WING - Earnings call transcript Q1 2019

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Operator

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Wingstop Inc. Fiscal First Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. this being note May today, Please XXXX. X, Instructions] conference recorded is Tuesday, [Operator

we Morrison, I have and call, over the On Charlie go Please Executive to the ahead. President to like Michael. Michael Chairman Vice and now CFO. would turn conference Skipworth, CEO; and

Michael Skipworth

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

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

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

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

Charles Morrison

for Michael, and thank us Thank you, you, joining all today.

global growth earnings domestic unit our a to the and X.X% comp growing with effectiveness sales of XXXX, is in a part innovation, Wingstop. of If growth awareness growing referenced then our comp QX a Michael via to footprint. testament to franchisees, of be start X.X% maintaining driving year. the quarter. strategies a sales the last that same-store the to best-in-class first you you read is such expand continuing for X.X% of sales same-store just This We and economics release top time our on brand know long-term a why This great it's same-store strong in had

into up a building to brand. our top XX vision this restaurant Wingstop of global of ladders All

We we're years excited for about of the we shareholder you all come. that in to the end, excited to positive company equally talk in investments term are for long to momentum sustainable To create our making some value very to are our business. about

term sustainable since growth brand of all the sales showing well our early last experienced to With our since growth advertising growth experienced, from has awareness success and us. we not on to it and that long laurels the be is Wingstop, future. to our we success This the brand status position we affectionately in to and time partners, our advertising of team that brand success of refer delivery amplified and kind feeling into the members a of on overwhelming Wingstop signs to quo, feel whom spoke. our fund, call. The been shareholders, rest additional earnings has capitalize as would try Wingstop TV strategy responsibility acceleration maintain the national national for our the success last but At and the franchisees, X% natural the has given our were

we strong On gave momentum our in the we accelerated indication a last to numbers evidenced the QX has growth what qualitative as but delivered. of quarter, the call, same-store you by of we rest and for were date, the X-year sales seeing X-

similar that that the plan of size today. grow vision going a of It's and at necessary point a fall XX where inflection way, we to brand. to are are by not to higher a best-in-class while to the X and the Broadly growth several with believe next brand. XXXX get headed phase categories: the drive did will into you a we're achieving great stock success. global invest vision kind as with level. So ago returns continue believe average becoming we investments and continued going believe ensure drive of before simplifying to our in numbers for reaching we to we to growth are we order investments and We partners how and so made Wingstop leading good, 'XX, that as every we in our destination We're the risk term our I'm restaurant run and unit $X.X prudent with as times guest are building and In extremely it company a there. average growth have and support investment our achieve this we we years an economics. now about investments long partners and to of play million. XX% public ourselves continue growth It's in times that our have because top without volumes discuss level continue franchise undertake rough company. organization accommodate means that current talking to levels the X our next, Wingstop reached getting unit the to growth. We toward approximately franchise take for next to to as we strategy enhancements; going in our who, on of potential was of great to We of invest Prior IPO, volume all drive Digitizing The even to I'm technology term we experience will deliver owe unit pace. long our success and the investments transaction; that we going full our Wingstop success kitchen best-in-class and

properties this order. continue and be technology as investments first started app to digital from other to continue a visiting as year. sales QX testing technologies point, that up are then over and facing way ongoing to order the at to and the payment select digitizing as through X and more the early, that consumer experience kiosks, our guests, necessary is coming with will best-in-class pick-up believe digital seeing the to speed are and menu digital innovate. basis leverage In best-in-class to To is of us In in our there on XX% lockers of with very kitchen. every well of invest points over are back boards while to channels, in experimenting point quarter, of house, We QR-coded we throughput the technology transaction. advantage, new from and web XXX and for our an first our we we to app right our strategic and well launched that the improvement beginning different brands an are ratings We area quarter converting we restaurants. service allow percentage guests Consistent last enhance offer just the

we of Wingstop look to we forward a the believe future, role. As will these the technologies key play

updates investments area further provide excited we're we more as in this We and learnings. to today making are gain

to made guest to people, adding XXXX. we In appropriate support in to in which in experience, initiatives These a key strategic of place investments to and addition investments run have growth making include we a technology lot we're in also investments into the are to top heads toward our We our as line strive as lean as growth run attracting to lean going top next future. phase. well the continue tier we talent and drive well organization ranks we

today But reality the future. not where franchised, is asset-light can in of heavily are success invest we're also model. must so that from the deviating are and poised for we our that We where continued our people, we headed we be in

possible XXXX minutes from hear provide XXXX. in more specifics regarding ensure few to set You Michael guidance. transparency clearly a our as expectations to intent much we will it is And for as

global we believe XX% will returns unit in digit same-store as I translate further low-single will turn which execute our restaurant discussion brand. that, first the into top With we a of results. our However, of remain algorithm building our to long best-in-class Michael of confident growth growth, call quarter we against sales and Wingstop for vision plus to term shareholder XX

Michael Skipworth

you. Thank

fueled of from by growth quarter. top delivered X.X% system-wide the a as was growth of levels on over of rate with XX.X% prior fueled strong growth As $XXX sales the pleased was totaling quarter, in start same-store mid-teens up first in we're at to the rate our mentioned, extremely sales Charlie for you same-store which, all execution We the Charlie, quarter another million that's heard XXXX. that year sales X.X% quarter domestic in This the a growth year. prior

total $X.X recognized compared quarter million it ended long fees while X.X% increased right as compared target restaurant quarter. in first Royalties, QX XX-percent-plus last the first the reflecting same-store can quite openings in restaurant we quarter year fees other with the XXX XX we pace increased domestic increase to the for translated This end last for is for On and higher good million XXXX development year are top to have front, to national cadence a franchise pipeline system-wide Advertising million development for fund number end us current prior revenue the quarter. we XXXX. quarter the in in restaurant XX growth the since the driven each sales. is that quarter quarterly million $X.X of X% of the to visibility footprint $XX.X term termination development. by from of of and seasonally year, From the new due now, and new growth of the QX compared as of global franchise well net million and of deliver year, as lower growth increase income ad $XX.X $XX.X in rate the unit new net XXXX. By to year gross related to the sales in line fiscal restaurants, into we perspective, on in to first our to XXXX confirm on May contribution XX.X% quarter restaurants the primarily of to the our year's May not fees X%

X% portfolio. our restaurants increase sales a for are volume are purposes, of the we from the levels or will increased of refranchising City the company-owned on restaurants' City Our to call as Cost newer, we City partner to growth necessary position in the XXX to the market. of who primarily in average restaurant of former from the increase restaurants is rates in company-owned acquired Kansas points X $XXX,XXX. due and in was prices sales of of in ad to the basis Kansas sales to confident These XXXX bone-in saw market $X.X we make closer of to to QX to younger, inflation develop and year same-store to beginning primarily X.X%. rest a XX% for investments increased these in X% that company-owned as since as restaurants XXXX million target restaurants quarter opportunity our XXXX. year-one Kansas sales. franchisee national acquisition the We $XX.X percentage much that remain fund our One by contribution the fourth restaurants due can this in well continue wing increase Kansas franchise The million, restaurant X out to modeling a the fiscal item

We the fourth as quarter training also additional labor and X future. expenses to restaurants in refranchised with associated repairs restaurants these maintenance the related of saw and XXXX operating prepare increases in Kansas other City we and to labor, be the in acquired

On of to the that we see topic be this the have deflation we not continues of the strong. time demand wings for at seasonal wing seen prices, as year typically

wing been the struggled first bird through In overall suppliers of strong demand pressure the also addition there has X wings, on as have the year. the with to we believe weights months supply for chicken

wings outlook prices market. pressure fill birds around are menu high roughly putting to counts. impact wing XX-pound on the taking fresh cases, partially is case the and we wing single prices in mid-to mitigate where These sold in it are inflation As market XX% of built digit our in wing smaller stand since XXXX. for sizes piece wing XX-pound inflation for more the With the today, is requirement inflation to our updating the

$XX.X XXXX in ability strength our of the unit is unit and line economic do will to Advertising model in growth a this $X.X increased with our confident to term that expenses growth. number unit target believe deliver remain we not inflation long our of million million. hinder XX-percent-plus However,

QX the the is XXXX, remind previously and does recognized is related rate advertising fund general everyone, from recognized the XXXX. actual As advertising revenue increase. the versus of at expenses is of were related $XX.X to $X.X administrative driving necessarily the and to Selling, X% correspond the are ad same time of at the beginning X% increased contribution a advertising. million mentioned, which increase Also the majority not to expenses the quarter, timing million in which

investments our prepare from as advertising noted, of phase late throughout organization we in XXXX Charlie roll-out the And backdrop growth. to the of well in strong systematic seen positioned we long in in expenses. be and year. we the the some QX As can our increase accelerating delivery, compared next of ensure began are of to the increases with marketing-related investments increase for top headcount-related expenses term when for national we results earlier investments $X.X These organization growth. $XXX,XXX contributing to line made Also is million last strategy

non-GAAP non-recurring were year-over-year However, this $X.X initiatives. balance by of of technology the is XX.X% million adjusted contributions EBITDA in reconciliation cost by its increase GAAP million included QX year $XXX,XXX most last that These recap completed as and income, offset in The comparable directly and are quarter. measure as net associated other driven our the in between with for SG&A increase of There's first increased EBITDA a included XXXX. $XX.X revenue. is Adjusted the well release. to earnings by investments table in offset the measure, in increases

been today, is are in was investment per the SG&A the we in income record EBITDA there's last a average a was million $XX.X first Adjusted our This in discussion Wingstop. $X.X net profitability interest a quarter rate as securitized and expense, we -- million per result debt. the debt by adjusted amount with applicable impacted the pleased for to guided on of to $X.XX prior is for down or quarter diluted our primarily balance interest a from first around quarter share call While higher of fair very which share, and year. higher earnings related $X.XX decline

to to rate the quarter option QX. The company's the year. tax tax the financial rate was stock XX% tax income period. tax earnings due lower the net included to a excess of net between benefits income lower with adjusted this is for the rate income anticipate Our rate is in exercises tax The continue XX% quarter, we recognition prior reconciliation XX% of data release. compared year Despite balance and our the in included the associated for during in

achieve XX%, robust flow to in continued We of of conversion strong another cash cash XXXX marking generation. quarter QX

$XX.X debt. As million of quarter, and end first the of the had we $XXX million hand in of cash on approximately

as quarter Our EBITDA compared pace, months full trailing rapid XX at almost delever we at net when was pro to debt continue adjusted a down a to turn the remain of flow for QX securitized number we leverage We leverage forma X this times of to to we and of growth with XXXX adjusted continue and combination our free through generation. EBITDA a level adjusted leverage debt. strong cash delever for believe comfortable the will

dividend as our XX% June our we XX will X. a XXXX $X.X remain Yesterday, of of Board is stockholders a Additionally, This record million. to returning quarterly to flow. on of declared stock, to dividend committed paid through per June be which shareholders of of basis common at Directors regular quarterly $X.XX targeted approximately approximately share totaling capital free of dividend, cash on of

fueled Now of which turning this considering effectiveness give delivery to color strategy of view continued our we the XXXX. rollout, around our growth that guidance, our it quarter, we prudent by national feel our sales is strong more advertising execution of and was national

of digit growth. mid-single unit deliver year, same-store XX% digits. will we over is our previously term as sales For above are growth anticipating of the low-single long which our long target that full stated, term target unit on we growth, And

previously additional SG&A specific several commentary We to -- clarity. the moving discussed. an as to in are to provide it that would to effort some take that We also pieces provide like XXXX acknowledge were there and investments relates

from as our reported $XX million this expect P&L $XX year We $XX previous fiscal to SG&A for on up $XX guidance to million, million the XXXX million. of and between be is

excludes metrics. SG&A impact transaction which included do adjusted our compensation revenue We in in marketing-related number for have further not have stock-based SG&A release is convention profitability that and from an a adjusted to and reported offsetting and reconciliation contributions equal as fees, and items, noncash earnings

comment of components Let briefly SG&A. included each me that in are on these

the digit anchored any now Operator, term will that, plus have. joining term long for all outlook per for are per to year. costs EPS As have and as XXXX million, interest franchisee fourth Wingstop approximately the expect Expenses to estimate is XX.X us national on same-store that will We expect related sharply continues occurs as answer Thank we with prior our guidance. In confident fully convention business to previously of you, and open in diluted to on impacts the year, tax previously targets for we each a happy expense reflects as in continue share $X.X million, convention from the between $X.X the $XX.X With XXXX; We following between in provided approximately rate XX% interest that our change please the $X.XX we between EPS of associated questions that and SG&A, and focused year. quarter of we completed prior outstanding. low-single term Please note the and mature. measure the a be we long $X.X may $X.X shares our introducing closing, sales for shared $X.XX expense no unit to and you advertising for million our from of million. XXXX QX when million, be XX% balance today. company, compared Separate of by we and stated, share, such, are $X.XX adjusted stock-based our questions. and and to the for note metrics the and manage with $X of we securitization growth business please grow. additional a compensation growing remain to scale success million long of million lines which growth

Operator

Thank you.

Instructions] conducting from We Tarantino first a will [Operator ahead question session. please. comes David Go be Baird. now Your question-and-answer from

David Tarantino

good on afternoon. a year congratulations a line. Hi the start And top strong the on to such

that the first you just strong for the guidance my year but comp in comparison against that. the as you of what the for maybe that year, the very toughest mid-single to quite the digit trying first the business So relative the is your to given I as if signal to gave full year don't anything rest compares are you about quarter? guidance had question look you about daunting guess, Thank about of the start the think year, to the

Charles Morrison

Hello for David. mid-single you definitely this start. digits wanted because the call And We give strong afternoon. of some guidance thank that to towards

was year. fair quarter the This check we comp amount the of that a in to toughest but the definitely growth may cycle performance, we throughout as year end that you tailed our the got really had as compare, recall XXXX's of we off

So into just you're to would take digits. guide as I about that mid-single consideration thinking the

David Tarantino

are you're willing share Charlie, related in so you And far? the anything second trending to quarter how to

Charles Morrison

No. any this to at insights QX providing time. We're not

David Tarantino

can on change is to the to then onetime cost? of invest some impact it. this is Michael, Or goals? in I in impact lean-in in I the a related on need layers the this envision so have reach after how your the parts with you guess, long the some the maybe is adding lean to offsets profit? in line, to but you terms year investments do continuing Got And as think net I you what just Charlie, about of profit respect moving And long-term the term, the that then you clarify what G&A know guidance? certainly

Michael Skipworth

flavor gives is $XX.X reconciliation in half we to let the Michael. G&A But really Hey, kind range for release that that's second $XX.X can the we're you bit directed a earnings so some in afternoon metrics, adjusted as And adjusted between the clarity see behind that I'll $XX.X in really of into question a adjusted number EBITDA. specifically of adjusted to G&A first that him. the logic answer of an million, profitability is the comparing a the that to million bit what's of provided little little David, million exactly and XXXX this growth what jump provide -- this towards a adjusted that number EBITDA. G&A Charlie was XXXX in of in impacting you and impacting

Charles Morrison

work very been comment the asking I'll you David, strategic while, the sure a think these on advertising on key the make national strong there. we increase with I the provide we're maximize appreciate associated notably areas I the in a We've to comp necessary starting the some spend demonstrate to important to for the couple which and I performance. investments question, clarity working potential and it's of think

one as the transaction and term being the then we've a add some are of other long digitizing delivery The to that lastly, in piece which brand. every further focus I'll for noted investments as

on has require in down us and then, each If we're really that investments maintain last in lot and be to test, able see deploy and already want about to maintain make the the of that we've of in in And of we a had to benefit road. into some the that those talked and confidence further of every to making investments. make kick sure already capacity the campaign G&A maximize advertising organization, wanted got place we've these and All team momentum from the investments making to sure each the I -- in ultimately, put build, some to of one started we that we to the quarter, place. investments be the think of is look to we we those. able new XXXX, late these We back our

we and the thing long as right these So our momentum the look the intra-quarter, definitely investments up business haul. the through as for to do you pick we on for maintained focus the of March saw business

pointed the to toward investments is made function bit we this step that do to of how we some future, the a prior believe of IPO. look the As we this we year, a to similar

beyond, itself position a to and brand of organization scale look we expect the continue would of G&A see in to return we XXXX type to And those franchisor know, other towards the a as time, this size we expect category into are necessary. time although, certainly, if and strategic you we from large Wingstop's will leverage in with as to point by investments grow so as feel we would the

David Tarantino

very Great. much. Thank you

Charles Morrison

welcome. You're

Operator

Thank you.

from next Barclays. comes Bernstein, Your question Jeffrey please. ahead Go

Jeffrey Bernstein

Great. people Thank last to the I and When only there maybe relative would the as as you. in Couple at strategic quarter in I questions seems would and well, on both to in some reconciliation for least guidance now we're flow year, which, the relates but had mentioned of advertising though, know it to infrastructure. the related material it terms that line SG&A. the at first, like about quarter, this in wording you $X.X $X there's from I quarter, last showed look of planned million. talking the increase it is following million investments think something last national a expenses lot through

clarify be to significant item? to within why line that those or it where be Whether should there maybe strategic wondering we I'm see So and another expecting would that's is increase investments?

Michael Skipworth

is this Jeff, Michael. Hey

thing, is $X.X captured there. million we range, 'XX, million majority provided, change that were to Let the so from to supporting reconciliation it's the me campaign, when $X.X our really when $X.X in talking one national were million $X.X of clarify at advertising G&A to we that look million last which to expenses increase that about we the related talking compared you quarter, 'XX about the

but is in to to Charlie his marketing-related increase can comments, the earlier the increases advertising, see expenses you categories there within G&A. in kind there some national referenced are support our So definitely there in other of

Jeffrey Bernstein

just million the additional about release like more so year additional last talking maybe of in it, now number? $X-million-plus was you're Got the press or $X.X last and versus showing

Michael Skipworth

right. exactly That's

Jeffrey Bernstein

the think directional Got new just EBITDA? above the wondering some last that adjustment other you. adjustments you're whether wondering okay. the any I'm mentioned providing, adjusted obviously that above to within would well And not cost growth of in terms term on versus range? making, now EPS you SG&A the I with quarter, guidance guidance then is that'll metric or you're it line thoughts you be in well to just on of But I'm adjusted EBITDA? in and or that long XX% It your adjusted expect EPS, you'd there's like would wondering settle more be a seem the terms whether XX% -- likely and you'd of think color directional which where offer

Charles Morrison

Yes.

Jeff clarity that think wanted question to the to kind referenced try to with of definitely great term all today to line. that about point I investments that's our drive a growth. We bottom excited we've and long was what the we're as to meant exactly that provide to

the And Depreciation, range, providing EPS rate, D&A. in tax addition, for pretty the to so in the stock expense, predictable amortization business, is comp interest year, in our roughly million. $X

you that of but number of back would in adjusted past kind For the pieces EBITDA, we communicated term adjusted to expect give XX% of XX% we've be kind get within can to the an I we that that long target all think this year, growth. you EBITDA to that definitely

Jeffrey Bernstein

one hear actually end that and peers new just of periodically terms wings gets make on to techniques I cooking the have when know you you of of typically I items. XX Got it. whole top know takes complaints casual speed can a your the minutes And you the the fast efforts it cook a that's pre-cooked lot of got to it lot XX, you just process, cooking in talked up or lastly, up

many cooking tests could around field an that would to refined peers? effort speed up playing techniques the your potentially of color or any provide process So obviously which on you help versus level to

Charles Morrison

Sure.

the adds learnings do benefits in opportunity incorporate opportunity seen this up things is our in improve is is we and that We're the down that the minutes example but to current are being find earlier the sub-XX. quality so a of what of couple and proven. between do averages year, place this of U.S. way cooking -- achieve it We where into as as our techniques Wingstop think and capacity One and from we a global ticket them will we could time. with One has put time that sacrifice We fashion to time our that to restaurant have a and in excited we still here certainly restaurant platforms minutes milestone, take part able to platform other bring we've to help that a believe to London advanced X to the about be not XX brand deliver there markets that XX that. in guests. quoted to in somewhere try some with a order been just from for that opened means some low is to which our by product a restaurant, X consistent us that as to and here quality we time very

we lot in but of the early this test. a phases are encouraged more So to come, what by we've seen

Jeffrey Bernstein

Great. Thank you.

Operator

Thank you.

question next please. from Morgan Your comes ahead Stanley. Go Glass, John

John Glass

a are as Qualitatively raising by Morgan Hey, increase Stanley, about talk out a just versus that lapping I'm can not you're ticket Wingstop, ticket prices quarter, the So yet. right? one, played wing you it's year big working how are franchisees particularly transactions reacting going this up quarter, prices? this ago. talk at Can you about

Charles Morrison

we growth so I you towards the answer further on part back or like to orders, about don't know, as comp. relates X And orders into through. of over suggested can ticket time. a XX-percent-plus a in of our is and of long we've to you I growth, algorithm that it if higher question, as and driven guide ticket of the comp you where at as average that think more the algorithm the point coming to think And specifics of on we're digitization what but there's $X by we sales in lift that transaction you we'd be The know get we that now term same-store lift orders many, Yes. ticket the to give first X settling this, points low-single long-term are check of digit can always play digital many those place seeing

those and web lift. have work associated our little growth. our our would is to app to that a will a that showing The price I price considered won't technology time. them some that franchisees thoughtful and benefit to careful Now franchisees take work with opposite, engaged that bit little quite knee-jerk-type then new of there of us with and time none increases, we impact that is third-party do a on be with the in transaction we've higher on team the a And negative have from have price comfort increases ticket

lift will end see will that So for we at balance feel good be the the growth. that of through day, form in the the we the of majority of year of guidance pretty our the the transaction

John Glass

mid-year delivery quarter quarter then follow-up. you. was And any color XX% you the and slower how to ago? your if on of year And provide comp? Is stores color still have stores a or thought? number? for think, can in And good respect? that by year-end. on delivery on by How Is may any I terms still know faster presume that this I a XX%, important that you many than Thank this target, accelerating you versus just had or I If could you're on of this you're target,

Charles Morrison

Yes.

expected. large quickly the XX% we cadence we're we as John, fairly right think we hit on roll threshold out I will markets. that Certainly some

first wasn't substantial. quarter's the So positive, impact, while

increase hope half performance we get as through the of do the see continued to we in back year. So

we lap both and we'll we on talked Now about we rate before. markets had couple right deliveries of that seen sales of testing the so a fourth keep -- now, a and performance our that growth as during in quarter as consistent mix start in that perspective a track right too rolling phase well. mind did that year, out in last large But for

John Glass

Thank okay. Got it you.

Operator

Thank you.

next question Your comes Guggenheim ahead DiFrisco from please. from Go Matthew Securities.

Matthew DiFrisco

somewhat Thank being if as little of you. could that higher, net as phenomenal a wing curious on count the a a sort growth? return concerns is more is just some store advertising year-over-year? I'm cash-on-cash the issues weather I franchisee. maybe had cost seasonality showing labor in you're prices to -- of just little about in rank in of question you a the development, Obviously, also, the still, a maybe far look moderate higher potentially plus the XX% expenses enough basis cause but is and doing some that lower to Or more that it

Charles Morrison

weather to hate would Hi, anything. for blame Matt, the I always

the a many the and focus we look able and openings what high have then think depends prior and than we tend a gross know, you of Super impact of of the pretty think And down, consistent, you and it of remind was we'll the that year. defer to quarter, franchisee on the on Bowl different as So volume franchisees go but And number playoffs, around everyone, seasonality that's may how year because where I of openings to and first end a until to the a if they it quarter later I'd the the down and way. of the they're construction we it lot this. first high the is making of them quality restaurants in it the I open couple at comes had before in the done, that were ago, we just in so then are fiscal in up sure get only can timing open

we're challenges. not franchisees top ranking of to concerned. So your question -- If

note to range the back prior than substantially had the messaging low get that's the the franchisees. I then price is team and wage to that's size noted, think yield it the of out unemployment, benefit through we by to know being also was Barry is we Michael us. the X-year seen up the members line kind that are chicken offset I reinforce the at the even wing bottom challenged offset that the trend, with prior so to against COGS looks would we're quite while to higher sets of and up bit, franchisees being starting through a to I the or with think business, which associated best attracting lower some a seasonal, PFG would our and everyone that itself a of also the And the which I year, potential of and X- year line as is seeing challenges has labor our in Urner seasonal, that negotiated line. kind normal rates, deal The industry flow be did is before important while to retaining the of very by we and per wings pound we

of today. So I done think growth and their most stands challenges type the comps, the I but the X-year we've in advertising think are performance sales both of by X- yielding that basis, are industry-leading fantastic the investing I believe same-store see, think as on beauty line, happy very a the of which both they're I what ones it with brand

Matthew DiFrisco

them may are And accelerating missed some of it, then for bringing any I the have -- there investment to I digital investments, as or as far to into in be and reflected and of the kiosks was stores? the franchisees CapEx any change in these them missed shared the going into costs

Charles Morrison

the with sense also don't what's of to And at capital need expense associated balance restaurant. make with but we're investments. the be think what that the I speed investments for figure to there's return market. is then honest, investment to we on a which that out an I even a some yet and and definitely, you point timing give opinion most that think to on What

lot we started a that, quite out. ways still unpack, I a would to need just we're getting there's that's on so So say

Matthew DiFrisco

Okay. you. Thank

Operator

Thank you.

Cowen comes and Co. Andrew question from next from ahead Your Charles Go please.

Andrew Charles

the time ago the year reasonable. called I consensus call, that XXXX And estimates out a you development Charlie you. for reiterating 'XX at on the you're appreciate XX-percent-plus were XQ Thank that just net for consensus but about estimates XX% are for reasonable? XX% based to unit that restaurant still reinflation, XXXX in XXXX, guidance growth now can on you in confirm XX% net development

Charles Morrison

Yes.

on algorithm year. you at confident in I can for some if our Let perspective long term a the look me we're why give see

look for you If the years couple last the that most openings, at brand, than or have back that to rate. less we and factor gross closure years the X% equal into fact average of on

insight as can XX-percent-plus through that a You right more in rate of certainly, or coming pipeline our that X, as come and into Michael we'll provide saw be with the and, into month But we that. mentioned, that do to growth can the next clarity we Coming we we ability into next quarter. algorithm. on as out have navigate able remain year we confident the walk consistent is the this to

Andrew Charles

have increase in cost looking sales of at been increase didn't the agreement place? the the would if have this then PFG And XXX-basis-points you quarter, what in

Charles Morrison

against down, seeing that the is. what we're pound price Barry break for the you per Urner benefit XX% to what would if landed think equates franchisees pricing the I -- we improvement on call the about you If

component is things. is the One other size PFG with landed that and of chicken of So sheer reflection the X wings agreement a is the the themselves.

Andrew Charles

it. Got

to basis So closer instead? to points XXX XXX increase

Charles Morrison

No.

Michael Skipworth

No.

more I think it than a would be bit that. little

Charles Morrison

Yes.

Michael Skipworth

QX, look percentage is you inflation P&L. we higher it inflation in in XX the purely the saw If was think the at Charlie than saying Urner our on what Barry about I was points

sizes kind the of the PFG as smaller pure of combination the so the wing we from benefits associated the is saw as benefit our inflation with the Urner And against the well Barry smaller agreement. birds

Andrew Charles

Michael, impact? stores termination many saw? fee international more could last get the question, fee, it you. or we this that on And was color got in how then -- you pipeline And did that domestic many $XXX,XXX I just how

Charles Morrison

terminate. that termination that did for the termination jump X That decided of wait brand prospect it where of together our is was -- patience materialize fee best it big for business domestic, prospect to we we not on some time you. their build I'll that the fee, component that happens the majority out. that and from the beyond level was interest put a their Yes, that in to international time That us. -- for to of gotten And was execute to to infrastructure had

our And that associated with so of onetime up market. have costs front covers a many fee those for the preparation deals

decided we did particular to it, termination book but the of we because restaurant instance. that so never in And a build

Andrew Charles

guys. Thanks helpful. That's

Operator

you. Thank

Wells Your of please. next from Tower question Jon ahead Fargo. comes Go

Jon Tower

Thanks. Great.

question. when Charlie, follow-up then earlier relationship I you that Just pricing a quickly an to had on with I third-party franchisees from put And place? you've mentioned in comment, work across a was think have engaged the clarification the a system,

Charles Morrison

place the in fourth put of in was that XXXX. quarter Yes,

Jon Tower

Okay.

cadence off-air And the new, the about again promotions. then for around right does know fairly apply just say quarter you year still I on-air everything few the quarter whether the you the wing fall, and reintroduced I a weeks and -- of believe Super fall. I year Spicy until bundles. any about starting or Are Bowl and Q until the now? food in things after be last quarter, I cadence the a still that that then again then season, shouldn't third spend, nights last cadence boneless being boneless back think, to still talked sorry, thought going Is used year? you the those XX So TRPs to higher the great. kind for football that advertising of and in then, even this thinking the about And second the doing Korean or was play did the even

Charles Morrison

will is with and celebrating schedules, between media a one anniversary we at week really of of be Great our the in those last X, have as this that year. which fact will question. we so compressed XX-week one Yes, one thing will X brand August, what national currently XXth about the we to these timing start other In were did year. last consistent the doing

that be a And messaging, through for years to that of that media events the so times those few in co-op markets I Wingstop. brand. always as you'll summer through that use XX flavor flavor but carry celebrate as see a -- it that'll along we both shortly here be some will supported digital other provide And yet, months primarily will off-peak local focus well the just during our on products and detail and coming won't things

coming early very specifics. what's months, provide but to to be So a little the able for summer about excited

Jon Tower

you. Thank

Operator

you. Thank

Go comes question with next Haskett. ahead Farmer from please. Your Jeff Gordon

Jeff Farmer

you. Thank

of a to system? was greater that markets advertising greater touched in level but of of markets, campaign right less did seen of you on how the launch developing That brand has the across those was where level momentum, March the advertising You curious sort of see momentum see after level I'm it evenly lower see -- markets, level transaction in the launch? the awareness? established some it with just you question, March ad impactful did it a transaction or

Charles Morrison

that better markets Yes, very markets Jeff. answer this brand are to seen in have would as as it easy have little for I media is performance, a put seen but most consistently partners, well creative or a seen Hi love across strong X the we suppose response we X There all the all part the plan the to was place. the that on system.

Jeff Farmer

I then daypart, a what in And follow-up guys delivery, on now past. you're terms week of you think Any in right seeing incrementality in suburban can part? the in are talked of delivery? color of you share what on seeing you terms urban versus

Charles Morrison

Yes, the nothing you past new couple to our over years. -- markets from test that tell haven't that we already discussed

results pretty the effect. the playbook mix top-line consistent and that see and new each it our been incrementality we from very as that feel way we that we market think that designed along, relates have comes I confident

Jeff Farmer

coming Okay. coming are And DoorDash orders of app right any in there app question what orders or Wingstop through in? getting delivery final curious mobile terms are own all the color how those directly? just terms coming now website percent those your are so in So of I'm one or delivery from you're those either of just

Charles Morrison

our move just Wingstop, pushing we out third the was way. show can test in franchisee's media. at perspective, those from that orders DoorDash, see two restaurant one per third a they're frankly, up when At slightly possible. see to DoorDash strong many we web advertising some preference have -- app started experienced DoorDash can still the as towards and some when towards mix more to Yes, our starting it's than through doing the XX-XX quite And towards same a what as swing our about orders we come recollection, has channels our test. But point,

orders So it's to make through the sure really the seamless of we key maximize system. number is the to coming us,

Jeff Farmer

you. Thank

Operator

you. Thank

Your from Chris next please. Stifel. ahead comes Go O'Cull, question

Unidentified Analyst

advertising XXXX, these delivery around been you've there mentioned be for market national in Hi thanks. priority It's In delivery just the wondering wouldn't [Alikon] advertising I'm rollouts? past, has a your larger actually in that Chris. any local

Charles Morrison

is beyond. with going opportunity TV a most supported Not as a use off if XXXX really, of on be for to this X for anything year, delivery-focused but might to there of tag hold that and we're spot, or part the our most and part it digital, messaging

Unidentified Analyst

new is, then to coming And with on place? previously what the the next if that done targeting system that are online in with of so, you're thanks. Okay, XX% delivery. has volumes units you unit Curious, delivery openings? question indicated new And

Charles Morrison

they think existing that To performance. that say, have online. pretty the don't offers new suffice mix a performance whether delivery unit any you to into the no provides give or will consistent I specifics metric delivery levels comes But are the restaurants. matter, as to come extent it a the I market overall they're new improving to a

Unidentified Analyst

Thanks taking questions. for the

Charles Morrison

welcome. You're

Operator

you. Thank

Your Will next ahead from is please. Slabaugh comes from Go who Stephens. question

Will Slabaugh

Yeah thanks guys.

during then it you Or take You the think mentioned media you the on benefit, I credit to if accelerated saw awareness maybe first quarter, the substantial? delivery growth was which to the or not as whole, you the was air, the elsewhere? that, you rate times so sales increased were too throughout quarter brand you stock of I more of simply maybe wondering as mentioned a if give

Charles Morrison

Yes.

it that anyway. of fueling brand campaign is the acceleration. primary third quarter definitely Primarily the start driver the until advertising think awareness I last and performance because of is didn't that the certainly

strong So there. I think there's a correlation

be accelerate year to the more gain line. beneficial rollout we throughout and and top certainly both of start the then hold takes to the delivery momentum As balance we the should

Will Slabaugh

that initiatives it. if you benefits given either was the transactions or just go ordering be up on the the to aggressively you the but the just that that however might if I more get to given benefits one higher, moving of I had through mix any follow-up done, continues Got online? app continuing out, to And both nicely, could digital and to consumer more of message curious

Charles Morrison

Yes.

delivery worked not to stated by cadence of in or discounting any We which quite or driven grow increase organically. that on And of for while necessarily and option none it's bring because quarter-to-quarter is P&L, I sort well which provide to for better them the the our average get no quite an all accelerate to a raise forced ticket sequentially delivery there's going will like was digital of think drive offer digital XXX-basis-point that number for as for to phone that approach delivery, we to to digital, add we continue we we'll that's board. think so which $X I order We continue acceleration. year-over-year, higher incentive see be to number bit. acceleration us sales, has continue an Wingstop, it option but saw a that about of help

Will Slabaugh

you. Great. Thank

Operator

you. Thank

Jake from comes SunTrust. question next Bartlett, ahead Go please. Your

Jake Bartlett

Thanks is case? really SG&A, the not that clarifications. that make can of was what maybe taking explicitly and national statement, just that, in questions. want if just the between it? we quarter couple difference I it that between expense those in the had revenue what was that thought tell understood Michael, was the impression the on the in we I income I to just isolate see answering the in what really us more found the advertising sure was SG&A, And Great. first on a I expense advertising previously so was you fund for it difference I X help could, advertising was? fund

Michael Skipworth

Jake. Sure, Yes.

to into revenue I it's think advertising advertising expense. not advertising is we inclusive headcount additional directly specific a the program, of some in the majority and advertising expenses other are related advertising with national There see that's difference rebate dollars would national correlated be fund necessarily well. just of the what that national go to G&A-related solve that as to resources SG&A you through have flowing our here

Jake Bartlett

franchise should to So where gross that offset, do we of is offset this? we that in that kind see revenue up

Michael Skipworth

Correct, correct.

Jake Bartlett

mean, of the how driving same-store about then what comment Maybe some to kind more against make to composing, of that terms if you Or on how from we it be interpret was is more compare could check-driven had made little I they as more of sales what explicit, Charlie, on same-store And year, of traffic-driven? of should quarters that and look conclusions the versus comment? you the rest Okay. to difficult to sales, compare. check-driven are the it kind we just rest that difficult was the was in

Charles Morrison

meaningful price Yes. increase, expect I not as any driving if absolutely not or taking mean, would you you're able be that. to any check lap

part we with growth on purely some pressure transaction puts check before overlap mentioned as that the lift that of comp. So to

direct a there's impact. think definitely I So

Jake Bartlett

Thank Okay. much. very you

Operator

Your Thank BMO please. Markets. you. Andrew [Operator Strelzik, Capital Instructions] Go from next question ahead comes

Andrew Strelzik

afternoon. good Hey,

Have were changed you're a wondering You in through existing mentioned awareness of that has to is, national I guess, how you the or XX-week ways types brand push? nice placements the the there to you of any gauge prominent, or bulk any what comp markets either metrics any and things the of way impact brand or do advertising gauge was of awareness has newer pretty metrics? of ads those how from tried those kind improved? now the I that much Are have certainly

Charles Morrison

so of national lag, they're until appear a usually to a gauge to They that in a those a don't process have go to it's a not survey that little we bit metrics quarter that now. we early up Yes, we sometimes do half available through with little a to execute coming, information a us quarterly. get lag. We yet right quarter

we a the awareness are be in increase So on will But for a back the aided we as driver through and new into impact as indications think I brand report all definite able that. QX, primary to see brand in then the customers able coming source to of indication growth. of move -- be a that

Andrew Strelzik

maybe markets some are so? last going? the particularly side, the trending a newer the us just progressed you are are where an mean, of maybe pleased, or with And as or on have to where months in update Any wanted you particularly could happy internationally, you markets give XX international concerned question things exit, Philippines things after I the on flip on things over are ask Great. how

Charles Morrison

the I'm a business Yes. represents put a -- new new about country to excited Each very internationally. new very, opportunity together. whole

core We're being if very those our U.K. prominent before the in in we we've taking very over of some other how on sales saw well. Central Each coming the market seen location same-store open partnerships few very partner about so is Circus been that ready market, shortly. each in and that at in and with France highlighted with but success, strong XX -- past restaurants, the and Mexico both off just getting I recently that as Mexico talked are great performing young as exceptionally have and performers we markets, in based look they're And the years, XX together. the Indonesia we we've all careful that markets we're some both to spent in developing from we you to we on approach of growth, as X America respectively, well. fairly scale, roughly of continued markets continue carried aggressively our time expand Piccadilly hold, And growing.

that investments this we we scale we're we a the on to as go, additional side be markets, international, we franchise experience for talked our that the making systems to enter all we high-quality prepared for center continue anticipate that international. sure prospects. So so feeling very of which about, would support good about doing year, Part provide new

So expect. we that's track for on still right what

Andrew Strelzik

very you Thank much. Great.

Charles Morrison

Welcome.

Operator

concludes This you. Thank teleconference. today's

now disconnect your may you participation. time. You this lines at Thank your for

Wingstop (WING) 9 May 192019 Q1 Earnings call transcript