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): July 27, 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.) |
| 15505 Wright Brothers Drive | ||
| Addison | ||
| Texas | 75001 | |
| (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, nor shall such information be deemed incorporated by reference in any filing under the Exchange Act or the Securities Act of 1933, as amended (the “Securities Act”), except as shall be expressly set forth by specific reference in such filing.
On July 28, 2021, Wingstop Inc. (the “Company,” “we,” “our,” or “us”) issued a press release reporting the Company’s financial results for its fiscal second quarter ended June 26, 2021. 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, 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 include, but are not limited to, the following:
•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 and other 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 herein 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. 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 July 27, 2021, the Company’s Board of Directors (the “Board”) declared a quarterly cash dividend of $0.17 per share of common stock. The dividend is payable on September 3, 2021 to stockholders of record as of the close of business on August 13, 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 July 28, 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: | July 28, 2021 | By: | /s/ Michael J. Skipworth |
| Chief Financial Officer<br><br>(Principal Financial and Accounting Officer) |
Document
FOR IMMEDIATE RELEASE
Wingstop Inc. Reports Fiscal Second Quarter Financial Results
Delivers Over 200 New Restaurants Over Last 12 Months, Resulting in 13.1% Unit Growth
Dallas, July 28, 2021 - (PR NEWSWIRE) - 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.
About Wingstop
Founded in 1994 and headquartered in Dallas, TX, Wingstop Inc. (NASDAQ: WING) operates and franchises over 1,600 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 addition, Wingstop launched
virtual brand Thighstop in June 2021 featuring crispy bone-in and boneless thighs sauced and tossed in Wingstop’s 11 signature flavors, available through Thighstop.com and DoorDash.
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, it’s system is comprised of independent franchisees, or brand partners, who account for approximately 98% of Wingstop’s total restaurant count of 1,624 as of June 26, 2021. During the fiscal quarter ended June 26, 2021, Wingstop opened 45 net new restaurants, an increase of 13.1%, and announced domestic same-store sales increased 2.1%. During the fiscal quarter ended June 26, 2021, Wingstop generated 64.5% 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 and 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 Statements
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,” “potential,” “plan,” “intend,” “believe,” “think,” “confident,” “may,” “should,” “can,” “have,” “will,” “seek,” “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 SG&A expenses, Adjusted SG&A expenses, Food, Beverage and Packaging costs, and unit growth, as well as our three- to five- year outlook for domestic same store sales growth, 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 Contacts
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)
| June 26,<br>2021 | December 26,<br>2020 | |||
|---|---|---|---|---|
| (Unaudited) | ||||
| Assets | ||||
| Current assets | ||||
| Cash and cash equivalents | $ | 43,504 | $ | 40,858 |
| Restricted cash | 4,657 | 4,815 | ||
| Accounts receivable, net | 5,854 | 4,929 | ||
| Prepaid expenses and other current assets | 9,132 | 5,532 | ||
| Advertising fund assets, restricted | 21,561 | 16,486 | ||
| Total current assets | 84,708 | 72,620 | ||
| Property and equipment, net | 39,598 | 27,948 | ||
| Goodwill | 53,690 | 53,690 | ||
| Trademarks | 32,700 | 32,700 | ||
| Customer relationships, net | 10,951 | 11,600 | ||
| Other non-current assets | 12,617 | 13,007 | ||
| Total assets | $ | 234,264 | $ | 211,565 |
| Liabilities and stockholders' deficit | ||||
| Current liabilities | ||||
| Accounts payable | $ | 3,812 | $ | 3,658 |
| Other current liabilities | 25,072 | 26,729 | ||
| Current portion of debt | 1,200 | 3,600 | ||
| Advertising fund liabilities | 21,561 | 16,486 | ||
| Total current liabilities | 51,645 | 50,473 | ||
| Long-term debt, net | 468,774 | 466,933 | ||
| Deferred revenues, net of current | 26,156 | 24,962 | ||
| Deferred income tax liabilities, net | 5,416 | 4,480 | ||
| Other non-current liabilities | 4,516 | 6,027 | ||
| Total liabilities | 556,507 | 552,875 | ||
| Commitments and contingencies | ||||
| Stockholders' deficit | ||||
| Common stock, $0.01 par value; 100,000,000 shares authorized; 29,743,375 and 29,687,123 shares issued and outstanding as of June 26, 2021 and December 26, 2020, respectively | 298 | 297 | ||
| Additional paid-in-capital | 594 | 421 | ||
| Retained deficit | (323,026) | (342,028) | ||
| Accumulated other comprehensive loss | (109) | — | ||
| Total stockholders' deficit | (322,243) | (341,310) | ||
| Total liabilities and stockholders' deficit | $ | 234,264 | $ | 211,565 |
WINGSTOP INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(amounts in thousands, except per share data)
| Thirteen Weeks Ended | ||||
|---|---|---|---|---|
| June 26,<br>2021 | June 27,<br>2020 | |||
| (Unaudited) | (Unaudited) | |||
| Revenue: | ||||
| Royalty revenue, franchise fees and other | $ | 33,135 | $ | 27,858 |
| Advertising fees | 22,577 | 19,923 | ||
| Company-owned restaurant sales | 18,288 | 18,324 | ||
| Total revenue | 74,000 | 66,105 | ||
| Costs and expenses: | ||||
| Cost of sales (1) | 14,207 | 13,387 | ||
| Advertising expenses | 23,301 | 20,424 | ||
| Selling, general and administrative | 16,066 | 13,375 | ||
| Depreciation and amortization | 1,523 | 1,398 | ||
| Gain on sale of restaurants and other expenses, net | — | (2,016) | ||
| Total costs and expenses | 55,097 | 46,568 | ||
| Operating income | 18,903 | 19,537 | ||
| Interest expense, net | 3,724 | 4,214 | ||
| Income before income tax expense | 15,179 | 15,323 | ||
| Income tax expense | 3,867 | 3,784 | ||
| Net income | $ | 11,312 | $ | 11,539 |
| Earnings per share | ||||
| Basic | $ | 0.38 | $ | 0.39 |
| Diluted | $ | 0.38 | $ | 0.39 |
| Weighted average shares outstanding | ||||
| Basic | 29,739 | 29,588 | ||
| Diluted | 29,873 | 29,793 | ||
| Dividends per share | $ | 0.14 | $ | 0.11 |
(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 | ||||||||
|---|---|---|---|---|---|---|---|---|
| June 26, 2021 | June 27, 2020 | |||||||
| 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 | $ | 8,023 | 43.9 | % | $ | 5,954 | 32.5 | % |
| Labor costs | 3,774 | 20.6 | % | 4,687 | 25.6 | % | ||
| Other restaurant operating expenses | 2,820 | 15.4 | % | 3,086 | 16.8 | % | ||
| Vendor rebates | (410) | (2.2) | % | (340) | (1.9) | % | ||
| Total cost of sales | $ | 14,207 | 77.7 | % | $ | 13,387 | 73.1 | % |
WINGSTOP INC. AND SUBSIDIARIES
Unaudited Supplemental Information
Restaurant Count
| Thirteen Weeks Ended | ||
|---|---|---|
| June 26,<br>2021 | June 27,<br>2020 | |
| Domestic Franchised Activity: | ||
| Beginning of period | 1,371 | 1,221 |
| Openings | 44 | 23 |
| Closures | — | (2) |
| Re-franchised by Company | — | 2 |
| Restaurants end of period | 1,415 | 1,244 |
| Domestic Company-Owned Activity: | ||
| Beginning of period | 33 | 32 |
| Openings | 1 | — |
| Closures | — | — |
| Re-franchised to franchisees | — | (2) |
| Restaurants end of period | 34 | 30 |
| Total Domestic Restaurants | 1,449 | 1,274 |
| International Franchised Activity: | ||
| Beginning of period | 175 | 160 |
| Openings | 4 | 2 |
| Closures | (4) | — |
| Restaurants end of period | 175 | 162 |
| Total System-wide Restaurants | 1,624 | 1,436 |
WINGSTOP INC. AND SUBSIDIARIES
Non-GAAP Financial Measures - EBITDA and Adjusted EBITDA
(Unaudited)
(amounts in thousands)
| Thirteen Weeks Ended | ||||
|---|---|---|---|---|
| June 26,<br>2021 | June 27,<br>2020 | |||
| Net income | $ | 11,312 | $ | 11,539 |
| Interest expense, net | 3,724 | 4,214 | ||
| Income tax expense | 3,867 | 3,784 | ||
| Depreciation and amortization | 1,523 | 1,398 | ||
| EBITDA | $ | 20,426 | $ | 20,935 |
| Additional adjustments: | ||||
| Gain on disposal of assets, net (a) | — | (2,016) | ||
| Stock-based compensation expense (b) | 2,456 | 1,969 | ||
| Adjusted EBITDA | $ | 22,882 | $ | 20,888 |
(a) Represents a gain resulting from the re-franchise of company-owned restaurants to a franchisee which is included in Gain on sale of restaurants and other expenses, net in the Consolidated Statements of Operations.
(b) 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 | ||||
|---|---|---|---|---|
| June 26,<br>2021 | June 27,<br>2020 | |||
| Numerator: | ||||
| Net income | $ | 11,312 | $ | 11,539 |
| Adjustments: | ||||
| Gain on disposal of assets, net (a) | — | (2,016) | ||
| Tax effect of adjustments (b) | — | 483 | ||
| Adjusted net income | $ | 11,312 | $ | 10,006 |
| Denominator: | ||||
| Weighted-average shares outstanding - diluted | 29,873 | 29,793 | ||
| Adjusted earnings per diluted share | $ | 0.38 | $ | 0.34 |
(a)Represents a gain resulting from the re-franchise of company-owned restaurants to a franchisee which is included in Gain on sale of restaurants and other expenses, net in the Consolidated Statements of Operations.
(b)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 June 26, 2021 and June 27, 2020, which includes provisions for U.S. federal income taxes, and assumes the respective statutory rates for applicable state and local jurisdictions.