UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark one)
☒
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SeptemberMarch 30, 2017
2024
☐
¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____                   


Commission File No. 001-37425

WINGSTOP INC.
(Exact name of registrant as specified in its charter)

Delaware47-3494862
Delaware47-3494862
(State or other jurisdiction of incorporation or organization)(IRS Employer Identification No.)
15505 Wright Brothers Drive
Addison, Texas75001
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)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareWINGNASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes   ¨ No


Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes   ¨ No


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filerxAccelerated filer☐
Larger accelerated filer¨Accelerated filerx
Non-accelerated filer¨☐(Do not check if a smaller reporting company)Smaller reporting company¨☐
Emerging growth companyx☐
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. x¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨☐ Yes   x No
On November 3, 2017April 30, 2024 there were 29,094,96729,369,978 shares of common stock outstanding.




TABLE OF CONTENTS
Page
PART I
Financial Information
34
Item 1.
Financial Statements
34
Consolidated Balance Sheets - SeptemberMarch 30, 20172024 (Unaudited) and December 31, 201630, 2023
34
Consolidated Statements of OperationsComprehensive Income (Unaudited) - Thirteen and Thirty-Nine Weeks Ended SeptemberMarch 30, 20172024 and September 24, 2016April 1, 2023
45
Consolidated Statements of Stockholders’ Deficit (Unaudited) - Thirteen Weeks Ended March 30, 2024 and April 1, 2023
6
Consolidated Statements of Cash Flows (Unaudited) - Thirty-NineThirteen Weeks Ended SeptemberMarch 30, 20172024 and September 24, 2016April 1, 2023
57
Notes to Consolidated Financial Statements (Unaudited)
68
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
13
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
2724
Item 4.
Controls and Procedures
2825
PART II
Other Information
2926
Item 1.
Legal Proceedings
2926
Item 1A.
Risk Factors
2926
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
2926
Item 3.
Defaults Upon Senior Securities
2926
Item 4.
Mine Safety Disclosures
2926
Item 5.
Other Information
2926
Item 6.
Exhibits
3027
Signatures
3128





3

PART I.     FINANCIAL INFORMATION
Item 1.     Financial Statements
WINGSTOP INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(amounts in thousands, except share and per sharepar value amounts)
 September 30,
2017		 December 31,
2016
 (Unaudited)  
Assets 
  
Current assets 
  
Cash and cash equivalents$4,589
 $3,750
Accounts receivable, net4,641
 3,199
Prepaid expenses and other current assets3,305
 1,634
Advertising fund assets, restricted4,674
 2,533
Total current assets17,209
 11,116
Property and equipment, net5,681
 4,999
Goodwill46,557
 45,128
Trademarks32,700
 32,700
Customer relationships, net15,904
 16,914
Other non-current assets3,073
 943
Total assets$121,124
 $111,800
Liabilities and stockholders' deficit   
Current liabilities   
Accounts payable$2,149
 $1,458
Other current liabilities9,024
 9,241
Current portion of debt3,500
 3,500
Advertising fund liabilities, restricted4,674
 2,533
Total current liabilities19,347
 16,732
Long-term debt, net136,685
 147,217
Deferred revenues, net of current8,545
 7,868
Deferred income tax liabilities, net12,039
 12,304
Other non-current liabilities2,182
 2,307
Total liabilities178,798
 186,428
Commitments and contingencies (see note 7)

 

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, respectively291
 287
Additional paid-in-capital1,337
 1,194
Accumulated deficit(59,302) (76,109)
Total stockholders' deficit(57,674) (74,628)
Total liabilities and stockholders' deficit$121,124
 $111,800

 March 30,
2024		 December 30,
2023
 (Unaudited) 
Assets 
Current assets 
Cash and cash equivalents$108,305 $90,216 
Restricted cash11,444 11,444 
Accounts receivable, net13,643 12,408 
Prepaid expenses and other current assets3,774 4,948 
Advertising fund assets, restricted33,710 25,328 
Total current assets170,876 144,344 
Property and equipment, net99,345 91,292 
Goodwill67,708 67,708 
Trademarks32,700 32,700 
Customer relationships, net7,424 7,740 
Other non-current assets34,198 34,041 
Total assets$412,251 $377,825 
Liabilities and stockholders' deficit
Current liabilities
Accounts payable$6,444 $4,725 
Other current liabilities38,675 40,951 
Advertising fund liabilities33,710 25,328 
Total current liabilities78,829 71,004 
Long-term debt, net712,790 712,327 
Deferred revenues, net of current31,543 30,145 
Deferred income tax liabilities, net5,634 3,721 
Other non-current liabilities17,834 17,994 
Total liabilities846,630 835,191 
Commitments and contingencies (see Note 7)
Stockholders' deficit
Common stock, $0.01 par value; 100,000,000 shares authorized; 29,369,978 and 29,337,920 shares issued and outstanding as of March 30, 2024 and December 30, 2023, respectively294 293 
Additional paid-in-capital918 2,676 
Retained deficit(435,226)(459,994)
Accumulated other comprehensive loss(365)(341)
Total stockholders' deficit(434,379)(457,366)
Total liabilities and stockholders' deficit$412,251 $377,825 
See accompanying notes to consolidated financial statements.

4



WINGSTOP INC. AND SUBSIDIARIES
Consolidated Statements of OperationsComprehensive Income
(amounts in thousands, except per share data)
(Unaudited)
 Thirteen Weeks Ended
 March 30,
2024		April 1,
2023
Revenue:
Royalty revenue, franchise fees and other$67,097 $48,188 
Advertising fees50,149 37,463 
Company-owned restaurant sales28,543 23,070 
Total revenue145,789 108,721 
Costs and expenses:
Cost of sales (1)
21,271 16,695 
Advertising expenses53,192 39,643 
Selling, general and administrative25,178 23,645 
Depreciation and amortization3,410 2,989 
Loss on disposal of assets— 77 
Total costs and expenses103,051 83,049 
Operating income42,738 25,672 
Interest expense, net4,544 4,573 
Other (income) expense(303)188 
Income before income tax expense38,497 20,911 
Income tax expense9,750 5,242 
Net income$28,747 $15,669 
Earnings per share
Basic$0.98 $0.52 
Diluted$0.98 $0.52 
Weighted average shares outstanding
Basic29,349 29,947 
Diluted29,478 30,031 
Dividends per share$0.22 $0.19 
Other comprehensive income (loss)
Currency translation adjustment$(24)$147 
Other comprehensive income (loss)(24)147 
Comprehensive income$28,723 $15,816 
 Thirteen Weeks Ended Thirty-Nine Weeks Ended
 September 30,
2017		 September 24,
2016		 September 30,
2017		 September 24,
2016
        
Revenue:     
  
Royalty revenue and franchise fees$16,354
 $13,660
 $50,204
 $41,463
Company-owned restaurant sales9,672
 8,150
 27,063
 25,144
Total revenue26,026
 21,810
 77,267
 66,607
Costs and expenses:     
  
Cost of sales (1)
7,823
 6,091
 21,290
 18,352
Selling, general and administrative8,144
 8,893
 26,694
 25,120
Depreciation and amortization881
 746
 2,407
 2,187
Total costs and expenses16,848
 15,730
 50,391
 45,659
Operating income9,178
 6,080
 26,876
 20,948
Interest expense, net1,302
 1,390
 3,908
 2,858
Other expense, net—
 216
 —
 254
Income before income tax expense7,876
 4,474
 22,968
 17,836
Income tax expense2,864
 1,721
 6,161
 6,714
Net income$5,012
 $2,753
 $16,807
 $11,122
        
Earnings per share       
Basic$0.17
 $0.10
 $0.58
 $0.39
Diluted$0.17
 $0.09
 $0.57
 $0.38
        
Weighted average shares outstanding       
Basic29,081
 28,725
 29,003
 28,652
Diluted29,384
 29,014
 29,362
 28,991
        
Dividends per share$0.07
 $2.90
 $0.07
 $2.90
        
(1) exclusive of depreciation and amortization, shown separately
      

(1) Cost of sales includes all operating expenses of company-owned restaurants, including advertising expenses, and excludes depreciation and amortization, which are presented separately.
See accompanying notes to consolidated financial statements.




5

WINGSTOP INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Deficit
For the Thirteen Weeks EndedApril 1, 2023 and March 30, 2024
(amounts in thousands, except share data)
(Unaudited)
Common Stock
SharesAmount
Additional
Paid-In Capital
Retained DeficitAccumulated Other Comprehensive LossTotal Stockholders’ Deficit
Balance at December 31, 202229,932,668 $300 $2,797 $(393,321)$(637)$(390,861)
Net income— — — 15,669 — 15,669 
Shares issued under stock plans49,817 — 111 — — 111 
Tax payments for restricted stock upon vesting(13,613)— — (2,292)— (2,292)
Stock-based compensation expense, net of forfeitures— — 3,345 — — 3,345 
Dividends declared on common stock and equivalents— — (5,444)(465)— (5,909)
Currency translation adjustment— — — — 147 147 
Balance at April 1, 202329,968,872 300 809 (380,409)(490)(379,790)
Common Stock
SharesAmountAdditional
Paid-In Capital		Retained DeficitAccumulated Other Comprehensive LossTotal Stockholders’ Deficit
Balance at December 30, 202329,337,920 $293 $2,676 $(459,994)$(341)$(457,366)
Net income— — — 28,747 — 28,747 
Shares issued under stock plans42,918 1 707 — — 708 
Tax payments for restricted stock upon vesting(10,860)— — (3,717)— (3,717)
Stock-based compensation expense, net of forfeitures— — 3,812 — — 3,812 
Dividends declared on common stock and equivalents— — (6,277)(262)— (6,539)
Currency translation adjustment— — — — (24)(24)
Balance at March 30, 202429,369,978 294 918 (435,226)(365)(434,379)
See accompanying notes to consolidated financial statements.
6

WINGSTOP INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(amounts in thousands)
(Unaudited)
 Thirteen Weeks Ended
 March 30,
2024		April 1,
2023
Operating activities  
Net income$28,747 $15,669 
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization3,410 2,989 
Deferred income taxes1,913 (800)
Stock-based compensation expense3,812 3,345 
Loss on disposal of assets— 77 
Amortization of debt issuance costs516 515 
Changes in operating assets and liabilities:
Accounts receivable(1,235)(676)
Prepaid expenses and other assets391 1,647 
Advertising fund assets and liabilities, net5,297 9,605 
Accounts payable and other current liabilities(127)2,633 
Deferred revenue1,922 654 
Other non-current liabilities13 40 
Cash provided by operating activities44,659 35,698 
Investing activities
Purchases of property and equipment(11,158)(4,319)
Payments for investments(500)— 
Cash used in investing activities(11,658)(4,319)
Financing activities
Proceeds from exercise of stock options708 111 
Repayments of long-term debt— (1,825)
Tax payments for restricted stock upon vesting(3,717)(2,292)
Dividends paid(6,606)(6,081)
Cash provided by (used in) financing activities(9,615)(10,087)
Net increase (decrease) in cash, cash equivalents, and restricted cash23,386 21,292 
Cash, cash equivalents, and restricted cash at beginning of period119,676 205,715 
Cash, cash equivalents, and restricted cash at end of period$143,062 $227,007 
Supplemental information:
Accrued capital expenditures$2,531 $6,668 



 Thirty-Nine Weeks Ended
 September 30,
2017		 September 24,
2016
    
Operating activities 
  
Net income$16,807
 $11,122
Adjustments to reconcile net income to cash provided by operating activities:   
Depreciation and amortization2,407
 2,187
Deferred income taxes(265) (68)
Stock-based compensation expense894
 392
Amortization of debt issuance costs219
 357
Changes in operating assets and liabilities:   
Accounts receivable(1,442) 875
Prepaid expenses and other assets(951) (98)
Accounts payable and other current liabilities(331) 961
Deferred revenue769
 201
Other non-current liabilities(127) 169
Cash provided by operating activities17,980
 16,098
    
Investing activities   
Purchases of property and equipment(1,834) (1,471)
Acquisition of restaurants from franchisees(3,949) —
Cash used in investing activities(5,783) (1,471)
    
Financing activities   
Proceeds from exercise of stock options1,301
 459
Borrowings of long-term debt3,500
 165,000
Repayments of long-term debt(14,125) (102,500)
Payment of deferred financing costs—
 (1,180)
Dividends paid(2,034) (83,268)
Cash used in financing activities(11,358) (21,489)
    
Net change in cash and cash equivalents839
 (6,862)
Cash and cash equivalents at beginning of period3,750
 10,690
Cash and cash equivalents at end of period$4,589
 $3,828


See accompanying notes to consolidated financial statements.
7
WINGSTOP INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)



(1)    Basis of Presentation and Update to Significant Accounting Policies
BasisNature of Presentation
operations.Wingstop Inc. (“Wingstop”, together with its consolidated subsidiaries (collectively, “Wingstop” or the “Company”), through its primary operating subsidiary, Wingstop Restaurants Inc. (“WRI”), collectively referred to as the “Company”, is in the business of franchising and operating Wingstop restaurants. As of SeptemberMarch 30, 2017, 971 franchised restaurants were in operation domestically, and 94 international franchised restaurants were in operation across seven countries. As of September 30, 2017,2024, the Company ownedhad a total of 2,279 restaurants in its system. The Company’s restaurant base is approximately 98% franchised, with 2,229 franchised locations (including 305 international locations) and operated 23 restaurants.50 company-owned restaurants as of March 30, 2024.
Basis of presentation. The accompanying unaudited consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. Consequently, financial information and disclosures normally included in financial statements prepared annually in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted. Balance sheet amounts are as of SeptemberMarch 30, 20172024 and December 31, 201630, 2023, and operating results are for the thirteen and thirty-nine weeks ended SeptemberMarch 30, 20172024 and September 24, 2016.April 1, 2023.
In the Company’s opinion, all necessary adjustments have been made for the fair presentation of the results of the interim periods presented. The results of operations for such interim periods are not necessarily indicative of the results to be expected for the full year. The accompanying interim unaudited consolidated financial statements should be read in conjunction with the audited financial statements and the related notes thereto included in the Company’s annual reportAnnual Report on Form 10-K for the fiscal year ended December 31, 2016.30, 2023.
Fiscal year.The Company uses a 52/52- or 53-week fiscal year that ends on the last Saturday of the calendar year. Fiscal years 20172024 and 20162023 each have 52 weeksweeks.
Cash, Cash Equivalents, and 53 weeks, respectively.
Advertising Fund
The Company administers the Wingstop Restaurants Advertising Fund (“Ad Fund”), which is used for various forms of advertising for the Wingstop brand. The revenues, expensesRestricted Cash. Cash, cash equivalents, and restricted cash flows of the Ad Fund are not included inwithin the Consolidated Statements of Operations orBalance Sheets and the Consolidated Statements of Cash Flows because the Company does not have complete discretion over the usage of the funds. Beginning in fiscal year 2017, in conjunction with the launch of national advertising, the advertising fund contribution collected from Wingstop restaurant franchisees and WRI-owned restaurants increased from 2% to 3% of gross sales. This change is not an increase to the existing 4% of the restaurants’ gross sales that has historically been required to be spent on advertising according to our franchise agreement, but rather a reallocation of the types of advertising on which the 4% advertising fee will be spent. For the thirty-nine weeks ended September 30, 2017 and September 24, 2016 the Company made discretionary contributions to the Ad Fund totaling $4.8 million and $1.7 million, respectively, for the purpose of supplementing the national advertising campaign, which were included in Selling, general & administrative (“SG&A”) expenses in the Consolidated Statements of Operations.
Recent Accounting Pronouncements
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). This update provides a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. The guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. This update is effective for annual and interim periods beginning after December 15, 2017 with early adoption permitted in fiscal year 2017. The Company will adopt this new guidance in fiscal year 2018 and expects to use the full retrospective transition method, which will result in restating each prior reporting period presented, fiscal years 2016 and 2017, in the year of adoption, as well as a cumulative effect adjustment to the opening balance of Accumulated Deficit as of the first day of fiscal year 2016.March 30, 2024 and December 30, 2023 were as follows (in thousands):
Based on a preliminary assessment, the Company believes the recognition of the majority of its revenues, including ongoing royalty fee revenues, which are based on a percentage of franchise sales,
March 30, 2024December 30, 2023
Cash and cash equivalents$108,305 $90,216 
Restricted cash11,444 11,444 
Restricted cash, included in Advertising fund assets, restricted23,313 18,016 
Total cash, cash equivalents, and restricted cash$143,062 $119,676 
Recently issued accounting pronouncements. We reviewed all recently issued accounting pronouncements and revenues from Company-owned stores, willconcluded that they were either not be affected by the new guidance. The Company expects the adoption of the new guidance to change the timing of recognition of initial franchise fees, including development and territory fees for our international business, and renewal fees. Currently, these fees are generally
WINGSTOP INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)

recognized upfront upon either opening of the respective restaurantapplicable or when a renewal agreement becomes effective. The new guidance will generally require these fees to be recognized over the term of the related franchise license for the respective restaurant.
The Company also expects the adoption of this new guidance to change the reporting of advertising fund contributions from franchisees and the related advertising fund expenditures, which are not currently included in the consolidated statements of operations. Under the new guidance, the Company expects advertising fund contributions and expenditures to be reported on a gross basis in the consolidated statements of operations. Although we expect this changeexpected to have a materialsignificant impact toon our total revenues and expenses, we expect such contributions and expenditures to be largely offsetting and not to materially impact our reported net income.
Although the majority of the assessment phase is complete, the Company continues to evaluate the impact the adoption of this new guidance willconsolidated financial statements. There have on these and other revenue transactions, in additionbeen no changes to the impact onrecently issued accounting policies and related disclosures.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. ASU 2016-02 will be effective beginningpronouncements not yet adopted disclosed in the first quarter of 2019. Early adoption of ASU 2016-02 as of its issuance is permitted. This new guidance requires a modified retrospective transition approachCompany’s Annual Report on Form 10-K for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. The Company is currently evaluating the impact of adopting this new guidance on the consolidated financial statements.
In March 2016, the FASB issued Accounting Standards Update 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which was issued to simplify accounting for several aspects of share-based payment transactions, including the income tax impact, classification on the statement of cash flows and forfeitures.
The Company adopted this new standard on January 1, 2017.

As a result, the recognition of excess tax benefits are reflected in our provision for income taxes in the Consolidated Statements of Operations rather than Stockholders’ deficit in the Consolidated Balance Sheet for all periods after fiscal year 2016. This provision was required to be applied prospectively. For the thirteen and thirty-nine weeks ended SeptemberDecember 30, 2017, we recognized $0.1 million and $2.5 million, respectively, of excess tax benefits in income tax expense in the Consolidated Statements of Operations.2023.

Excess tax benefits are now reported in cash flows from operating activities rather than cash flows from financing activities in the Consolidated Statement of Cash Flows. We elected to apply this change in presentation retrospectively, and thus, prior periods have been adjusted, resulting in an increase to cash provided by operating activities and cash used in financing activities of $1.0 million for the thirty-nine weeks ended September 24, 2016.
This new standard allows entities to make an accounting policy election to either estimate the number of equity awards that are expected to vest, as previously required, or account for forfeitures when they occur. We have elected to recognize forfeitures in the period they occur. This change in accounting policy did not result in a material impact to the Consolidated Statements of Operations.
(2)    Earnings per Share
Basic earnings per share is computed by dividing income available to common shareholdersstockholders by the weighted average number of shares of common sharesstock outstanding for the reporting period. Diluted earnings per share reflects the potential dilution that could occur if securities convertible into, or other contracts to issue, common stock were exercised or converted into common stock. For the calculation of diluted earnings per share, the basic weighted average number of shares is increased by the dilutive effect of the exercise and vesting of stock options and service-based and performance-based restricted stock units, respectively, as determined using the treasury stock method.
8
WINGSTOP INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
Basic weighted average shares outstanding is reconciled to diluted weighted average shares outstanding as follows (in thousands):
 Thirteen Weeks Ended Thirty-Nine Weeks Ended
 September 30,
2017		 September 24,
2016		 September 30,
2017		 September 24,
2016
Basic weighted average shares outstanding29,081
 28,725
 29,003
 28,652
Dilutive shares303
 289
 359
 339
Diluted weighted average shares outstanding29,384
 29,014
 29,362
 28,991
WINGSTOP INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)

Thirteen Weeks Ended
March 30,
2024		April 1,
2023
Basic weighted average shares outstanding29,349 29,947 
Dilutive shares129 84 
Diluted weighted average shares outstanding29,478 30,031 
For the thirteen weeks ended SeptemberMarch 30, 20172024 and September 24, 2016, respectively, approximately 3,000 and 5,000April 1, 2023, equity awards representing approximately 12,000 and 13,000 shares, respectively, were excluded from the dilutive earnings per share calculation because the effect would have been anti-dilutive.
For the thirty-nine weeks ended September 30, 2017 and September 24, 2016, respectively, approximately 11,000 and 5,000 equity awards were excluded from the dilutive earnings per share calculation because the effect would have been anti-dilutive. 
(3)    Stockholders’ Deficit
Dividends
On August 3, 2017,In connection with the Company’s regular dividend program, the Company’s Board of Directors declared a quarterly dividend of $0.07$0.22 per share of common stock for shareholdersin the first quarter of record as2024, resulting in a total dividend payment of September 3, 2017, which was paid on September 18, 2017, totaling $2.0approximately $6.5 million.

Subsequent to the thirdfirst quarter, on November 2, 2017,April 30, 2024, the Company’s Board of Directors declared a quarterly dividend of $0.07$0.22 per share of common stock for shareholdersstockholders of record as of December 4, 2017,May 17, 2024. The regular quarterly dividend is to be paid on December 19, 2017,June 7, 2024, totaling approximately $2.0$6.5 million.
Share Repurchase Program
On August 17, 2023, the Company announced a share repurchase program with authorization to purchase up to $250.0 million of its outstanding shares of common stock (the “Share Repurchase Program”). As of March 30, 2024, $125.0 million remained available for repurchase under the Share Repurchase Program.
(4)    Fair Value Measurements
Fair value is the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. Assets and liabilities are classified using a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value as follows:
Level 1 — Unadjusted quoted prices for identical instruments traded in active markets.
Level 2 — Observable market-based inputs or unobservable inputs corroborated by market data.
Level 3 — Unobservable inputs reflecting management’s estimates and assumptions.
9
WINGSTOP INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The carrying values of cash and cash equivalents, accounts receivable, and accounts payable approximate fair value due to their short-term nature. Fair value of debt isand the investment in bonds issued by the Company’s United Kingdom master franchisee, Lemon Pepper Holdings Ltd. (“LPH”), are determined on a non-recurring basis, which results are summarized as follows (in thousands):
 
Fair Value
Hierarchy
 March 30, 2024December 30, 2023
  
Carrying
Value
 Fair Value
Carrying
Value
Fair Value
Securitized Financing Facility:
2020-1 Class A-2 Senior Secured Notes (1)
Level 2$472,800 $426,187 $472,800 $423,823 
2022-1 Class A-2 Senior Secured Notes (1)
Level 2$248,125 $222,370 $248,125 $222,370 
Investments in bonds of LPH (2)
Level 3$3,572 $4,314 $3,557 $4,306 
 
Fair Value
Hierarchy
 September 30, 2017 December 31, 2016
  
Carrying
Value (2)
 Fair Value 
Carrying
Value (2)
 Fair Value
Senior Secured Credit Facility:   
  
  
  
Term loan facility (1)
Level 2 $65,625
 $65,625
 $68,250
 $68,250
Revolving credit facility (1)
Level 2 $75,000
 $75,000
 $83,000
 $83,000
(1) The fair value of long-term debtthe 2020-1 and 2022-1 Class A-2 Senior Secured Notes was estimated using available market information.
(2) Excluding issuance costs netted on the Balance Sheet.The fair value approximates discounted cash flows using current market rates for debt investments with similar maturities and credit risk.
The Company also measures certain non-financial assets (primarily long-lived assets, intangible assets, and goodwill) at fair value on a non-recurring basis primarily long-lived assets, intangible assets and goodwill, in connection with ourits periodic evaluations of such assets for potential impairment.
(5)Income Taxes
Income tax expense and the effective tax rate were $2.9$9.8 million and 36.4%25.3%, respectively, for the thirteen weeks ended SeptemberMarch 30, 2017,2024, and $1.7$5.2 million and 38.5%25.1%, respectively, for the thirteen weeks ended September 24, 2016. Income tax expense and theApril 1, 2023. The effective tax rate were $6.2 million and 26.8%, respectively, for the thirty-nine weeks ended September 30, 2017, and $6.7 million and 37.6%, respectively, for the thirty-nine weeks ended September 24, 2016.
Income tax expense for the thirteen and thirty-nine weeks ended September 30, 2017 includes $0.1 million and $2.5 million in tax benefits, respectively, resulting from the recognition of excess tax benefits from share-based compensation in income tax expense rather than paid-in capital due to the adoption of ASU 2016-09, which resulted in a lower effective tax rate for the thirteen and thirty-nine weeks ended September 30, 2017 comparedremained comparable to the prior year period.fiscal first quarter.
(6)Debt Obligations
Long-term debt consisted of the following components (in thousands):
March 30, 2024December 30, 2023
2020-1 Class A-2 Senior Secured Notes$472,800 $472,800 
2022-1 Class A-2 Senior Secured Notes248,125 248,125 
Debt issuance costs, net of amortization(8,135)(8,598)
Total debt712,790 712,327 
The senior secured credit facilityCompany’s outstanding debt was issued by Wingstop Funding LLC, a limited-purpose, bankruptcy-remote, wholly-owned indirect subsidiary of Wingstop Inc. and consists of (i) Series 2020-1 2.84% Fixed Rate Senior Secured Notes, Class A-2 (the “2020 Class A-2 Notes”), (ii) Series 2022-1 3.734% Fixed Rate Senior Secured Notes, Class A-2 (the “2022 Class A-2 Notes”), and (iii) a term loanrevolving financing facility in an aggregateof Series 2022-1 Variable Funding Senior Notes, Class A-1 (the “2022 Variable Funding Notes,” and together with the 2022 Class A-2 Notes, the “2022 Notes”), which permits borrowings of up to a maximum principal amount of $70.0$200 million, subject to certain borrowing conditions, a portion of which may be used to issue letters of credit.
No borrowings were outstanding under the 2022 Variable Funding Notes as of March 30, 2024 and a revolving credit facility up to an aggregate amount of $110.0 million. December 30, 2023.
As of SeptemberMarch 30, 2017,2024, the term loan facilityCompany’s leverage ratio under the 2020 Class A-2 Notes and the revolving credit facility had2022 Class A-2 Notes was less than 5.0x. Per the terms of the Company’s debt agreements, principal payments can be suspended at the borrower’s election until the repayment date as long as the Company maintains a leverage ratio of less than 5.0x. Accordingly, the Company elected to suspend payments following the principal payment made in the second quarter of 2023, and the entire outstanding balancesbalance of $65.6$720.9 million of the 2020 Class A-2 Notes and $75.0 million, respectively, bearingthe 2022 Class A-2 Notes has been classified as long-term debt due after fiscal year 2026.
The 2020 Class A-2 Notes and 2022 Notes were issued in securitization transactions, and are guaranteed by certain limited-purpose, bankruptcy-remote, wholly-owned indirect subsidiaries of the Company and secured by a security interest at 3.33%.in
10
WINGSTOP INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)

In 2017, the Company made payments of $11.5 million and $2.6 million on the outstanding principal balance of its revolving credit facility and term loan facility, respectively, and borrowings on its revolving credit facility of $3.5 million.
The senior secured credit facility is secured by substantially all of their assets, including certain domestic and foreign revenue-generating assets, consisting principally of the Companyfranchise-related agreements, intellectual property, and requires compliance with certain financial and non-financial covenants. As of September 30, 2017, the Company was in compliance with all covenants.vendor rebate contracts.
As of September 30, 2017, the scheduled principal payments on debt were as follows (in thousands):
Remainder of fiscal year 2017$875
Fiscal year 20183,500
Fiscal year 20192,625
Fiscal year 20203,500
Fiscal year 2021130,125
Total$140,625
(7)    Commitments and Contingencies
WRI leases certain office and retail space and equipment under non-cancelable operating leases with terms expiring at various dates through July 2032.
A schedule of future minimum rental payments required under our operating leases, excluding contingent rent, that have initial or remaining non-cancelable lease terms in excess of one year, as of September 30, 2017, is as follows (in thousands):
Remainder of fiscal year 2017$446
Fiscal year 20181,783
Fiscal year 20191,561
Fiscal year 20201,436
Fiscal year 20211,282
Fiscal year 20221,226
Thereafter4,038
Total$11,772
Rent expense under cancelable and non-cancelable leases was $508,000 and $479,000 for the thirteen weeks ended September 30, 2017 and September 24, 2016, respectively, and $1.5 million and $1.4 million for the thirty-nine weeks ended September 30, 2017 and September 24, 2016, respectively.
The Company is subject to legal proceedings, claims, and liabilities, such as employment-relatedincluding claims and premises-liability cases,actions resulting from employment-related and franchise-related matters, which arise in the ordinary course of business and are generally covered by insurance. In the opinion of management, the amount of ultimate liability with respect to thosesuch actions shouldis not likely to have a material adverse impact on the Company’s financial position, results of operations, or cash flows.
Corporate office lease
During the fiscal first quarter 2024, the Company executed a lease for an office building with undiscounted fixed payments over the initial term of $66.9 million. The lease has not yet commenced, and therefore has not been recognized on the Company's Consolidated Balance Sheet. The lease has an initial lease term of 13.3 years and is expected to commence in the fiscal second quarter 2024.
(8)Stock-Based Compensation
During the thirteen weeks ended March 30, 2024, the Company granted 22,200 restricted stock units (“RSUs”) to certain employees. The RSUs granted to certain employees generally vest in equal annual amounts over a three-year period subsequent to the grant date and had a weighted-average grant-date fair value of $370.76 per unit.
In addition, the Company granted 23,433 performance stock units (“PSUs”) to certain employees during the thirteen weeks ended March 30, 2024. Of the total PSUs granted, 20,297 PSUs are subject to a service condition and a performance vesting condition based on return on incremental invested capital (“ROI PSUs”). The ROI PSUs are generally eligible to cliff-vest approximately three years from the grant date, and the maximum vesting percentage that could be realized for each of the ROI PSUs is 250% based on the level of performance achieved for the awards. The remaining 3,136 PSUs granted are subject to a service condition and a performance vesting condition based on the number of net new restaurants opened over the performance period (“NNR PSUs”). The NNR PSUs vest in equal annual amounts over a three-year period, and the maximum vesting percentage that could be realized for each of the NNR PSUs is 100% based on the level of performance achieved for the awards. The PSUs had a weighted-average grant-date fair value of $370.76 per unit. Total compensation cost for the PSUs is determined based on the most likely outcome of the performance condition and the number of awards expected to vest based on the outcome.

Total compensation expense related to all share-based awards, net of forfeitures recognized, was $3.8 million and $3.3 million for the thirteen weeks ended March 30, 2024 and April 1, 2023, respectively, and was included in Selling, general and administrative (“SG&A”) expense in the Consolidated Statements of Comprehensive Income.
(9)    Revenue from Contracts with Customers
The following table represents a disaggregation of revenue from contracts with customers for the thirteen weeks ended March 30, 2024 and April 1, 2023 (in thousands):
Thirteen Weeks Ended
March 30, 2024April 1, 2023
Royalty revenue$61,192 $43,513 
Advertising fees and related income50,149 37,463 
Franchise fees1,242 1,061 

11
WINGSTOP INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)

(8)Stock-Based Compensation
Stock-based compensation is measured atFranchise fee, development fee, and international territory fee payments received by the grant date, basedCompany are recorded as deferred revenue on the calculated fair valueConsolidated Balance Sheets, which represents a contract liability. Deferred revenue is reduced as fees are recognized in revenue over the term of the award, and is recognized as an expense overfranchise license for the requisite employee service period (generallyrespective restaurant. As the vesting periodterm of the grant).franchise license is typically ten years, substantially all of the franchise fee revenue recognized in the thirteen weeks ended March 30, 2024 was included in the deferred revenue balance as of December 30, 2023. Approximately $10.2 million and $9.3 million of deferred revenue as of March 30, 2024 and December 30, 2023, respectively, relates to restaurants that have not yet opened, so the fees are not yet being amortized. The weighted average remaining amortization period for deferred franchise and renewal fees related to open restaurants is 7.0 years. The Company recognized $0.9 million in stock compensation expense fordid not have any material contract assets as of March 30, 2024.
(10)    Subsequent Event
Subsequent to the thirty-nine weeks ended September 30, 2017, with a corresponding increase to additional paid-in-capital. Stock compensation expense is included in SG&A in the Consolidated Statements of Operations.
Stock Options
The following table summarizes stock option activity (in thousands, except per share data):
 Stock Options Weighted Average Exercise Price Aggregate Intrinsic Value Weighted Average Remaining Term
Outstanding - December 31, 2016855
 $5.14
 $20,905
 6.8
Granted—
 $—
    
Exercised(325) $4.00
    
Canceled(109) $7.12
    
Outstanding - September 30, 2017421
 $5.52
 $11,679
 5.9
The total grant-date fair value of stock options vested during the thirty-nine weeks ended September 30, 2017 was $1.0 million. The total intrinsic value of stock options exercised during the thirty-nine weeks ended September 30, 2017 was $8.1 million. As of September 30, 2017, total unrecognized compensation expense related to unvested stock options was $1.1 million, which is expected to be recognized over a weighted-average period of 1.7 years.
Restricted Stock Units and Performance Stock Units
The following table summarizes activity related to restricted stock units and performance stock units (in thousands, except per share data):
 Restricted Stock Units Weighted Average Grant Date Fair Value Performance Stock Units Weighted Average Grant Date Fair Value
Outstanding - December 31, 2016—
 $—
 —
 $—
Granted105
 27.02
 94
 27.52
Released—
 —
 —
 —
Canceled(11) 26.30
 (8) 26.30
Outstanding - September 30, 201794
 $27.10
 86
 $27.63
The fair value of restricted stock units and performance stock units are based on the closing market priceend of the stock on the date of grant. The restricted stock units granted during the thirty-nine weeks ended September 30, 2017 vest over a three year service period. As of September 30, 2017, total unrecognized compensation expense related to unvested restricted stock units was $2.1 million, which is expected to be recognized over a weighted-average period of 2.4 years.
The performance stock units vest based on the outcome of certain performance criteria. For performance stock units granted during the thirty-nine weeks ended September 30, 2017, the amount of units that can be earned range from 0% to 100% of the number of performance awards granted, based on the achievement of certain adjusted EBITDA targets, as defined by the plan, over a performance period of one to three years. The compensation expense related to the performance stock units is recognized over the vesting period when the achievement of the performance conditions become probable. As of September 30, 2017, total unrecognized compensation expense related to unvested performance stock units was $1.8 million, which is expected to be recognized over a weighted-average period of 2.4 years.
Restricted Stock Awards
The Company granted 9,000 shares of restricted stock awards during the thirty-nine weeks ended September 30, 2017 with a weighted average grant date fair value of $29.12. The fair value of the non-vested restricted stock awards is based on the closing price on the date of grant. As of September 30, 2017, total unrecognized compensation expense related to unvested restricted stock awards was $0.4 million, which will be recognized over a weighted average period of approximately 2.4 years.
WINGSTOP INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)

(9)Business Segments
The Franchise segment consists of domestic and international franchise restaurants, which represent the majority of our system-wide restaurants. As of September 30, 2017, the franchise operations segment consisted of 1,065 restaurants operated by Wingstop franchisees in the United States and seven countries outside of the United States as compared to 929 franchised restaurants in operation as of September 24, 2016. Franchise operations revenue consists primarily of franchise royalty revenue, sales of franchise and development fees, international territory fees, and other revenue.
As of September 30, 2017, the Company segment consisted of 23 company-owned restaurants, located in the United States, as compared to 20 company-owned restaurants as of September 24, 2016. Company restaurant sales are comprised of food and beverage sales at company-owned restaurants. Company restaurant expenses are operating expenses at company-owned restaurants and include food, beverage, labor, benefits, utilities, rent and other operating costs.
Information on segments and a reconciliation to income before taxes are as follows (in thousands):
 Thirteen Weeks Ended Thirty-Nine Weeks Ended
 September 30,
2017		 September 24,
2016		 September 30,
2017		 September 24,
2016
Revenue:       
Franchise segment$16,354
 $13,660
 $50,204
 $41,463
Company segment9,672
 8,150
 27,063
 25,144
Total segment revenue$26,026
 $21,810
 $77,267
 $66,607
        
Segment Profit:       
Franchise segment$8,251
 $6,199
 $23,792
 $18,794
Company segment927
 1,236
 3,084
 4,211
Total segment profit9,178
 7,435
 26,876
 23,005
Corporate and other (1)
—
 1,355
 —
 2,057
Interest expense, net1,302
 1,390
 3,908
 2,858
Other (income) expense, net—
 216
 —
 254
Income before taxes$7,876
 $4,474
 $22,968
 $17,836
(1) Corporate and other includes corporate related items not allocated to reportable segments and consists primarily of expenses associated with the refinancing of our credit agreement and our public offerings.
(10)    Restaurant Acquisition
On July 16, 2017,fiscal first quarter 2024, the Company acquired twoone existing restaurantsrestaurant from a franchisee. The total purchase price was $3.9$3.3 million, and was paid in cash funded by operations and proceeds from our revolving credit facility.cash on hand. The results of operations of these locations are included in our Consolidated Statements of Operations as of the date of acquisition. Therestaurant acquisition is accounted for as a business combination.
The following table summarizes the final allocation of the purchase price toCompany is still determining the estimated fair valuesvalue of assets acquired and liabilities assumed at the date of the acquisition, inclusive of adjustments made during the measurement period (in thousands): 
 Final Purchase Price Allocation
Inventory$16
Property and equipment183
Reacquired franchise rights2,323
Goodwill1,429
Gift card liability(2)
Total purchase price$3,949
WINGSTOP INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)

assumed. The excess of the purchase price over the aggregate fair value of assets acquired waswill be allocated to goodwill and is attributable to the benefits expected as a result of the acquisition, including sales and unit growth opportunities. As of September 30, 2017, $1.4 million of the goodwill from the acquisition is expected to be deductible for federal income tax purposes.
Pro-forma financial information of the combined entities is not presented due to the immaterial impact of the financialgoodwill. The results of the acquired restaurants onoperations of this location will be included in our consolidated financial statements.
The fair value measurementConsolidated Statements of tangible and intangible assets and liabilitiesComprehensive Income as of the acquisition date is based on significant inputs not observed in the market and thus represents a Level 3 fair value measurement. Fair value measurements for reacquired franchise rights were determined using the income approach. Fair value measurements for property and equipment were determined using the cost approach.of acquisition.

12

Item 2.     Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of ourthe financial condition and results of operations of Wingstop Inc. (collectively with its direct and indirect subsidiaries on a consolidated basis, “Wingstop,” the “Company,” “we,” “our,” or “us”) should be read in conjunction with the accompanying unaudited consolidated financial statements and related notes in Part I, Item 1 of this Quarterly Report on Form 10-Q (this “Quarterly Report”) and with the audited consolidated financial statements and the related notes included in our annual reportAnnual Report on Form 10-K.10-K for the fiscal year ended December 30, 2023 (our “Annual Report”). The statements in this discussion regarding industry outlook, our expectations regarding our future performance, liquidity and capital resources, and other non-historical statements in this discussion are forward-looking statements. These forward-looking statements are subject to risks and uncertainties, including, but not limited to, the risks and uncertainties described in “Special Note Regarding Forward-Looking Statements”Statements,” below and “Risk Factors” beginning on page 1511 of our annual report on Form 10-K.Annual Report. Our actual results may differ materially from those contained in or implied by any forward-looking statements.
We operate on a 5252- or 53 week53-week fiscal year ending on the last Saturday of each calendar year. Our fiscal quarters are comprised of 13 weeks, with the exception of the fourth quarter of a 53 week53-week year, which contains 14 weeks. Fiscal years 20172024 and 20162023 each contain 52 weeks and 53 weeks, respectively.weeks.
Overview
Wingstop is a high-growth franchisor and operator of restaurants that offer cooked-to-order, hand-sauced and tossed chicken wings.

We believe we pioneered the concept of wings as a “center-of-the-plate” item for all of our meal occasions. While other concepts include wings as add-on menu items or focus on wings in a bar or sports-centric setting, we are singularly focused on wings, fries and sides, which generate approximately 92% of our system-wide sales.

We offer 11 bold, distinctive and craveable flavors on our bone-in and boneless chicken wings paired with fresh-cut, seasoned fries and sides made fresh daily. Our menu is highly-customizable for different dining occasions, and we believe it delivers a compelling value proposition for groups, families, and individuals. We have broad and growing consumer appeal anchored by a sought after core demographic of 18-34 year old Millennials, which we believe is a loyal consumer group that dines at fast casual restaurants more frequently.

Founded in 1994 in Garland, Texas, we have sold approximately 4 billion wings since our inception. Today, Wingstop is the largest fast casual chicken wings-focused restaurant chain in the world, with over 2,250 locations worldwide. We are dedicated to serving the world flavor through an unparalleled guest experience and has demonstratedoffering of classic wings, boneless wings, tenders, and chicken sandwiches, always cooked to order and hand-sauced-and-tossed in 11 bold, distinctive flavors.
The Company is primarily a franchisor, with approximately 98% of Wingstop’s restaurants currently owned and operated by independent franchisees. We believe our asset-light, highly-franchised business model generates strong operating margins and requires low capital expenditures, creating stockholder value through strong and consistent free cash flow and capital-efficient growth. As
First Quarter of September 30, 2017, we had2024 Highlights
•System-wide sales increased 36.8% over the prior fiscal first quarter to $1.1 billion;
•65 net new openings in the fiscal first quarter 2024 for a total 1,088 restaurants across 42 statesof 2,279 worldwide locations;
•Domestic same store sales increased 21.6% over the prior fiscal first quarter;
•Company-owned restaurant same store sales increased 6.2% over the prior fiscal first quarter;
•Digital sales increased to 68.3% of system-wide sales;
•Domestic AUV increased to $1.9 million;
•Total revenue increased 34.1% over the prior fiscal first quarter to $145.8 million;
•Net income increased 83.5% to $28.7 million, or $0.98 per diluted share, compared to net income of $15.7 million, or $0.52 per diluted share in the prior fiscal first quarter;
•Adjusted net income and eight countriesadjusted earnings per diluted share, both non-GAAP measures, increased 61.8% to $28.7 million, or $0.98 per diluted share, compared to $17.8 million, or $0.59 per diluted share in our system. Our restaurant base is 98% franchised, with 1,065 franchised locations (including 94 international locations)the prior fiscal first quarter; and 23 company-owned restaurants.

•Adjusted EBITDA, a non-GAAP measure, increased 45.3% to $50.3 million, compared to adjusted EBITDA of $34.6 million in the prior fiscal first quarter.
13

Key Performance Indicators
Key measures that we use in evaluating our restaurants and assessing our business include the following:
Number of restaurants. Management reviews the number of new restaurants, the number of closed restaurants, and the number of acquisitions and divestitures of restaurants to assess net new restaurant growth, system-wide sales, royalty and franchise fee revenue and company-owned restaurant sales.growth.
Thirteen Weeks Ended
March 30,
2024		April 1,
2023
Domestic Franchised Activity:
Beginning of period1,877 1,678 
Openings47 32 
Closures— — 
Restaurants end of period1,924 1,710 
Domestic Company-Owned Activity:
Beginning of period49 43 
Openings1 — 
Closures— — 
Restaurants end of period50 43 
Total Domestic Restaurants1,974 1,753 
International Franchised Activity(1):
Beginning of period288 238 
Openings17 8 
Closures— (3)
Restaurants end of period305 243 
Total System-wide Restaurants2,279 1,996 
 Thirteen Weeks Ended Thirty-Nine Weeks Ended
 September 30,
2017		 September 24,
2016		 September 30,
2017		 September 24,
2016
Domestic Franchised Activity:       
Beginning of period946
 831
 901
 767
Openings28
 31
 79
 96
Closures(1) —
 (7) (1)
Acquired by Company(2) —
 (2) —
Restaurants end of period971
 862
 971
 862
        
Domestic Company-Owned Activity:       
Beginning of period21
 20
 21
 19
Openings—
 —
 —
 1
Closures—
 —
 —
 —
Acquired from franchisees2
 —
 2
 —
Restaurants end of period23
 20
 23
 20
        
Total Domestic Restaurants994
 882
 994
 882
        
International Franchised Activity:       
Beginning of period89
 63
 76
 59
Openings5
 4
 20
 11
Closures—
 —
 (2) (3)
Restaurants end of period94
 67
 94
 67
        
Total System-wide Restaurants1,088
 949
 1,088
 949
(1) Including U.S. territories
System-wide sales. System-wide sales represents net sales for all of our company-owned and franchised restaurants, as reported by franchisees. While we do not record franchised restaurant sales as revenue, our royalty revenue is calculated based on a percentage of franchised restaurant sales, which generally range from 5.0% to 6.0% of gross sales net of discounts. This measure allows management to better assess changes in our royalty revenue, our overall store performance, the health of our brand, and the strength of our market position relative to competitors. Our system-wide sales growth is driven by new restaurant openings as well as increases in same store sales.
AverageDomestic average unit volume (AUV)(“AUV”). Domestic 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 domestic company-owned and franchised restaurant economics. Changes in domestic AUV growth are primarily driven by increases in same store sales and are also influenced by opening new restaurants.
SameDomestic same store sales. SameDomestic same store sales reflects the change in year-over-year sales for the same store restaurant base. We define the same store restaurant base to include those restaurants open for at least 52 full weeks. This measure highlights theperformance of existing restaurants, while excluding the impact of new restaurant openings and permanent closures. We reviewsame store sales for domestic company-owned restaurants as well as system-wide domestic restaurants. SameDomestic same store sales aregrowth is driven by changesincreases in transactions and average transaction size. Transaction size changesincreases are driven by price changesincreases or favorable mix shiftsshift from either a changean increase in the number of items purchased or shifts into higher/lowerhigher priced categories of items.

EBITDA and Adjusted EBITDA. We define EBITDA as net income before interest expense, net, income tax expense (benefit), and depreciation and amortization. We define Adjusted EBITDA as net income before interest expense, net, income tax
14

expense (benefit), and depreciation and amortization, with further adjustments for losses on debt extinguishment and financing transactions, transaction costs, gainscosts and losses on the disposal of assets,fees associated with investments in our strategic initiatives, and stock-based compensation expense. Adjusted EBITDA may not be comparable to other similarly titled captions of other companies due to differences in methods of calculation. For a reconciliation of net income to EBITDA and Adjusted EBITDA see the table below. Forand for further discussion of EBITDA and Adjusted EBITDA as non-GAAP measures and how we utilize them, see footnote 2 below.
Adjusted Net Income and Adjusted Earnings Per Diluted Share. We define Adjusted net income as net income adjusted for losses on debt extinguishment and financing transactions, transaction costs, costs and fees associated with investments in our strategic initiatives, and related tax adjustments that management believes are not indicative of the Company’s core operating results or business outlook over the long term. We define Adjusted earnings per diluted share as Adjusted net income divided by weighted average diluted share count. For a reconciliation of net income to Adjusted net income and for further discussion of Adjusted net income and Adjusted earnings per diluted share as non-GAAP measures and how we utilize them, see footnote 3 below.
The following table sets forth our key performance indicators as well as our total revenue and net income for the thirteen and thirty-nine weeks ended SeptemberMarch 30, 20172024 and September 24, 2016 (dollars in thousands)April 1, 2023 (in thousands, except unit data):
 Thirteen Weeks Ended Thirty-Nine Weeks Ended
 September 30, 2017 September 24, 2016 September 30, 2017 September 24, 2016
Number of system-wide restaurants open at end of period1,088
 949
 1,088
 949
System-wide sales (1)
$274,021
 $235,975
 $802,420
 $707,077
Domestic restaurant AUV$1,102
 $1,126
 $1,102
 $1,126
System-wide domestic same store sales growth4.1% 4.1% 1.7% 3.9%
Company-owned domestic same store sales growth5.5% 4.8% 0.5% 6.9%
Total revenue$26,026
 $21,810
 $77,267
 $66,607
Net income$5,012
 $2,753
 $16,807
 $11,122
Adjusted EBITDA (2)
$10,412
 $8,319
 $30,177
 $25,545
Thirteen Weeks Ended
March 30, 2024April 1, 2023
Number of system-wide restaurants open at end of period2,279 1,996 
System-wide sales (1)
$1,123,607 $821,632 
Domestic restaurant AUV$1,918 $1,662 
Domestic same store sales growth21.6 %20.1 %
Company-owned domestic same store sales growth6.2 %10.3 %
Total revenue$145,789 $108,721 
Net income$28,747 $15,669 
Adjusted EBITDA (2)
$50,263 $34,584 
Adjusted net income (3)
$28,747 $17,771 
(1) The percentage of system-wide sales attributable to company-owned restaurants was 3.5%2.5% and 2.8% for both the thirteen weeks ended SeptemberMarch 30, 20172024 and September 24, 2016, and was 3.4% and 3.6% for the thirty-nine weeks ended September 30, 2017 and September 24, 2016,April 1, 2023, respectively. The remainder was generated by franchised restaurants, as reported by our franchisees.
(2) EBITDA and Adjusted EBITDA are supplemental measures of our performance that are not required by, or presented in accordance with, U.S. GAAP. EBITDA and Adjusted EBITDA are not measurements of our financial performance under U.S. GAAP and should not be considered as an alternative to net income or any other performance measure derived in accordance with U.S. GAAP, or as an alternative to cash flowsflow 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 transaction costs, gains and losses on the disposal of assets and stock-based compensation expense. There were no gains and losses on disposal of assets during the thirteen and thirty-nine weeks ended September 30, 2017 and September 24, 2016. 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 period over periodon 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 we believe they assist us 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;
15

•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 shares.plan.
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. Items excluded from these non-GAAP measures are significant components in understanding and assessing financial performance. In addition, the instruments governing our indebtedness use EBITDA (with additional adjustments) to measure our compliance with covenants such as fixed charge coverage, lease adjusted leverage and debt incurrence. 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 U.S. GAAP results and using these non-GAAP measures only as performance measures and supplementally. As noted in the table below, Adjusted EBITDA includes adjustments for losses on debt extinguishment and financing transactions, transaction costs, gainscosts and losses on disposal of assetsfees associated with investments in our strategic initiatives, and stock-based compensation among other items. It is reasonable to expect that these items will occur in future periods. However, weexpense. 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 reconciliation table below help management with a measure of our core operating performance over time by removing items that are not related to day-to-day operations.
The following table reconciles net income to EBITDA and Adjusted EBITDA for the thirteen and thirty-nine weeks ended SeptemberMarch 30, 20172024 and September 24, 2016April 1, 2023 (in thousands):
 Thirteen Weeks Ended Thirty-Nine Weeks Ended
 September 30,
2017		 September 24,
2016		 September 30,
2017		 September 24,
2016
Net income$5,012
 $2,753
 $16,807
 $11,122
Interest expense, net1,302
 1,390
 3,908
 2,858
Income tax expense2,864
 1,721
 6,161
 6,714
Depreciation and amortization881
 746
 2,407
 2,187
EBITDA$10,059
 $6,610
 $29,283
 $22,881
Additional adjustments:       
Transaction costs (a)
—
 1,570
 —
 2,272
Stock-based compensation expense (b)
353
 139
 894
 392
Adjusted EBITDA$10,412
 $8,319
 $30,177
 $25,545
Thirteen Weeks Ended
March 30,
2024		April 1,
2023
Net income$28,747 $15,669 
Interest expense, net4,544 4,573 
Income tax expense9,750 5,242 
Depreciation and amortization3,410 2,989 
EBITDA$46,451 $28,473 
Additional adjustments:
Consulting fees (a)
— 2,766 
Stock-based compensation expense (b)
3,812 3,345 
Adjusted EBITDA$50,263 $34,584 
(a) Represents costs and expenses related to the refinancingsnon-recurring consulting fees that are not part of our credit agreementongoing operations and our public offerings; all transaction costsare incurred to execute discrete, project-based strategic initiatives, which are included in SG&A withSelling, general and administrative on the exceptionConsolidated Statements of $215,000Comprehensive Income. The costs incurred in the thirteen weeks ended April 1, 2023 include consulting fees relating to a comprehensive review of our long-term growth strategy for our domestic business to explore potential future initiatives, which review was completed in fiscal year 2023. Given the magnitude and scope of this strategic review
16

initiative that is includednot expected to recur in Other expense, net during the thirteen and thirty-nine weeks ended September 24, 2016.foreseeable future, the Company considers the incremental consulting fees incurred with respect to the initiative not reflective of the ongoing costs to operate its business.
(b) Includes non-cash, stock-based compensation.compensation, net of forfeitures.


(3) 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 of 1933, as amended (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.

The following table reconciles net income to Adjusted net income and calculates adjusted earnings per diluted share for the thirteen weeks ended March 30, 2024 and April 1, 2023 (in thousands):
Thirteen Weeks Ended
March 30,
2024		April 1,
2023
Numerator:
Net income$28,747 $15,669 
Adjustments:
Consulting fees (a)
— 2,766 
Tax effect of adjustments (b)
— (664)
Adjusted net income$28,747 $17,771 
Denominator:
Weighted-average shares outstanding - diluted29,478 30,031 
Adjusted earnings per diluted share$0.98 $0.59 
(a) Represents non-recurring consulting fees that are not part of our ongoing operations and are incurred to execute discrete, project-based strategic initiatives, which are included in Selling, general and administrative on the Consolidated Statements of Comprehensive Income. The costs incurred in the thirteen weeks ended April 1, 2023 include consulting fees relating to a comprehensive review of our long-term growth strategy for our domestic business to explore potential future initiatives, which review was completed in fiscal year 2023. Given the magnitude and scope of this strategic review initiative that is not expected to recur in the foreseeable future, the Company considers the incremental consulting fees incurred with respect to the initiative not reflective of the ongoing costs to operate its business.
(b) Represents the tax effect of the aforementioned adjustments to reflect corporate income taxes at an assumed effective tax rate of 24% for the thirteen weeks ended April 1, 2023, which includes provisions for U.S. federal income taxes, and assumes the respective statutory rates for applicable state and local jurisdictions.

17

Results of Operations
Thirteen Weeks Ended SeptemberMarch 30, 20172024 compared to Thirteen Weeks Ended September 24, 2016April 1, 2023
The following table sets forth our results of operations for the thirteen weeks ended SeptemberMarch 30, 20172024 and September 24, 2016 (inApril 1, 2023 (dollars in thousands):
 Thirteen Weeks Ended Increase / (Decrease)
 September 30,
2017		 September 24,
2016		 $ %
Revenue:       
Royalty revenue and franchise fees$16,354
 $13,660
 $2,694
 19.7 %
Company-owned restaurant sales9,672
 8,150
 1,522
 18.7 %
Total revenue26,026
 21,810
 4,216
 19.3 %
Costs and expenses:       
Cost of sales (1)
7,823
 6,091
 1,732
 28.4 %
Selling, general and administrative8,144
 8,893
 (749) (8.4)%
Depreciation and amortization881
 746
 135
 18.1 %
Total costs and expenses16,848
 15,730
 1,118
 7.1 %
Operating income9,178
 6,080
 3,098
 51.0 %
Interest expense, net1,302
 1,390
 (88) (6.3)%
Other expense, net—
 216
 (216) (100.0)%
Income before income tax expense7,876
 4,474
 3,402
 76.0 %
Income tax expense2,864
 1,721
 1,143
 66.4 %
Net income$5,012
 $2,753
 $2,259
 82.1 %
Thirteen Weeks EndedIncrease / (Decrease)
March 30,
2024		April 1,
2023		$%
Revenue:
Royalty revenue, franchise fees and other$67,097 $48,188 $18,909 39.2 %
Advertising fees50,149 37,463 12,686 33.9 %
Company-owned restaurant sales28,543 23,070 5,473 23.7 %
Total revenue145,789 108,721 37,068 34.1 %
Costs and expenses:
Cost of sales (1)
21,271 16,695 4,576 27.4 %
Advertising expenses53,192 39,643 13,549 34.2 %
Selling, general and administrative25,178 23,645 1,533 6.5 %
Depreciation and amortization3,410 2,989 421 14.1 %
Loss on disposal of assets— 77 (77)(100.0)%
Total costs and expenses103,051 83,049 20,002 24.1 %
Operating income42,738 25,672 17,066 66.5 %
Interest expense, net4,544 4,573 (29)(0.6)%
Other (income) expense(303)188 (491)(261.2)%
Income before income tax expense38,497 20,911 17,586 84.1 %
Income tax expense9,750 5,242 4,508 86.0 %
Net income$28,747 $15,669 $13,078 83.5 %
(1) ExclusiveCost of sales includes all operating expenses of company-owned restaurants, including advertising expenses, but excludes depreciation and amortization, shownwhich are presented separately.
Total revenue. Revenue
During the thirteen weeks ended SeptemberMarch 30, 2017,2024, total revenue was $26.0$145.8 million, an increase of $4.2$37.1 million, or 19.3%34.1%, compared to $21.8$108.7 million in the comparable period in 2016.2023.

Royalty revenue, and franchise fees. During the thirteen weeks ended September 30, 2017, royalty revenue and franchise fees were $16.4and otherincreased $18.9 million, an increase of $2.7which $9.4 million or 19.7%, compared to $13.7 million in the comparable period in 2016. Royalty revenue increased $2.0 millionwas due to an increase in the number of franchised restaurants from 929 at September 24, 2016 to 1,065 at September 30, 2017 and domestic same store sales growth of 4.1%. 21.6%, and $7.2 million was due to net new franchise restaurant development. Other revenue increased $0.7by $1.1 million primarily due to an increase in vendor rebates comparedrebates.

Advertising fees increased$12.7 million due to a 36.8% increase in system-wide sales during the prior year period.fiscal first quarter 2024.

Company-owned restaurant sales. During the thirteen weeks ended September 30, 2017, company-owned restaurant sales were $9.7increased $5.5 million, due to an increase of $1.5$3.3 million or 18.7%, comparedrelated to $8.2 million in the comparable period in 2016.addition of seven net new company-owned restaurants since the prior fiscal first quarter. The increase is the resultremainder of the acquisition of two restaurants from a franchisee in the third quarter 2017 resulting in sales of $0.8 million,increase was due to company-owned domestic same store sales growth of 5.5%6.2%, which was driven primarily due toby an increase in transaction counts, and the opening of one company-owned restaurant during December 2016.transactions.
Cost of sales. During the thirteen weeks ended September 30, 2017, cost of sales was $7.8 million, an increase of $1.7 million, or 28.4%, compared to $6.1 million in the comparable period in 2016.
18

Cost of sales as a percentage of company-owned restaurant sales was 80.9% in the quarter ended September 30, 2017 compared to 74.7% in the prior year.


The table below presents the major components of cost of sales (dollars 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 costs2,295
 23.7 % 1,934
 23.7 %
 Other restaurant operating expenses1,634
 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 %
Thirteen Weeks Ended
March 30, 2024April 1, 2023
In dollarsAs a % of company-owned restaurant salesIn dollarsAs a % of company-owned restaurant sales
Food, beverage and packaging costs$9,903 34.7 %$7,486 32.4 %
Labor costs6,675 23.4 %5,517 23.9 %
Other restaurant operating expenses5,410 19.0 %4,226 18.3 %
Vendor rebates(717)(2.5)%(534)(2.3)%
Total cost of sales$21,271 74.5 %$16,695 72.4 %
Food, beverage and packaging costs as a percentage of company-owned restaurant sales were 42.8%34.7% in the thirteen weeks ended SeptemberMarch 30, 20172024, compared to 36.0%32.4% in the comparable period in 2016. The2023. This increase iswas primarily due to a 41.3%34.8% increase in commodities rates forthe cost of bone-in chicken wings as compared to the prior year period.
Labor costs as a percentage of company-owned restaurant sales were 23.7% for the thirteen weeks ended September 30, 2017, comparable to the prior year period.
Other restaurant operating expenses as a percentage of company-owned restaurant sales were 16.9% for the thirteen weeks ended September 30, 2017 compared to 17.6% in the comparable period in 2016. The decrease as a percentage of company-owned restaurant sales is primarily due to our ability to leverage costs due to the company-owned domestic same store sales increase of 5.5%.
Selling, general and administrative. During the thirteen weeks ended September 30, 2017, SG&A expense was $8.1 million, a decrease of $0.7 million compared to $8.9 million in the comparable period in 2016. 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 third quarter of 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 year period.
Depreciation and amortization. During the thirteen weeks ended September 30, 2017, depreciation expense was $0.9 million, an increase of $0.1 million, compared to $0.7 million in the comparable period in 2016.
Interest expense, net. During the thirteen weeks ended September 30, 2017, interest expense was $1.3 million, a decrease of $0.1 million compared to $1.4 million in the comparable period in 2016. The decrease is primarily due to a decrease in the principal amount of indebtedness as compared to the prior year period.
Income tax expense. Income tax expense was $2.9 million in the thirteen weeks ended September 30, 2017, yielding an effective tax rate of 36.4%, compared to an effective tax rate of 38.5% Our purchases in the prior year. The decreasefiscal first quarter were tied primarily to the spot market, which benefited from significant deflation in the effective tax rate is due to tax benefits of $0.1 million resulting from the recognition of excess tax benefits from share-based compensation in income tax expense rather than paid-in capital as a result of the adoption of a new accounting standard.

Segment results. The following table sets forth our revenue and operating profit for each of our segments for the period presented (dollars in thousands):
 Thirteen Weeks Ended Increase / (Decrease)
 September 30,
2017		 September 24,
2016		 $ %
Revenue:       
Franchise segment$16,354
 $13,660
 $2,694
 19.7 %
Company segment9,672
 8,150
 1,522
 18.7 %
Total segment revenue$26,026
 $21,810
 $4,216
 19.3 %
        
Segment Profit:       
Franchise segment$8,251
 $6,199
 $2,052
 33.1 %
Company segment927
 1,236
 (309) (25.0)%
Total segment profit$9,178
 $7,435
 $1,743
 23.4 %
Franchise segment. During the thirteen weeks ended September 30, 2017, franchise segment revenue was $16.4 million, an increase of $2.7 million, or 19.7%, compared to $13.7 million in the comparable period in 2016. Royalty revenue increased $2.0 million due to 136 net franchise restaurant openings since September 24, 2016 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.
During the thirteen weeks ended September 30, 2017, franchise segment profit was $8.3 million, an increase of $2.1 million, or 33.1%, compared to $6.2 million in the comparable period in 2016 primarily due to the growth in revenue.
Company segment. During the thirteen weeks ended September 30, 2017, company-owned restaurant sales were $9.7 million, an increase of $1.5 million, or 18.7%, compared to $8.2 million in the comparable period in 2016. The increase is the result of the acquisition of two restaurants from a franchisee in the third quarter 2017 resulting in sales of $0.8 million, company-owned domestic same store sales growth of 5.5%, primarily due to an increase in transaction counts, and the opening of one company-owned restaurant during December 2016.
During the thirteen weeks ended September 30, 2017, company segment profit was $0.9 million, a decrease of $0.3 million, or 25.0%, compared to $1.2 million in the comparable period in 2016. The decrease is primarily due to a 41.3% increase in the commodities rates for bone-in chicken wings, offset by leveraging of fixed costs due to the company-owned same store sales growth of 5.5%.

Thirty-Nine Weeks Ended September 30, 2017 compared to Thirty-Nine Weeks Ended September 24, 2016
The following table sets forth our results of operations for the thirty-nine weeks ended September 30, 2017 and September 24, 2016 (in thousands):
 Thirty-Nine Weeks Ended Increase / (Decrease)
 September 30,
2017		 September 24,
2016		 $ %
Revenue:       
Royalty revenue and franchise fees$50,204
 $41,463
 $8,741
 21.1 %
Company-owned restaurant sales27,063
 25,144
 1,919
 7.6 %
Total revenue77,267
 66,607
 10,660
 16.0 %
Costs and expenses:       
Cost of sales (1)
21,290
 18,352
 2,938
 16.0 %
Selling, general and administrative26,694
 25,120
 1,574
 6.3 %
Depreciation and amortization2,407
 2,187
 220
 10.1 %
Total costs and expenses50,391
 45,659
 4,732
 10.4 %
Operating income26,876
 20,948
 5,928
 28.3 %
Interest expense, net3,908
 2,858
 1,050
 36.7 %
Other expense, net—
 254
 (254) (100.0)%
Income before income tax expense22,968
 17,836
 5,132
 28.8 %
Income tax expense6,161
 6,714
 (553) (8.2)%
Net income$16,807
 $11,122
 $5,685
 51.1 %
(1) Exclusive of depreciation and amortization, shown separately.
Total revenue. During the thirty-nine weeks ended September 30, 2017, total revenue was $77.3 million, an increase of $10.7 million, or 16.0%, compared to $66.6 million in the comparable period in 2016.
Royalty revenue and franchise fees. During the thirty-nine weeks ended September 30, 2017, royalty revenue and franchise fees were $50.2 million, an increase of $8.7 million, or 21.1%, compared to $41.5 million in the comparable period in 2016. Royalty revenue increased $5.3 million primarily due to an increase in the number of franchised restaurants from 929 at September 24, 2016 to 1,065 at September 30, 2017 and domestic same store sales growth of 1.7%. Other revenue increased $3.4 million, primarily due to an increase in vendor rebates, including a one-time payment, based on system-wide volumes purchased in the prior year, received in conjunction with a new vendor agreement that was executed during the first quarter of 2017. The funding from this agreement will primarily be used to support our national advertising campaign. This increase was offset by $1.1 million in vendor contributions received in the prior year period for the franchisee convention.
Company-owned restaurant sales. During the thirty-nine weeks ended September 30, 2017, company-owned restaurant sales were $27.1 million, an increase of $1.9 million, compared to $25.1 million in the comparable period in 2016. The increase is primarily due to the acquisition of two restaurants from a franchisee during the third quarter 2017 resulting in sales of $0.8 million, the opening of two company-owned restaurants during June and December 2016, and an increase in company-owned domestic same store sales of 0.5%, primarily due to an increase in transaction counts.
Cost of sales. During the thirty-nine weeks ended September 30, 2017, cost of sales was $21.3 million, an increase of $2.9 million, or 16.0%, compared to $18.4 million in the comparable period in 2016. Cost of sales as a percentage of company-owned restaurant sales was 78.7% in the thirty-nine weeks ended September 30, 2017 compared to 73.0% in the prior year.


The table below presents the major components of cost of sales (dollars in thousands):
  Thirty-Nine 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$11,002
 40.7 % $9,357
 37.2 %
 Labor costs6,535
 24.1 % 5,541
 22.0 %
 Other restaurant operating expenses4,431
 16.4 % 4,194
 16.7 %
 Vendor rebates(678) (2.5)% (740) (2.9)%
 Total cost of sales$21,290
 78.7 % $18,352
 73.0 %
Food, beverage and packaging costs as a percentage of company-owned restaurant sales were 40.7% in the thirty-nine weeks ended September 30, 2017 compared to 37.2% in the comparable period in 2016. The increase is primarily due to a 20.5% increase in commodities rates for bone-in chicken wings.
Labor costs as a percentage of company-owned restaurant sales were 24.1%23.4% for the thirty-ninethirteen weeks ended SeptemberMarch 30, 20172024, compared to 22.0%23.9% in the comparable period in 2016.2023. The increasedecrease as a percentage of company-owned restaurant sales iswas primarily due to an increase in wage rates and labor due to the investments in roster sizes and staffing we made in the third and fourth quarterssales leverage as a result of fiscal year 2016 and the impactcompany-owned domestic same store sales growth of our two 2016 openings which perform at lower volumes than our average AUV.6.2%.
Other restaurant operating expenses as a percentage of company-owned restaurant sales were 16.4%19.0% for the thirty-ninethirteen weeks ended SeptemberMarch 30, 20172024 compared to 16.7% in18.3% for the comparable period in 2016.thirteen weeks ended April 1, 2023. The decreaseincrease as a percentage of company-owned restaurant sales iswas primarily due to a decrease repairs and maintenance, as well as a decreaseincreases in pre-openingrestaurant level operating expenses.
Advertising expenses associated with
During the opening of a new company-owned restaurant during June 2016.
Vendor rebates decreased $0.1 million primarily due to a vendor rebate received during the thirty-ninethirteen weeks ended September 24, 2016 related to the franchisee convention.
Selling, general and administrative. During the thirty-nine weeks ended SeptemberMarch 30, 2017, SG&A expense was $26.72024, advertising expenses were $53.2 million, an increase of $1.6$13.5 million compared to $25.1$39.6 million in the comparable period in 2016.2023. 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 and administrative (“SG&A”)
During the thirteen weeks ended March 30, 2024, SG&A expense was $25.2 million, an increase of $1.5 million compared to $23.6 million in the comparable period in 2023. The increase in SG&A expense is primarily due towas driven by an increase in voluntary contributionsheadcount related expenses of $2.1 million to support the Company madegrowth in our business, professional fees of $1.4 million associated with the Company’s strategic initiatives, and an increase in performance-based stock compensation expense of $0.5 million primarily related to its advertising fund, including a one-time paymentthe Company’s prior year performance. These increases were partially offset by $2.8 million in non-recurring consulting fees incurred in the prior fiscal first quarter in conjunction with a new vendor agreement executed duringquarter.
Depreciation and amortization
During the thirteen weeks ended April 1, 2017, which was intended to provide support for the Company’s national advertising campaign. SG&A expense also increased due to planned headcount additions and an increase in stock based compensation and travel expenses. These increases are partially offset by a decrease of $1.1 million of expenses related to the 2016 franchisee convention, as well as a decrease in nonrecurring expenses of $2.1 million related to the follow on offering and refinancing of our credit agreement, which occurred in the prior year period.
Depreciation and amortization. During the thirty-nine weeks ended SeptemberMarch 30, 2017,2024, depreciation expense was $2.4$3.4 million, an increase of $0.2$0.4 million compared to $2.2$3.0 million in the comparable period in 2016.
Interest expense, net. During the thirty-nine weeks ended September 30, 2017, interest expense was $3.9 million, an increase of $1.1 million compared to $2.9 million in the comparable period in 2016.2023. The increase isin depreciation and amortization was primarily due to an increase in the principal amount of indebtednesscapital expenditures related to our technology investments.
Interest expense, net
During the refinancing of our credit agreement,thirteen weeks ended March 30, 2024, interest expense, net was $4.5 million, which occurred inwas comparable to the third quarter of 2016.prior year period.
Income tax expense. Income tax expense was $6.2 million in
During the thirty-ninethirteen weeks ended SeptemberMarch 30, 2017,2024, we recognized income tax expense of $9.8 million yielding an annual effective tax rate of 26.8%25.3%, comparedcomparable to an annual effective tax rate of 37.6% in the prior year. The decrease in the effective tax rate is due to tax benefits of $2.5 million resulting from the recognition of excess tax benefits from share-based compensation in income tax expense rather than paid-in capital as a result of the adoption of a new accounting standard.

Segment results. The following table sets forth our revenue and operating profit for each of our segments for the period presented (dollars in thousands):
 Thirty-Nine Weeks Ended Increase / (Decrease)
 September 30,
2017		 September 24,
2016		 $ %
Revenue:       
Franchise segment$50,204
 $41,463
 $8,741
 21.1 %
Company segment27,063
 25,144
 1,919
 7.6 %
Total segment revenue$77,267
 $66,607
 $10,660
 16.0 %
        
Segment Profit:       
Franchise segment$23,792
 $18,794
 $4,998
 26.6 %
Company segment3,084
 4,211
 (1,127) (26.8)%
Total segment profit$26,876
 $23,005
 $3,871
 16.8 %
Franchise segment. During the thirty-nine weeks ended September 30, 2017, franchise segment revenue was $50.2 million, an increase of $8.7 million, or 21.1%, compared to $41.5 million in the comparable period in 2016. Royalty revenue increased $5.3 million primarily due to 136 net franchise restaurant openings since September 24, 2016 and domestic same store sales growth of 1.7%. Other revenue increased $3.4 million primarily due to an increase in vendor rebates, including a one-time payment, based on system-wide volumes purchased25.1% in the prior year received under a new vendor agreement executed during the first quarter of 2017. The funding from this agreement will primarily be used to support our national advertising campaign. This increase was offset by $1.1 million in vendor contributions received in the prior year period for the franchisee convention.period.
During the thirty-nine weeks ended September 30, 2017, franchise segment profit was $23.8 million, an increase of $5.0 million, or 26.6%, compared to $18.8 million in the comparable period in 2016 primarily due to the growth in revenue.
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Company segment. During the thirty-nine weeks ended September 30, 2017, company-owned restaurant sales were $27.1 million, an increase of $1.9 million, compared to $25.1 million in the comparable period in 2016. The increase is primarily due to the acquisition of two restaurants from a franchisee during the third quarter 2017 resulting in sales of $0.8 million, the opening of two company-owned restaurants during June and December 2016, and an increase in company-owned domestic same store sales of 0.5%, primarily due to an increase in transaction counts.
During the thirty-nine weeks ended September 30, 2017, company segment profit was $3.1 million, a decrease of $1.1 million, or 26.8%, compared to $4.2 million in the comparable period in 2016. The decrease is primarily due to a 20.5% increase in commodities rates for bone-in chicken wings and an increase in wage rates and labor due to the investments in roster sizes and staffing we made in the third and fourth quarters of fiscal year 2016.


Liquidity and Capital Resources
General. Our primary sources of liquidity and capital resources are cash provided from operating activities, cash and cash equivalents on hand, and proceeds from the incurrence of debt.borrowings available under our securitized financing facility. Our primary requirements for liquidity and capital are working capital, and general corporate needs.needs, capital expenditures, income tax payments, debt service requirements, dividend payments, and repurchasing shares of our common stock (if any). Historically, we have operated with minimal positive working capital or with negative working capital. We believe thatgenerally utilize available cash flows from operations to invest in our business, service our debt obligations, pay dividends, and repurchase shares of our common stock (if any).
Our primary sources of short-term and long-term liquidity are expected to be cash flows from operations and capitalavailable borrowings under our 2022 Variable Funding Notes (as defined below). As of March 30, 2024, the Company had $108.3 million of cash and cash equivalents on its balance sheet.
Based upon current levels of operations and anticipated growth, we expect that cash flows from operations, combined with our securitized financing facility including our 2022 Variable Funding Notes, will be sufficient to financemeet our continued operationscapital expenditure, working capital and growth strategy.debt service requirements for at least the next twelve months and the foreseeable future.
The following table shows summary cash flows information for the thirty-ninethirteen weeks ended SeptemberMarch 30, 20172024 and September 24, 2016April 1, 2023 (in thousands):
Thirteen Weeks Ended
March 30,
2024		April 1,
2023
Net cash provided by (used in):
Operating activities$44,659 $35,698 
Investing activities(11,658)(4,319)
Financing activities(9,615)(10,087)
Net change in cash and cash equivalents$23,386 $21,292 
 Thirty-Nine Weeks Ended
 September 30,
2017		 September 24,
2016
Net cash provided by (used in):   
Operating activities$17,980
 $16,098
Investing activities(5,783) (1,471)
Financing activities(11,358) (21,489)
Net change in cash and cash equivalents$839
 $(6,862)
Operating activities. Our cash flows from operating activities are principally driven by sales at both franchise restaurants and company-owned restaurants, as well as franchise and development fees. We collect franchise royalties from our franchise owners on a weekly basis. Restaurant-level operating costs at our company-owned restaurants, unearned franchise and development fees, and corporate overhead costs also impact our cash flowsflow from operating activities.
Net cash provided by operating activities was $18.0$44.7 million in the thirty-ninethirteen weeks ended SeptemberMarch 30, 2017,2024, an increase of $1.9$9.0 million from $16.1cash provided by operating activities of $35.7 million in 2016.the thirteen weeks ended April 1, 2023. The increase wasis primarily due to thean increase in netoperating income, partially offset by the timing of changes in working capital specificallyand changes in Ad Fund cash and cash equivalents, which are directly related to the timing of interest payments.payments for expenses incurred for national advertising.
Investing activities. Our net cash used in investing activities was $5.8$11.7 million in the thirty-ninethirteen weeks ended SeptemberMarch 30, 2017,2024, an increase of $4.3$7.3 million from $1.5 millioncash used in investing activities of $4.3 million in 2016.the thirteen weeks ended April 1, 2023. The increase in cash used in investing activities was primarily due to the acquisition of two restaurants from a franchisee during the third quarter 2017, as well as an increase in capital expenditures overrelated to our technology investments as compared to the comparableprior fiscal year period.
Financing activities. Our net cash used in financing activities was $11.4$9.6 million in the thirty-ninethirteen weeks ended SeptemberMarch 30, 2017,2024, a decrease of $10.1$0.5 million from cash used in financing activities of $21.5$10.1 million in 2016.the thirteen weeks ended April 1, 2023. The decrease in cash used in financing activities was primarily due to the initiation of a regular dividend of $2.0 million paid to stockholders, compared to a special dividend of $83.3 million paid in connection with the refinancing of our credit agreementprincipal payment made in the prior period. This wasfiscal year period, partially offset by net repaymentsan increase in taxes paid on stock vesting during the period.
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Securitized financing facility. On March 9, 2022, the Company completed a securitized financing transaction, pursuant to which Wingstop Funding LLC (the “Issuer”), a limited purpose, bankruptcy-remote, indirect wholly-owned subsidiary of the Company, issued $250 million of its Series 2022-1 3.734% Fixed Rate Senior Secured Notes, Class A-2 (the "2022 Class A-2 Notes"). The Issuer also entered into a revolving financing facility of Series 2022-1 Variable Funding Senior Notes, Class A-1 (the “2022 Variable Funding Notes,” and together with the 2022 Class A-2 Notes, the “2022 Notes”), which permits borrowings of up to a maximum principal amount of $200 million, subject to certain borrowing conditions, a portion of which may be used to issue letters of credit. The proceeds from the securitized financing transaction were used to pay related transaction fees and expenses, strengthen the Company's liquidity position and for general corporate purposes, which included a return of capital to the Company’s stockholders.
In addition to the 2022 Notes, the Company’s outstanding debt consists of its existing Series 2020-1 2.84% Fixed Rate Senior Secured Notes, Class A-2 (the “2020 Class A-2 Notes”). No borrowings were outstanding under the 2022 Variable Funding Notes as of March 30, 2024.
During the fiscal first quarter of 2024, the Company continued to have a leverage ratio under the 2020 Class A-2 Notes and the 2022 Class A-2 Notes of less than 5.0x. Per the terms of the Company’s debt agreements, principal payments are not due until the repayment date as long as the Company maintains a leverage ratio of less than 5.0x. Accordingly, the entire outstanding balance of the 2020 Class A-2 Notes and the 2022 Class A-2 Notes has been classified as long-term debt due after fiscal year 2026.
Dividends. We paid a quarterly cash dividend of $10.6$0.22 per share of common stock, aggregating $6.5 million in the thirty-nine weeks ended Septemberfiscal first quarter of 2024. On April 30, 2017, compared to net borrowings of $62.5 million in the comparable period in 2016.
Senior secured credit facility. On June 30, 2016, we entered into a $180.0 million new senior secured credit facility, which replaced the second amended and restated credit facility dated March 18, 2015. In connection with the new senior secured credit facility, the facility size was increased to $180.0 million and is comprised of a $70.0 million term loan and a $110.0 million revolving credit facility. The previous credit facility included a term loan of $132.5 million and a revolving credit facility of $5.0 million. We used the proceeds from the new senior secured credit facility and cash on hand to refinance $85.5 million of indebtedness under2024, the Company’s March 2015 credit facility and to payBoard of Directors approved a dividend of $83.3 million$0.22 per share, to be paid on June 7, 2024 to stockholders of record as of May 17, 2024, totaling $6.5 million.
We do not currently expect the restrictions in our debt instruments to impact our ability to make regular quarterly dividends pursuant to our quarterly dividend program. However, any future declarations of dividends, as well as the amount and timing of such dividends, are subject to capital availability and the discretion of our Board of Directors, which must evaluate, among other things, whether cash dividends are in the best interest of the Company and our stockholders. Borrowings
Share Repurchase Program. On August 17, 2023, the Company announced a share repurchase program with authorization to purchase up to $250.0 million of its outstanding shares of common stock (the “Share Repurchase Program”). As of March 30, 2024, $125.0 million remained available for repurchase under the new senior secured credit facility bear interest, payable quarterly, at the base rate plus a margin (1.00% to 2.00%, dependent on our reported leverage ratio) or LIBOR plus a margin (2.00% to 3.00%, dependent on our reported leverage ratio), at the Company’s discretion. The new senior secured credit facility also extended the maturity date from March 2020 to June 2021. Subject to certain conditions, the Company has the ability to increase the size of the new senior secured credit facility by an additional $30.0 million.Share Repurchase Program.
In the current year, we made principal payments of $14.1 million and borrowed $3.5 million on our new senior secured credit facility. Under the new senior secured credit facility, principal installments for the term loan of $875,000 are due quarterly with all unpaid amounts due at maturity in June 2021.
The new senior secured credit facility is secured by substantially all of our assets and requires compliance with certain financial and non-financial covenants, including fixed charge coverage and leverage. We were in compliance with these covenants as of

September 30, 2017. Failure to comply with these covenants in the future could cause an acceleration of outstanding amounts under the term loan and restrict us from borrowing under the revolving credit facility to fund our liquidity requirements.
Contractual Obligations
In connection with our new senior secured credit facility, principal payments of $875,000 are due quarterly with all unpaid amounts due at maturity in June 2021.
Off-Balance Sheet Arrangements
We had no off-balance sheet arrangements or obligations, except for leases, as of September 30, 2017.
Critical Accounting Policies and Estimates
Our consolidated financial statements and accompanying notes are prepared in accordance with GAAP. Preparing consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. These estimates and assumptions are affected by the application of our accounting policies. Critical accounting estimates are those that require application of management’s most difficult, subjective, or complex judgments, often as a result of matters that are inherently uncertain and may change in subsequent periods. While we apply our judgment based on assumptions believed to be reasonable under the circumstances, actual results could vary from these assumptions. It is possible that materially different amounts would be reported using different assumptions. Our critical accounting policies and estimates are identified and described in our annual consolidated financial statements and the related notes included in our Form 10-K,Annual Report, and there have been no material changes since the filing of our annual report on Form 10-K.Annual Report.
Recent Accounting Pronouncements
JOBS Act. We currently qualify as an “emerging growth company” pursuantRefer to Note 1, Basis of Presentation, of the notes to the provisions of the JOBS Act. For as long as we are an “emerging growth company,” we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, reduced disclosure obligations relating to the presentation ofconsolidated financial statements in Management’s Discussion and Analysis of Financial Condition and Results of Operations, exemptions from the requirements of holding advisory “say-on-pay” votes on executive compensation and shareholder advisory votes on golden parachute compensation.statements.
In addition, an emerging growth company can delay its adoption of certain accounting standards until those standards would otherwise apply to private companies. However, we are choosing to “opt out” of this extended transition period, and as a result, we plan to comply with any new or revised accounting standards on the relevant dates on which non-emerging growth companies must adopt the standards. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.
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As of the last business day of our second quarter of fiscal 2017, our market capitalization held by non-affiliates exceeded $700 million. On this basis, we anticipate that we will qualify as a “large accelerated filer” as of the end of our fiscal year 2017, at which time we will cease to qualify as an emerging growth company and for the various reporting requirement exemptions described above. Among other things, our independent registered public accounting firm will be required to formally attest to the effectiveness of our internal controls over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act. If we are unable to comply with the requirements of Section 404 in a timely manner, the market price of our stock could decline and we could be subject to sanctions or investigations by the NASDAQ Stock Market, the SEC or other regulatory authorities, which could require additional financial and management resources. We anticipate incurring additional professional service fees and other operating expenses as a result of this and other public company reporting requirements that will apply to us in future fiscal periods.

Special Note Regarding Forward-Looking Statements
This document containsreport includes statements about future eventsof our expectations, intentions, plans and expectationsbeliefs that constitute forward-looking statements. Forward-looking“forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and are intended to come within the safe harbor protection provided by those sections. These statements, which involve risks and uncertainties, relate to the discussion of our business strategies and our expectations concerning future operations, margins, profitability, trends, liquidity and capital resources and to analyses and other information that are based on our beliefs, assumptionsforecasts of future results and expectationsestimates of our future financial and operating performance and growth plans, taking into accountamounts not yet determinable. These forward-looking statements can generally be identified by the information currently available to us. Such statements include, in particular, statements about our plans, strategies and prospects. Words such asuse of forward-looking terminology, including the terms “may,” “will,” “should,” “expect,” “anticipate,” “intend,” “plan,” “outlook,” “anticipate,” “believe,” “think,” “estimate,” “seek,” “estimate,“predict,” “can,” “could,” “would,“project,” “will” and“potential” or, in each case, their negative or other variations of such words and similar expressions are intended to identify such forward-looking statements. Examples ofor comparable terminology, although not all forward-looking statements in this Quarterly Reportare accompanied by such terms. These forward-looking statements are made based on Form 10-Q include, butexpectations and beliefs concerning future events affecting us and are not limitedsubject to uncertainties, risks, and factors relating to our expectations

with respect to our future liquidity, expensesoperations and consumer appeal. These statements are based on beliefs and assumptionsbusiness environments, all of Wingstop’s management, which in turn are based on currently available information. These statements are not guarantees of future performance and involve assumptions and risks and uncertainties that are difficult to predict. Therefore,predict and many of which are beyond our control, that could cause our actual outcomes and results mayto differ materially from what isthose matters expressed or implied or forecasted in suchby these forward-looking statements.
FactorsSuch risks and other factors include those listed below and elsewhere in this report and our Annual Report, that could cause actual results or outcomes to differ from the results expressed or implied by forward-looking statements include, among other things:statements:    
overall macroeconomic conditions may impact •our ability to successfully executeeffectively implement our growth strategystrategy;
•our relationships with, and franchise and open new restaurants that are profitable and to increase our revenue and operating profits;
the impact of the operating resultsperformance of, our andfranchisees, as well as actions by franchisees that could harm our franchisees’ existing restaurants on our financial performance;business;
the impact of new restaurant openings on our financial performance;
•our ability to identify, recruit and contract with a sufficient number of qualified franchisees and to open new franchise restaurants;franchisees;
our ability to develop and maintain the Wingstop brand, including through effective advertising and marketing and the support of our franchisees’ and the negative impact of actions of a franchisee, acting as an independent third party, could have on our financial performance or brand;
concerns regarding•risks associated with food safety, and food-borne illness and other health concerns;
•our and ability to successfully expand into new markets;
•our franchisees’ reliance on vendors, suppliers and distributors orability to effectively compete within our industry;
•risks associated with changes in food and supply costs,costs;
•risks associated with interruptions in our supply chain, including any increaseavailability of food products;
•risks associated with data privacy, cybersecurity and the use and implementation of information technology including heightened risks that may arise upon increased adoption of artificial intelligence technologies;
•risks associated with our increasing dependence on digital commerce platforms and third-party delivery service providers;
•uncertainty in the priceslaw with respect to the assignment or allocation of liabilities in the ingredients most critical tofranchise business model;
•risks associated with litigation against us or our menu, particularly bone-in chicken wings;franchisees;
our•risks associated with the availability and our franchisees’ ability to compete with many other restaurants and to increase domestic same store sales and average weekly sales;cost of labor;
•our ability to successfully meet or exceedadvertise and market our business;
•risks associated with changes in customer preferences, perceptions and eating habits;
•risks associated with our future performance and operating results falling below the expectations of securities analysts and investors;
•risks associated with the geographic concentration of our business;
•the impact on our business from unexpected events such as international conflict or investors concerning war and related sanctions, acts of terrorism, civil unrest, epidemics and pandemics and severe weather;
•our annualability to comply with laws and government regulations, including those relating to food products, employment and franchising, or quarterly operating results, domestic same store salesincreased costs associated with new or average weekly sales;changing regulations;
•our ability to maintain adequate insurance coverage for our business;
•risks associated with damage to our reputation or lack of acceptance of our brand in existing or new markets;
•risks associated with our expansion into newinternational markets may present increased risks due to our unfamiliarity with those areas;and foreign government restrictions on operations;
the reliability of •our our franchisees’ and our licensees’ information technology systems and network security, including costs resulting from breaches of security of confidential guest, franchisee or employee information;
legal complaints, litigation or regulatory compliance, including changes in laws impacting the franchise business model;
our and our franchisees’ ability to attract and retain qualified employees while also controlling labor costs;
potential fluctuations in our annual or quarterly operating results and the impact of significant adverse weather conditionsexecutive officers and other disasters;key employees;
disruptions in our and our franchisees’ ability to utilize computer systems to process transactions and manage our business;
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health concerns arising from outbreaks of viruses, including the impact of a pandemic spread of avian flu on our and our franchisees’ supply of chicken;
our and our franchisees’ ability to obtain and maintain required licenses and permits or to comply with alcoholic beverage or food control regulations;
our ability to maintain insurance that provides adequate levels of coverage against claims;
our and our franchisees’ ability to successfully operate in unfamiliar markets and markets where there may be limited or no market recognition of our brand, including the impact that our expansion into international markets has on our exposure to risk factors over which neither we nor our franchisees have control;
the potential impact opening new restaurants in existing markets could have on sales at existing restaurants;
the effectiveness of our advertising and marketing campaigns, which may not be successful;
food safety issues, which may adversely impact our or our franchisees’ business;
changes in consumer preferences, including changes caused by diet and health concerns or government regulation;
the continued service of our executive officers;
our ability to successfully open new franchised Wingstop restaurants for which we have signed commitments;
our stated sales to investment ratio and average unlevered cash-on-cash return may not be indicative of future results of any new franchised restaurant;

•our ability to protect our intellectual property;property, including trademarks and trade secrets;
•the impact on our business from environmental, social and corporate governance matters; and
•our ability to generate or raise capital on acceptable terms in the future, including our ability to incur additional debt and other restrictions undercomply with the terms of our existing senior secured credit facility;
the JOBS Act allowing ussecuritized debt financing and generate sufficient cash flows to postpone the date by which we must comply with certain laws and regulations intended to protect investors and to reduce the amount of information we provide insatisfy our reports filed with the SEC until the end of our fiscal year 2017, at which time we expect to no longer qualify as an emerging growth company;
the costs and time requirements as a result of operating as a public company, including our ability to maintain adequate internal control over financial reporting in order to comply with applicable reporting obligations;
fluctuations in exchange rates on our revenue;
future impairment charges; and
the impact of anti-takeover provisions in our charter documents and under Delaware law, which could make an acquisition of us more difficult, limit attempts by our stockholders to replace or remove our current management and limit the market price of our common stock.
significant debt service obligations thereunder.
The above list of factors is not exhaustive. Some of these and other factors are discussed in more detail under “Risk Factors” in our annualAnnual Report. When considering forward-looking statements in this report on Form 10-K. Weor that we make in other reports or statements, you should keep in mind the cautionary statements in this report and future reports we file with the SEC. Any forward-looking statements made in this report speak only as of the date of the report, unless specified otherwise. New risks and uncertainties arise from time to time, and we cannot predict when they may arise or how they may affect us. Except as required by law, we assume no obligation to update or revise any forward-looking statements for any reason, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, even if new information becomes available in the future.

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Item 3.     Quantitative and Qualitative Disclosures About Market Risk
Impact of Inflation.The primary inflationary factors affecting our and our franchisees’ operations are food and beverage costs, labor costs, energy costs and the costs and materials used in the construction of new restaurants. Our restaurant operations are subject to federal and state minimum wage laws governing such matters as working conditions, overtime and tip credits. Significant numbers of our and our franchisees’ restaurant personnel are paid at rates related to the federal and/or state minimum wage and, accordingly, increases in the minimum wage increase our and our franchisees’ labor costs. To the extent permitted by competition and the economy, we have mitigated increased costs by increasing menu prices and may continue to do so if deemed necessary in future years. Substantial increases in costs and expenses could impact our operating results to the extent such increases cannot be passed through to our customers. Historically, inflation has not had a material effect on our results of operations. Severe increases in inflation, however, could affect the global and U.S. economies and could have an adverse impact on our business, financial condition and results of operations.
Commodity Price Risk. We are exposed to market risks from changes in commodity prices. Many of the food products purchased by us are affected by weather, production, availability and other factors outside our control.control, including inflation as compared to the prior year period. Although we attemptenter into arrangements in an effort to minimizemitigate the effect of price volatility by negotiating fixed price contracts for the supply of key ingredients,food costs, there are no established fixed price markets for fresh bone-in chicken wings, so we aremay be subject to prevailing market conditions. Bone-in chicken wings accounted for approximately 31.7%18.3% and 28.8%16.2% of our company-owned restaurant cost of sales during the thirty-ninethirteen weeks ended SeptemberMarch 30, 20172024 and September 24, 2016,April 1, 2023, respectively. A hypothetical 10% increase in the bone-in chicken wing costs would have increased costs of sales by approximately $0.7$0.4 million during the thirty-ninethirteen weeks ended SeptemberMarch 30, 2017.2024. We do not engage in speculative financial transactions nor do we hold or issue financial instruments for trading purposes. In instances when we use fixed pricing arrangements with our suppliers, these arrangements cover our physical commodity needs, are not net-settled, and are accounted for as normal purchases.
Interest Rate Risk. We are subjectOur long-term debt, including current portion, consisted entirely of the $720.9 million incurred under the 2020 Class A-2 Notes and the 2022 Class A-2 Notes as of March 30, 2024 (excluding unamortized debt issuance costs). The Company’s predominantly fixed-rate debt structure has reduced its exposure to interest rate risk in connection with borrowings under our senior secured credit facility, which bears interest at variable rates. As of September 30, 2017, we had $140.6 million outstanding under our credit facility. Derivative financial instruments, such as interest rate swap agreements and interest rate cap agreements, may be used for the purpose of managing fluctuating interest rate exposuresincreases that exist from our variable rate debt obligations that are expected to remain outstanding. Interest rate changes do notcould adversely affect the market value of such debt, but could impact the amount of our interest payments, and accordingly, our futureits earnings and cash flows, assuming other factors are held constant. A hypothetical 1.0% percentage point increase or decreasebut the Company remains exposed to changes in market interest rates reflected in the fair value of the debt and to the risk that the Company may need to refinance maturing debt with new debt at a higher rate. The Company is exposed to interest rate associated with our credit facilities would have resulted in a $1.4 million impact on interest expense on an annualized basis.increases under the 2022 Variable Funding Notes; however, the Company had no outstanding borrowings under its 2022 Variable Funding Notes as of March 30, 2024.

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Item 4.     Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of SeptemberMarch 30, 2017,2024, pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).Act. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of March 30, 2024, our disclosure controls and procedures are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SECthe rules and forms of the SEC, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There have been no significant changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II.     OTHER INFORMATION
Item 1.     Legal Proceedings
From time to time we may beWe are currently involved in various claims and legal actions that arise in the ordinary course of business. We do not believe that the ultimate resolution of anybusiness, including claims and actions resulting from employment-related and franchise-related matters. None of these actions, individually or inmatters, some of which are covered by insurance, has had a material effect on us, and, as of the aggregate, willdate of this report, we are not party to any pending legal proceedings that we believe would have a material adverse effect on our business, financial position,condition, results of operations liquidity or capital resources.cash flows.However, a significant increase in the number of these claims or an increase in amounts owing under successful claims could materially and adversely affect our business, financial condition, results of operations or cash flows.
Item 1A. Risk Factors
A description of the risk factors associated with our business is contained in the “Risk Factors” section of our annual report on Form 10-K for the fiscal year ended December 31, 2016. We anticipate that we will qualify as a “large accelerated filer” as of the end of our fiscal year 2017, at which time we will cease to qualify as an emerging growth company under the JOBS act and for the various reporting requirement exemptions, including the requirements of Section 404 of the Sarbanes-Oxley Act.Annual Report.
There have been no other material changes to our Risk Factors as previously reported.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.On August 17, 2023, the Company announced a share repurchase program with authorization to purchase up to $250.0 million of its outstanding shares of common stock (the “Share Repurchase Program”). No shares were repurchased under the Share Repurchase Program during the fiscal first quarter 2024. As of March 30, 2024, $125.0 million remained available for repurchase under the Share Repurchase Program.
Item 3.     Defaults uponUpon Senior Securities
None.
Item 4.     Mine Safety Disclosures
Not applicable.
Item 5.     Other Information
None.During the thirteen weeks ended March 30, 2024, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

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Item 6.    Exhibits
Index to Exhibits
Exhibit No.Description
Exhibit No.Description
3.1
Amended and Restated Certificate of Incorporation of Wingstop Inc., as amended through June 15, 2020, filed as exhibitExhibit 3.1 to the Registration Statement of the CompanyCompany’s Quarterly Report on Form S-1/A (Registration10-Q for the quarterly period ended June 27, 2020 (File No. 333-203891)001-37425) on June 2, 2015July 29, 2020 and incorporated herein by reference herein.
3.2
Amended and Restated Bylaws of Wingstop Inc. filed as exhibit 3.2 to the Registration Statement of the Company on Form S-1/A (Registration No. 333-203891) on June 2, 2015 and incorporated herein by reference
10.1*
Executive Employment Agreement,, effective as of AugustDecember 1, 2022, filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K (File No. 001-37425) on December 2, 2017, among Wingstop Restaurants Inc.2022 and Michael Skipworthincorporated by reference herein.
10.2*31.1*
Amendment Two to the Wingstop Inc. 2015 Omnibus Incentive Compensation Plan, effective as of August 3, 2017
31.1*
Certification of Principal Executive Officer under Section 302 of the Sarbanes–Oxley Act of 20022002.
31.2*
Certification of Principal Financial Officer under Section 302 of the Sarbanes–Oxley Act of 20022002.
32.1**
Certification of Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes–Oxley Act of 20022002.
32.2**
Certification of Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes–Oxley Act of 20022002.
101 INS*Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101 SCH*Inline XBRL Taxonomy Extension Schema Document
101 CAL*Inline XBRL Taxonomy Extension Calculation Linkbase Document
101 DEF*Inline XBRL Taxonomy Extension Definition Linkbase Document
101 LAB*Inline XBRL Taxonomy Extension Label Linkbase Document
101 PRE*Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*Cover Page Interactive Data File (formatted as Inline XBRL and Contained in Exhibit 101)
* Filed herewith.
** Furnished, not filed.



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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.
(Registrant)
Date:May 1, 2024By:Wingstop Inc./s/ Michael J. Skipworth
(Registrant)
Date:November 3, 2017By:/s/ Charles R. Morrison
ChairmanPresident and Chief Executive Officer
(Principal Executive Officer)
Date:May 1, 2024By:/s/ Alex R. Kaleida
Date:November 3, 2017By:/s/ Michael J. Skipworth
Chief Financial Officer
(Principal Financial and Accounting Officer)



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