Wingstop Inc. Reports Fiscal Second Quarter 2022 Financial Results
Wingstop Inc. (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.
“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:
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Thirteen Weeks Ended |
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June 25, 2022 |
June 26, 2021 |
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Number of system-wide restaurants open at end of period |
1,858 |
1,624 |
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Number of domestic franchise restaurants open at end of period |
1,600 |
1,415 |
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Number of international franchise restaurants open at end of period |
219 |
175 |
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System-wide sales (in thousands) |
$ 633,620 |
$ 589,665 |
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Domestic restaurant AUV (in thousands) |
$ 1,581 |
$ 1,556 |
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Domestic same-store sales growth |
(3.3) % |
2.1 % |
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Company-owned domestic same store sales growth |
(4.9) % |
(3.1) % |
|
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Net income (in thousands) |
$ 13,307 |
$ 11,312 |
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|
Adjusted net income (in thousands) |
$ 13,590 |
$ 11,312 |
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|
Adjusted EBITDA (in thousands) |
$ 23,667 |
$ 22,882 |
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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.
About Wingstop
Founded in 1994 and headquartered in Dallas, TX, Wingstop Inc. (NASDAQ: WING) operates and franchises more than 1,850 locations worldwide.
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WINGSTOP INC. AND SUBSIDIARIES |
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Consolidated Balance Sheets |
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(amounts in thousands, except share and per share data) |
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|
June 25, |
December 25, |
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|
(Unaudited) |
|||
|
Assets |
|||
|
Current assets |
|||
|
Cash and cash equivalents |
$ 165,824 |
$ 48,583 |
|
|
Restricted cash |
17,112 |
3,448 |
|
|
Accounts receivable, net |
7,234 |
6,993 |
|
|
Prepaid expenses and other current assets |
5,628 |
4,928 |
|
|
Advertising fund assets, restricted |
13,681 |
6,197 |
|
|
Total current assets |
209,479 |
70,149 |
|
|
Property and equipment, net |
60,854 |
54,503 |
|
|
Goodwill |
56,877 |
56,877 |
|
|
Trademarks |
32,700 |
32,700 |
|
|
Customer relationships, net |
9,660 |
10,302 |
|
|
Other non-current assets |
25,791 |
24,672 |
|
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Total assets |
$ 395,361 |
$ 249,203 |
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Liabilities and stockholders’ deficit |
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Current liabilities |
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Accounts payable |
$ 3,121 |
$ 5,414 |
|
|
Other current liabilities |
29,188 |
28,070 |
|
|
Current portion of debt |
6,675 |
— |
|
|
Advertising fund liabilities |
13,681 |
6,197 |
|
|
Total current liabilities |
52,665 |
39,681 |
|
|
Long-term debt, net |
709,546 |
469,394 |
|
|
Deferred revenues, net of current |
27,056 |
28,024 |
|
|
Deferred income tax liabilities, net |
5,898 |
7,432 |
|
|
Other non-current liabilities |
15,666 |
14,197 |
|
|
Total liabilities |
810,831 |
558,728 |
|
|
Commitments and contingencies |
|||
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Stockholders’ deficit |
|||
|
Common stock, $0.01 par value; 100,000,000 shares authorized; |
299 |
299 |
|
|
Additional paid-in-capital |
646 |
463 |
|
|
Retained deficit |
(415,822) |
(310,031) |
|
|
Accumulated other comprehensive loss |
(593) |
(256) |
|
|
Total stockholders’ deficit |
(415,470) |
(309,525) |
|
|
Total liabilities and stockholders’ deficit |
$ 395,361 |
$ 249,203 |
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WINGSTOP INC. AND SUBSIDIARIES |
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Consolidated Statements of Operations |
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(amounts in thousands, except per share data) |
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Thirteen Weeks Ended |
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June 25, |
June 26, |
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(Unaudited) |
(Unaudited) |
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Revenue: |
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Royalty revenue, franchise fees and other |
$ 36,044 |
$ 33,135 |
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Advertising fees |
28,987 |
22,577 |
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Company-owned restaurant sales |
18,746 |
18,288 |
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Total revenue |
83,777 |
74,000 |
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Costs and expenses: |
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Cost of sales (1) |
14,899 |
14,207 |
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Advertising expenses |
29,685 |
23,301 |
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Selling, general and administrative |
13,949 |
16,066 |
|
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Depreciation and amortization |
2,547 |
1,523 |
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Loss on disposal of assets |
323 |
— |
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Total costs and expenses |
61,403 |
55,097 |
|
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Operating income |
22,374 |
18,903 |
|
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Interest expense, net |
5,986 |
3,724 |
|
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Other expense |
26 |
— |
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Income before income tax expense |
16,362 |
15,179 |
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Income tax expense |
3,055 |
3,867 |
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Net income |
$ 13,307 |
$ 11,312 |
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Earnings per share |
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Basic |
$ 0.45 |
$ 0.38 |
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Diluted |
$ 0.44 |
$ 0.38 |
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Weighted average shares outstanding |
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Basic |
29,882 |
29,739 |
|
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Diluted |
29,914 |
29,873 |
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Dividends per share |
$ 0.17 |
$ 0.14 |
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(1) Cost of sales includes all operating expenses of company-owned restaurants, including advertising expenses, |
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WINGSTOP INC. AND SUBSIDIARIES |
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Unaudited Supplemental Information |
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Cost of Sales Margin Analysis |
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(amounts in thousands) |
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Thirteen Weeks Ended |
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|
June 25, 2022 |
June 26, 2021 |
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In dollars |
As a % of |
In dollars |
As a % of |
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Cost of sales: |
|||||||
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Food, beverage and packaging costs |
7,376 |
39.3 % |
8,023 |
43.9 % |
|||
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Labor costs |
4,328 |
23.1 % |
3,774 |
20.6 % |
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Other restaurant operating expenses |
3,419 |
18.2 % |
2,809 |
15.4 % |
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|
Vendor rebates |
(412) |
(2.2) % |
(410) |
(2.2) % |
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Cost of sales (excluding pre-opening expenses) |
14,711 |
78.5 % |
14,196 |
77.6 % |
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Pre-opening expenses |
188 |
1.0 % |
11 |
0.1 % |
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Total cost of sales |
14,899 |
79.5 % |
14,207 |
77.7 % |
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WINGSTOP INC. AND SUBSIDIARIES |
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Unaudited Supplemental Information |
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Restaurant Count |
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Thirteen Weeks Ended |
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June 25, |
June 26, |
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Domestic Franchised Activity: |
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Beginning of period |
1,551 |
1,371 |
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Openings |
49 |
44 |
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Closures |
— |
— |
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Restaurants end of period |
1,600 |
1,415 |
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Domestic Company-Owned Activity: |
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Beginning of period |
37 |
33 |
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Openings |
2 |
1 |
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Closures |
— |
— |
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Restaurants end of period |
39 |
34 |
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Total Domestic Restaurants |
1,639 |
1,449 |
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International Franchised Activity: |
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Beginning of period |
203 |
175 |
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Openings |
16 |
4 |
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Closures |
— |
(4) |
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Restaurants end of period |
219 |
175 |
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Total System-wide Restaurants |
1,858 |
1,624 |
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WINGSTOP INC. AND SUBSIDIARIES |
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Non-GAAP Financial Measures – EBITDA and Adjusted EBITDA |
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(Unaudited) |
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(amounts in thousands) |
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Thirteen Weeks Ended |
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June 25, |
June 26, |
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Net income |
$ 13,307 |
$ 11,312 |
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Interest expense, net |
5,986 |
3,724 |
|
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Income tax expense (benefit) |
3,055 |
3,867 |
|
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Depreciation and amortization |
2,547 |
1,523 |
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EBITDA |
$ 24,895 |
$ 20,426 |
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Additional adjustments: |
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Loss on disposal of assets (a) |
323 |
— |
|
|
Consulting fees (b) |
50 |
— |
|
|
Stock-based compensation expense, net of forfeitures (c) |
(1,601) |
2,456 |
|
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Adjusted EBITDA |
$ 23,667 |
$ 22,882 |
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(a) |
Represents a loss resulting from the sale of assets to a franchisee pursuant to a multi-unit development agreement executed |
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(b) |
Represents costs and expenses related to a consulting project to support the Company’s strategic initiatives, which are |
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(c) |
Includes non-cash, stock-based compensation, net of forfeitures. |
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WINGSTOP INC. AND SUBSIDIARIES |
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Non-GAAP Financial Measures – Adjusted Net Income and Adjusted EPS |
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(Unaudited) |
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(amounts in thousands, except per share data) |
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|
Thirteen Weeks Ended |
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|
June 25, |
June 26, |
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Numerator: |
|||
|
Net income |
$ 13,307 |
$ 11,312 |
|
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Adjustments: |
|||
|
Loss on disposal of assets (a) |
323 |
— |
|
|
Consulting fees (b) |
50 |
— |
|
|
Tax effect of adjustments (c) |
(90) |
— |
|
|
Adjusted net income |
$ 13,590 |
$ 11,312 |
|
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Denominator: |
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Weighted-average shares outstanding – diluted |
29,914 |
29,873 |
|
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Adjusted earnings per diluted share |
$ 0.45 |
$ 0.38 |
|
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(a) |
Represents a loss resulting from the sale of assets to a franchisee pursuant to a multi-unit development agreement executed |
|
(b) |
Represents costs and expenses related to a consulting project to support the Company’s strategic initiatives, which are |
|
(c) |
Represents the tax effect of the aforementioned adjustments to reflect corporate income taxes at an assumed effective tax |
SOURCE Wingstop Restaurants Inc.