DALLAS, May 06, May 06, 2020 (GLOBE NEWSWIRE via COMTEX) -- Wingstop Inc. ("Wingstop" or the "Company") /zigman2/quotes/206814832/composite WING -0.65% today announced financial results for the fiscal first quarter ended March 28, 2020.
Business Update from Charlie Morrison, Chairman and CEO of Wingstop:
In our last business update to investors and fans of the brand, I was happy to report that the Wingstop brand remained resilient during this unprecedented time for us all. Our performance actually improved in the last two weeks of the first quarter ended in March. I attribute that resiliency and performance to the strength of our system, led by our team members, our franchisees (whom we affectionately call our brand partners) and our supplier partners - all of whom remain committed to our mission of Serving the World Flavor! We have leveraged our core values of Authentic, Service-Minded, and Entrepreneurial as our guide for the decisions and actions we have taken to ensure Wingstop remains one of the best-positioned brands to navigate a situation like the COVID-19 crisis. We call it the Wingstop Way, and I believe in times like these, our shared, behaved values are the best indicator of the past, present, and future success of any company.
As I shared in my letter on April 7, we proactively focused on three key priorities to navigate this trying time:
-- Support the well-being and safety of our team members, brand partners, and guests
-- Continuing to serve our Wingstop fans flavor in a safe and clean environment
-- Give back to our communities where we operate
These priorities are the foundation of our operations for our 1,400+ global restaurants each day. The strength of our performance is certainly reflected in our results, including a very strong start to the second quarter, with April same-store sales growth in our domestic operations exceeding 30%. This topline performance, coupled with significantly reduced bone-in wing prices, means that our brand partners are seeing incredibly strong four-wall performance in their restaurants. Because of our good fortune and anchored in our core values, we launched our "Flavor for Good" week. From April 19 through April 25, we engaged our brand partners as well as the support of Wingstop Charities to give back and serve flavor to the teachers, healthcare workers and first responders in our communities, who are on the front-lines of this pandemic. Our generous brand partners, along with Wingstop Charities, provided more than one million meals to those impacted by the pandemic through cash and food donations. In addition to our outreach to those on the front lines, we also supported our brethren in the restaurant industry by joining forces with the National Restaurant Association Educational Foundation and Guy Fieri to support the Restaurant Employee Relief Fund. Wingstop donated $1 million to the Restaurant Employee Relief Fund to provide access to $500 grants per person for restaurant workers who will desperately need aid in the coming weeks and months as our industry gets back on its feet post-COVID-19.
I would like to provide more clarity on our performance and a preliminary update on domestic same-store sales for the first four weeks of the second quarter of 2020. As a reminder, our domestic same-store sales experienced a slight uptick as we closed out the first quarter with an 8.9% increase from March 15 to March 28. The first four weeks of April were even stronger. Prior to the outbreak of COVID-19, our off-premise sales accounted for 80% of our domestic system sales, and digital sales consisted of just over 40% of our sales. Since closing our dining rooms on March 16, 2020, 100% of sales are off premise and digital orders account for nearly 65% of our sales. We believe the investments made over the past few years to build a world-class digital and delivery foundation for our brand positioned us for the success we have seen during this time. To quantify that, our domestic same-store sales increased more than 30% in the month of April, far exceeding our own expectations. However, our brand partners, supplier partners, and our delivery partner Doordash have not missed a beat with this strong increase. We are humbled by our performance and remain confident in the solid positioning of our brand in life during the COVID-19 outbreak and after the pandemic subsides. Our international business, which consists of 160 restaurants, has not fared as well during this time. Our international brand partners rely more heavily on the availability of dining rooms for locations in large malls as well as a market like Mexico, where our business is more of a casual dining model. Internationally, we have been more adversely impacted due to the closure of these dining rooms in response to COVID-19, but have seen the teams react well to this change by leveraging our domestic experience to provide access to take-out and delivery in all markets. We continue working closely with our international brand partners by providing support to help mitigate the impact financially so they can re-emerge stronger and ready for continued growth.
In addition to acknowledging our team members, brand partners, supplier partners and guests, I would like to close by thanking our shareholders who have provided so much support and confidence to us during this time and throughout the past five years. At Wingstop, we recognize the corporate responsibility we have to the various stakeholders we serve, including our team members, brand partners, supplier partners, shareholders and the communities in which we operate. We appreciate how these stakeholders have come together in a supportive way to enable us to continue our mission to Serve the World Flavor.
With my prayers for your health and safety during this challenging time,
Highlights for the fiscal first quarter 2020 compared to the fiscal first quarter 2019:
-- System-wide sales increased 18.6% to $429.9 million
-- 28 net openings in the fiscal first quarter 2020
-- Domestic same store sales increased 9.9%
-- Digital sales increased to 47.0% at the end of the fiscal first quarter 2020
-- Total revenue increased 15.4% to $55.4 million
-- Net income increased 22.6% to $8.1 million, or $0.27 per diluted share, for the thirteen weeks ended March 28, 2020, compared to $6.6 million, or $0.22 per diluted share, in the prior fiscal first quarter.
-- Adjusted EBITDA*, a non-GAAP measure, increased 17.8% to $16.4 million
* Adjusted EBITDA is a non-GAAP measure. A reconciliation of Adjusted EBITDA to the most directly comparable financial measure presented in accordance with GAAP is set forth in the schedules accompanying this release. See "Non-GAAP Financial Measures."
Key operating metrics for the fiscal first quarter 2020 compared to the fiscal first quarter 2019
Thirteen Weeks Ended March 28, 2020 March 30, 2019 Number of system-wide restaurants open at end of period 1,413 1,273 Number of domestic franchise restaurants open at end of period 1,221 1,112 Number of international franchise restaurants open at end of period 160 132 System-wide sales (in thousands) $ 429,898 $ 362,369 Domestic same store sales growth 9.9 % 7.1 % Net income (in thousands) $ 8,096 $ 6,606 Adjusted EBITDA (in thousands) $ 16,357 $ 13,885
Fiscal first quarter 2020 financial results
Total revenue for the fiscal first quarter 2020 increased to $55.4 million from $48.1 million in the fiscal first quarter last year.
-- Royalty revenue, franchise fees and other increased $2.9 million to $24.2 million from $21.3 million in the fiscal first quarter of the prior year. The increase was primarily due to 137 net franchise restaurant openings since March 30, 2019 and domestic same store sales growth of 9.9%. Franchise fees decreased $0.7 million primarily due to higher termination fees recognized in the first thirteen weeks of fiscal year 2019.
-- Advertising fees and related income increased $2.8 million to $16.0 million from $13.2 million in the fiscal first quarter of the prior year. The increase was primarily due to the 18.6% increase in system-wide sales in the fiscal quarter ended March 28, 2020 compared to the fiscal quarter ended March 30, 2019.
-- Company-owned restaurant sales increased $1.7 million to $15.2 million from $13.5 million in the fiscal first quarter of the prior year. The increase was primarily due to company-owned same store sales growth of 6.2%, which was primarily driven by an increase in transactions and the acquisition of one franchised restaurant, as well as the opening of two company-owned restaurant since the prior year comparable period resulting in additional sales of $0.9 million.
Cost of sales increased to $11.2 million from $9.7 million in the fiscal first quarter of the prior year. As a percentage of company-owned restaurant sales, cost of sales increased to 73.4% from 72.0%. The increase was driven primarily by increased labor costs due to wage inflation and incentive pay associated with COVID-19, which provided as much as an additional $150 per week to full-time team members, as well as an increase in delivery fees due to the growth in delivery mix as a percent of total sales. These increases were slightly offset by the increase in company-owned same store sales of 6.2%, which was primarily driven by an increase in transactions.
Advertising expenses were $14.9 million compared to $12.7 million in the fiscal first quarter of the prior year. Advertising expenses are recognized at the same time the related revenue is recognized, which does not necessarily correlate to the actual timing of the related advertising spend.
Selling, general & administrative expense ("SG&A") increased to $14.3 million compared to $12.5 million in the fiscal first quarter of the prior year. The increase in SG&A expense was due to an increase of $0.6 million of charges associated with certain organizational changes, $0.5 million associated with additional expenses to support our national advertising campaign which has an equal and offsetting contribution in revenue, and an increase of $0.5 million in stock-based compensation expense.
Net income was $8.1 million, or $0.27 per diluted share, compared to net income of $6.6 million, or $0.22 per diluted share, in the fiscal first quarter of the prior year.
As of March 28, 2020, there were 1,413 Wingstop restaurants system-wide. This included 1,253 restaurants in the United States, of which 1,221 were franchised restaurants and 32 were company-owned, and 160 franchised restaurants in international markets. During the fiscal first quarter 2020, there were 28 net system-wide Wingstop restaurant openings.
In recognition of the Company's strong cash flow generation in the first quarter and our commitment to returning value to stockholders, our Board of Directors authorized and declared a quarterly dividend of $0.11 per share of common stock, resulting in a total dividend of approximately $3.2 million. This dividend will be paid on June 25, 2020 to stockholders of record as of June 18, 2020.
Company Withdraws 2020 Guidance
In light of COVID-19 events, and uncertainty surrounding the U.S. and global economic conditions in the coming year, the Company is withdrawing its previous 2020 guidance for domestic same-store sales, system-wide unit growth, SG&A, Adjusted SG&A and the effective tax rate.
Liquidity and Use of Cash Update
With uncertainty surrounding COVID-19 events, and as a precautionary measure, the Company borrowed $16.0 million under its outstanding variable funding notes to improve its cash position, providing the Company with an unrestricted cash balance of $31.0 million at the end of the first fiscal quarter of 2020 compared to $12.8 million as of December 28, 2019.
Preliminary Estimated Sales Update for the Available Periods in the Second Quarter of 2020 (Unaudited)
Given the unprecedented impact of the COVID-19 pandemic on the Company's business and the restaurant industry, the Company is including the below preliminary estimates of domestic and company-owned same store sales growth for the first four weeks of the second quarter of 2020.
Same store sales growth: (versus the prior year period) Period 4, 2020 (Mar. 29, 2020 to Apr. 25, 2020) Domestic restaurants +33.4% Company-owned restaurants +32.6%
The following definitions apply to these terms as used in this release:
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 transaction costs, costs and fees associated with investments in our strategic initiatives, 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 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 convention-related expenses and expenses associated with national advertising.