WING - Earnings call transcript Q4 2017

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Operator

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Wingstop Inc., Fiscal Fourth Quarter and Fiscal Year 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note that this conference is being recorded today, Thursday, February 22, 2018.

have Skipworth, Chairman Chief we Officer; Chief call, Michael and Financial the Charlie and Morrison, Executive On Officer. I the would conference turn over to now Michael. like to Please go ahead.

Michael Skipworth

fourth have and A release. website posted Relations to Everyone at you Investor is fiscal should the on Thank our XXXX welcome. copy fiscal tab quarter under earnings wingstop.com. and year access our

statements you results Our are could on of future guarantees statements are discussion not reliance numerous to today will subject materially cause undue and also include what should therefore, risks forward-looking them. that place statements. expect. we These to These forward-looking uncertainties from not performance, and differ actual

detailed affect recent filings results condition. operating Our the risks financial discussion our contain future that could a and SEC of

a we We presentation release. will like substitute in believe GAAP Charlie. in performance. contained evaluating comparable this useful prepared over call are of in with isolation that, to Reconciliations also not The our to in or discuss With be accordance certain be GAAP. for that information turn measures the can results should our additional considered I as non-GAAP earnings financial measures to would

Charlie Morrison

the We joining everyone. today you, and with consumer its in and XXXX. Wingstop Presidential began your on in the We XXXX for of challenges some election. with sentiment Thank XXXX interest negative brand Michael, today’s in appreciate We has faced of afternoon good coming call. greatest overcame our us that XX-year out history

its $X.X recorded our negative challenges any and sales in of though Then, challenges cannot high XXXX. core our overcome We XXXX XXX food which we've ending growth wing positive We've and Wingstop another by achieved $X Most record consumers restaurants achieved these in basis with the year a worldwide. strength a year, record affected year. quarter story. peak first Wingstop XXXX growth. rate a but with name that franchises XXXX ending key strong costs XX.X% the model. regular really Our recorded of in We the metrics confirmation we the to milestone our business resulted sales. impacted acutely was The model, right in sales, sales restaurants resilience X,XXX a billion And single business wide that case, at such tell points. same-store of also tested unit were has in few. brands XXth company-owned Wingstop same-store billion dividend and initiated experienced we just system system-wide in inflation

sales, XXXX, sales by national XX.X% full in wing still cash our inflation rewarding in targeted with year. quarter, our were at flow result total followed a in per And respectively delivering IPO our fourth the as mentioned EPS same-store EBITDA dividend of $XXX in in up the of including shareholders. drive will XXXX campaign of I X.X% And discuss sales XXXX adjusted quarterly return a flow. year the system-wide throughout shareholders, same-store advertising share dividend to P&L have As board also increase we Michael prior our recapitalization cash headwinds saw regular was to dividends our to for year. cash trend XXX%. we to growth same-store XXXX, balance in able the resulting adjusted business returned X.X% company-owned where the XXXX, capital paid able that special a awareness were brand then week. we and related a sheet, we domestic our over the shareholders, XX.X% initiated generation, commitment and strong We dividend directors confidence started XX%. in that our our last finally a in launched we million increase February of to significant with XX% last sales despite advertising of growth these shareholder June in but and over represent with throughout national of and specifics high grow just with negative return restaurants, We accelerated to Since by free domestic $X.XX to our

we best-in-class delivery believe through we ahead, and national will key our development. long-term international As growth business digital four look as continue we drive expansion, strategies, we deliver to results, forward advertising,

of briefly me one each on these. comment Let

in said, advertising our February we the international entrance advertising. is we XXXX, As XXXX national after immediately with Bowl launch Super

Our we on presence TV building. attempting steady design Instead awareness. of was for national weeks XX advertising in to of and national television, on off. we a big program We delivered ads same-store our were provide brand brand on while build growth narrowly wanted, on advertising a focused two improvement a splash, were or cadence the weeks three to that believe campaign weeks throughout steady just two at XXXX. what three sales We

more With in sales to in advertising the XXXX. dollars XX% spend in have growth XXXX, we system-wide

and unaided awareness we have room other on compared growth focus aided to brand continue We for brands. and to as still national

as growth. XXXX we will multiyear provide benefit a follow a believe similar to will which Our XXXX, campaign cadence top-line sales

in their XXXX. is long-term XX% our or XX% reflecting generating fourth more of a In the XX% increase prior sales their basis of online quarter up period. third quarter, strategy the point revenues online, channels. domestic the XX.X% in from made -- our online Approximately fourth total up sales from our through sales, restaurants sales the Another from are of XXX year quarter of just up online growing XX.X% and

to to continue organically We offers the digital side incentives debts. of business our grow without any convert or

we joined the half we a fueling OnStar provides recently and growth. the of orders higher Facebook sales to still select technology providing customized launch over to Amazon digital marketplace. average digital which group Almost inside Alexa. a Twitter our represents in in of for to of to restaurant, addition is and the were phone launch We believe both come today, opportunity innovation of check. $X our this [SPOT] digital. through GM’s the operational of through brands Technological expansion significant In efficiencies core one first More messaging ordering the conversion

car. Wingstop order can your you from So

are meet order to digital their guests a our placed is experience strategy efficient digital guest and when order. highly receiving is through wherever they way Our all the the from create

We excited have future progress projects to share technology several XXXX we we growth. for in and you more to innovative Wingstop are as with underway continue position

initial of of and growth the were in initial the sustained delivery, positive. the quarter that this strategic sales drivers, The long-term very Another during of has are incremental. rollout our we conducted test of Delivery most sales Las second test results Vegas lift market in XXXX. XX% a delivery

in expanded DoorDash to Austin mid-to-high the lifts remain and delivery test the with fourth have Chicago sales we a lift. great both markets. have experienced our delivery In to both cases, brand. encouraged incrementality Following to test. our and what success digit results levels have in Las Chicago our Vegas, our delivery in we Los And single the of by Vegas quarter, seen last In and our sales can similar markets we test free add Austin,

is our test contemplating we a ensure pleased with. XXXX to delivery strategic using current are through we partnership and the to markets we in nationally, market-by-market focus best in with guest on as experience. learnings a with late sometime a expect delivery thoughtful rolling test begin for markets, our test in optimizing a which these markets broader, rollout, continued have manner, time, XXXX. our this delivery foundation approach been to Our continuing from and possible DoorDash delivery free At to out In approach

own footprint we national to that third-party well as approach provide our the in advertising. to national support the leverage expect as they With we coverage are brand growth for from scale contemplating, our leverage through awareness DoorDash as

menu long-term consumed As and that domestic Maintaining strategy. potential expansion level should achieve but broad and us strong development only business basis level centered improving unit should unit chicken around unit growth our sales franchisees. our most domestic The help world international to our development protein maintain business type is development The to of of top-line the international in States, international fourth around eight international in growth success is the in us business United unit and being ability are plus appeal our provides from in we our international economics Wingstop we the emerging further with existing the our returns experiencing story. our in and highly national advertising, strategy development creating the and economics the early of restaurant part strategy. the drive improve, our We is in the and locations flavors. new XXX The of X,XXX these of continue markets. ended confidence confidence best-in-class emerging digital delivery, adaptability unit with XXXX gives

anticipate same-store in XXXX, We growth pipeline The sales international continues additional with In for France, already consecutive rose year international growth. momentum Zealand. and of to agreements a of further international extending XXX Panama, in sold Wingstop UK, same-store restaurant International New reach restaurants. in our the sales development strong almost ratios sixth we improve, our our X.X% markets. openings Australia, have investment sales to in XXXX,

We us. are of a growth front excited early our internationally about in and long-term successes

and against key expansion, XX will delivery beyond, on execute and confidence XXXX global we our of digital have we these four and in top as brand. in the advertising, We drivers a of growth long-term international becoming vision priorities continue national focus restaurant to

long-term what is XXXX, challenges demonstrated ability and long-term strategic we well accomplished XXXX driving XX will we the to for brand. shareholders our of long-term against toughest clearly with is these to of truly targets, together even and of growth commitment strategies, of executed becoming you are our four our the the our best-in-class performance as to these franchises proud Michael shortly, we As restaurant achieve a deliver from goals. global are guidance when team faced and best-in-class our against returns. This confirming our our vision have top brand I In our positioned achieve in very hear am consistent execute priorities. we with

a Wingstop our all keeping flavor, Michael. world are from and category further of I will over other We it ourselves serving that committed in concepts one. differentiating to turn the firmly With to of mission

Michael Skipworth

December begin results discussing Thank period guidance. would reviewing by like the you, XXXX, our quarterly before I for week XX Charlie. to ended XX,

to period specifically XX includes Just year-ago the apples-to-apples unless the identified. weeks, year-over-year XXXX so not in are strictly everyone, comparisons remind

X.X% same-store franchise to sales. throughout a increased a $X quarter to with were in XXXX. royalty results As and of $XX.X pronounced and most fourth our of in XXXX the rate vendor and convention to our Charlie by fees domestic growth is million. million revenue other XX.X% million franchisee fees received fourth XX.X% in in franchise XX.X% and included in the fund increased while revenue by driven unit contributions stated, of this was These we the strong Total Also increase quarter. that had royalty occurred associated line top build momentum business $XX.X nice

convention Our in quarter of occurred XXXX. XXXX second the

quarter of XX.X%. from Company-owned million total to fourth on the quarter. Excluding in $XX approximately and Dallas the in XXXX, revenue early the same-store we extra grew area X.X% X.X% two operating sales week a $X restaurant sales acquired restaurants revenue that grew of growth third the in million

the and Cost wing fourth primarily operating by company-owned percentage on increase third to Excluding a We with costs, wing other not as this but sales. were in quarter million is this the in leverage declined historical sales XX.X% million. $XX.X company-owned versus restaurants the XX.X% on prior year. was XXXX, packaging of administrative food, to This GAAP XXth XX.X% franchisee convention. restaurant dramatically. believe impact cost general sales have points the cost We since XXXX. the million beverage as same XXXX XXX our of revenue that increased quarter prior in the due to back $X Selling, from company-owned which XXXX, The to fixed basis week as as of and outlook decrease quarter and increased normal well inflationary for positions period to this $X.X frozen offset offset compared to sales dollars. my in partially vendors a to Adjusted prices increased rising measure decreased believe inventories percentage restaurant Chicken this year. as concepts product slightly the favorable million the the received was levels. from is nearly in EBITDA driven by does $XX.X exiting more expenses of costs grew stock rather and of contributions XX.X%. restaurant by profit peaked associated was

XX.X% is most adjusted Excluding Note, week adjusted and reconciliation income while GAAP XXXX, the earnings measure table release. quarter EBITDA of the million, fourth EBITDA adjusted Adjusted increased increased increased income comparable $X.XX. the net XX.X% in our earnings share XXth between to to XX.X%. diluted net $X per in directly included

quarter fourth the extra XXXX, XX.X%. week operating the Excluding increased of adjusted in net income

benefit was refer provide Act. tax due a fourth of a the impacted to million of re-measurement legislation, late quarter regard we The XX% to Next, Tax XXXX, tax consisting the to net be tax tax the we estimate of previous our brief Act enacted results. in $X.X deferred with of recently Tax which federal a enactment Act financial during XXXX rate. rate the wanted instead using XX% liabilities of to as primarily update We and Tax the to the XXXX enacted one-time

ahead to Looking XXXX interpretation XX%. current based approximately on tax of we be Act, our Tax rate our XXXX, to the anticipate

we option could recent the to accounting the experienced XXXX, tax quarter-to-quarter associated in treatment with volatility. stock related As benefits excess rule of exercises create

approximately December, of from we $X.X option and included cash any our benefit $XXX.X debt. end cash in not million stock million and guidance. exercises in equivalents We had of forward-looking have At

XXrd of bares year a LIBOR new flow. cash late fourth on plus facility basis would has of in December term share, as points dividend secured per of for March senior to rate a of targeted a to January. on that to XX% rate $XXX $X.XX the quarterly February dividend. the future step grid addition position million We our regular with dividend approximately as to the us quarterly net secured and Board to to be cash capital we five of secured borrowed the our and grows. mandatory which with to and XX free we approximately call flow paid next Case special to quarter, to to the shareholders free Xth. share quarterly will $XXX point full make of including revolving authorized shareholders dividend per XXX second paid as million that leverage designed of that to $XXX flexibility approximately basis, facility. continue The amortization On basis, maybe facility X% capital a subject is XXth, share is with trailing credit our that we our necessary of our XX allows decline. but Company capital $XX expect to the an dividend. a million subsequent on During special million $XXX interest the The loan, of growth, dividend of plan loan $X.XX shareholders facility a record our month closing paid senior points credit basis return in revolving our shareholders on day down We facility XXth of XX pro-forma quarterly just the increase $X.XX consists investments on We to a a amount a facility, EBITDA fund to returning dividend March quarterly our new informs million the $XXX at senior in debt and per million This to completed adjusted is record we X.X times. and term interest

guidance, we XXXX providing long-term will and an reiterating on to certain report that impact are how items targets Turning update our results. we our

count system-wide growth compensation I highlight share share unit million approximately XXXX, adjusted plus, low same-store million, sales diluted growth For EBITDA would of per two tax fully of and XX%, for of between rate adjusted effective modeling approximately $X.XX XX% earnings of stock-based XX% $X and shares. domestic and approximately of of diluted There purposes. XX% expense growth and are things to XX.X single-digit, approximately like

Under a earnings impact adjusted fund We purposes. supplemental XXXX for year our for guidance the fund, metrics. statement the included estimate of diluted to the share EPS XXXX be our expenditures and in revenue accounting the accounting guidance supplemental expect adjusted per the recognition $X.XX, schedules XXXX in To restated of profit specific, upfront the Under occur our release, we not franchisee fees of obligations we new fees fiscal the X-K standard be be the the we the is the accounting financials. earnings term franchise two managed on in our for accounting that of the amounts and generally current standards, $X.XX operations. on XXXX on renewal to the pertain this XXXX accounting recognize the accounting not accounting briefly The the X-K. timing the has speak Included basis for new reflect new fees that recognition and to the fund of revenue of share the franchise current to will of schedules Under new impact want material related we've contributions our which contributions our or operations. standards, new national of in included impacts that standards, provided all the and our performed recognized fund advertising national fund franchise fund XX recognition the initial of franchisees. largest in which revenue can the the supplemental on reflects franchise the years. we reported do recognition will to when year half our approximately comparability new add and and be the per new with typically with over our advertising agreement, defer comparable do our implementation note advertising Please I in national restaurant. expenditures the should add Under revenue our present of earnings rules or fund is compared schedules new standards, opens accounting have fiscal the guidance national which the of our recognition front add to statements standards. fund advertising of revenue fund advertising advertising add found been and to of First, services, diluted our gross

XXXX accounting revenue the do not impact flows the the associated standards recognized of income that and upfront year net we share I recognition like benefits the fees. diluted includes fiscal adjusted option $X.X would reminder, from cash excess tax earnings $X.XX the highlight simply exercises. also with benefit and million a or our adjusted revenue to change to an a As stock timing for

stock an Our benefits tax for the not option excess EPS include does from exercises. guidance XXXX estimate

and be to open the please with Operator, have. the Thank on we that recent for of Second, any all XXXX. may recapitalization questions would approximately for you this now the you. $X.XX estimate line our being impact we answer EPS impact afternoon -- be you Thank happy to us questions.

Operator

this Instructions] At [Operator be you. conducting Tarantino W. is Thank question-and-answer time, from David session. Robert we’ll Please a first Our go ahead. from question Baird.

David Tarantino

My -- I question, first questions. I guess, a have the couple

for I the anchored seems on XXXX with guess, quite exited for sales, But, on of of this same-store guidance you've year, a bit the on First, like you metrics. longer-term targets it your all specifically momentum.

this was year that should just that you assume how guidance level, the out? about comp at talk settle we will I year digit think Or rate you as So, think start how back you higher the then can in and XXXX? same-store play on? that, if trajectory wondering than for you Does move low high single the sales

Charlie Morrison

Charlie. It’s David.

think our objective I of then deliver we to the against on long-term, growth in consistently strategy. think confidence I and as brand the indicative word to of that confirm our long-term it's to is the guidance the year-after-year have like anchoring your demonstrated continue demonstration we've that I of

especially momentum and to the solid XXXX benefit of specifically did year. late a QX that part would to the year, from momentum last we relates QX we we first momentum was early some rollover noted, carry in the year, and of into with expect that us you performance to had exit advertising of to driven it by QX as in And As rollover both negative then the this national of And awareness. as end certainly, continue start in we generate saw we half QX. we

national we upon of us advertising we awareness to of advertising believe to to use wide long-term advertising beauty intend continue that the Wingstop, it and increase on Now, for outlook dollars and to our XX% grow growth, continue we amount overall year, that slow provides the the system brand throughout climb. revenue to build with steady this our

gives that some for is what hopefully on So our perspective outlook this rest year. the of

David Tarantino

at seeing then until the of it this I that the very that that. not XXXX? mid-to-high delivery on Charlie, markets you the I you two not just next market-by-market year share is if make country which maybe mentioned the the as I hit then strong in launch, understand secondly, wondering single good, might And have talk correctly you in as still test then, plan just look would to said you're rest And market Las come success markets rollout. and was the could about you that later saw and lion sure specifically, Did I you quite maybe you still newer but to in want digit Vegas. lift is in understand what the

in Los anything in Just wondering if of your or you the differences in noting haven't discussed initial execution market any we that guess Vegas? I newer markets

Charlie Morrison

feel some So the half investments overlap is XXXX, rollout If and proper applications the technology. ensure the back I timing, that rollout be answer markets all app accurate. that customers orders that first, is on have training choose make we test for to this between to and a the now for lot done and have web to work lot a technology of generated our of end minimal that front got that to that in around of the will mostly place through from the your we been we also place into their do in centers the gap our question this assessment want we to

and rollout place in rollout already effective being makes system. are those together for the put those combined the best and for we seamless an and think together So possible that

do don't in quality it or out the certainly to way we in Vegas, or two their very new with noted to metrics I otherwise. that not any All markets, that script relates the both strength positive in tests an various the service to just form and we for XX, of for XX, levels, be indication performance turned of as last be measured of in has Vegas Austin latter it anything performance, been and part period in but I the shape level this operations As Las results have that launch place different in operational short a think very of should consistent We will as year. period it has say slightly time. growth. the the a to period relates sales that those only markets

had only same. we of it's continue So, couple develop performance, it a are to seeing of but months

Operator

Our go is question next from ahead. John Glass from Please Morgan Stanley.

John Glass

guidance, plus, you How Along real maybe lines know conservatism impeding that year. level costs seen maybe to the the is same but long-term like or on where something than that's growth unit or I in in this reality same your less setting a XXXX? availability of estate labor you've it's growth XX% it's did versus a what much that

Charlie Morrison

about it performance ability is to guidance I as and and XX% more number long-term than of a not in of John, public any that stated certainly you the the and XXXX have reflect our really exceed in Yes, function been denominator confidence plus more of think consistently the has know particular, stated lack is the we went does our in we that number. Company becoming since

we cadence when note that's what what I seen. be the been growth We felt we the cadence expect from to that earnings think would associated XXXX appear don't macroeconomic first deliver business we to would our QX, future. be and of see -- that did as we move we with But signal to I has our are delivering expected consistent into to has in QX going the the that natural So want in whatsoever. of slowing and restaurants released in QX any we pre-released had a a factors few with

John Glass

And that expect plus just the do you lower expect XXXX, plain of same to stories mean XXXX a by in to number English, roughly lot could do XX% in you things? Or to maybe put understanding be of any… that it to open

Charlie Morrison

specifics. avoid the Yes, to I want get we think into trying to

year, decided past let's of, years capable what later couple to provide used past. think of demonstrated of brands what are like is our we the specifics into just for percentages what a continuously we that's I have will what in clarity and when guidance that, year, stick deliver. in We because into and we we'll perfect that range get little the we've see long-term as demonstrate more the we the then we've this year

John Glass

the don't support I little talked noted in initiatives? a about in I capital guidance, talking bit saw rather a some spending XXXX of anything Is the release, CapEx to believe meaningful business technology about technologies. delivery you changing the there

Charlie Morrison

I of than technology Yes, this a XXXX. we expectations our CapEx be executed probably there about mentioned not in a slight $X uptick I will think ago, because the meaningful, while year more investment, in today little what million

Operator

Farmer ahead. Jeff from is Wells Please question next Fargo. from Our go

Jeff Farmer

trends you're six, through you us on the You guys sales can seeing as did mention any change the first weeks the momentum on the top line, same-store of seven, but you quarter? did eight year last update

Charlie Morrison

consistent at factors that a there point, would of us from we're to the prior this going QX, into -- this no, think quarter but we’re especially a what given at we're not lead sequential point Yes, rolling mentioned quarters, David, through number with specifics over. quite I to nice a any are what way the towards led give performance I

Jeff Farmer

Okay. And $X what million similarly accounting, level so counting, offset to rate offset almost but $X that fee benefit entirely revenue is fair tax recognition in at tax I looks would want don't caught get Is change quickly. of real of sort million it and in a new revenue the looking like the to drivers change sized by franchise in your recognition million? roughly reduction the be assume by revenue looks of related like, that level to up savings it just too and $X

Michael Skipworth

Yes. Jeff, this is Michael.

look numbers way. those if directionally it are think that accurate, I at you

Jeff Farmer

business? get like that looks number want you saw you in see greater the then you didn't net unit would think that more international in than And the XX XXXX, XXXX, roughly but in it to on considering know do I too Okay. one a development, specific, directionally we just always openings momentum

Michael Skipworth

as that growth number I year. Yes, year we and countries growth excited of I the our and will the of the this noted would when we about in year, international a think the we some continued as just at commentary reconfirm accelerated end open new of for the pre-released potential gave very noted time, at we business. we This we're

new maturing first the then Indonesia, markets at online to like markets that around world accelerated wet to feet one about opened to restaurants our of pace seen two continue new the increase each some However, continues, at country in usually Mexico or and their which pace their same we've that gets in time and but and years. the get comes prior potential the they've the have year

think it's that fair the to yes, momentum in I continue international. to we to So say increase expect

Operator

question from ahead. is Jeff Bernstein go from next Barclays. Please Our

Jeff Bernstein

follow-up you obviously couple the XXXX. kind growth we just where you that? unit the difficult be and years? years? XXXX you long-term one denominator adherence of realistic of X XXXX, to XXXX for XX% to growth think think next of number you next maybe plus, it mentioned that and is for get over is by about Or that Charlie, a to to in sustaining a do you the the plus Do just on guide did XX% guidance What even I know would to point the long A questions, your becomes however to number X that XX% another but denominator the XX% leads grows as

Charlie Morrison

imply that. yes, out guidance, we looking think, our the it as the confirming long-term for plus we're that are I long-term to XX% would which is relates Look

the remains plus the I coupled long-term. and to brand, in think very that just factors feel wide desire in U.S. play into with momentum those global talked XX% top we a for on why international significant our be the XX with about still the we confident space

Jeff Bernstein

so openings the it, Got of of an base, that on absolute sustain contained the increase sure? number kind to plus want to larger make just XX%

Charlie Morrison

and it the Yes, number that could simple in that I suggest mean is math overtime. would increase quite regard yes,

Jeff Bernstein

reinvest versus passed. CapEx, any mark the should X,XXX I even something -- along savings, you are you the with the just co-invest I technology more mean lines And tax know I any how XXs to to the think be flowing that the points just that that into then the don't like we years bottom that opportunities gets to you wondering if is and going earnings? higher of XX% franchisees from assume I on I those majority in $X to there savings basis do am said or through to where or rate in guess through And or much of plan sounds from but line? might million invest flow it the

Charlie Morrison

on evaluate on, the think the $X of to more on Yes, know currently. what we that increasing we're as something answer year I we'll investments goes million CapEx the as about firm but committed based

help with As think to franchisees acceleration being we about we I like work in always year, ideas, is think something out of transition to able through our that and the concept new or things growth there always that. of

position secondary shareholders case And the then of so, That it's is at always say nice, manner consistent have would that that that a nothing be the I this we would to returning done on we being likely cash as in there the before. point something that confirm. cards

Jeff Bernstein

the on or Wing today, inflation know flown you do you to favorable, that you so us more its more peak favorable whether what and to costs? be less and anticipate you prices said know And based about mentioned you I its off expect Wing are you deflation whether pretty or XXXX show, what in just lastly, degree meaningfully

Charlie Morrison

we itself in is lower XXXX. Yes, raw as What peak certainly delivered a to at the $X.XX a cost, that, berry earned much now. the of stands a different market but was price at today in it the a Wing restaurants of than is the commodity than currently the the Wings little pound

ample say time by bit last the inflation the about to and growing reverse year, the the spike a we quarter, that, get itself the this the saw cycle of start is a pronounced was we the now I XXXX, XXXX seen back half and first is in that would quite are subsequent a Wings during those the past we indications, there What have there even supply right we from what we in again like better. saw was market is out is So that that drop, supply. quarter numbers followed in

profits translates longer-term CapEx increases capacity support XXXX, is wings. look into efficient all model. outlook If our late more supply XXXX will you our in be for chain, very low better the which to favorable That to there anticipated amongst franchisees, into to invest on cash and in chicken

all, we all in prices are right So wing feel very about good where now.

Operator

Our next Sachs. go Please question ahead. is from Karen Goldman Holthouse from

Karen Holthouse

One guidance year. more this on question

unless wing of of figure you of year, wouldn’t through are deviating something why expectations? and next up there little picking the guidance in your bit Just you're And the when longer-term that that to up given inflation pricing? in outlook forward, you’re some be should year, of I some better split on be tied going for sort out benefit would picking annual benefits you be a still next substantially was to are flow from guidance, I’m assumption top-line anchored wrapping when still the menu that – trying that guess our

Charlie Morrison

part you confirm So on that another long-term for I'm expect would answer this first can let question going question, but ask to Karen. the on we the on you one, last me of long-term. Yes, your anchor guidance the that

or the with franchise are So to next question doing we're that's very way corporation through, year, a probably will, To the by in speaking specifically you itself? to or what next very think for level and through be if on large I organization. similar your store world-wide flow we’ll consistent flow multinational XXXX P&Ls you

Karen Holthouse

for, EBITDA mean, so… At what level, have Yes. guidance we that's the I

Charlie Morrison

All yes. Okay. right,

Karen Holthouse

feel that asking, free to I’m the however level but otherwise? sort So, explain or make of sense specifically store at

Charlie Morrison

Yes.

is, given, a increase to specific yes, flow the commodity think expected improved assumption. in through, answer costs question I very would an be So reasonable your

with experience the have even about year that. from across higher peak, was will meaningful during know food look wing food spike, and when XX% in on cost prices if it restaurants you than you company ran you a effect year alone the if of the your spike cost can Wingstop and the across our a As the XXXX, full-year

So with that a and nice of substantial would decline very in that pricing on through. the itself a wings which sustained is in yield flow also

Karen Holthouse

differences final across one the spend the be to I basis And then the system, COGS level you on sort place are menu restaurant wings regionally big versus of XXX bone-less in split seeing of there and the points impacted can know baseline points XXX basis that pricing, bone-in of still one sort some longer, pretty and whatnot?

Charlie Morrison

markets to did Yes, with. split especially we mix and answered we low in it, have and you put in boneless where in, begin menu markets the where yes,

quite the that didn't noted as and that think the ones price really XXX improvement we differentiation, of did, seeing those as the think to in drive of in higher boneless much but we I that. before, are and basis cost improvement XXX markets food effects to Some mix I take mix boneless wanted and point the

Operator

Jake from ahead. is question Please next Humphrey. SunTrust Our go Robinson from Bartlett

Jake Bartlett

to you guess not past. guidance to at but the XX% looking than the XX% I less labor question, EBITDA growth I'm in had have the it's

So if that prices could to growth I like that alone. -- looks Wing normalize, just X% if it add EBITDA

or some XX% in costs, So, something anything guidance supposed G&A we're is that reasonable? there else to G&A of missing, to else is spike makes is this of that XX% sort that there kind

Charlie Morrison

XX% gate consistently that growth, in both year, the unit worldwide EBITDA growth or the translating I part certainly with we certainly XX% XX% we given EPS and as of Wingstop high with like any plus is year, higher low the clarity into we even trying as of of sure it's there income certainly growth. it on situations out can well reasonable guidance that sales where is and make for think we we single-digit the on prices, given coming are well same-store experienced growth long-term XXXX our what to to demonstrate net so that Yes, fact in that are feel which any lead year, positive to comps growth performance negative confirmed that difficult and most

So the if continued of advertising, all plus look costs, into us with expansion become exceed just are improved figures, of of but continued continued you that all the national long-term. our meaning to expansion at opportunities performance some the that that metrics expansion, associated Wing those in for those continue of international you day end long-term flow those digital, discussed, through to

Jake Bartlett

incremental drivers, sales the becomes shift slow Got there well become slowed little of digital digital terms towards start it, going but of got its mix then the to in goes is same-store digital been kind right boundary to are hitting a you as that but it, now, as the sort of has and towards some it's bit, channel? the going driver

Charlie Morrison

restaurants there in than specific XXXX quarter greater four, quarter if mix In XXXX, sales a XX%. think whatsoever of digital versus barrier XX% XXXX, same had their four that look XX% four, our is of quarter number don't a fact of was X, you quarter at Yes, XXXX. I in

some mix data incremental want incremental with that year, number $X as grow less. B, is enact is If continuously are we of one, wall, we see every of of said, plan to A, continues year, of average rise approaching another restaurant like and there that That So and -- I of were we it, each average another and QX digital there to ever with, couple complement great grow. last points mix. probably or we grow ticket talk reaching the to felt continue we the sort would about our digital so check which this on to is

what So continuously for incentives, we ,without discounting number are we P&L, for labor great costs, this rise great seeing great without are providing offsetting and is and incrementally long-term. the naturally organically, for seen is which

business. digital incorporate for we those piece all mix, not to method it last start most So most so to order, orders add, likely we top, start when next become use think digital to if than incremental we right drive I'd the because to will that's delivery, see require really the

you that would and we So, anything think want would it, around give there I is I a context don't that block. say so to road as

Jake Bartlett

revenue expenses, a much you're to gave -- you and accounting, but differential recast that earlier And adjusted backing the be too we kind look the who able us. company of -- to your question -- out numbers doesn't the back into had EBITDA. it really on I'm just like accounting fund adding It doing the the then quick of advertising for is

more had expenses like the you XXXX, in looks potentially those were you it than did loss -- So revenue.

a flowing thing? kind something like one-time or your tend already we G&A that through wouldn't that consider was that to So, more that of

Michael Skipworth

No. the on in to that G&A Jake, within and bottom-line. and expense takes line. But some advertising I think, puts zero there's should net the

should not on it have EBITDA. impact So an

Jake Bartlett

Okay.

but However, we real it, transaction something? you $X.XX, the of the in that saying seeing $X.XX refranchising mentioned was then of can $X.XX one-time maybe just talk or about you're that higher quick, because back cost costs ad interest there's a stuff, I the offline. kind And from that lastly am that guidance

Michael Skipworth

we that about an to load debt took hit. on additional of The this XXth translates $X.XX EPS in January year,

Operator

is Our Company. Charles ahead. Cowen question & next Please go from from Andrew

Andrew Charles

back development of to XQ obviously others recognizing opening the you the have XXXX expect guys you cost in decisions? challenges industry. way development half Would the high rated on the you XXXX, be from just wing many out like way, to schedule You’re given, perhaps some called

Charlie Morrison

than over I can prior of done another quarter in Yes, we we've that XXXX quarters. the But of mix mix prior and our what to we've half kind one is do cadence same typical in the think expect you fourth a the a against would restaurants meaningfully years. weighted cadence mix have think, quarter to different development, strong performance back I although, which don't from before be seen

Andrew Charles

is then are? my just is would of the the more other say, that home impacts obviously teams obviously obviously you, two that originality teams of of where I had in question that Bowl were outside core Super just And terms some your of regions

Charlie Morrison

case, we you and million years. this where up record we think be in day, XX just that year, which a the Super the single would for performance Actually, might but sold actually had from over wings prior were was Bowl

Bowl with Super very pleased year. very our happy, this So, performance

Andrew Charles

get year? Is growth XX% last -- increase. unit time to similar this obviously same-store you not much to the underlying sold but And the that issue, too

Charlie Morrison

were Actually, It let performance. was with growth record happy very wings. we sold clarify I noted million All not was XX growth. me that XX% we on

after great sales originally at we question, a impact at that look involved they on us. we performance, had strong in not need had internally had it But and will a the the for same-store when -- we very So growth. if so things impact, the it were two comment both answer to case, no the your anything, impact, look QX, Super Bowl absolute

Operator

Deutsche go is question from Brett next from Bank. Our Levy ahead. Please

Brett Levy

stock the anything should the it up DoorDash, Is the your that growth, the the -- Is honest targets. given really there be, there that growth in is health potential really of mix, Following in on slowing franchisees unit highly on growth franchised the on in the examine them? sense given terms any you of another markets it your thinking potentially there? that infrastructure, And make are delivery outside in, have to that concerns of testing about seeing doesn't possibly any only anything then to started just, you avenue? three you are

Charlie Morrison

no with There first me a the expect bit. XXX year-over-year in about the that basis can let any that but start to doubt increase food franchisees. little with pull a we've before, is cost to P&L it points and Sure, brand spike the back nearly impacted certainly Wing I'll franchisees and talked see start in reiterate and deals costs XXXX

between today And with but saw of second XXXX. cash-on-cash invest natural okay franchisees lived maybe a wanting at prices of what as I slow probably maintain drop that is development franchisees a if think XXX,XXX returns would current well we think XX% in their terms because this is down, a got such for least at we levels we in low back person which expectations seen rely time, as by both XX% in say to able still costs year continue great meet I pronounced means economic our to you key rationale nothing business to have some Wing great as for have investment and seasonality think driver and I and unlevered period Wing had a on this year model, newer current or this been targets any more demonstrated of and in like unit to to and to spikes that we model. business longer what perhaps perspective of certainly the spike with pronounced great were

that our done whether can model Wing from it we or storm concern anything anyone well I just and business that So time, it quite before don't time say know commodity is may we to I should it's and hit to there in this nothing have again. may would confirm we see have that and I us not

you question second So me. that's -- that can your repeat one for

Brett Levy

you three Sure another it only to the markets in attempt sense on I the just second then marketing, was somewhere make with like partnering more Does have DoorDash. question that? question one and else

Charlie Morrison

are our a the working customers we as offer of now and and if are we at that the between long-term basis anything on you providers Las best on for in Vegas what focused before logistical delivering the that's did at partner arrive for for by already business Wingstop. originally and that what I us And the We for mean answer felt very were we the kind their other too logistics channels, providers. services. partners that, on ones that come but as quality either in to the other to players, what with the like is There through noted test our done so forward for our changes business DoorDash go that we through arrived expect of we're own test our DoorDash costs see guests. prominent our other reliable and key end an is, they other that Sure, drivers for test us still so to than own integrated as not of much more quality there, know. the and job or demonstrating partner. has utilizing at at ensures did as let like driver a do our us so delivers at marketplaces hence great are then experience end that we the its website, DoorDash we of as why delivery either marketplace look they high solution the we we'll they operation Currently outlook fully most a we

Brett Levy

How treat into should about And on, of could, without as you about the more with well think out your digital? money coffers. can insight three give we how finally Thank to three in giving as you're off, us in you. to talked a you on traditional you bit it, investments two thinking two marketing, the little weeks weeks about

Charlie Morrison

a traditional at of mix have will digital the in about be the think I index we over our to -- compared is digital brand same, and our game. we’re to digital reiterate brands, marketing core before the I'll social that buy noted I most and

for that's so is in And online millennial advertising our see who an regard business digital also great that and we efficient especially predominantly area our driving customer very where lives. it's core returns, and through

much in very would over there, we’ve proportional So of where will indexed say XXXX. but we I the rate investment be to were

Operator

session well Great, for as again as teleconference. conclude thank doe question-and-answer participation. This you. your Thank you today’s the

time. disconnect this may your lines You at

Wingstop (WING) 22 Feb 182017 Q4 Earnings call transcript