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Wingstop Inc. Reports Fiscal Second Quarter Financial Results
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PR Newswire
DALLAS, July 28, 2021
DALLAS, July 28, 2021 /PRNewswire/ -- Wingstop Inc. ("Wingstop" or the "Company") (NASDAQ: WING) today announced financial results for the fiscal second quarter ended June 26, 2021.
Highlights for the fiscal second quarter 2021 compared to the fiscal second quarter 2020:
- System-wide sales increased 15.8% to $589.7 million
- 45 net new openings in the fiscal second quarter 2021, an increase of 13.1%
- Domestic same-store sales increased 2.1%
- Domestic restaurant AUV increased to approximately $1.6 million, compared to $1.4 million in the prior fiscal second quarter
- Digital sales increased to 64.5% of sales, compared to 63.7% in the prior fiscal second quarter
- Total revenue increased 11.9% to $74.0 million
- Net income was $11.3 million, or $0.38 per diluted share, compared to net income of $11.5 million, or $0.39 per diluted share in the prior fiscal second quarter. Adjusted net income* and adjusted earnings per diluted share*, both non-GAAP measures, increased 13.1% to $11.3 million and $0.38 per diluted share, compared to $10.0 million and $0.34 per diluted share in the prior fiscal second quarter
- Adjusted EBITDA*, a non-GAAP measure, increased 9.5% to $22.9 million
* Adjusted EBITDA, adjusted net income, and adjusted diluted earnings per share are non-GAAP measures. Reconciliations of adjusted EBITDA, adjusted net income, and adjusted earnings per diluted share 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 results in the second quarter continue to prove the strength of our brand and our growth strategies. We successfully lapped last year's outstanding results and generated domestic same-store sales growth of 2.1% during this year's fiscal second quarter, or 34.0% on a two-year basis, an acceleration from the 30.6% we saw in the first quarter," commented Charlie Morrison, Chairman and Chief Executive Officer of Wingstop. "Despite the challenging commodity environment, we had another record quarter for development and have now opened more than 200 restaurants during the last 12 months, highlighting our brand partners' continued excitement to grow with our brand. We believe we are well positioned to execute against our strategic long-term growth drivers."
Key operating metrics for the fiscal second quarter 2021 compared to the fiscal second quarter 2020:
| | Thirteen Weeks Ended | ||||||
| | June 26, 2021 | | June 27, 2020 | ||||
| Number of system-wide restaurants open at end of period | 1,624 | | | 1,436 | | ||
| Number of domestic franchise restaurants open at end of period | 1,415 | | | 1,244 | | ||
| Number of international franchise restaurants open at end of period | 175 | | | 162 | | ||
| System-wide sales (in thousands) | $ | 589,665 | | | $ | 509,045 | |
| Domestic restaurant AUV (in thousands) | $ | 1,556 | | | $ | 1,366 | |
| Domestic same-store sales growth | 2.1 | % | | 31.9 | % | ||
| Company-owned domestic same store sales growth | (3.1) | % | | 24.7 | % | ||
| Net income (in thousands) | $ | 11,312 | | | $ | 11,539 | |
| Adjusted net income (in thousands) | $ | 11,312 | | | $ | 10,006 | |
| Adjusted EBITDA (in thousands) | $ | 22,882 | | | $ | 20,888 | |
Fiscal second quarter 2021 financial results
Total revenue for the fiscal second quarter 2021 increased to $74.0 million from $66.1 million in the fiscal second quarter last year. Royalty revenue, franchise fees and other increased $5.3 million primarily due to domestic same-store sales growth of 2.1% as well as 184 net franchise restaurant openings since June 27, 2020. Advertising fees increased $2.7 million due to domestic system-wide sales growth in the fiscal quarter ended June 26, 2021 compared to the fiscal quarter ended June 27, 2020. Company-owned restaurant sales were comparable to the prior year period.
Cost of sales increased to $14.2 million from $13.4 million in the fiscal second quarter of the prior year. As a percentage of company-owned restaurant sales, cost of sales increased to 77.7% from 73.1% in the prior year comparable period. The increase was primarily due to a 64.8% increase in the cost of bone-in chicken wings as compared to the prior year period, in which we experienced unusually significant deflation in the cost of bone-in chicken wings.
Advertising expenses were $23.3 million compared to $20.4 million in the fiscal second quarter of the prior year primarily due to domestic system-wide sales growth. Advertising expenses are recognized at the same time as the related revenue, which does not necessarily correlate to the actual timing of the related advertising spend.
Selling, general & administrative expense ("SG&A") increased $2.7 million to $16.1 million from $13.4 million in the fiscal second quarter of the prior year. The increase in SG&A expense was primarily due to an increase of $2.0 million in headcount related expenses to support the growth in our business, an increase of $0.5 million in stock-based compensation expense, and an increase of $1.0 million in professional fees to support the Company's strategic initiatives. These increases were partially offset by a decrease of $1.0 million related to a donation made in the prior year period to the National Restaurant Employee Relief Fund to support restaurant workers in times of need.
Interest expense, net was $3.7 million in the fiscal second quarter of 2021, a decrease of $0.5 million, or 11.6%, compared to $4.2 million in the prior fiscal period. The decrease was due to the refinancing of our securitized financing facility on October 30, 2020, which increased our outstanding debt by $162.4 million and reduced our interest rate from 4.97% to 2.84%.
Net income was $11.3 million, or $0.38 per diluted share, compared to net income of $11.5 million, or $0.39 per diluted share, in the fiscal second quarter of the prior year. Adjusted net income, which excludes a $2.0 million gain resulting from the re-franchise of company-owned restaurants to a franchisee during the prior year period, increased 13.1% to $11.3 million and $0.38 per diluted share, compared to $10.0 million and $0.34 per diluted share in the prior fiscal second quarter.
Change in Presentation
Beginning in the fiscal first quarter 2021, we have reclassified headcount related expenses that support our national advertising fund to Advertising expenses on the Consolidated Statements of Operations. These expenses were previously presented within SG&A and totaled $1.9 million and $1.8 million for each of the thirteen weeks ended June 26, 2021 and June 27, 2020, respectively. Prior period amounts have been reclassified to conform to the current presentation. This reclassification had no impact on operating income, the consolidated balance sheets or statements of cash flows.
Financial Outlook
Consistent with our three- to five-year outlook, the Company reiterates mid-single digit domestic same store sales growth. Additionally, the Company expects the following for the fiscal year ending December 25, 2021:
- Unit growth of 12%+
- Food, Beverage and Packaging costs of approximately 44%, as a percentage of company owned restaurant sales and total cost of sales of approximately 80%, as a percentage of company owned restaurant sales
- SG&A of $64.8 to 66.8 million; and
- Adjusted SG&A, a non-GAAP measure, of between $55.1 - $56.6 million. A reconciliation of Adjusted SG&A to SG&A, the nearest applicable GAAP measure, is provided below:
| | 2021 Outlook | ||||||
| | Low | | High | ||||
| SG&A, reported | $ | 64.8 | | | $ | 66.8 | |
| Stock compensation expense | 9.7 | | | 10.2 | | ||
| Adjusted SG&A (a) | $ | 55.1 | | | $ | 56.6 | |
| |
| (a) Adjusted SG&A is a non-GAAP measure. |
Restaurant Development
As of June 26, 2021, there were 1,624 Wingstop restaurants system-wide. This included 1,449 restaurants in the United States, of which 1,415 were franchised restaurants and 34 were company-owned, and 175 franchised restaurants in international markets. During the fiscal second quarter 2021, there were 45 net system-wide Wingstop restaurant openings.
Quarterly Dividend
In recognition of the Company's strong cash flow generation, confidence in the business, and our commitment to returning value to stockholders, our board of directors approved a 21% increase in the quarterly dividend payable to Wingstop stockholders from $0.14 to $0.17 per share of common stock, resulting in a total dividend of approximately $5.06 million. This dividend will be paid on September 3, 2021 to stockholders of record as of August 13, 2021.
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, 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. We caution investors that amounts presented in accordance with our definitions of EBITDA and Adjusted EBITDA may not be comparable to similar measures disclosed by our competitors, because not all companies and analysts calculate EBITDA and Adjusted EBITDA in the same manner.
Adjusted net income is defined as net income adjusted for transaction costs, costs and fees associated with investments in our strategic initiatives, and related tax adjustments.
Adjusted net income per diluted share is defined as adjusted net income divided by weighted average diluted share count.
Adjusted SG&A is defined as selling, general and administrative expenses adjusted for losses on debt extinguishment and refinancing transactions, transaction costs, costs and fees associated with investments in our strategic initiatives, and stock-based compensation expense.
Conference Call and Webcast
Chairman and Chief Executive Officer, Charlie Morrison, and Chief Financial Officer, Michael Skipworth, will host a conference call today to discuss the fiscal second quarter 2021 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) and entering the passcode 10157790. The replay will be available through Wednesday, August 4, 2021.
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.
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