8-K
Wingstop Inc. (WING)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 16, 2021
WINGSTOP INC.
(Exact name of registrant as specified in its charter)
| Delaware | 001-37425 | 47-3494862 |
|---|---|---|
| (State or other jurisdiction of incorporation or organization) | Commission File Number | (IRS Employer Identification No.) |
| 5501 LBJ Freeway | ||
| 5th Floor | ||
| Dallas | ||
| Texas | 75240 | |
| (Address of principal executive offices) | (Zip Code) |
(972) 686-6500
(Registrant’s telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
|---|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |
| Securities registered pursuant to Section 12(b) of the Act: | ||
| --- | --- | --- |
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| Common Stock, par value $0.01 per share | WING | NASDAQ Global Select Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
| Emerging growth company | ☐ |
|---|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 2.02. | Results of Operations and Financial Condition |
|---|
The following information is furnished pursuant to Item 2.02, “Results of Operations and Financial Condition.” Consequently, it is not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section. It may only be incorporated by reference in another filing under the Exchange Act or the Securities Act of 1933, as amended (the “Securities Act”), if such subsequent filing specifically references this Current Report on Form 8-K.
On February 17, 2021, Wingstop Inc. (the “Company,” “we,” “our,” or “us”) issued a press release reporting the Company’s financial results for its fiscal fourth quarter and fiscal year ended December 26, 2020. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated by reference herein in its entirety. The press release uses the following non-GAAP financial measures: EBITDA and Adjusted EBITDA, adjusted net income, adjusted earnings per diluted share, and adjusted selling, general and administrative (“SG&A”) costs. A discussion of these financial measures, including a discussion of the usefulness and purpose of each measure, is included below.
EBITDA and Adjusted EBITDA. EBITDA and Adjusted EBITDA are supplemental measures of our performance that are not required by, or presented in accordance with, U.S. generally accepted accounting principles (“GAAP”). EBITDA and Adjusted EBITDA are not measurements of our financial performance under GAAP and should not be considered as alternatives to net income or any other performance measure derived in accordance with GAAP, or as alternatives to cash flows from operating activities as a measure of our liquidity.
We define “EBITDA” as net income before interest expense, net, income tax expense, and depreciation and amortization. We define “Adjusted EBITDA” as 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. We present EBITDA and Adjusted EBITDA because we consider them to be important supplemental measures of our performance and believe they are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. Management believes that investors’ understanding of our performance is enhanced by including these non-GAAP financial measures as a reasonable basis for comparing our ongoing results of operations. Many investors are interested in understanding the performance of our business by comparing our results from ongoing operations on a period-over-period basis and would ordinarily add back non-cash expenses such as depreciation and amortization, as well as items that are not part of normal day-to-day operations of our business.
Management uses EBITDA and Adjusted EBITDA:
•as a measurement of operating performance because they assist management in comparing the operating performance of our restaurants on a consistent basis, as they remove the impact of items not directly resulting from our core operations;
•for planning purposes, including the preparation of our internal annual operating budget and financial projections;
•to evaluate the performance and effectiveness of our operational strategies;
•to evaluate our capacity to fund capital expenditures and expand our business; and
•to calculate incentive compensation payments for our employees, including assessing performance under our annual incentive compensation plan and determining the vesting of performance-based equity awards.
By providing these non-GAAP financial measures, together with a reconciliation to the most comparable GAAP measure, we believe we are enhancing investors’ understanding of our business and our results of operations, as well as assisting investors in evaluating how well we are executing our strategic initiatives. In addition, the instruments governing our indebtedness may use EBITDA (with additional adjustments) to measure our compliance with covenants. EBITDA and Adjusted EBITDA have limitations as analytical tools and should not be considered in isolation, or as an alternative to, or a substitute for, net income or other financial statement data presented in our consolidated financial statements as indicators of financial performance. Some of the limitations are:
•such measures do not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments;
•such measures do not reflect changes in, or cash requirements for, our working capital needs;
•such measures do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our debt;
•such measures do not reflect our tax expense or the cash requirements to pay our taxes;
•although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and such measures do not reflect any cash requirements for such replacements; and
•other companies in our industry may calculate such measures differently than we do, limiting their usefulness as comparative measures.
Due to these limitations, EBITDA and Adjusted EBITDA should not be considered as measures of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results and using these non-GAAP measures only supplementally. As noted in the press release attached hereto as Exhibit 99.1, Adjusted EBITDA includes adjustments 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. It is reasonable to expect that these items will occur in future periods. However, we believe these adjustments are appropriate because the amounts recognized can vary significantly from period-to-period, do not directly relate to the ongoing operations of our restaurants, and complicate comparisons of our internal operating results and operating results of other restaurant companies over time. Each of the normal recurring adjustments and other adjustments described in this paragraph and in the press release help management measure our core operating performance over time by removing items that are not related to day-to-day operations.
Adjusted Net Income and Adjusted Earnings Per Diluted Share. Adjusted net income represents net income adjusted for transaction costs, costs and fees associated with investments in our strategic initiatives, gains and losses on the disposal of assets, and related tax adjustments that management believes are not indicative of the Company’s core operating results or business outlook over the long-term. However, it is reasonable to assume that transaction costs may occur in future periods. Adjusted earnings per diluted share is defined as adjusted net income divided by weighted average diluted share count. Adjusted net income and adjusted earnings per diluted share are supplemental measures of operating performance that do not represent and should not be considered alternatives to net income and earnings per share, as determined by GAAP. These measures have not been prepared in accordance with Article 11 of Regulation S-X promulgated under the Securities Act. Management believes adjusted net income and adjusted earnings per diluted share supplement GAAP measures and enable management to more effectively evaluate the Company’s performance period-over-period and relative to competitors.
Adjusted SG&A. Adjusted SG&A is defined as selling, general and administrative expenses adjusted for transaction costs, costs and fees associated with investments in our strategic initiatives, and stock-based compensation expense. Additionally, SG&A is further adjusted for items which have offsetting contributions that are included in revenue, such as expenses associated with national advertising. Adjusted SG&A is a supplemental measure of operating performance that does not represent and should not be considered an alternative to SG&A costs, as determined by GAAP. This measure has not been prepared in accordance with Article 11 of Regulation S-X promulgated under the Securities Act. Management believes adjusted SG&A supplements GAAP measures and enables management to more effectively evaluate the Company’s performance period-over-period and relative to competitors.
| Item 8.01. | Other Events |
|---|
Quarterly Dividend
On February 16, 2021, the Company’s Board of Directors (the “Board”) declared a quarterly cash dividend of $0.14 per share of common stock. The dividend is payable on March 26, 2021 to stockholders of record as of the close of business on March 5, 2021. The declaration of any future dividends is subject to the Board’s discretion.
| Item 9.01. | Financial Statements and Exhibits |
|---|---|
| (d) | Exhibits |
| --- | --- |
| 99.1 | Press release, dated February 17, 2021 (furnished pursuant to Item 2.02) |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL Document) |
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Wingstop Inc. | |||
|---|---|---|---|
| Date: | February 17, 2021 | By: | /s/ Michael J. Skipworth |
| Chief Financial Officer<br><br>(Principal Financial and Accounting Officer) |
Document
FOR IMMEDIATE RELEASE
Wingstop Inc. Reports Fiscal Fourth Quarter and Full Year 2020 Financial Results
Opens 153 Net New Restaurants in 2020
Records 17th Consecutive Year of Positive Same-Store Sales Growth
Dallas, February 17, 2021 - (PR NEWSWIRE) - Wingstop Inc. (“Wingstop” or the “Company”) (NASDAQ: WING) today announced financial results for the fiscal fourth quarter and fiscal year ended December 26, 2020.
Highlights for the fiscal fourth quarter 2020 compared to the fiscal fourth quarter 2019:
▪System-wide sales increased 26.5% to $502.5 million
▪59 net new openings in the fiscal fourth quarter 2020
▪Domestic same-store sales increased 18.2%
▪Domestic restaurant AUV increased to approximately $1.49 million, compared to $1.25 million in the prior fiscal fourth quarter
▪Digital sales increased to 62.5% of sales, compared to 38.2% in the prior fiscal fourth quarter
▪Total revenue increased 19.0% to $63.3 million
▪As a result of the $13.7 million of expenses associated with the refinancing of our debt and payment of special dividend, net loss was $6.4 million, or loss of $0.21 per diluted share, compared to net income of $3.0 million, or $0.10 per diluted share, in the prior fiscal fourth quarter. Adjusted net income* and adjusted diluted earnings per share*, both non-GAAP measures, were $5.3 million and $0.18 per diluted share, compared to $4.3 million and $0.14 per diluted share in the prior fiscal fourth quarter
▪Adjusted EBITDA*, a non-GAAP measure, increased 14.7% to $16.2 million
Highlights for the fiscal year 2020 compared to the fiscal year 2019:
▪System-wide restaurant count increased 11.0% to 1,538 worldwide locations with 153 net openings
▪System-wide sales increased 28.8% to $2.0 billion
▪Domestic same-store sales increased 21.4%, marking the 17th consecutive year of same store sales growth
▪Total revenue increased 24.6% to $248.8 million
▪Net income increased to $23.3 million, or $0.78 per diluted share, compared to $20.5 million, or $0.69 per diluted share, in the prior fiscal year. Adjusted net income* and adjusted diluted earnings per share*, both non-GAAP measures, were $32.5 million and $1.09 per diluted share, compared to $21.7 million and $0.73 per diluted share in the prior fiscal year
▪Adjusted EBITDA*, a non-GAAP measure, increased 26.1% to $71.9 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.”
“I am extremely proud of the tremendous efforts of our brand partners, supplier partners, and thousands of team members in the face of unprecedented circumstances to deliver our industry leading 17th consecutive year of positive same-store sales growth in 2020. The domestic same-store sales growth of 21.4% drove our domestic average unit volumes to almost $1.5 million, advancing our best-in-class unit economics. We opened 153 net new restaurants in 2020, and as we enter into 2021, our pipeline of domestic restaurant commitments exceeds 700, up from 610 in the prior year,” commented Charlie Morrison, Chairman and Chief Executive Officer of Wingstop. “2020 further proved the resiliency of our model and we’re truly humbled by our results. We remain focused on our strategic long-term growth drivers and driving shareholder value as we work toward our vision of becoming a top 10 global restaurant brand.”
Key operating metrics for the fiscal fourth quarter 2020 compared to the fiscal fourth quarter 2019
| Thirteen Weeks Ended | ||||||
|---|---|---|---|---|---|---|
| December 26, 2020 | December 28, 2019 | |||||
| Number of system-wide restaurants open at end of period | 1,538 | 1,385 | ||||
| Number of domestic franchise restaurants open at end of period | 1,327 | 1,200 | ||||
| Number of international franchise restaurants open at end of period | 179 | 154 | ||||
| System-wide sales (in thousands) | $ | 502,472 | $ | 397,243 | ||
| Domestic restaurant AUV (in thousands) | $ | 1,489 | $ | 1,246 | ||
| Domestic same-store sales growth | 18.2 | % | 12.2 | % | ||
| Company-owned domestic same store sales growth | 10.4 | % | 8.9 | % | ||
| Net (loss) income (in thousands) | $ | (6,410) | $ | 3,047 | ||
| Adjusted net income (in thousands) | $ | 5,256 | $ | 4,287 | ||
| Adjusted EBITDA (in thousands) | $ | 16,228 | $ | 14,154 |
Fiscal fourth quarter 2020 financial results
Total revenue for the fiscal fourth quarter 2020 increased to $63.3 million from $53.2 million in the fiscal fourth quarter last year.
▪Royalty revenue, franchise fees and other increased $4.1 million to $28.0 million from $23.9 million in the fiscal fourth quarter of the prior year. The increase was primarily due to domestic same-store sales growth of 18.2% as well as 152 net franchise restaurant openings since December 28, 2019, partially offset by a decrease in contributions received for our franchisee convention, which occurred in the fourth quarter of 2019. There was no franchisee convention held in fiscal year 2020.
▪Advertising fees increased $4.2 million to $19.3 million from $15.2 million in the fiscal fourth quarter of the prior year. The increase was primarily due to domestic system-wide sales growth in the fiscal quarter ended December 26, 2020 compared to the fiscal quarter ended December 28, 2019.
▪Company-owned restaurant sales increased $1.8 million to $15.9 million from $14.1 million in the fiscal fourth quarter of the prior year. The increase was due to company-owned same-store sales growth of 10.4%, which was primarily driven by an increase in transaction size, as well as an increase in the number of company-owned restaurants. Since the beginning of the prior fiscal year period, we acquired six company-owned restaurants from franchisees, opened three new company-owned restaurants, and refranchised seven company-owned restaurants to franchisees.
Cost of sales increased to $12.2 million from $10.5 million in the fiscal fourth quarter of the prior year. As a percentage of company-owned restaurant sales, cost of sales increased to 76.7% from 74.2% in the prior year comparable period. The increase was primarily due to a 17.7% increase in the cost of bone-in chicken wings as compared to the prior year period. This increase was partially offset by sales leverage achieved as a result of the increase in company-owned same-store sales of 10.4%.
Advertising expenses were $17.6 million compared to $14.5 million in the fiscal fourth 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 $3.1 million to $21.0 million from $17.8 million in the fiscal fourth quarter of the prior year. The increase in SG&A expense was primarily due to $1.4 million in higher professional fees primarily related to investments in technology, $1.3 million of expenses related to COVID-19 and support provided to international franchisees, $1.1 million in higher variable-based compensation expense, and approximately $1.0 million in headcount related expenses to support the growth in our business. These increases were partially offset by a decrease of $1.8 million related to the franchisee convention held in the fourth quarter of 2019. There was no franchisee convention held in fiscal year 2020.
Interest expense, net was $4.0 million in the fiscal fourth quarter of 2020, a decrease of $0.2 million, or 4.0%, 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%.
Loss on debt extinguishment and refinancing transactions was $13.7 million in the fiscal fourth quarter of 2020 due to costs and fees associated with the refinancing of our securitized financing facility during the fiscal fourth quarter of 2020.
Net loss was $6.4 million, or $0.21 per diluted share, compared to net income of $3.0 million, or $0.10 per diluted share, in the fiscal fourth quarter of the prior year.
Adjusted net income was $5.3 million, or $0.18 per diluted share, compared to $4.3 million, or $0.14 per diluted share, in the prior year period. Reconciliations between net income and adjusted net income and between earnings per diluted share and adjusted earnings per diluted share are included in the accompanying financial schedules.
Key operating metrics for the fiscal year 2020 compared to the fiscal year 2019
| Fiscal Year Ended | ||||||
|---|---|---|---|---|---|---|
| December 26, 2020 | December 28, 2019 | |||||
| Number of system-wide restaurants open at end of period | 1,538 | 1,385 | ||||
| Number of domestic franchise restaurants open at end of period | 1,327 | 1,200 | ||||
| Number of international franchise restaurants open at end of period | 179 | 154 | ||||
| System-wide sales (in millions) | $ | 1,951 | $ | 1,515 | ||
| Domestic restaurant AUV (in thousands) | $ | 1,489 | $ | 1,246 | ||
| Domestic same-store sales growth | 21.4 | % | 11.1 | % | ||
| Company-owned domestic same store sales growth | 14.2 | % | 9.8 | % | ||
| Net income (in thousands) | $ | 23,306 | $ | 20,476 | ||
| Adjusted net income (in thousands) | $ | 32,500 | $ | 21,716 | ||
| Adjusted EBITDA (in thousands) | $ | 71,882 | $ | 56,989 |
Fiscal year 2020 financial results
Total revenue for fiscal year 2020 increased 24.6% to $248.8 million from $199.7 million in the prior fiscal year. The increase was primarily due to increases in royalty revenue and advertising fees resulting from 152 net franchise restaurant openings since December 28, 2019 and domestic same-store sales growth of 21.4%.
Company-owned restaurant sales increased $9.5 million to $65.0 million from $55.5 million in the prior fiscal year. The increase was primarily due an increase in company-owned same-store sales of 14.2%, which was driven by both an increase in transaction size and transactions.
Net income was $23.3 million, or $0.78 per diluted share, compared to net income of $20.5 million, or $0.69 per diluted share in the prior fiscal year.
Adjusted net income was $32.5 million, or $1.09 per diluted share, compared to $21.7 million, or $0.73 per diluted share, in the prior fiscal year. The increase in adjusted net income is primarily driven by the increases in total revenues and a lower effective tax rate due to excess tax benefits associated with stock options exercised in fiscal year 2020. The increases in revenue were offset by increased expenses related to national advertising and additional SG&A expenses primarily related to increased headcount-related expenses to support the growth in our business and higher variable performance-based compensation expense. Reconciliations between net income and adjusted net income and earnings per diluted share and adjusted earnings per diluted share are included in the accompanying financial schedules.
Financial Outlook
The Company is reaffirming its three- to five-year outlook, consisting of the following:
•10%+ system-wide annual unit growth
•Mid-single digit domestic same store sales growth
Additionally, the Company expects SG&A for fiscal year 2021 of between $76.0 - $78.5 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 | Fiscal Year | |||||
|---|---|---|---|---|---|---|
| Low | High | 2020 | ||||
| SG&A, reported | $ | 76.0 | $ | 78.5 | $ | 69.0 |
| Convention costs (a) | Approximately 2.0 | — | ||||
| Expenses related to national advertising (a) | 9.2 | 9.7 | 7.9 | |||
| Stock compensation expense | 9.7 | 10.2 | 8.6 | |||
| Loss on debt extinguishment and refinancing transactions | — | — | 0.2 | |||
| Consulting fees associated with strategic initiatives | — | — | 1.4 | |||
| Adjusted SG&A (b) | $ | 55.1 | $ | 56.6 | $ | 50.9 |
| (a) Convention costs and expenses related to national advertising both have equal and offsetting contributions included in revenue and do not impact operating income. | ||||||
| (b) Adjusted SG&A is a non-GAAP measure. |
Restaurant Development
As of December 26, 2020, there were 1,538 Wingstop restaurants system-wide. This included 1,359 restaurants in the United States, of which 1,327 were franchised restaurants and 32 were company-owned, and 179 franchised restaurants in international markets. There were 59 net system-wide Wingstop restaurant openings during the fiscal fourth quarter 2020, and 153 net system-wide restaurants were opened during the fiscal year ended December 26, 2020.
Quarterly Dividend
In recognition of the Company’s strong cash flow generation, confidence in the business, and commitment to returning value to stockholders, our board of directors authorized and declared a quarterly dividend of $0.14 per share of common stock, resulting in a total dividend of approximately $4.2 million. This dividend will be paid on March 26, 2021 to stockholders of record as of March 5, 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 losses on debt extinguishment and refinancing transactions, costs and fees associated with investments in our strategic initiatives, gains and losses on the disposal of assets, and related tax adjustments.
Adjusted earnings 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. Additionally, SG&A is further adjusted for items which have offsetting contributions that are included in revenue, such as convention costs and expenses associated with national advertising.
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 fourth quarter 2020 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 10151476. The replay will be available through Wednesday, February 24, 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.
About Wingstop
Founded in 1994 and headquartered in Dallas, TX, Wingstop Inc. (NASDAQ: WING) operates and franchises over 1,500 locations worldwide. The Wing Experts are dedicated to Serving the World Flavor through an unparalleled guest experience and offering of classic wings, 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 2020, Wingstop's system-wide sales increased 28.8% year-over-year to approximately $2.0 billion, marking the 17th consecutive year of same-store sales growth, and Wingstop achieved over 700% stockholder return since its 2015 initial public offering. With a vision of becoming a Top 10 Global Restaurant Brand, its system is comprised of independent franchisees, or brand partners, who account for more than 98% of Wingstop’s total restaurant count of 1,538 as of December 26, 2020. During the fiscal quarter ended December 26, 2020, Wingstop generated 62.5% of sales via digital channels including Wingstop.com and the Wingstop app.
A key to Wingstop’s success is The Wingstop Way, which includes a core value system of being Authentic, Entrepreneurial, Service-minded, and Fun. This value system extends to its environmental, social, governance platform as Wingstop seeks to provide value to all stakeholders.
The Company has been ranked on Entrepreneur Magazine's "150 Strongest-Growing Franchises" and "The World's Best Franchises" (2020), Franchise Business Review's "Top Food Franchises" (2020), Nation's Restaurant News' "Top 200 Restaurant Chains" (2020), Fast Casual's "Top 100 Movers & Shakers" (2020), and named to The Stevie Awards for Great Employers (2020).
For more information visit www.wingstop.com or www.wingstop.com/own-a-wingstop and follow @Wingstop on Twitter and Instagram and at Facebook.com/Wingstop. Learn more about Wingstop’s involvement in its local communities at www.wingstopcharities.org.
Non-GAAP Financial Measures
To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use non-GAAP financial measures, including those indicated above. By providing non-GAAP financial measures, together with a reconciliation to the most comparable GAAP measure, we believe we are enhancing investors’ understanding of our business and our results of operations, as well as assisting investors in evaluating how well we are executing our strategic initiatives. These measures are not intended to be considered in isolation or as substitutes for, or superior to, financial measures prepared and presented in accordance with GAAP. The non-GAAP measures used in this press release may be different from the measures used by other companies. A reconciliation of each measure to the most directly comparable GAAP measure is available in this news release. In addition, the Current Report on Form 8-K furnished to the SEC concurrent with the issuance of this press release includes a more detailed description of each of these non-GAAP financial measures, together with a discussion of the usefulness and purpose of such measures.
Forward-looking Information
Certain statements contained in this news release, as well as other information provided from time to time by Wingstop Inc. or its employees, may contain forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “guidance,” “anticipate,” “estimate,” “expect,” “forecast,” “outlook,” “target,” “project,” “plan,” “intend,” “believe,” “confident,” “may,” “should,” “can,” “have,” “will,” “likely,” “future” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. Examples of forward-looking statements in this news release include our 2021 fiscal year outlook for system-wide unit growth, domestic same store sales growth, SG&A expenses, Adjusted SG&A and statements regarding our progress toward our goal of becoming a top 10 global restaurant brand. Any such forward-looking statements are not guarantees of performance or results and involve risks, uncertainties (some of which are beyond the Company’s control), and assumptions. Although we believe any forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect our actual financial results and cause them to differ materially from those anticipated in any forward-looking statements.
Our ability to achieve or maintain sales and earnings may be affected by COVID-19 related factors, including, among others: the length of time that the pandemic continues; the inability of workers, including third party delivery drivers, to work due to illness, quarantine, or government mandates; temporary store closures due to reduced workforces or government mandates; the unemployment rate; the extent and effectiveness of any COVID-19 stimulus packages; the ability of our franchisees to operate their restaurants during the pandemic and pay royalties; and trends in consumer spending during and after the end of the pandemic. Please refer to the risk factors discussed in our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, which can be found at the SEC’s website www.sec.gov. The discussion of these risks is specifically incorporated by reference into this news release.
Any forward-looking statement made by Wingstop Inc. in this press release speaks only as of the date on which it is made. We undertake no obligation to update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.
Media Contact
Megan Sprague
972-331-9155
Media@wingstop.com
Investor Contact
Alex Kaleida and Susana Arevalo
972-331-8484
IR@wingstop.com
WINGSTOP INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(amounts in thousands, except share and per share data)
| December 26,<br>2020 | December 28,<br>2019 | |||
|---|---|---|---|---|
| Assets | ||||
| Current assets | ||||
| Cash and cash equivalents | $ | 40,858 | $ | 12,849 |
| Restricted cash | 4,815 | 4,790 | ||
| Accounts receivable, net | 4,929 | 5,175 | ||
| Prepaid expenses and other current assets | 5,532 | 2,449 | ||
| Advertising fund assets, restricted | 16,486 | 4,927 | ||
| Total current assets | 72,620 | 30,190 | ||
| Property and equipment, net | 27,948 | 27,842 | ||
| Goodwill | 53,690 | 50,188 | ||
| Trademarks | 32,700 | 32,700 | ||
| Customer relationships, net | 11,600 | 12,910 | ||
| Other non-current assets | 13,007 | 12,283 | ||
| Total assets | $ | 211,565 | $ | 166,113 |
| Liabilities and stockholders' deficit | ||||
| Current liabilities | ||||
| Accounts payable | $ | 3,658 | $ | 3,348 |
| Other current liabilities | 26,729 | 21,454 | ||
| Current portion of debt | 3,600 | 3,200 | ||
| Advertising fund liabilities | 16,486 | 4,927 | ||
| Total current liabilities | 50,473 | 32,929 | ||
| Long-term debt, net | 466,933 | 307,669 | ||
| Deferred revenues, net of current | 24,962 | 22,343 | ||
| Deferred income tax liabilities, net | 4,480 | 4,485 | ||
| Other non-current liabilities | 6,027 | 8,115 | ||
| Total liabilities | 552,875 | 375,541 | ||
| Commitments and contingencies | ||||
| Stockholders' deficit | ||||
| Common stock, $0.01 par value; 100,000,000 shares authorized; 29,687,123 and 29,457,228 shares issued and outstanding as of December 26, 2020 and December 28, 2019, respectively | 297 | 295 | ||
| Additional paid-in-capital | 421 | 552 | ||
| Accumulated deficit | (342,028) | (210,275) | ||
| Total stockholders' deficit | (341,310) | (209,428) | ||
| Total liabilities and stockholders' deficit | $ | 211,565 | $ | 166,113 |
WINGSTOP INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(amounts in thousands, except per share data)
| Thirteen Weeks Ended | Year Ended | |||||||
|---|---|---|---|---|---|---|---|---|
| December 26,<br>2020 | December 28,<br>2019 | December 26,<br>2020 | December 28,<br>2019 | |||||
| (Unaudited) | (Unaudited) | |||||||
| Revenue: | ||||||||
| Royalty revenue, franchise fees and other | $ | 28,020 | $ | 23,900 | $ | 108,883 | $ | 88,291 |
| Advertising fees | 19,340 | 15,179 | 74,930 | 55,932 | ||||
| Company-owned restaurant sales | 15,922 | 14,107 | 64,998 | 55,453 | ||||
| Total revenue | 63,282 | 53,186 | 248,811 | 199,676 | ||||
| Costs and expenses: | ||||||||
| Cost of sales (1) | 12,216 | 10,463 | 48,583 | 41,105 | ||||
| Advertising expenses | 17,648 | 14,532 | 69,428 | 52,891 | ||||
| Selling, general and administrative | 20,950 | 17,832 | 68,985 | 57,295 | ||||
| Depreciation and amortization | 2,231 | 1,465 | 7,518 | 5,484 | ||||
| Gain on sale of restaurants and other expenses, net | 156 | — | (3,093) | — | ||||
| Total costs and expenses | 53,201 | 44,292 | 191,421 | 156,775 | ||||
| Operating income | 10,081 | 8,894 | 57,390 | 42,901 | ||||
| Interest expense, net | 4,018 | 4,184 | 16,782 | 17,136 | ||||
| Loss on debt extinguishment and refinancing transactions | 13,665 | — | 13,665 | — | ||||
| Income (loss) before income tax expense | (7,602) | 4,710 | 26,943 | 25,765 | ||||
| Income tax expense (benefit) | (1,192) | 1,663 | 3,637 | 5,289 | ||||
| Net income (loss) | $ | (6,410) | $ | 3,047 | $ | 23,306 | $ | 20,476 |
| Earnings (loss) per share | ||||||||
| Basic | $ | (0.22) | $ | 0.10 | $ | 0.79 | $ | 0.70 |
| Diluted | $ | (0.21) | $ | 0.10 | $ | 0.78 | $ | 0.69 |
| Weighted average shares outstanding | ||||||||
| Basic | 29,686 | 29,454 | 29,601 | 29,415 | ||||
| Diluted | 29,845 | 29,709 | 29,804 | 29,670 | ||||
| Dividends per share | $ | 5.14 | $ | 0.11 | $ | 5.50 | $ | 0.40 |
(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
Unaudited Supplemental Information
Cost of Sales Margin Analysis
(amounts in thousands)
| Thirteen Weeks Ended | ||||||||
|---|---|---|---|---|---|---|---|---|
| December 26, 2020 | December 28, 2019 | |||||||
| In dollars | As a % of company-owned restaurant sales | In dollars | As a % of company-owned restaurant sales | |||||
| Cost of sales: | ||||||||
| Food, beverage and packaging costs | $ | 6,218 | 39.1 | % | $ | 5,133 | 36.4 | % |
| Labor costs | 3,645 | 22.9 | % | 3,267 | 23.2 | % | ||
| Other restaurant operating expenses | 2,657 | 16.7 | % | 2,505 | 17.8 | % | ||
| Vendor rebates | (304) | (1.9) | % | (442) | (3.1) | % | ||
| Total cost of sales | $ | 12,216 | 76.7 | % | $ | 10,463 | 74.2 | % |
| Fiscal Year Ended | ||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| December 26, 2020 | December 28, 2019 | |||||||
| In dollars | As a % of company-owned restaurant sales | In dollars | As a % of company-owned restaurant sales | |||||
| Cost of sales: | ||||||||
| Food, beverage and packaging costs | $ | 23,303 | 35.9 | % | $ | 20,317 | 36.6 | % |
| Labor costs | 15,801 | 24.3 | % | 12,582 | 22.7 | % | ||
| Other restaurant operating expenses | 10,821 | 16.6 | % | 9,794 | 17.7 | % | ||
| Vendor rebates | (1,342) | (2.1) | % | (1,588) | (2.9) | % | ||
| Total cost of sales | $ | 48,583 | 74.7 | % | $ | 41,105 | 74.1 | % |
WINGSTOP INC. AND SUBSIDIARIES
Unaudited Supplemental Information
Restaurant Count
| Thirteen Weeks Ended | Fiscal Year Ended | |||
|---|---|---|---|---|
| December 26,<br>2020 | December 28,<br>2019 | December 26,<br>2020 | December 28,<br>2019 | |
| Domestic Franchised Activity: | ||||
| Beginning of period | 1,277 | 1,169 | 1,200 | 1,095 |
| Openings | 52 | 34 | 131 | 114 |
| Closures | (1) | (3) | (5) | (8) |
| Acquired by Company | (1) | — | (6) | (1) |
| Re-franchised by Company | — | — | 7 | — |
| Restaurants end of period | 1,327 | 1,200 | 1,327 | 1,200 |
| Domestic Company-Owned Activity: | ||||
| Beginning of period | 31 | 30 | 31 | 29 |
| Openings | — | 1 | 2 | 1 |
| Closures | — | — | — | — |
| Acquired by Company | 1 | — | 6 | 1 |
| Re-franchised to franchisees | — | — | (7) | — |
| Restaurants end of period | 32 | 31 | 32 | 31 |
| Total Domestic Restaurants | 1,359 | 1,231 | 1,359 | 1,231 |
| International Franchised Activity: | ||||
| Beginning of period | 171 | 141 | 154 | 128 |
| Openings | 8 | 13 | 26 | 31 |
| Closures | — | — | (1) | (5) |
| Restaurants end of period | 179 | 154 | 179 | 154 |
| Total System-wide Restaurants | 1,538 | 1,385 | 1,538 | 1,385 |
WINGSTOP INC. AND SUBSIDIARIES
Non-GAAP Financial Measures - EBITDA and Adjusted EBITDA
(Unaudited)
(amounts in thousands)
| Thirteen Weeks Ended | Fiscal Year Ended | |||||||
|---|---|---|---|---|---|---|---|---|
| December 26,<br>2020 | December 28,<br>2019 | December 26,<br>2020 | December 28,<br>2019 | |||||
| Net income (loss) | $ | (6,410) | $ | 3,047 | $ | 23,306 | $ | 20,476 |
| Interest expense, net | 4,018 | 4,184 | 16,782 | 17,136 | ||||
| Income tax expense (benefit) | (1,192) | 1,663 | 3,637 | 5,289 | ||||
| Depreciation and amortization | 2,231 | 1,465 | 7,518 | 5,484 | ||||
| EBITDA | $ | (1,353) | $ | 10,359 | $ | 51,243 | $ | 48,385 |
| Additional adjustments: | ||||||||
| Loss on debt extinguishment and refinancing transactions (a) | 13,816 | — | 13,816 | — | ||||
| Gain on disposal of assets, net (b) | 156 | — | (3,093) | — | ||||
| Consulting fees (c) | 1,358 | 1,630 | 1,358 | 1,630 | ||||
| Stock-based compensation expense (d) | 2,251 | 2,165 | 8,558 | 6,974 | ||||
| Adjusted EBITDA | $ | 16,228 | $ | 14,154 | $ | 71,882 | $ | 56,989 |
(a)Represents costs and expenses related to the refinancing of our securitized financing facility and payment of a special dividend; all transaction costs are included in Loss on debt extinguishment and refinancing transactions on the Consolidated Statements of Operations, with the exception of $151,000 during the year ended December 26, 2020 that is included in Selling, general and administrative expense on the Consolidated Statements of Operations.
(b)Represents a gain resulting from the re-franchise of company-owned restaurants to franchisees which is included in Gain on sale of restaurants and other expenses, net on the Consolidated Statements of Operations.
(c)Represents costs and expenses related to a consulting project to support the Company's strategic initiatives, which are included in Selling, general and administrative expense on the Consolidated Statements of Operations.
(d)Includes non-cash, stock-based compensation.
WINGSTOP INC. AND SUBSIDIARIES
Non-GAAP Financial Measures - Adjusted Net Income and Adjusted EPS
(Unaudited)
(amounts in thousands, except per share data)
| Thirteen Weeks Ended | Fiscal Year Ended | |||||||
|---|---|---|---|---|---|---|---|---|
| December 26,<br>2020 | December 28,<br>2019 | December 26,<br>2020 | December 28,<br>2019 | |||||
| Numerator: | ||||||||
| Net income (loss) | $ | (6,410) | $ | 3,047 | $ | 23,306 | $ | 20,476 |
| Adjustments: | ||||||||
| Loss on debt extinguishment and refinancing transactions (a) | 13,816 | — | 13,816 | — | ||||
| Gain on disposal of assets, net (b) | 156 | — | (3,093) | — | ||||
| Consulting fees (c) | 1,358 | 1,630 | 1,358 | 1,630 | ||||
| Tax effect of adjustments (d) | (3,664) | (390) | (2,887) | (390) | ||||
| Adjusted net income | $ | 5,256 | $ | 4,287 | $ | 32,500 | $ | 21,716 |
| Denominator: | ||||||||
| Weighted-average shares outstanding - diluted | 29,845 | 29,709 | 29,804 | 29,670 | ||||
| Adjusted earnings per diluted share | $ | 0.18 | $ | 0.14 | $ | 1.09 | $ | 0.73 |
(a)Represents costs and expenses related to the refinancing of our securitized financing facility and payment of a special dividend; all transaction costs are included in Loss on debt extinguishment and refinancing transactions with the exception of $151,000 during the year ended December 26, 2020 that is included in Selling, general and administrative expense on the Consolidated Statements of Operations.
(b)Represents a gain resulting from the re-franchise of company-owned restaurants to franchisees which is included in Gain on sale of restaurants and other expenses, net on the Consolidated Statements of Operations.
(c)Represents costs and expenses related to a consulting project to support the Company's strategic initiatives, which are included in Selling, general and administrative expense on the Consolidated Statements of Operations.
(d)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 December 26, 2020 and December 28, 2019, which includes provisions for U.S. federal income taxes, and assumes the respective statutory rates for applicable state and local jurisdictions.