launch of MyWingstop, which we're really excited about.
Speaker Change: We have a pretty exciting and it's early innings still with my wing stop but we do have some pretty exciting proof points that are showing up and one that we We would point to is we saw the highest level of new digital guest retention we've ever seen in the third quarter
Speaker Change: And it's showcasing how we're able to leverage that platform to lean into and invest in those new guest profiles that's allowing us to demonstrate some hyper-personalization that's impacting the business.
Speaker Change: So long story short, we have confidence in the business. We're not here to guide to 2025. But I think we would just point to the fact that we see a lot of runway in the strategies we're executing against.
Speaker Change: Okay, that's very helpful and very encouraged my second question very encouraging to see the new store economics the new store volumes You know up 1.6 million dollars I mean, that's nearly a million dollars higher than when you guys went public roughly ten years ago So I'm just curious. Do you see a ceiling on this or do you think that you know? Just given this the playbook you have in place You know the ability for more third-party delivery sales the benefits of national advertising You think this has more room to run higher?
Speaker Change: They're performing much stronger than that 2023 vintage that you referenced, which is really encouraging to see. And then I commented earlier how we did see this year across every single vintage, which includes that original Wingstop open 30 years ago.
Speaker Change: that's doing north of $4 million. We saw double-digit same-source sales growth across every single vintage. So we think there's a lot of runway in front of us to continue to drive growth and gives us confidence in our target that we set last quarter, or revealed last quarter of a $3 million AUV.
Speaker Change: Very helpful. Thank you.
Speaker Change: The next question is from Sarah Senatore with Bank of America. Please go ahead.
Sarah Senatore: Thank you. Actually a follow-up first and then maybe a question. Follow-up was just on the international, those agreements. I think so that would put you, those plus your existing store count, you know, gets you like kind of a quarter of the way to the long-term, you know, $4,000 that I think you've put out there.
Sarah Senatore: I know that you only recently put out there some I'm not suggesting that you should revise it again, but I'm just curious
Sarah Senatore: Did that number contemplate all of these new signings because it seems like a pretty meaningful increase versus what you have on the ground now and I'm just trying to understand how conservative that long-term guide is and then I give a separate question please.
Speaker Change: the expansion we discussed today, but I think it also showcases
Speaker Change: We have a plus sign for a reason on our targets that we haven't found the ceiling and we're still growing and expanding our presence across the markets we're opening. Our UK market is a great example. We have over 50 restaurants.
Speaker Change: And AUVs now are over $3 million in the market. They continue to showcase that same story. When you stack the vintage, each vintage is comping and growing transaction growth. So I think as we've demonstrated in our past, we'll continue to...
Speaker Change: Douglas Goldstein, CFP®, is the director of Profile Investment Systems and the host of the Goldstein on Gelt radio show. He is a licensed financial professional both in the U.S. and Israel.
Speaker Change: with the MBA. And I guess maybe more broadly, you know, one of the things that it seemed like we saw this year in 2024 was like this sort of step up in underlying volumes if I, you know, if I compare it to pre COVID, which I know is a long time ago.
Speaker Change: What does this partnership mean and is this sort of another opportunity for potentially a step change? I know your awareness has not grown as fast as your comps, but if you could just sort of give a little bit more insight into.
Speaker Change: Yeah, absolutely, Sarah, and we're really excited about this partnership with the NBA. It's a first for us. We think it fits perfectly within our strategy that we're executing.
Speaker Change: We're going to be able to own the green carpet event for the celebrity game and we're actually going to be able to have a presence in-game, so think of the logo on a court or even outside of the arena.
Speaker Change: And in addition to that, it's going to allow us or unlock some social content series with the MBA.
Speaker Change: as well as give us access to perhaps some custom TV spots that allow us to leverage NBA talent. And so, as we think of the evolution of the brand, of continuing to scale Wingstop,
Speaker Change: and drive top-of-mind awareness for the brand. We think this is a pretty exciting evolution in our strategy.
Speaker Change: Thank you.
Speaker Change: Welcome. Thank you.
Speaker Change: The next question is from Jim Salera with Stevens Inc. Please go ahead.
Speaker Change: Yes, thanks for taking our question.
Jim Salera: I wanted to ask if you guys would be able to potentially parse out, you know,
Speaker Change: Very strong volume trends, but if we can break that into that frequency of
Jim Salera: Increasing frequency of existing customers versus new customers since there's still this huge awareness gap that you're closing and obviously The increase in advertising this year. I'm sure is bringing a lot of new people to the platform So any details you could give on how much of the volume is being driven by people coming more frequently versus new customers?
Speaker Change: Hey, thank you for the question. You know, I think that highlights another unique element of our strategies and our growth story is
Speaker Change: That growth, it's actually coming from both, which is pretty exciting. We're seeing an uptick in frequency, and this is something that is pretty new for us this year. We've seen a pretty consistent frequency over my tenure with the brand, and it's pretty exciting to see
Speaker Change: The profile of these new guests, the addition of chicken sandwich, the addition of additional channels or access points with the brand.
Speaker Change: frequency, but then it's also helping us acquire a lot of new guests. We continue to set records quarter after quarter.
Speaker Change: industry-leading growth, which is pretty remarkable to think about, you know, our reiteration of our outlook this year of approximately 20 percent.
Speaker Change: And not only is that number impressive by itself, but it also sets us up for our 21st consecutive year of same source cells growth. There's just nobody else out there doing that.
Speaker Change: Yeah, I appreciate the context on it. Maybe one more to just kind of double-click on.
Speaker Change: If we talk about the increasing frequency, is that primarily driven by...
Speaker Change: out there more.
Alex Kaleida: Hi Jim, this is Alex. Actually we're seeing both growth in the classic wings and the boneless business and as we think about it we step back from our brand health and our funnel metrics
Alex Kaleida: Another area that we see in frequencies are growth in across all income cohorts in our database are seeing frequency growth as of the last quarter.
Jim Salera: Great. Appreciate all the color, guys. I'll hop back in the queue.
Speaker Change: The next question is from Brian Harber with Morgan Stanley. Please go ahead.
Speaker Change: Thanks. Thanks.
Speaker Change: Just looking at the company owned store margins quickly, the food cost I see there has kind of gone from like low to mid 30% to mid to high 30%.
Speaker Change: with that range right now.
Speaker Change: Good morning, Brian. Just to call out for company restaurants specifically before I address food costs, we did have a little bit of noise related to three restaurant acquisitions we made in the Dallas market that we expect to carry in a bit into quarter four and that relates to training labor and R&M expenses that we have to set those restaurants up for the long term and catch up some things there. But to address your question on food costs, it did deliver upon our expectations and last quarter is a good example of the effectiveness of our supply chain strategy. We saw the spot market on wings move past $2.25 per pound and historically when our buy was anchored to that weekly spot market purchase,
Speaker Change: And to answer a question on the brand partner food cost, they're actually seeing a food cost as 300 basis points lower than what the company restaurants are averaging.
Mike Haraway: Mike Haraway.
Speaker Change: Okay, thanks. And your G&A guide, is the change there really just incentive comp driven? Is there anything else that's sort of varied versus plan there? And I don't know if you have any thoughts on, you know, what that kind of looks like next year yet.
Speaker Change: That's correct, Brian. It's purely based on the performance adjustments associated with our stock-based compensation that you saw in the guidance update for both our stock comp as well as our SG&A.
Speaker Change: Despite, even with those investments though, we are showing leverage year over year.
Speaker Change: The next question is from Danilo Gargillo with Bernstein. Please go ahead.
Speaker Change: Hey, Danilo, can you repeat the last part of your question, please? Our phone broke up over here. Yeah.
Danilo Gargillo: Sorry, yes. What is your updated view on split stores given that you've seen some great successes in development in the United States?
Speaker Change: are existing brand partners in the U.S. You know, and I think one of the testaments that we've said before that remains the same is 95% of the restaurants we open...
Speaker Change: our Existing Brand Partners reinvesting. And so we'll update that pipeline at the end of the year on the exact count. But when you combine that obviously with these new markets for international, the pipeline is really, really strong.
Speaker Change: Now, if you take a step back on our updated unit opportunity we see in the U.S.
Speaker Change: that we provided last quarter of roughly 6,000 or more restaurants. You know, we'd actually built playbooks that are down to trade area specific,
Speaker Change: identified site locations.
Speaker Change: that ladder up to that overall unit opportunity we see in the U.S.
Speaker Change: And I think the exercise and the work was completed in conjunction with one another. We feel confident in continuing to improve our unit economics for our brand partners, which will inherently fuel continued industry-leading unit growth.
Speaker Change: I think for 2025 it's really no different in the strategies we've been executing this year and the amount of runway we have and it's not just one
Speaker Change: work in concert with one another and really kind of fuel each other that give us a lot of Excitement and a lot of confidence in our ability to continue to scale AUVs to to three million dollars over time It's pretty remarkable to think we just celebrated last quarter achieving our two million AUV target And we're already above 2.1 million one quarter later So I think it just speaks to the effectiveness of our strategies and our excitement
Speaker Change: The next question is from Andy Barish with Jefferies. Please go ahead.
Speaker Change: Hey guys, you know, excuse me, wondering
Andy Barish: You know, if you could kind of quantify a little bit more the, you know, maybe the TRP growth. I assume it's, you know, in 24 relatively in line with the, you know, kind of approaching 40% system sales growth. But if you if you kind of look out to 25,
Andy Barish: divert a few dollars from the regular, you know, sort of marketing, you know, weights or anything like that, that we should be aware of.
Speaker Change: Thank you, Andy, for the question. You know, it's interesting, we don't...
Speaker Change: and John
Speaker Change: and we're on a heck of a lot more spots this year than we were last year.
Speaker Change: and I wouldn't say this MBA sponsorship really diverts any dollars away from
Speaker Change: continuing to invest in more placements on on live sports. It really just helps enhance that.
Speaker Change: And I think bring us more front and center within the MBA programming that we're pretty excited about. And it'll all feed back to the opportunity we have around continuing to scale awareness. But I think looking at system sales, obviously it's a one-for-one increase in our ad fund dollars.
Speaker Change: but obviously we get a little bit of efficiency on those dollars as we get bigger and bigger as well. So being able to lean in in a bigger way as we continue to scale the brand.
Speaker Change: Well and then one one quick follow-up on on food costs
Speaker Change: you know some lag kind of you know a quarter lag or so just relative to the spike in wing cost that
Speaker Change: You know, you guys absorb a little bit of it, obviously not the same as historically. And then how do we think about the 4Q, you know, company-owned food costs relative to that 3Q level, please?
Speaker Change: Andy, there's a slight, perhaps, lag in our food costs. What you saw in Q3 was likely the peak for the year, so to anticipate in Q4, we stepped down a little bit more in food costs for company restaurants. But I did flag, as well, though, that there are some additional investments on training, labor, and repair maintenance expenses that will flow into Q4 from the acquisitions we made. That's a bit unique to company restaurants, specifically, as you know.
Speaker Change: Thanks, guys.
Speaker Change: The next question is from Jeff Farmer with Gordon Haskett. Please go ahead Thank you. Just following up on Andy's question and Sarah's from earlier as well about advertising so
Jeff Farmer: Just big picture, what comes next for a national advertising fund that is growing at that 40% clip?
Speaker Change: Obviously, the NBA is coming there. You basically got to that always on.
Jeff Farmer: Media Strategy a couple years ago, but what are some of the more aspirational things you guys are looking at on the marketing front over the next couple of years?
Speaker Change: Yeah, it's a great question, Jeff. We do think we are showcasing breakthrough creatives, and I think we give a much bigger impression that we're on more than we actually are. We're up meaningfully over last year, but we're still not on every game. And if we are on a game, it's still a spot or two a game. So there's still a lot more.
Speaker Change: awareness driving runway in front of us on our current strategy but I think the MBA sponsorship is a great example of how we can
Speaker Change: continue to evolve, continue to lean in.
Speaker Change: and drive brand awareness through the size and growth we're experiencing in our ad fund. So I would say more of that, but yes, our current tactics which.
Speaker Change: are proving to be highly effective, continue to have a fair amount of runways associated with each of them.
Speaker Change: Okay, just an unrelated follow-up, you guys touched on it a little bit on the international front, but
Speaker Change: Unilevel economics with those international units, obviously the U.S. economics are as good as they get, but can you give us some context as to what type of cash-in-cash-return your international franchisees are seeing with those units?
Speaker Change: You hear us talk about the UK and the 50 restaurants there a lot, and I would say, Jeff, the cash-on-cash returns, the unit economics, are very similar to those that we experience here in the U.S., maybe a little bit higher build-out cost, but
Speaker Change: When you look at the AUVs that Alex mentioned earlier, north of $3 million, the cash-on-cash returns are really strong there.
Speaker Change: You know, even though in aggregate, it's a decent sized number, close to 350 I think.
Speaker Change: Thank you for your time. Thank you.
Speaker Change: Each market or each territory is at a pretty different phase in its growth cycle. So I think we want to see still a little bit more scale, a little bit more representative.
Speaker Change: a demonstration of the overall health of the business before we start breaking that out. But it's something that's on our radar and we hear investors and analysts loud and clear.
Speaker Change: Okay, thank you
Speaker Change: The next question is from Gregory Frankfurt with Guggenheim. Please go ahead.
Gregory Frankfurt: You know, I've looked the last two years, revenue is up 80%, GNA is up 80%, and I kind of think about maybe the opportunity to leverage that going forward. How are you thinking about the growth rate for that line item? And maybe just as a follow-up to that,
Speaker Change: Good morning, Greg. What you're seeing in SG&A is us investing in the long-term, scaling capabilities in areas, whether it's in international, to invest ahead of growth.
Speaker Change: the investments we're making there. And then we have had some adjustments connected to the performance, this industry-leading performance we've delivered related to incentive-based compensation. But as I mentioned, that is showing our G&A outlook that we have for this year is showing leverage relative to where we were last year. And if you trace back five years ago, we were probably in more of that low three percentage.
Speaker Change: We also provided an outlook for
Speaker Change: That would imply an approximately 42% rate for adjusted EBITDA growth. And that's on top of a prior year in 2023 that delivered adjusted EBITDA growth of 38%. We believe that's an industry-leading profit picture that we provided and shows the sustainability of the results we're driving.
Speaker Change: Thank you.
Speaker Change: The next question is from Christine Cho with GF. Please go ahead. Hi. Thank you for taking my question. So Alex, I think you mentioned in your comments that a majority of your new units are being developed by existing brand partners. And I'm just trying to understand whether this has been a meaningful factor in accelerating the new store ramp compared to the past. And are your partners seeing increased synergies between their stores as they go from a handful of stores maybe 3 or 4 years ago to 9 now and probably again a lot higher in a few years?
Speaker Change: Yeah, just trying to gauge the impact of a more experienced and scaled kind of brand partner based on your long-term AUV and unit growth. Thank you.
Michael Skipworth: Thanks for the question, Christine. Good morning. You know, I think Michael called this out in his prepared remarks earlier. We had over 70 different brand partners open a restaurant this year, which I think is pretty unique in a franchise system relative to others out there. And what that showcases is there's brand partners of all size and scale that are growing with Wingstop and interested in adding more Wingstops to their portfolios.
Michael Skipworth: operators scale to 15, 15 unit operators scale to 30 restaurants which drives this number of 95% of our growth coming from existing brand partners and translate into this record pace of pipeline that we're seeing.
Speaker Change: The next question is from Brian Vaccaro with Raymond James. Please go ahead.
Brian Vaccaro: Hi, thanks. Just two quick ones for me. Following up on margins, Alex, what was the year-on-year bone-in wing inflation in the third quarter? And could you just level set us on your fourth quarter COGS and maybe company store margin expectations?
Speaker Change: Hi Brian, yeah I think that's a great example of what we've been able to navigate and the effectiveness of our supply chain strategy. We had a peak window this year where the inflation was more than 200 percent. In the last quarter it was over a hundred percent inflation on that spot market wing price.
Speaker Change: and we were able to navigate that by, you know, with the strategies we're executing on supply chain. I mentioned earlier that we do anticipate that food costs would step down a little bit into the fourth quarter, and I think more importantly, beyond the company food costs, is that our brand partners are seeing a food cost, and I think that's going to be a big part of the
Speaker Change: That's 300 basis points better than what our company restaurants reported, which is incredibly exciting for us and what they're seeing that's further strengthening their returns.
Speaker Change: Okay, thank you. And then, more broadly, just in light of the more intense industry value environment,
Speaker Change: you know, including many large QSRs, pushing meal deals and the like. I'm curious if you've seen any changes in your customer order patterns or frequency and just how you think about your broader value posture heading into year-end. Thank you.
Speaker Change #100: Yeah, Brian, I would say...
Speaker Change #101: First and foremost, we're pretty encouraged by what we see in our business. We referenced it earlier, how we saw growth in every single cohort as we cut the data.
Speaker Change #101: In addition to that, we continue to measure really strong levels in quality and value.
Speaker Change #101: And we've said this before, but our disciplined approach to pricing, we think, has paid dividends for us. And so we believe we're well positioned to navigate this environment and feel confident in our ability to deliver another record year for the brand.
Speaker Change #102: This concludes our question and answer session and the conference is also now concluded. Thank you for attending today's presentation. You may now disconnect.