Confirms Annual Guidance for Fiscal Year 2017
Dave Goebel Joins as New Independent Director
Wingstop Inc. (NASDAQ:WING) today reported fiscal third quarter
financial results for the period ended September 30, 2017.
Highlights for the Fiscal Third Quarter
2017 compared to the Fiscal Third Quarter 2016
- System-wide sales increased 16.1%
- System-wide restaurant count increased 14.6% to 1,088 global
locations
- Domestic same store sales increased 4.1%
- Total revenue increased 19.3% to $26.0 million
- Net income increased to $5.0 million, or $0.17 per diluted
share*, compared to $2.8 million, or $0.09 per diluted share
- Adjusted EBITDA**, a non-GAAP measure, increased 25.2% to $10.4
million
- Adjusted net income**, a non-GAAP measure, increased 34.3% to
$5.0 million
* In the fiscal first quarter of 2017, the
Company adopted Accounting Standards Update No. 2016-09,
Compensation - Stock Compensation (Topic 718): Improvements to
Employee Share-Based Payment Accounting (ASU 2016-09), which
required the Company to record excess tax benefits from
equity-based compensation as a reduction to income tax expense in
the income statement, whereas they were previously recognized in
equity. See the “Adoption of New Accounting Guidance” section below
for additional information.
** Adjusted EBITDA and adjusted net income are
non-GAAP measures. Reconciliations of adjusted EBITDA and adjusted
net income to the most directly comparable financial measures
presented in accordance with GAAP, are set forth in the schedules
accompanying this release. See “Non-GAAP Financial Measures.”
Chairman and CEO Charlie Morrison stated, “We
continue to drive best-in-class results, and our third quarter
demonstrates that we are working on the right strategic priorities
for our business. Domestic same store sales rose 4.1%, driven
primarily by our decision to begin national advertising in the
first quarter, which continues to generate increasing consumer
awareness of Wingstop across America. Our continued topline growth
yielded an adjusted EBITDA increase of 25.2% and a diluted adjusted
EPS increase of 30.8% during the third quarter.”
Morrison added, “Our asset-light business model
generates significant cash flow allowing us to return capital to
shareholders on a frequent basis - further demonstrating our
confidence in our ‘Category of One’ brand. We will pay our second
quarterly dividend of $0.07 per share in December and are preparing
for another potential recapitalization of our balance sheet in the
first half of 2018.”
Key Operating Metrics for the Fiscal
Third Quarter 2017 Compared to the Fiscal Third Quarter
2016
|
|
|
Thirteen Weeks Ended |
|
September 30, 2017 |
|
September 24, 2016 |
Number of system-wide
restaurants open at end of period |
1,088 |
|
|
949 |
|
Number of domestic
franchise restaurants open at end of period |
971 |
|
|
862 |
|
Number of international
franchise restaurants open at end of period |
94 |
|
|
67 |
|
System-wide sales (in
thousands) |
$ |
274,021 |
|
|
$ |
235,975 |
|
System-wide domestic
same store sales growth |
4.1 |
% |
|
4.1 |
% |
Net income (in
thousands) |
$ |
5,012 |
|
|
$ |
2,753 |
|
Adjusted EBITDA (in
thousands) |
$ |
10,412 |
|
|
$ |
8,319 |
|
|
|
|
|
|
|
|
|
Fiscal Third Quarter 2017 Financial
Results
Total revenue for the fiscal third quarter 2017
increased 19.3% to $26.0 million from $21.8 million in the fiscal
third quarter last year.
- Royalty revenue and franchise fees increased $2.7 million to
$16.4 million from $13.7 million in the fiscal third quarter last
year. This increase was due to a 14.6% increase in the number of
franchised restaurants and domestic same store sales growth of
4.1%. Other revenue increased $0.7 million, primarily due to an
increase in vendor rebates compared to the prior year period.
- Company-owned restaurant sales increased $1.5 million to $9.7
million from $8.2 million in the fiscal third quarter last year.
The increase was the result of the acquisition of two restaurants
from a franchisee in July 2017 resulting in sales of $0.8 million,
company-owned domestic same store sales growth of 5.5%, and the
opening of one company-owned restaurant during December 2016.
Cost of sales increased to $7.8 million from
$6.1 million in the prior year’s fiscal third quarter. As a
percentage of company-owned restaurant sales, cost of sales
increased to 80.9% from 74.7%. The increase was driven primarily by
a 41.3% increase in commodity rates for bone-in chicken wings as
compared to the prior year period. This increase was partially
offset by our ability to leverage costs due to the company-owned
domestic same store sales increase of 5.5%.
Selling, general & administrative expenses
(SG&A) decreased 8.4% to $8.1 million compared to $8.9 million
in the prior year’s third quarter. The decrease in SG&A expense
is due to a decrease in nonrecurring costs of $1.4 million related
to the refinancing of our credit agreement and subsequent dividend
payout, which occurred in the fiscal third quarter 2016. This
decrease is partially offset by an increase in voluntary
contributions made to the Company’s advertising fund of $0.3
million, as well as planned headcount additions and an increase in
stock based compensation, as compared to the prior quarter.
Net income increased to $5.0 million, or $0.17
per diluted share, compared to net income of $2.8 million, or $0.09
per diluted share in the prior year’s third quarter.
Adjusted net income increased 34.3% to $5.0
million, or $0.17 per diluted share, compared to $3.7 million, or
$0.13 per diluted share, in the prior year’s third quarter. A
reconciliation between net income and adjusted net income is
included in the accompanying financial data.
Adoption of New Accounting
Guidance
The Company adopted ASU 2016-09 in the fiscal
first quarter 2017. This standard requires excess tax benefits from
share based compensation to be recorded in income tax expense
rather than paid in capital. The adoption resulted in a $0.1
million decrease in the fiscal third quarter 2017 provision for
income taxes, or a 1.4 percentage point decrease in the effective
rate, due to the recognition of excess tax benefits for options
exercised. The adoption did not impact diluted EPS in the fiscal
third quarter 2017. Refer to the Company’s Form 10-Q for the
quarter ended September 30, 2017 for additional information
regarding the impact of the adoption of ASU 2016-09.
Restaurant Development
As of September 30, 2017, there were 1,088
Wingstop restaurants system-wide. This included 994 restaurants in
the United States, of which 971 were franchised restaurants and 23
were company-owned. Our international presence consisted of 94
franchised restaurants across seven countries. During the fiscal
third quarter 2017, there were 32 net system-wide Wingstop
restaurants opened, including five international franchised
locations.
Appointment of Independent Board
Member
On November 1, 2017, the Board of Directors
appointed David L. Goebel to the Board as a new independent
Director. Mr. Goebel joins the Wingstop Board with more than 40
years of experience in the retail, food service, and hospitality
industries. Mr. Goebel currently serves as Lead Director of
Jack In the Box Inc., and as a board member of QuickChek, a
privately held gas/convenience food company. He is a partner and
faculty member for Merryck & Co. Ltd., a worldwide firm that
provides peer to peer mentoring services for senior business
executives. From 2001- 2007, he served in various executive
positions at Applebee’s International, Inc., including as President
and Chief Executive Officer in 2006-2007, during which time it
operated nearly 2,000 restaurants in the United States and
abroad. Previous to that, Mr. Goebel was President of Summit
Management, Inc., a consulting group specializing in executive
development and strategic planning.
“Dave Goebel is an accomplished board director,
CEO, and entrepreneur,” said Morrison. “His deep industry
experience and leadership make him a valuable addition to the
Wingstop Board, and we are very fortunate to have him on our
team.”
Quarterly Dividend Program
In recognition of the Company’s strong cash flow
generation, confidence in the business, and commitment to returning
value to shareholders, our Board of Directors has authorized and
declared a quarterly dividend of $0.07 per share of common stock,
totaling approximately $2.0 million. This dividend will be paid on
December 19, 2017 to shareholders of record as of
December 4, 2017.
Fiscal Year 2017 Financial Outlook
We are confirming the following financial
outlook for the fiscal year ending December 30, 2017:
- System-wide unit growth of approximately 13% - 15%
- Low single digit domestic same store sales growth
- SG&A expenses of $36.5 million - $37.5 million
- Net income of $20.9 million - $21.2 million
- Fully diluted EPS growth of 23% - 25%, which reflects 29.3
million diluted shares outstanding, over 2016 adjusted earnings per
diluted share of $0.58
- Adjusted EBITDA growth of 13% - 15%
|
|
|
Fiscal Year Ended |
|
December 30, 2017 |
|
(in millions) |
|
Low |
|
High |
Net income |
$ |
20.9 |
|
|
$ |
21.2 |
|
Interest expense,
net |
5.4 |
|
|
5.4 |
|
Income tax expense |
8.7 |
|
|
8.9 |
|
Depreciation and
amortization |
3.5 |
|
|
3.5 |
|
EBITDA |
$ |
38.5 |
|
|
$ |
39.0 |
|
Additional
adjustments: |
|
|
|
Stock-based
compensation expense (a) |
1.6 |
|
|
1.8 |
|
Adjusted EBITDA |
$ |
40.1 |
|
|
$ |
40.8 |
|
|
|
|
|
(a)
Estimated non-cash, stock-based compensation. |
|
The following definitions apply to these
terms as used in this release:
Same store sales reflects 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 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
transaction costs, 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 plus transactions costs and non-cash gains and losses
resulting from the disposal of assets, minus related adjustments to
income tax expense.
Adjusted earnings per diluted
share is defined as adjusted net income divided by
weighted average diluted share count.
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 third quarter 2017
financial results at 4:30 PM Eastern Time.
The conference call can be accessed live by
dialing 201-689-8562. A replay will be available two hours after
the call and can be accessed by dialing 412-317-6671; the passcode
is 13669872. The replay will be available through Thursday,
November 9, 2017.
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,
Texas, Wingstop Inc. (NASDAQ:WING) operates and franchises more
than 1,000 restaurants across the United States, Mexico, Singapore,
the Philippines, Indonesia, the United Arab Emirates, Malaysia, and
Saudi Arabia. The Wing Experts’ menu features classic and boneless
wings with 11 bold, distinctive flavors including Original Hot,
Cajun, Atomic, Mild, Teriyaki, Lemon Pepper, Hawaiian, Garlic
Parmesan, Hickory Smoked BBQ, Louisiana Rub, and Mango Habanero.
Wingstop’s wings are always cooked to order, hand-sauced and tossed
and served with a variety of house-made sides including fresh-cut,
seasoned fries. Having grown its domestic same store sales for 13
consecutive years, the Company has been ranked #3 on the “Top 100
Fastest Growing Restaurant Chains” by Nation’s Restaurant News
(2016), #7 on the “Top 40 Fast Casual Chains” by Restaurant
Business (2016), and was named “Best Franchise Deal in North
America” by QSR magazine (2014). Wingstop was ranked #88 on
Fortune’s 100 Best Medium Workplaces list in October 2016. For more
information visit www.wingstop.com or
www.wingstopfranchise.com. Follow us on facebook.com/Wingstop
and Twitter @Wingstop.
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,”
“project,” “plan,” “intend,” “believe,” “confident,” “may,”
“should,” “can have,” “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 fiscal year 2017 outlook for new restaurant openings,
domestic same store sales growth, SG&A expenses, net income,
EBTIDA, adjusted EBITDA, adjusted net income, adjusted earnings per
diluted share and our diluted share count, as well as our
anticipated potential domestic restaurant expansion opportunity,
positioning to make progress towards domestic restaurant potential
and 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. Please refer to the risk factors discussed in our Form
10-K for the year ended December 31, 2016, 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 ContactBrian
Bell972-707-3956bbell@wingstop.com
Investor ContactRaphael
Gross203-682-8253raphael.gross@icrinc.com
|
|
|
|
WINGSTOP INC. AND SUBSIDIARIES |
Consolidated Balance Sheets |
(amounts in thousands, except share and per share
amounts) |
|
|
|
|
|
September 30, 2017 |
|
December 31, 2016 |
|
(Unaudited) |
|
|
Assets |
|
|
|
Current assets |
|
|
|
Cash and
cash equivalents |
$ |
4,589 |
|
|
$ |
3,750 |
|
Accounts
receivable, net |
4,641 |
|
|
3,199 |
|
Prepaid
expenses and other current assets |
3,305 |
|
|
1,634 |
|
Advertising fund assets, restricted |
4,674 |
|
|
2,533 |
|
Total
current assets |
17,209 |
|
|
11,116 |
|
Property and equipment,
net |
5,681 |
|
|
4,999 |
|
Goodwill |
46,557 |
|
|
45,128 |
|
Trademarks |
32,700 |
|
|
32,700 |
|
Customer relationships,
net |
15,904 |
|
|
16,914 |
|
Other non-current
assets |
3,073 |
|
|
943 |
|
Total assets |
$ |
121,124 |
|
|
$ |
111,800 |
|
Liabilities and
stockholders' deficit |
|
|
|
Current
liabilities |
|
|
|
Accounts
payable |
$ |
2,149 |
|
|
$ |
1,458 |
|
Other
current liabilities |
9,024 |
|
|
9,241 |
|
Current
portion of debt |
3,500 |
|
|
3,500 |
|
Advertising fund liabilities, restricted |
4,674 |
|
|
2,533 |
|
Total
current liabilities |
19,347 |
|
|
16,732 |
|
Long-term debt,
net |
136,685 |
|
|
147,217 |
|
Deferred revenues, net
of current |
8,545 |
|
|
7,868 |
|
Deferred income tax
liabilities, net |
12,039 |
|
|
12,304 |
|
Other non-current
liabilities |
2,182 |
|
|
2,307 |
|
Total
liabilities |
178,798 |
|
|
186,428 |
|
Commitments and
contingencies |
|
|
|
Stockholders'
deficit |
|
|
|
Common
stock, $0.01 par value; 100,000,000 shares authorized; 29,093,736
and 28,747,392 shares issued and outstanding as of September 30,
2017 and December 31, 2016, respectively |
291 |
|
|
287 |
|
Additional paid-in-capital |
1,337 |
|
|
1,194 |
|
Accumulated deficit |
(59,302 |
) |
|
(76,109 |
) |
Total
stockholders' deficit |
(57,674 |
) |
|
(74,628 |
) |
Total liabilities and stockholders' deficit |
$ |
121,124 |
|
|
$ |
111,800 |
|
|
|
|
|
|
|
|
|
|
WINGSTOP INC. AND SUBSIDIARIES |
Consolidated Statements of Operations |
(Unaudited) |
(amounts in thousands, except per share
data) |
|
|
|
Thirteen Weeks Ended |
|
September 30, 2017 |
|
September 24, 2016 |
|
|
|
|
Revenue: |
|
|
|
Royalty
revenue and franchise fees |
$ |
16,354 |
|
|
$ |
13,660 |
|
Company-owned restaurant sales |
9,672 |
|
|
8,150 |
|
Total
revenue |
26,026 |
|
|
21,810 |
|
Costs and
expenses: |
|
|
|
Cost of
sales (1) |
7,823 |
|
|
6,091 |
|
Selling,
general and administrative |
8,144 |
|
|
8,893 |
|
Depreciation and amortization |
881 |
|
|
746 |
|
Total
costs and expenses |
16,848 |
|
|
15,730 |
|
Operating income |
9,178 |
|
|
6,080 |
|
Interest expense,
net |
1,302 |
|
|
1,390 |
|
Other expense, net |
— |
|
|
216 |
|
Income before income
tax expense |
7,876 |
|
|
4,474 |
|
Income tax expense |
2,864 |
|
|
1,721 |
|
Net income |
$ |
5,012 |
|
|
$ |
2,753 |
|
|
|
|
|
Earnings per share |
|
|
|
Basic |
$ |
0.17 |
|
|
$ |
0.10 |
|
Diluted |
$ |
0.17 |
|
|
$ |
0.09 |
|
|
|
|
|
Weighted average shares
outstanding |
|
|
|
Basic |
29,081 |
|
|
28,725 |
|
Diluted |
29,384 |
|
|
29,014 |
|
|
|
|
|
(1) exclusive of depreciation and amortization, shown
separately |
|
|
|
WINGSTOP INC. AND SUBSIDIARIES |
Unaudited Supplemental Information |
Cost of Sales Margin Analysis |
(amounts in thousands) |
|
|
|
Thirteen weeks ended |
|
September 30, 2017 |
|
As a % of company-owned restaurant
sales |
|
September 24, 2016 |
|
As a % of company-owned restaurant
sales |
Cost of sales: |
|
|
|
|
|
|
|
Food,
beverage and packaging costs |
$ |
4,136 |
|
|
42.8 |
% |
|
$ |
2,932 |
|
|
36.0 |
% |
Labor
costs |
2,295 |
|
|
23.7 |
% |
|
1,934 |
|
|
23.7 |
% |
Other
restaurant operating expenses |
1,634 |
|
|
16.9 |
% |
|
1,438 |
|
|
17.6 |
% |
Vendor
rebates |
(242 |
) |
|
(2.5 |
)% |
|
(213 |
) |
|
(2.6 |
)% |
Total cost of
sales |
$ |
7,823 |
|
|
80.9 |
% |
|
$ |
6,091 |
|
|
74.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WINGSTOP INC. AND SUBSIDIARIES |
Unaudited Supplemental Information |
Restaurant Count |
|
|
|
Thirteen Weeks Ended |
|
September 30, 2017 |
|
September 24, 2016 |
Domestic
Franchised Activity: |
|
|
|
Beginning of
period |
946 |
|
|
831 |
|
Openings |
28 |
|
|
31 |
|
Closures |
(1 |
) |
|
— |
|
Acquired by
Company |
(2 |
) |
|
— |
|
Restaurants end of
period |
971 |
|
|
862 |
|
|
|
|
|
Domestic
Company-Owned Activity: |
|
|
|
Beginning of
period |
21 |
|
|
20 |
|
Openings |
— |
|
|
— |
|
Closures |
— |
|
|
— |
|
Acquired from
franchisees |
2 |
|
|
— |
|
Restaurants end of
period |
23 |
|
|
20 |
|
|
|
|
|
Total Domestic Restaurants |
994 |
|
|
882 |
|
|
|
|
|
International
Franchised Activity: |
|
|
|
Beginning of
period |
89 |
|
|
63 |
|
Openings |
5 |
|
|
4 |
|
Closures |
— |
|
|
— |
|
Restaurants end of
period |
94 |
|
|
67 |
|
|
|
|
|
Total System-wide Restaurants |
1,088 |
|
|
949 |
|
|
|
|
|
|
|
|
WINGSTOP INC. AND SUBSIDIARIES |
Non-GAAP Financial Measures - EBITDA and Adjusted
EBITDA |
(Unaudited) |
(amounts in thousands) |
|
|
Thirteen Weeks Ended |
|
September 30, 2017 |
|
September 24, 2016 |
Net income |
$ |
5,012 |
|
|
$ |
2,753 |
|
Interest expense,
net |
1,302 |
|
|
1,390 |
|
Income tax expense |
2,864 |
|
|
1,721 |
|
Depreciation and
amortization |
881 |
|
|
746 |
|
EBITDA |
$ |
10,059 |
|
|
$ |
6,610 |
|
Additional
adjustments: |
|
|
|
Transaction costs
(a) |
— |
|
|
1,570 |
|
Stock-based
compensation expense (b) |
353 |
|
|
139 |
|
Adjusted EBITDA |
$ |
10,412 |
|
|
$ |
8,319 |
|
|
|
|
|
|
|
|
|
(a) Represents costs and expenses related to the refinancings of
our credit agreement and our public offerings; all transaction
costs are included in SG&A with the exception of $215,000 that
is included in Other expense, net during the period
ended September 24, 2016.
(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 |
|
September 30, 2017 |
|
September 24, 2016 |
Numerator: |
|
|
|
Net
income |
$ |
5,012 |
|
|
$ |
2,753 |
|
Adjustments |
|
|
|
Transaction costs (a) |
— |
|
|
1,570 |
|
Tax
effect of adjustments (b) |
— |
|
|
(590 |
) |
Adjusted
net income |
$ |
5,012 |
|
|
$ |
3,733 |
|
|
|
|
|
Denominator: |
|
|
|
Weighted-average shares outstanding - diluted |
29,384 |
|
|
29,014 |
|
|
|
|
|
Adjusted
earnings per diluted share |
$ |
0.17 |
|
|
$ |
0.13 |
|
|
|
|
|
|
|
|
|
(a) Represents costs and expenses related to the refinancings of
our credit agreement and our public offerings; all transaction
costs are included in SG&A with the exception of $215,000 that
is included in Other expense, net during the period
ended September 24, 2016.
(b) Represents the tax effect of the aforementioned adjustments
to reflect corporate income taxes at an assumed effective tax rate
of 37.6% for the period ended September 24, 2016, which
includes provisions for U.S. federal income taxes, and assumes the
respective statutory rates for applicable state and local
jurisdictions.
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