WING - Earnings call transcript Q2 2019

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Operator

Good day, and welcome to the Wingstop Second Quarter 2019 Earnings Conference Call. [Operator instructions] Please note this event is being recorded.

I would now like to turn the conference over to Michael Skipworth, CFO of Wingstop. Please go ahead.

Michael Skipworth

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

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

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

that We earnings our also GAAP. Reconciliations use prepared release. we this be certain our believe GAAP presentation as comparable The to isolation be non-GAAP additional evaluating results are financial a in in accordance should contained for in not measures considered in useful with of measures information can performance. or substitute

would With Charlie. to that, turn over I the call like to

Charles Morrison

best all XXth years morning. and one this for franchisees thank us you, with industry leading and milestone, of for Thank the to very economic of same-store domestic another And the of highlighted anniversary sales world providing report growth, growth serving our you quarter by Michael, we're flavor strong of joining proud to the the excitement Wingstop; marked July growth models to add industry. XX.X%. unit XX this in

our not Wingstop hard our would refer in system. the as brand These Wingstop investments brand of X,XXX if results not the the success we ended franchisees, restaurants with the of quarter partners. affectionately and We the over second it to work and whom for happen were

for unchanged, pillars by our franchisees second awareness and to sales half via sustaining our our innovation, growing unit long-term to expand continuing three ahead strategy XXXX of look economics footprint. growth best-in-class the and maintaining we and global growth our brand same-store main beyond, anchored remains As

our shareholders. up brand this delivering of to to building restaurant global our and into industry-leading a of top-XX returns vision ladders All Wingstop

pleased development. very of with new restaurant I'm our of pipeline the strength

the net With for will XXXX. new the balance our we XXX is XXXX. growth with in of of into numbers development unit have clarity we have XX%-plus target the the of visibility unit believe XXX consistent today restaurants in long-term open between rate This and pipeline, growth. we We

I'm business. quarter, development for Overall, from start the year pleased in This saw resulting with We of XX.X% domestic by the the growth shaping of pipeline, largely line a growth clear way which our demonstration the up in of the very driven the of XXXX. line is from the momentum our which strong second our domestic continue, benefiting of in is the top is same-store is sales top domestic strategy. effectiveness strengthening

asked the to franchisees advertising ad to to from As rate a X% X%. our reminder, fund invest contribution XXXX, additional in X% we in increasing national an our

of national will with the growth national great this driving are mix increase delivery XXXX, This strategy XX.X% stronger of quarter, reach to awareness, has the that QSR of sales combined expansion the line both our digital we the exited the year. strategy, we continued advertising of rollout that top as was the balance believe our and which Our sustain with tried same at leverages consumer a core Wingstop. larger not which to investment, creative broadening audience our from equates time a while yet targeting roughly drive XX% our to

international at business past same-store brand a the improve continue rate we unit I but our over to high is continues as few consistent pace level international business. portability the of of to believe generally our would have on demonstrated all we is years, accelerating Today economics as we of to have growing seen The low the over and international like progress The double some regions the digits. it restaurants, to of international the growth the pace you we Wingstop not also might have successfully with sales update expect. single world. XXX growth

We opportunities the optimize of few have markets. model in international a moderated as development to key Wingstop intentionally we the explore pace

technology believe in of speed we breakthrough We shopping our late a malls restaurant in centers. in guest such deployed high have London opened demonstrated city and with foot we more the XXXX and markets as in especially the individual experience, kitchen service that fall in have occasions where areas

year optimizing track we to the development Our additional new that deploy first service in the we UK. critical before France speed markets markets. We in in these before which restaurant believe accelerate model this same sell we is the will open on of model and is later deployed of the pace any

at are clearly we the as growing pace all our we markets us have consistent to a believe see development pace, track put defined model. the international on we plan optimized While prove that'll begin accelerate of to newly a

unit which $X.X today's the which exceed our year-over-year at is is returns on algorithm. While growth, partners flow-through, best-in-class low above This we the in due for fact million. to second volume, P&L compared are long-term were are on flow-through strong brand slightly XX% our X-year are line is still XXXX, that year-over-year. to of the quarter pressure pressure prices at there approaching And of system we our as enjoying enjoying while primarily do see that prices average top wings

August We to in us on To through while minimize know growth. let believe maintain excited profits I'm focus of help top you our generating more that to volatility franchisees provide our predictable some cash flows costs a volatility. we promotion point, have that fixed line minimizing this that we diligent and will beginning a leveraging late for fall

more specifics closer. draws promotion around fall that time provide the will as We

of top As delivery is earlier, growth. a driver key our mentioned I line

is we high single- launched continue We our delivery delivery in phased markets consistent in to in mix that to mix that test see our markets, low saw what rollout. double-digit with have

for completed company-owned restaurants. the by In of third-party all our our including marketplace we restaurants track remain to said, domestic the XXXX. delivery in our launched being XX% of efforts end on April, over We of delivery we test discusses a of of saw That providers, Michael aggressive P&L, advertising rollout putting resulted minute have when Wingstop.com delivery delivery of the completely the which in partner restaurant he margins. in will markets, initial DoorDash what on the between and mix about talk additional our in company-owned pressure from DoorDash, the flipping has

rate have we commission a Historically, higher their paid marketplace. are placed that delivery on on orders

on DoorDash shift saw be which resulting focused this remain to a unit our in best-in-class mix, third level we maintaining building worked in on will this brand. in into commission our We Wingstop a the commission As and we the later improve economics, quarter for that our rebuild marketplace global structure in structure central flow-through to immediately place and pricing more favorable with channel is P&L. of transactions, top-XX will vision

are I quarter Next investments first call relates want we from reiterate our it to a of in business. my as to few the making comments

In in opportunity strategy plan on As inflection brand we for its to our well full members success our sustainable the as means times first we team continued of feel our to and now our in necessary numbers, into a and our long-term that are this partners call, to position we point and vision top-XX to I shared the Wingstop a to size an potential. We capitalize The future. drive quarter brand represents rough vision a Wingstop responsibility investments believe shareholders, long-term the make all grow becoming investments restaurant toward position to reach six to today. brand. support global growth

average mentioned as kind I We cash-on-cash with our earlier, brand volume are unit partners, $X.X this believe we our who, almost growth approximately current million. unlevered XX% at of of will benefiting from achieve returns

our As Wingstop higher unit franchise as first two level. potential a operators. and you kitchen and enhancements, witnessed showcase these experience guest technology organization digitizing transaction, with fall of every three in are this building the categories year, destination for the for demonstrating drive to Broadly, volumes investments quarters - the and even into the average next we leading simplifying

Consistent believe investments offer is that area continue advantage, there to ongoing as to a necessary us innovate. well right technology experience as our be best-in-class technology the guests, to as will strategic that with invest other we and continue to brands to a for leverage

test, believe learnings. speed in play lockers Wingstop and to production will we look future, gain enhancements As we pickup improve currently and further will forward role, back-of-the-house the key we we of to a the kiosks, including as provide technologies updates more

drive investments include lean to in our international business strategic making phase. experience, technology and continue well to strive we organization top-tier future. towards run well ranks lean the our addition and the as talent the adding a growth, to support to we line run as building we key In going and growth attracting into investments next to are top We to are also have as These place guest in in headcount people. initiatives we appropriate investments

investment XX,XXX square-foot signed June, headquarters. million. in a an new a state-of-the-art building for an in shared $XX.X we office As we corporate acquire agreement announced to We

As our Wingstop center we kitchen, format, of flexibility a a mock increased multi-tenant growth supports scalability must that compared and and our team next to also will environment our talent. we building test phase have has grows, new attracts restaurant. current an and and This office global innovation top ensure house as building

SG&A discussed This in investments and Wingstop While we that range in a are and corporate have the provided here are quarter pride that growth within road have just Dallas, down we represents brand. headquarters today. we here are the the from to today the our space excited last we the reiterating and

the One Michael. call before final highlight to joining

release a to we to return a our flow and common a report ago, the press increase model. continue going strong XXX%. public of Board business To pleased asset-light confidence a top share of our our demonstration stock, end shareholders and XX% that four and exceeds return as of little in priority. of to delivered in mentioned, cash a returning dividend shareholder Directors overall capital our more to than approved that total quarterly Since we shareholder in remains $X.XX per years As that have grow, our driving the generation I'm

it I'll over Michael. that, turn With to

Michael Skipworth

you. Thank

another quarter, an which our a in X-year Charlie, growth the million growth sales for year prior up comp. of same-store totaling We with over from slight our million. increase prior the compared of has $XXX quarter. quarter, execution heard $XX.X start system-wide of in in of strategy acceleration was to of the the a Underlying year revenue domestic you industry-leading top level This this strong As XX.X% $XX the total translated XXXX. to quarter, our XX.X% to sales million fueled was against XX.X% growth line delivered quarter growth

QX development On reflecting to the with XX quarter compared net front, the quarter as a year. in restaurants, in the X,XXX XX new global footprint of last we ended restaurants

mentioned, year range XXX we to net the XXX fiscal Charlie in to for land expect As new restaurants XXXX.

back the As a with of our new consistent years, the prior openings towards year. tend and to weighted half restaurant reminder be

increased in growth XX.X% the our of sales. national XX.X% royalties, income to last translated The in to sales openings million primarily year year, $X.X and to quarter other, the the the primarily ad fees related fiscal of million, fees to fund $XX.X increasing the domestic to XXX net well the XX.X% and million in X% franchise growth million, gross by increase rate $X as $XX.X and franchise XXXX, since X% system-wide to system-wide contribution sales Advertising as due from growth. driven sales same-store in restaurant second

Our million. This since to franchise the QX and due XX%, of million primarily $XX.X of XXXX. sales company-owned same-store $X.X five restaurant is growth restaurants increased to of sales acquisition XX.X% or increase

for by percentage of in we are last in XXX QX second XX.X% as Charlie a noted, company-owned increase restaurant due And sales XXXX. as basis lapping was to increased primarily points wing This the a quarter QX compared sales inflation wing of of year. prices low to XXXX. of X-year Cost

higher restaurants the City contributing three and restaurants. Also X% our delivery fund company-owned acquired late commissions the operating contribution increase ad our in and was other X%, completed all rollout related to expenses XXXX in labor of the XXXX to national in third-party to delivery to of the from of rate we as Kansas April

is prices during downward of seasonal flat quarter, correspond conjunction contribution have expenses QX. to XX% fund wings elevated for environment, continue This for Advertising to the the the $X.X we related outlook In million rate. in coupled roughly we last QX to updating in advertising at price remain or be to XXXX. to wing of a typically same the our strong not we necessarily and increased see. seen the consistent revenue increase the the wing to summer Also through timing are of not does Similar light start wing current to in are has supply and advertising. that expenses months the overall trend million with the demand advertising recognized into demand strong allowed recognized relatively and the inflation the time remind $XX with related everyone, ad actual

were quarter, We Selling, of into began the million $X.X the general prepare QX early next making for in XXXX. versus phase the XXXX, a our $XX.X XXXX administrative of and we in increase as late investments expenses and which million organization is growth. organization throughout

a of quarter team the approximately of in Also in XXXX. members increase in line a strong we and of began strategy, for increase delivery With results These new to investments $XXX,XXX are from resulted increase national second digital the long-term $XXX,XXX over primarily national backdrop the rollout expansion, in advertising growth. top accelerating are to ensure we well-positioned of a expenses. which investments headcount-related the some marketing-related the contributing was our form expenses

in is certain However, within between well EBITDA included directly as stock in increase Stock-based as for is investments balance this other reconciliation approximately a increased the related is strategic The increase initiatives. quarter. our revenue. included modification driven the earnings of table $XXX,XXX most and a the adjusted measure, There awards it's by compensation of release. the million contributions technology $XX.X measure, SG&A in net GAAP $XXX,XXX non-GAAP to advertising second XX.X% income increased comparable by Adjusted to quarter. offset EBITDA,

last earnings tax Net to which is debt on income balance prior from average second call, or quarter million, related in rate per for the quarter into debt tax income in and applicable year the rate $X.XX year, result had entered of last to in our the XX.X% the securitized that by interest well was as higher of and was period. decline our interest expense, primarily prior higher of $X.X our guided diluted rate to in we of a This November a quarter the $X.XX down impacted as compared we share, second X.X% year. the effective

model flow, of continues Our quarter rate XX% cash asset-light a robust conversion flow franchised with second cash to in the produce XX.X%.

quarter, $XXX.X the second As million of end we of debt. net the had in

cash of and continue the trailing a which turn and capital our of delever growth continue X.Xx over through the we full down returning a remain comfortable We net of ended two term XX-month than EBITDA quarterly through to basically pace, quarter to with leverage to flow XX% of committed quarters. at free long rapid as will We debt at generation. leverage believe we adjusted to with shareholders to more delever EBITDA We is approximately second remain we our in cash level a combination adjusted strong free flow. dividend, targeted at this

to approximately stockholders up Our XX. stock, on approved from This Board August per of per our quarterly $X.XX be share $X.XX will increase million Directors XX% record totaling dividend, dividend as in of common $X.X a to XX, share. of September paid of

part to of our shareholders. We an important quarterly use this is consistently overall capital, are our feel the evaluating and of best dividend excess commitment

raising on outlook an growth of our domestic we full At growth. digits, domestic high year, two growth recognize for sales target anticipated we up guidance, long-term to mid-single-digit our XXXX first which of on of the strong XXXX, we prior sales low in is provide same-store same-store growth year to XXXX. above full the guidance in the from sales single-digit are Based the update our single year like would midpoint quarters

updating year outlook for XXX new XXX we mentioned, are growth previously restaurants. as net Additionally, to our to XXXX, fiscal unit

are $XX prior guidance million our million. reiterating to $XX SG&A We of

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

those To me each in reiterate, let are of briefly included that comment SG&A. on components

between Expenses advertising consistent We and and components, of million each expect $X.X our national to note compensation million. convention $X.X $XX.X adjusted and prior for quarter Adjusting approximately be of and $X to million, between million, between million our $XX.X to convention fourth stock-based we $X.X guidance. Please franchisee the year. XXXX, for cost be $X.X million. of SG&A our in occurs that million related with expect these

are we $XX.X million. XXXX. SG&A, expense reiterating following from of Separate the for Interest

expense tax securitization estimate share. adjusted XX% year, reflects diluted $X.XX to of in by $X.XX fully Please QX we approximately an and shares the per additional continued for EPS balance in completed effective We associated the XXXX between of which the $X.XX the and rate share, XXXX, of of million impacted EPS interest XX.X note, per with outstanding.

we headquarters on opening new of headquarters a this with the of before corporate a June. P&L largely cash up new by to The our time, for from headquarters the XXXX. will source At remaining the the acquisition in revolving not credit. follow on are impact acquisition Lastly, funded call anticipating we line be questions, wanted in hand, announced significant for

due undergoing our well new still to gaining of diligence overall cost as of out the understanding move. build a are as efforts the We and space the better and timing

In closing, our growth measure to anchored scale same-store sales well the continues business continue shareholders, success will on long-term for maximizing unit mature. confident we to growing have our remain the as and targets partners' both Wingstop returns long and in XX%-plus as our shared long-term with We to growth focused outlook growth. metrics manage term, business and low and brand previously as our and on a provided that remain we is single-digit our

questions be questions. open you Operator, today. for for all happy any us now may joining have. please We lines would Thank the you to that answer

Operator

[Operator go from of David comes first question Tarantino Please instructions] ahead. Our Baird.

David Tarantino

up, I is and guidance. the the know Michael, EPS going earnings comp guidance first, changing. clarification the on Just but isn't a guidance

the company line? confirm to just else is key you sales revenue Or going there on is cost the surface? that of operated the under the can anything increase offset So

Michael Skipworth

that's David, exactly Yes, right.

SG&A One of I not for year. now, our end kind we're the changing cost year, range we say of balance definitely is And higher outlook for sales drivers in EPS that, also of forecasting key at of the estimating that range. the us of the is trending, component of we're would other for we're impacting right range, kind towards the the that's the the playing that look inflation as into it the

kind range. those pieces of that same us landing that two it's arrive So within at EPS

David Tarantino

or into the if Charlie second you the for the range And the willing after Great. year heading would year. a Because Thank the feeling comment, the of second such half the seeing that's of about guidance in for open for QX, half of business just the you're comp And down? year. does trends the wide how you. are slow And Michael, guess leave interpretations strong year wondering imply. what, I to full guidance momentum you're

Charles Morrison

continue Yes, which the to but the I last had seeing QX, is noting a anchored the that of introduction think the compare. in as as XXXX, quarter the also which year, fourth we that driven prior delivery, of just both on tougher started by the bundle of higher did momentum year, guidance in promotion during well compares we leading to

Operator

of ahead. question go next Our Bernstein from Please comes Barclays. Jeffrey

Jeffrey Bernstein

questions. Two

know first The And long-term color year. the with unit you I comfortable XX% unit and around one know growth this XX% I growth. Michael, mentioned about just gave some you algorithm

and franchisees, any Or franchisees and it's wing for So remains wondering that inflation your you the think whether, been were if the company elevated, return the labor for any or growth unit I'm enough to too openings that is seem inclined sustain, be cost it wouldn't really presumably that But were your if and, in on XXXX. be strong, wondering to back painful there's obviously painful might stores slowdown. expect therefore, persist. pull leaders if among the on just you doesn't risk XX%-plus these concern flipside, to whether just and pressures to any industry the to

Michael Skipworth

deflationary important and the some really wing momentum seeing we're nice No, we we're think Charlie think, to food long-term Thank this in pipeline And we're really this actually that call, to economics XXXX. kind seeing threshold. it's really there. the that the question. we extremely earlier referenced year, do of within that have that when look for note year, if Charlie on you, with unit that the at inflation exceed that the that it running has that algorithm wings costs kind on that of where Jeff, about XX% level building falls the noted as domestic drives within prices more saw we it we development I still those And

Charles Morrison

specific Jeff, that that performance business to any high I know, of time in change; coming We that wing year And look a to that. a strengthening we moment domestic the demonstrated to lost XXXX, our the would guided into a if pipeline. out environment our of to and great the hence, don't has why especially from at frame. year-to-date, you target we pipeline, to balance confidence as have within for X-month X- demonstrate add the the visibility that, expect you hasn't of

So prices no see of expectation today. slowing that we'd the because any wing

Jeffrey Bernstein

could the comp, I at and seem and national focused the directionally, then you contributes and of you've strength And would you And whether economics maybe late. your you. three as the terms the standpoint, it which think on usage be mentioned digital, be the think are a just if the least just could how expectation, we on would you the delivery the was above think to down, the flipping impact each the break I each be great in what wondering just obviously initiative one advertising. very and investors terms that outsized you delivery around of comment well. on of clarify third-party delivery seen from in areas, Got to strong that

Charles Morrison

specifics the check. transaction I that commentary of on fact my from anchor parts. component not is coming growth, the majority the can't I'll from growth Absolutely. on provide our

coming majority with digital about the that, And of a so we're being from transaction all happy XXX% do digital although delivery efforts with is to very drive continues happy that. $X The higher very ticket. our growth; this ticket, we're enhance average

our new strategy, from ad coffers, on clearly hold. our XX% in back our X%, attracting that guests look to contribution believe we has advertising approach to raising taken Wingstop, national at the more that X% to fund which added you about dollars If and pointed was

our It is of performance. overall a driver significant

along, this are just in delivery, that right very transactions out lot comes believe, we DoorDash is and top actually delivery at are its to different results more the we've and a efforts has we mentioned of what from point with and seeing than and in incrementality. this, marketplace, with regard coming aggressive the As delivery more anything to originally. seeing those we're us so with the had rolled talked Wingstop, we're consistent uniqueness do that than tested XXs we we line The of in mix their what XX% wingstop.com. That, does about DoorDash than advertising to around it to

very more of the side of price addition that modification specific margin if But way restaurants. still that we same performance of important orders only. our on a pricing change a as orders by noted our wingstop.com based the lot taking a with structure anticipate had to you our that will transaction. we that, structure margin, on a eliminate have engagement DoorDash because the in that the commission To or orders marketplace absorb of The will, we cost commission date. was to overall felt we and comment of wingstop.com try for in on before the a have gap we productive commission pay lower to do We core

this third and the certainly the going particular fourth into latter into we moderate. P&L the believe into impact will So to quarter, XXXX,

Operator

Our Stanley. next question of Glass Morgan from comes John

John Glass

in given the have start believing first international, understand Charlie, international's investors kitchen to break really up. going kitchen, understand equipment. gone a I think stock's the I taking on you're where the ramp to throughput But to

the of doesn't you or why what's you them kind or accelerated have and stores modify you it quarters makes to else in that engaged, to the they're you whatever number open unit think able kitchen up getting going a now, really see can it's of need timeframe international sense months So take engage, anyway? before of of growth? an before to those to terms still maybe understanding package And partners

Charles Morrison

everyone U.K., no relates had experience there's world, different in different efficiency. some seen is markets we've we're experience as the on engaging we've idea to doubt mean our that kitchen other new operate I it Yes. One the that around ways. in the thing

with malls, have high United Cambridge about a talk and, dictates climate, opened of the these And individual in speed location Kingdom in in like areas is happens you we the to where foot ways accelerate this in has that lots do Circus, right We've when where in in have shopping high for the pace there you that service, we of foot where to London So example, business fall. more lot that therefore, of done malls fall a of transactions. order. identified local incredibly

five a now speed it as metrics So improves relates dialed down of that instead scores. service of That's minutes. waiting meaningful to our our we've order, maybe between seven your somewhere somewhere and between XX for and XX gotten to minutes change,

world This level room. really investment a more not This may delivered. the as in of more we you affects And for for higher standard product touch of where sports around other and across have the you the world, to casual your of if in dining, markets bar-oriented fast/casual, necessary those model. a markets Mexico, dining of know, wait example, service operate look John, order for is the we walk-up, and a that be place

mind. that can what don't sure open Development markets, in we certainly is development the I we But means it of and, we're still start that stop more new model to believe importantly, with think open we make any development. will that new to moderate pace continue. going So this it we that as

very concern no So on our on end. our business. still confident international We're

to these markets. same-store on we're international, our sales double-digit call, even growth the seventh middle sales positive mid- same-store mentioned in to of I consecutive high- the growth year in of As for

quarter model that deliberate the pace to and another or in believe, approach make sure careful right, the particular very may sometimes in very impact continues we're strengthen. model got our the So international, We one our development. we've to to to of be going

John Glass

Thank given of store I about are have XX stronger increased last a us productivity? national XX% you. just gone materially. conditions. the years You've trending cash-on-cash be returns. XX this had advertising. fair bit comps much How your they? also on months you update up But new a versus again, Can must I are new little months? now year it's prior couple the of openings where would know a stronger, assume you Obviously over talked they store those

Charles Morrison

They and of that which, progress statement. domestic to mean to are not our also that's been, advertising our It markets accurate with continuing does I'll nicely. development and reminder based priority aggressively Yes, them to as national have very to going are those cannibalization. those strategy, markets. attention an on means deliberately our Roughly markets. exists pipeline call rather fair we than And a a they franchisees, our the as just fortressing bit in hold stronger grow taking effectiveness XX that's our strategy. in invest markets XX% take of

continue we've stronger we to strategy. as we strengthen performance very happy national through add demonstrated get of expect that our fortressing on awareness to to we're the with obviously and time. which And advertising, So our the over brand, efforts

John Glass

directionally, result to a new Or as store of closure I talk But number? is? stores chain the this? opening is are new where you a mean there all productivity now average can about

Charles Morrison

No.

increase year national of $XXX,XXX not about an followed the point you $XXX,XXX in average. yet to talked our we've year-on-year. XX% know think overall a our stores, first that new We're algorithm has about for I by increased. being That

the Some awareness of fact of is these that is low. markets by still that relatively emerging in just driven some

our initiated improve was We've current during awareness metrics everyone, to XX% brand campaign campaign. aided we those experienced this awareness Just about before XXs seen the upper to launch. remind our average

can But in we're XXs percents. numbers those very and some XX still in that. with pleased So markets, down be the

So the steep a we've pretty those we that to climb. got markets climb well. as hill and those are restaurants we add markets, as performance new to improve in hill But seeing

to national that to So markets, that to eventually, that newer of still mature and love of have We're these average. some we'd they in are. get markets but gain same traction, ahead certainly

Operator

ahead. Goldman from of comes Sachs. question Our Fogertey next go Please Katherine

Katherine Fogertey

color a the non-core to was to if how than that you. more going of evolving you versus quarter. give split website markets, little the And to could company site this customers bit saw referenced wondering around do DoorDash delivery. I you your you here Thank So core of

Charles Morrison

core to differentiation between non-core mix. relates as that think it I there's don't Yes. a and

foremost, I our to sales markets. with performance everything think test and seen that's first it we've do delivery in mix and strong had at or what with above a

So really that. focus. this just with we're advertising to do very in shift happy had with It

We do our little reinforce not advertising introductory may work, it putting out part happen You that national not and behind will we are we this but advertising beyond. when I'll is our a XXXX it. delivery, roll of year. absolutely but in own efforts recall, plan That

reason, is Wingstop efforts business beneficiary of to for seeing you're good and, what a is and aggressive now that. right So by their market DoorDash

the now latter the And rates and expect that was commission and P&L into you'll Again so because the in of moderate. the just reiterate, see that beyond just were created to unexpected. flip gotten QX, part We that that that we've that. to QX different, impact also

Operator

Our next Gordon comes Farmer from Please of ahead. go Haskett. question Jeff

Jeff Farmer

ad kicked believe of in support. I your with, to February off pretty weeks campaign So was late XX I it was advertising heavy think new XX

Your the same-store play. But at able support were same-store inflected while in the that support point mid-May? clearly in to sales you question those was trends sustain when sales dropped is, some

Charles Morrison

question. pace say month-out. the during growth quarter, same-store happy and sales Very the that consistent month-in of was to Great

carryover think I of window. during very that some advertising was that of great strong some a

by anniversary our XXth kicked of Wing what In Day. we our culminated off National Chicken of with addition that XX days to as that, way announced flavor we celebration

in we two supported new at time. some media first with we've local the two We same had time good launched onboard, advertising the it was coming And that balance that that our some with other then flavors flavors had so largest things out markets, And of home as when we efforts well weren't digital, around in national. to sustain a and some it. other advertising our lot of supplemented we

very quarter. all-in-all So through pleased cadence the the with consistent

Jeff Farmer

ups follow earlier on Thank two that. questions. you for quick just And

to company-owned the to the front house restaurant is pursue the going technology just restaurants. be making sort of on curious for what appetite with you've the the take First investments. Are they next brand of been of similar franchisee the is continuing house, onboard investments and to I'm level? back to in

Charles Morrison

Yes.

I think that, early it's Jeff. to tell

these speeds, what which investments. most little pickup DFW sequence we're cooking really payment, are seen footprint. which lot in with about is some that And cover here a also the about includes consistent all just to we're area our improves gamut and three which to these We investments have that learning It also some investments back-of-house the how modified parts of we've a remind with in entry effective restaurants component the everyone, these of here, for and contemplating bit of technology kiosks international lockers. order

effectiveness a opportunity So to at trying that if of some a KDS-type technology our you as we're U.S. will that improves And order platform. kitchen well. terms in then look management, as

those with differentiated, test. end than day, the us advisory about earlier be so these at great see are it'll maintain best-in-class invest want our along we makes investment But into a this. this we that we the making of sense on in we're generate council And for franchise sure which unit us to parts us unique all the to to incorporated And return have. evaluate that help economics bringing of and what All later. of rather the is way, is we

Jeff Farmer

question All helpful. right. tax last That's very just on And the rate.

in that up level. end both guidance I So you're your and rate 'XX, think tax well to up a below going initial with 'XX ends

bit? believe that Or tax should that to looking sticking forward XX% you term that your it with to to XX% come guns reason down be So a any for rate? XXXX, longer potential to in of of to sort is a terms

Michael Skipworth

Michael. is This

of we're our good what's predictability as stock having from differences is continue option the sight XX% on expectation, rate. the tax to the XX% really which long-term that range I to around think without to going anchor a into creating exercises, as line far

Operator

of question Andrew and next Our Cowen Company. comes from Charles

Andrew Charles

Or you provide other the want you if if it X/X that structure does quantify to and between economic wondering the will, delivery through actions restaurant And avoid? you Wingstop-owned is to the I'm to that to I Wingstop of channels? to rates, the from DoorDash DoorDash. or said mix was sense and peers, channel? something to guests X/X in-app make about previously continue versus guys think it Wingstop-owned sales Can commission the you incentives, do intercept that go similar coupons two

Charles Morrison

during mentioned I you foremost, which the think And mix commented we we that that. and confirmed test, also was and was First what flipped we about a XX/XX.

you those pretty So should give clear indication of numbers that a were. what

the necessary to the As what channel. on anything people been also with we what DoorDash. like suit to rather channel, that. have the differentiated believe followed to incentives for based and done and than instead, able We want we've that's modified We, drive architect with didn't to our from marketplace don't relates certainly have to we it an do incentive, channel pricing other it to brands

way, direction. mix go point, don't wingstop.com. a other strength other means believe as So said rely we to into need sort at drive this any coupon our another through that the incentive national of rather a would XXXX it's and better We a incorporate to value or going advertising on to

Andrew Charles

know that more year-over-year if are prices, implies a curious pricing the take look X% long-term the normalize mean you when suggest. is helpful. guidance, just That's target. for wing updated then there what demand amongst inflation the inflation I to I would And to than basis saying? pricing But are franchisees? to more franchisees X% wing out anticipated on there multiyear relative what

Charles Morrison

Yes.

an carefully. taking that a mentioned helping of we've that partnered we fantastic for through industry job our RMS, price and leader calls very working doing brands establish franchisees think are adopting And effective I that. on who in previous is strategies

this we've position we're is before, fixed of to price deflation wing the that with inflation I there properly, seeing of points as that to pricing is prior year. very extraordinary or, price the one yes, reflective going be, now. Which just So wing think in that up; right comp. as overlapping going ongoing associated said always of the you not wings we're into is it's to noted is important price two That ongoing in we'll note that the put

it's the past. it's saw So levels in higher while this and long-term than what at pricing, would algorithm we the not XXXX prefer, in our years slightly other that

Operator

Miller of Nicole comes question from Piper Jaffray. next Our

Nicole Regan

question, corporate your headquarter move, what Turning the example, and something flexibility what Thanks. might would having you be or kind that wondering do in to the pipeline. depth the restaurant, regard. I'm more understand you differently, was of curious the with in stay of the same hearing the if to talk about perspective I I for mock change? kitchen test might tasting just In guess I and about, might menu curious hypothetical

Charles Morrison

of more making Yes, test have there this very a common believe, have; restaurant, to certainly for Wingstop. this question. number the by flexibility buying for and is kitchen which much we be not we Thanks proper decision a the with of mockup case a will proper to One, have and restaurant our changes, building. companies

of And technology our product, use for restaurants incorporated so to into tests. our evaluate today, we some those by of test existing impacts way new as I company-owned and we of or when tend innovative those, mentioned earlier, as economics ideas bed the are

early as well is We flow restaurant. better the technology it the we're maybe environment use that for alpha, would impacting a that changes can give those consumers the with test about use clean and kitchen, of And making. notably beta we of us which and so research the can kind for the

that So really there then more are we lot sense. piece effective last restaurants the on that tend to lean our in make that. a efforts. lot is, do And training to to operating of existing Again, our a pieces much of

innovation. well some to great impact So of scaling as going a the and global effectiveness are like we up investments these as culture growing brand, feel yield we're a brand of for the our top-XX as as towards

Nicole Regan

then Thank value, sales of flavor precursor as same-store can speed what's you just the is of about etcetera? components share question. underlying terms And last that a scores? second that. accuracy, and to your for And in guest correlation? What current a you How a that, much satisfaction moving

Charles Morrison

focus all the Right in there our mix. of and satisfaction years, which our attention now our strong measure becoming over improvements would seen meaningful overall of the we've closely and I a based sales satisfaction same-store larger you ours We from transactions, is to do growth, our believe two guests it concerted brand. any overall those are with day very as guest that monitor last that effort case be correlation Sure. a a digital and can towards on really to our every tell

sales quarter of discerning noted, channel. the I through is the coming digital a our more much with That we exited XX.X% As guest.

And guest around time, The of concepts happy I'm primarily appreciates, technology and of of scores value compare exceeds on top fall the our in in continued as our which that can for chains areas is we be averages in overall solutions right progress in line. Wingstop and satisfying business. as industry on Typically executing right we've and X guest well say satisfaction our terms having satisfaction. product the critical training as done that we're on in that effective done of restaurant terms in those incremental and guest. we guest is when time of while many seen or X attach which that your in terms price to And scores generally right our cases category of

Operator

of comes Wells Please Tower question from Fargo. go Jon next Our ahead.

Jon Tower

me. from few Just a

franchisees to your that equipment in that same thinking kitchen the the I'm the given alongside these the some of on tests you First curious willingness doing be change your time? some it returns And stores it's you're in put does market, over the normal above of be out States, in doing urban the do some of located that United particularly where push technology? would the may to if there how hit and tests could to of to company-owned market you perhaps equipment in or get out that London, point, that were kitchen you're there, it stores. succeed, rate if equipment the about know invest the tests expedite then other used a on particularly on international

Charles Morrison

you. Excellent questions. Thank

first our to the related address one that. me investment appetite Let for

us. think for I both a to yes, great that believe alongside return willing generates we answer would the short in technology of be invest is we partners brand our

how the manage and, forward. that, kind the business an falls cases, beneficial information on the the from of we example, could we benefit determination squarely strength of for like I investment that of think in the going decision glean that be some to can

So but, that's to our crossed be determined, minds. certainly yes,

relates enough not improve restaurant. that gained we changes of to would our heavy have insight to restaurant delivery-oriented and yet square-foot, notably, transaction suggest we that the from the X,XXX carryout, of it speed change service the standard equipment As times, seat, complexion limited

we improve restaurants. existing However, growth. for have which But certainly make it on capacity all end and additional the much haven't can can throughput, restaurants case, that in that top our even more productive really hit yet

anyway. which and room that So grow guests' the actually address the cook We faster time, the improves in a is there key there's think puts can to we food here making overall quicker, hands sure satisfaction.

So, time. and done certainly and before, that satisfaction being right by mentioned I driven on is as

in the focus itself if an change manifest So on we'll it's just business, effort, not asset yet. that to going improve the sure but we more

Jon Tower

year Okay. the contribution step-up in where And else the advertising future there also, percentage from could absolute gears in Is sort terms foreseeable anything than Obviously switching towards contribution of a was that it then in national to step there again? up of even advertising. mix franchisees. the this just mix, is? take shift the the contract your add to and/or perhaps already national Or ability up that more could

Charles Morrison

year, next half for call half year. and does agreement by point for point a following another Wingstop franchise opportunity the The the to contribution the increase a a then

into What good the go growth ad brand fund the not investments we I We we've make that that. P&L, of with the back prices, franchisees into quarter we at on decision factor I see is, performance the think the gotten quite that our dollars wing this year. what will asking side just pleased an higher execute look in if And fruit yields sales for have the for is you XX%, above if those increase them, can year. in the balance from to with all whether the that or we best right we're are challenges delivery in say We're the business next our the system-wide with those next investment. determined not would will

of we'd make So more work change. to we do whether expect with, regardless dollars a to have meaningfully

Jon Tower

option, then XXXX or again at And the in the that point exercise basis the just and it do forward you years, end of does in step-up that, XX on can if don't expire carry it? does future have XXXX, XXXX, you that in

Charles Morrison

not us it at an that expiration. the gives Yes, does have in point right It time. just

Jon Tower

respect of on elevated to for was growth year Okay. an Obviously then you. year that lastly just And G&A. this line with

about or any about relative should curious if of sort sales growth you time. system-wide revenue think us growth it Just can over overall we to thoughts give how

Charles Morrison

some on if function as recognize the brands another decide be young certainly and we leverage that want for you at a the that can this to global be then the But creating level company at we we think, top-XX step us. would at do premature see see a road, to we looked against two. increase building make that emerging we while know and would relatively of that point year, or we expect take next But growing down I up metric. level a benchmark to and brands, in another And restaurant ourselves one the look year at investment.

those able I have same out the us too we not investing another Said and investments, roll capacity so unproductive team future. there in in through of to especially time, new a doing our and in national yield in think have we've that to deeper experience international, markets plenty growth it development improper And in make for the as that addition long the way, I in guest a this because as we're the good adjustments of on year time, strength for that, that. primarily of period size up media internationally, this we're really and us in far would to we're at then be well, team, and made our making future. advertising improved investments also set really to added be think then stretch investment we to and focus the the contemplating big

good I So going there's think this on do long leverage to term. be

Operator

DiFrisco Matt Guggenheim Our next question Securities. from comes of

Matt DiFrisco

respect With and couple to you question. disclose company the a differential between the and that? comp a franchise, then the clarifications had of did Just

Michael Skipworth

company XX.X% Yes, Matt. the stores domestic It XX.X%. of was compared the at did, system we to

Matt DiFrisco

Or that you year-on-year Okay. then adjustment within X%? question the Did you XX% for plus XX.X% commodity And price. around was that I imply price that were think X% some about was the inflation? the XX% only and answering another

Charles Morrison

Well, check of in by vast price. of X I'll that do the just to majority our improvement to We comp, our But transactions points is mix. Always have X clarify. driven point. we digital have is growth at our expect comp this in

Matt DiFrisco

But wing are cost to offset franchisees price, wing taking the inflation? the price

Charles Morrison

Yes.

with partnership bit I've of our in would cadence this of in a we to before, mentioned mentioned RMS, earlier. now over reflect price points little X putting and of into I always in time, that are a X that As price

Matt DiFrisco

XXXX? end XX% was now then the I Okay. to it's now, that in to And of right going by reach think get you're and delivery, XX% the of

Michael Skipworth

the of the We're on to year. track end we're XX%-plus in by that the today, low and XXs hit mark

Matt DiFrisco

your relatively correct double-digit math think comp almost assume almost sales, that so be to So delivery high. of you a delivery? it in the half would X% of stores, delivery your XX% single-digit being high coming double-digit that incrementality cited of I it's of then is or percent If comp, your about would from be to in as

Charles Morrison

this or keep quarter the At be the so have the you that XX% the that ramping up the time, over would mind, of been case. have year. entirety point, full effect don't of in that some we But Matt, for

But yes, the now. in that's assumption comp how don't ramps, would think be I reasonable it a as So that make. to it's reflected

Matt DiFrisco

taking that Or marketplace that demand? tests their had marketplace, the that the DoorDash last menu marketplace increase you And price respect and guess with so to historically price. then drive about people going are I been brand disrupt consumer that concerned sensitive already? price you always your suggest to somewhat on is might question. menu your my that you've to up With not much much on to demand marketing impact you've on taking seen that too the demographic their spending have

Charles Morrison

channel decision fairly pricing Yes, confident on is made that that inelastic. that we the

expect to be issue. we that an don't So

Operator

of go Our BMO next Andrew Markets. Strelzik ahead. question Please comes from Capital

Andrew Strelzik

things from Two me.

the of Have much how you incorporated impact how was much previously cost the the those otherwise dynamics would to delivery inflation how second, wing wing commodity outlook? of underlying any from were much agreement? Thanks. the And are be some margin the terms inflation dynamics that in you've able to realizing. are new under the in First, quantify you much of Or discussed how into nonpermanent mitigating channels shift those then that or terms -- changed? cost were

Michael Skipworth

of significantly of XX Andrew, DFW, it a some Yes. the are end we our as going called that that delivery definitely think of those we middle, balance corporate so we of items launched included we in in noted, a But actionable corporate economics. stores. stores, margins, number specifically with which DoorDash as was plan of out. to April to put driver, relates haven't But store impact have total that because improve Charlie the

Andrew Strelzik

were of And the cost the side you terms been were you in the realizing. that wing realizing had cost on -- the mitigating that inflation dynamics

Michael Skipworth

we I guys changed to QX. wing not a lot Yes. simply relates guess with you prices, last on it has from put as it spoke time to

are that PFG little still we the receiving of partnership bit our So and a pricing. benefit from

that count. add is we slightly would bit the that a so actually we our is then commented maybe the were first actual not a piece have it and And is quite so I on back quarter. gone sizes And P&Ls. on bird bird as yield the what comment to weights on hitting inflation relates the bit, Urner little to that's little more than up getting benefit we're the we in different the And only see Barry

Operator

comes of Will Please next question Stephens. from Our Slabaugh ahead. go

Will Slabaugh

anticipated. up some And realize I across maybe comments following markets. bit the different Just than slower different accelerating around have you international little prototypes we on a

or looking more could a if So parts various that the ROI to if the significant the anywhere how or there's chop in maybe and wood on wondering I and there payback more other any getting across of periods those little you about talk pushback you're anything bit are was areas. be world, could

Charles Morrison

have think reinforce a to see opportunity we the made tend we operate areas areas I Wingstop. Yes. in tough a return. we a ROI. higher different stronger world, commentary in service, earlier, There's London speed the that And the improve prototype service increase I'll always model of I a where And seeing of the to prototype have to comfort improvements service our fast as modification by to speed will casual on echoed of The in return relates the we're give our impact a it of big the on that investment. overall as us guests, for

our That exceed in said, that strength almost we've that noted higher. sustain, markets, model. in we restaurants And indicator that's to to metric all the the ratio believe for international of previously, this a and investment some ratios sales great continues of X:X tend a cases

as However, we do better we much growth, why we hence, can that has ROI and, accelerate model success. making do we believe for so higher that with a we're sure a more and predictability

Operator

question Andy from next Jefferies. of comes Our Barish

Andy Barish

reach you're to kind the of of data have brand the sense bringing yet of kind results expanding this Be do In strong that you a been interested consumer you're the opened into to being pipeline, get if showing, enough point? at development And work in out, on completed by what looking this secondly, existing is just then or point? either franchisees that see percentage the has currently at or of process.

Charles Morrison

this seeing In we Prior The segmentation new to are customer did effectiveness launching had our is plays preliminary, strategy of first early that comprehensive growth ourself to lion's are our and in advertising have and, that that that identified huge we share profess segments. is there awareness suggest is chicken X%, not but new clearly did the tried. the indications with Wingstop eat campaign the additional in done, QSR very wings, getting a our a would of we it like the of question, but terms we've base not attaching of to. absolutely that traunch and we it to research of as consumers consumers out from therefore, of are these

is this happening. very that we're so And pleased

we new prior enough to are lot at of focused the were broad but One a audience, we This our time, still expanding over efforts expand had core people years resources our core, and tent, pointed would national reasons the the a straight our users lot a that heavy is Wingstop, those feeling to achieve of that that felt of advertising the knew. we confident message of we on the ones growth. are that the

grow pipeline to pipeline development with an primarily we've to of relates XX% not a existing franchisees. existing pipeline in that also system seen comment franchisees. than More our on franchisees what growing, to that of it continue the strategy As actually and with for is before, provide development, which franchisees. of consolidate very comprised number our of existing I'll base consistent our shrinking, is the ongoing of part is is

Operator

of next SunTrust. question comes Bartlett Our from Jake

Jake Bartlett

your think quality I the kind Charlie, core the food. of part of had kind the when made-to-order differentiators, been of of And it's aspect. of that one of

see be And really delivery so well, your the stores the that in as And of you that. move kind change we could as of kind there and U.S. test of service of a in context if this Is quality and that U.S.? unlock those an well? internationally, is kind this that in possibility of the internationally, domestically of I think that could successful something for to resistance all as change it's so could that initial

Charles Morrison

unlock in the it U.S. potential has the to Certainly

means and was felt this we we erode still not to the it order. to I that and then the it the quality me to provide if example, question. will for to a offer as will or attention we the guest. serve. degrade and lamp, product cook to hold make do this By heat would under careful we fact to that the the quality call sure pay of We product going attention Let brand if no do our

cook the that and cook there's we So there. procedures accelerated in this time. no how change Really pace it's just provides for the with us wings

we as and roll it certainly the can seeing be the we efficiencies fresh, same something a we always, in benefit. as consider identify see we're So cooked-to-order guess that And and if U.S. replicate could model, I overseas wings. to out would

Jake Bartlett

Got it.

I it to that would a U.S., mean, you this would I What's the change able evolved? to a now. loved I do be time long so is something technology just something's in be changed? understand, in Now have imagine for

Charles Morrison

to secrets. has I with it's upfront. all to don't the do -- But give how prepare Yes, more wings the want away we really it

procedures cooking final cooked and evaluating. the we've then involves much simplistic wing, really It's prepared, wings in product a in same. place. It's flash, to just really the that itself; put frying change a process procedure process it's the the in will. So a if slower that we're to But doesn't finishing them fresh you get still a order, overall

Jake Bartlett

Can the just the to different one trying margins. you in restaurant now, how three much comps. very on you pressuring might break out be and, Kansas franchisees how level Got it. much stores question And that labor? then I'm level understand experience in last experiencing than margins just particular City, bought given those what are that how the of are

Charles Morrison

Yes.

this. some on give me Let perspective

having into necessary deferred couple turn expect. the a people, standard a in we to were we the operate of identified over the standard invest them quarters, think back I restaurants to as at believe is maintenance, for things training, number for common we've us of necessity that them past That the in these required order to for us investment what brand.

are to at happy quite operating these very I'm well this restaurants say, point.

Margins very as volume. that restaurants comps. our AUV XX line noted line the additional in expectations the differentiator restaurants before, system. is, with they are And the for are are our real fact, side unit top that In strong average in at we've our on to of compared lower there

be and transferred which definitive for So, in those The is, right get owner sure new key development a the anticipate for the ownership restaurants here signing under make we agreement then to that case that. we would market. market, do

And to we make so, we're right careful player. sure going and as diligent pick always, to the be

think those us I behind investment So days material, these of significant or and restaurants now. is are don't impact the I to think

Operator

you Thank call. conference the concludes for today's attending and session question-and-answer our presentation. concludes This

disconnect. You may now

Wingstop (WING) 4 Aug 192019 Q2 Earnings call transcript