WING - Earnings call transcript Q4 2021

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Operator

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Wingstop Inc. Fiscal Fourth Quarter 2021 Earnings Conference Call. [Operator Instructions] Please note that, this conference is being recorded today, Thursday, February 16, 2022.

On the call today are Charlie Morrison, Chairman and Chief Executive Officer; Michael Skipworth, President and Chief Operation Officer; and Alex Kaleida, Senior Vice President and Chief Financial Officer. to of call FP&A like Arevalo, to now President Vice and would turn over the Susana I Investor Relations. ahead. go Please

Susana Arevalo

Thank posted at under ir.wingstop.com. have should Investor Relations Quarter XXXX welcome. our our the Release. and website on Earnings is Fourth Year and access copy A tab Fiscal Full you, to Everyone

actual materially and Our includes These statements. future what forward-looking discussion could uncertainties expect. of to that are differ and subject statements performance, results cause we currently our today from numerous are risks to not guarantees

substitute SEC that performance. comparable Our our for Reconciliations condition. prepared with such could GAAP. our future can financial measures filings earnings accordance certain measures believe evaluating GAAP results use should in financial Presentation and affect considered of be in describe a information various in to contained useful be release. not in we that risks are our isolation operating as We non-GAAP results or

keep you Q&A the participants to for Lastly With allow ask call as like turn over a follow-up that, as the each session, question Charlie. to many possible to question. ask that and a would to I please to we one

Charlie Morrison

good you Thank morning. and

has partners, brand call has environments. combined on reflect full who we includes technology, today returned people our of the XX.X%. and with the store and at has fourth of and time, our EBITDA same more industry growth us June franchisees, XXXX. our System in shareholders year XX.X% brand in cash dividends. new each billion X.X% time, of results journey invested a return. and team year, $X.X in growth affectionately enjoyed that with by have us investments our averaged Our in unit adjusted Today, Over Over has leading operating initial Since and quarter nearly way continued That still time, that growth efforts whom averaged than that since our momentum delivered with year. that after XX.X% time XXX% averaged increased are has development returned challenging I our annually. sales our want domestic sales year reflect results despite to public offering our

changed be streak length. of XX our In outlook provide as that a that continue growth as for XXXX. is we face world so in store of well pressures tougher to we now positive store an our XXXX, XXth years same the XXXX, sales March I strategic robust that that was to We shutdowns. and dramatically. are say baseline But same same to consecutive rooms guest our our tightest Domestic the and and results customers would to the well in job pandemic, as seen our store of XXXX In stimulus we No seen And have domestic amount were years, early to XXXX technology thankfully prior economy occasions ever in performance have we to XXXX in in as the volumes challenges as context was XX a digital what growth able to unit but as quickly bone-in one XXXX, and even in saw ready. to invest performance Wingstop hard The X.X same that continued a have due experienced pivot accept in stack delivered dining for decision year. strategic XXXX. wings year XX% virus the peaking environment. were ordering. sit our spot their year Many pumped that in We Wingstop prepares playbook in delivery brand. experienced dining only for best-in-class settled business brands for they inflationary record with today, Wingstop Wingstop in XXXX. did to here leverage guests the and we experience now ‘XX growth the price the high of increased of our million. store sales average as operating our thought restaurants a of again. for in into for inflation, increasing XX% did reopen, growth, market of to economy able lapped than to year for sales sales as eclipse We our and Wingstop similar to chicken began in and extraordinary challenges XXXX. delivering Many the as from into our not execute teams January, closed year a it associated rose recently the more X.X% of proud in to led the the greater lap even at the we but protect

As a chicken all the of approximately XX% core product of make bone-in up menu reminder wings are our and purchases.

on simple absorb our long-term still strategies. keep focus operating us Our and allows model our these to swings,

And EBITDA another headwinds of us we X,XXX year of plan XXXX the with growth. continued face levels, new this more challenging cost and enjoyed record the We of aligned a domestic of have on net the markets development, returned to changes XX.X% than positioning in delivered replenishing and face new of operating partners XXX in units, of that have our mitigated pattern the believe adjusted the growth. positioned and is the In adversity, That us opened trend of plus our our new and product We Despite for to understand another shareholders the overseas. has restaurants XXXX to growth. the brand continuing brand. international us and such pre year pursue our on and XXXX, continued plus XX% XXXX. Our challenges in start we goal volatility pipeline most growth, have price for IPO. our environment ended the we XXX a open year thus of commitments experienced leading pandemic record net growth business from industry for with since for

all rolling that not pandemic of the to A result in a not positioned by itself. years. was stayed a Our a over true the changed has brand performance that well after year is It a strategy has brand in category that subsided. proven reflective of is in XXXX just

We not turnaround. a in are

We future. momentum take that continued the have into well will us

marketing as Marketing national ever than to As I'm Wingstop for to XXXX, to excited brand. consolidate $XXX increase the take with and we I fund million. going our as partners, Local are look In with more brand it our collaboration X% our to total spend our allocation

our platform database million our focus, the convert We true have Martec marketing to of built a approach a leveraging than infrastructure XX users. brand to promotional from more

quarter on multiyear $XX investment tech our the expanding we build and for to This continue XXXX to not a or the started to million toughest future, tests and results. This leading industry a great unique stack, of in global continue story also a been about is is a our will platform. year. story brand We that Wingstop a redefine position great showcase withstand to able our has

concerned our continue what the in expect long-term sustainable other face with We slow experience We quarter. brands strategy. us economy growth, cause to going given to see true could will XXXX. the are our deliver of any Shareholders been happen slow. growth. we might that intend down long-term has That stay so to to the headwinds that far, is and But in not in even we later to

mid-single domestic our intend deliver store and growth record restaurants. is to Our our digit on algorithm XXXX, XXX In midterm we same strong. of sales net new momentum approximately new of achieve

X,XXX our footprint will plus that We our restaurants. restaurants. potential international to domestic we business believe maintain now strategic for investments total X,XXX the can future. continue that X,XXX to and to With make scale restaurants, a well of position That's into our scale

has is work we over to who shaping we with to business getting up great very another continued shareholders our believe approximately with let total brand in their management started. Wingstop. And industry, one we are of XXXX very of for have it that I'm to as Alex. strong me XXX% be strongest thankful for to in well. proud Wingstop. Our yet With return. turn believe relationship performance team since And with long-term that our us. was to year are confidence that our another XXXX this is the growing the and IPO this partners honored I'm proud be delivered we the something shareholder just

Alex Kaleida

Thanks Charlie.

demonstrates Our for two XX.X% resiliency the and strength challenging performance amidst momentum fourth same continued equates backdrop. of our full basis year. year, for year the with the on pleased for fourth X% and store a during year which and a by Domestic the to quarter we're X.X% our quarter the full and full quarter, grew model. macro-economic XX.X% And sales fourth

Cost growth many during $XX.X was as provide increase increased XXXX. of another sales, to to by of openings sales resulted Urner domestic by of an the restaurant when XXX and billion provides metric in units transactions, company-owned sales In to in by to last during inflation, other Royalty million. cost increase pre-opening high top wing sales In the addition versus XXXX. our today's better associated approximately same points for quarter half our prices in line fees growth sales quarter. $X.X core increased release, to of year. power record record XXXX. of store our $XX.X quarter during one expenses. increased marketing X.X% fourth was of increase year excluding An development pre-opening due and percentage primarily jumbo time of The of XX% this the cost paired wings quarter XXX franchise mainly additional largely many The revenue, fourth to was restaurant with $X.X X.X%. Manhattan, to revenue of increase clarity franchise year We compared the with increased into system-wide increases This our fourth by during bone-in was XXXX expansion full new Company-owned efforts. prices. of the presentation insight million due net during the percentage impact margins. same XX.X% into and net in address owned sales Barry underscores one company fourth believe the with performance which This and driven driven exceptional price sales one-to-one we expenses $X.X sales eight growth introduced to by into source million million. to a sales

mitigation strategies. to price of However, our landed XX.X% saw restaurants increase thanks an costs in our only

we stated mitigate volatility more variety of options chain. strategies the gain of costs. exploring actively One we is And supply of in food control are our to our a strategic see to

of deliver brand to continue see price points. returns. are regards wing sequential $X.XX jumbo wings, behind XXX we is has is see into class sequential to our This the a and of as predictable pleased inflation, us, for worst declining goal basis in margins to for improvement best-in- to food the carried in as well continue to Our as improvement restaurant benefit the at a we pound, believe now menu deliver With increases. company-owned costs more quarter per trend partners XXXX and price

positive restaurant initiatives company on and half to trends a format, we these our in digital year-over-year As of carry test opened entrepreneurial to transactions. reach prices recently spirit, a out allowing continue, second new in we Leveraging the year. the anticipate equipment rapidly only and wing and deflation delivery us XXX% prototype with layouts

and expenses fourth as has the million $X.X We and quarter, expense strategy York open in by in in the on market way the excited light franchisees of in six In year expenses noted $X.X to This growth during SG&A support for Manhattan SG&A New in we increase were big City initiatives. stock-based accrual outperformance same a $XX.X our investment In the to guidance. was a in decrease our as adjustments XXXX prior $XXX,XXX XXXX the additional up decrease to as record the to to strategic quarter, another of compensation million this show our the also in of to and we for our incentive well These $X.X of offset EBITDA release associated for partially an a prior $XXX,XXX compared The by support to three we people year. been with primarily today's measure adjustment was business, quarter to remain expense. have fourth contemplated to eight to was our non-GAAP XX.X%. and in not of by decreases related due consulting potential plan locations end million change at fourth SG&A in international in million. million of Adjusted in restaurants expect brand. costs support provided $XX COVID-XX quarter, decreased execute inclusive

public And averaged EBITDA. in mentioned, than We XX%. The their most a $X.XX as booked the another compensation included Charlie company, fourth of quarter rate adjusted and X.Xx and impact between $X.X period measures both today's and performance first As XX% has X.X Adjusted to ended diluted $XXX.X net a marks debt per share, year were net quarter improvement per adjusted non-GAAP year of XXXX our based are adjusted turns of adjusted and more versus year. since growth last XX% release. EPS. ratio in the respectively, the XX% share, last our the and million non-GAAP year our growth in to measures million up same comparable a $X.XX compared year. of had leverage share earnings with same diluted debt-to-adjusted income Reconciliations and earnings EBITDA per EBITDA, GAAP net

highly light quickly to franchise strong delever our from model. continue cash We flow asset generation our with

our as well $X.XX per monitoring stock of as of approximately payable million announced directors common of March XX, stockholders share to will the Today, a of are March the quarterly dividends capital This environment. most as We XXXX. evaluating on be macro dividend of uses XXXX. of paid XX, board totaling effective record consistently $X.X

As long-term And Wingstop’s to in outlook. clearly heard growth. long-term investments remain make to drive Charlie, continue appropriate will the confident you we from we

algorithms brand includes we continue growth. new expense, growth to resources want includes we sales reported with ahead, $XX are to week. As XXX of modeling growth to million, $XX store confident and XXXX million that we for global will for look million between net domestic digit, XXrd guidance mid-single restaurants, our XXXX an of purposes as in million I that $XX enable a same be which everyone stock-based estimated to and SG&A Also, XXXX behind invest $XX we remind compensation estimate

for an $X Charities In call restaurant Wingstop crossed the moment serve. we with its providing the Charities important to open we over I'd need efforts in a in team like and we Wingstop to inception. community members to Before their Q&A, take communities XXXX, and since million milestone organizations celebrate

During Wingstop provided XXXX team $XXX,XXX over Charities members. alone, and organizations restaurant

X our the our contribution the at Center. Hungry provided addition, our youth. million by In meals members both and work team hard in all restaurant Support Kid No We and appreciate to

drives for partners who momentum. all created tremendous our partners ongoing our year deliver growth supplier pandemic. Our is Brand and our the and helped differentiator another despite and We Wingstop believe by banner culture challenges a

a fulfill focused While for let's growth Operator, we that, executing vision to restaurant Top brand. strategic line our global on XX remain Q&A. turn With our please to priorities the of becoming open questions.

Operator

David [Operator Instructions] of The Tarantino first Baird. question is from

David Tarantino

same good is Hi, your sales outlook. question morning. Charlie, on my store

you I move prepared economy some digit through about think potentially you that mid-single But midterm growth. as year. algorithm your also you expect your of the on concerns mentioned in remarks mentioned to you the deliver slowing

comment And see year and on as given of facing? just confidence I'm you you here the So the if wondering playing could comparisons today. your you're sit you how your do out, degree Thanks. Outlook perhaps

Charlie Morrison

Yes, that's frankly, able to years brand. that, if confident quite question. is, on But we not in is Wingstop, the mid-single been to advantage digit what headwinds able a confidence towards the that think midterm challenges think navigate demonstrate no very Wingstop. achieving this our and the achieve present for think algorithm. that Thank the be was we've my able you various year, actually matter David. on particular that I economy the tailored to commentary the more headwind I we've We're towards, through morning, I of any slowing, the centered can Good to at that been comments there to

we've the for. pressures see even macro frequency when the saw over year. seen indulgent And occasions Our this play. last that come years. they we doesn't our I think that to of that their love tend customers some Wingstop We'll to And two change, that to protect continue

Operator

of Glass The next question is John Stanley. from Morgan

John Glass

of ‘XX. isn't Good an visit Thanks. that the XXXX to I understanding it a ‘XX. much year or guidance versus it's record But wanted versus for new increase morning. unit revisit

or trying factors environment the that development in prohibit is the are it's inflationary versus so unit development. maybe what conservatism that real out increased And your what view, I'm just whether cost environment may parse some to

factors XXX, thought about So of just the I as how it behind guess conservatives one number. you that

Charlie Morrison

morning, John. Yes. Good

and achieving that in even we're headwinds start inflation, consideration the there, the year. to And in that target withstand We've to macro here we very in in challenges always yet couple that that into us outlook always we quarter pipeline. a closer XXX. there's that past and against it to always there's we err thrown cause the XXXX that we us able of hope in We've that of have three, front strong on think would side being more record, already another been all of we think clarity, confident at to Obviously, been-- able demonstrated I momentum a as challenges had see to get the have to could we've deliver any beat notably to two years. not macro some we always been exist the been the and that might lose guidance but some continues. we've clearly and now, we that, we month face strong also I do, nothing set hit but of as mentioned, the expectations on the when into that them. right we'll momentum we we And if clarity have, the starts thoughtful have was I in year, our development on have quarter our six

them franchisees, fourth the opening their the through quarter continues, restaurants quarter, attention our development international demonstration levels. markets, are that's If stand us, in the in a pre-pandemic and a overseas and weeks. international they front and have that recent down them come and their businesses our positive just in a call to as back of we we're now, are in open in trend for fourth to continuing of a has so pace quarter then coming XX which look a definitely going finish is those even the franchisees is that wings lot more the to positives of we also as and lot to now, the chicken price alone, seeing to So year continuing strong down restaurants that in build that right

time. that's take more believe And they coming continues, quarter. the We challenges, achievable. number board, us. see where good front of in But if we'll bit pipeline barring little have any momentum new about markets the very feel overall, on certainly we is in that a another are I we And

John Glass

same contextualize quarter do thank will your for some just component fact, increase? about that, the but at what what Just of last generally sales maybe fourth know the Great, in pricing rolls of what you to the understand off, help guidance On comps? you quarter? what's you clear. some for talked was implied the fourth? ’XX, ‘XX? price was assume what how, store And pricing very I In that be taking drives

Charlie Morrison

that QX. Yes, quarter were price last I fourth would in the price quarter take the of taper the actual I to increase into going say franchisees off noted effect taking should start think we effect, that may that

is of a of noise on year certainly overall, to little basis the the only have way that think off may year comp some taper our half we we year. quarter we're looking overall because some throughout will So do how that effect. the a a the that But is balance the one comp starting about I that bit. some at fairly of wane would through pricing year it of expect But stronger back to in in year the one the wind that the two way pricing of anticipate as consistent

Operator

from is of next The Bernstein Barclays. question Jeffrey

Jeffrey Bernstein

Great, thank you much. very

now your up franchisees. menu on First, XX% pricing. on just the I year following by quarter pricing commentary maybe menu last that believe taken starting roughly based the you're with

it, aggressive target of the considering seems lower income it do On we the consumer. face

perhaps anything seems of the So to concern consumer I more know bundles and spend protect to far offer things are Wingstop, one elasticity thus you've or where side franchisees on seen that am then just the now mentioned looking occasions consumer deals like indulgent up. wondering, or I follow you the related ease to their to of some any pressure

Charlie Morrison

points. One that Jeff. increases last about morning, good in thing price is the year keep consideration total effect to Yes, of was XX

increases first price do in starting However, some taken year. the in quarter, we over roll prior the were

of probably So that is impact the about that. net of half

general been get it increase, a nature to the took And with but of of as they're is As do retail ability we significant and indicator pricing and comp. economy some we'll usually and think the demonstrate, our volume. price have, good when effect to we those Alex Wingstop, only it price the they the willing the do transactions. the we two the inflation per And price through is take money higher on to mentioned about pretty year, effect which amount we've in relates consumer in with negative other that we're but rollover to is able get continue not year Even of power, we'll grow prices, to the with back to of on other occasions. many that and to a think price transaction call, to taking of last of expect increases the points normal our see cadence a but quite having one frankly, that increases, not consumer have the I I

John Glass

you up just and made. commentary on Understood my follow then the marketing was

that you much you on Thank kind there's and And more you some on between up from local basis want spending that's channels I spending make that plan basis it would to said reallocating points They're you. how great. broken XX sure just point of national franchisees that or just that confirm national. could could XXX just more. aren't be think you to color provide is so how I another maybe to shifting if

Charlie Morrison

appreciate you that Yes, capturing I that. and you thank for question.

to the overall take marketing cooperative was with distributed now was did to local I spend think what our in spend. agree a was it's our around on that we with as that strategy. country, What larger and marketing national very markets, our notably a franchisees consolidate reflection important our

X% So the local, developing we platform that there efficient is at money of fact users a in on use did local decision that ability partners one-to-one arrived to our one can for this was is than we we're much on that drive more be them are national on market. basis market in the believe forward. in one-to-one we we a couple that spending that strategies that What efficiently number more our scattered national capitalizes going more Wingstop the brand plus and database that with we sales marketing on much today, why these are can a we will a our of a basis XX on approach to than a centered analysis million

the cases The buy thing consolidate can we at level, better to level, local gain. don't better need our to Facebook we national terms XX% notice that be of also other many that is it we we money with in in do like purchase, at efficiency buying the just to the substantially things and advertising XX%

really funnel affect So and the really I then of long-term the guest the bringing enhances of our our at marketing, it this for people targeted marketing filling into with And that our macro our to experience so up brand. approach that the think matches our this will that top strategy of overall spend overall customers. level, positively one-to-one micro effectiveness spend,

for big think we win the a future. it's So

John Glass

now national? Is any or from X%, local there to X% shifting local you is XXX% Are National? remaining that

Charlie Morrison

no XXX% There is remaining. local It That national. is correct. is

Operator

from Nicole Piper The of Miller next question is Sandler.

Nicole Miller

you about and good ask Thank frequency. morning. want I to

time. XX of guests So have couple back a light, to you out in from times members provided And heavy new years, year. go in attracting at these think that, you maybe terms and plot XX look of can what at like kind your you Analyst And say a AUV, loyalty come been information turn new there's into shared a Day and say proxy four I and if guests but the year, you a the they happens to medium let's XXXX seems about what can guests last times visits year major users. of are January what enough like and influence light average with then out if AUV XX users, we as just It we average in of the million the frequency. a at

So these guests come matter. how much new strategy? But matter, customers more to impact new does units translating often new your

Charlie Morrison

be Thank you increasing frequency and for the agree of impact brand. the Nicole. strategy for way By very you both sustainable thoughtful this that growth of coming long-term new I users to technology, that I'll customers which sales the deliver with store should we've many over so same talked the into the half, an question, and the existing brand. able year frequency call to we've brand attention at those associated last segment interesting about a able been new better customers is note a and back with our is the guests level of amongst sophistication a in also we've that understand them tailor invite we we more type and a the our retain database this lot in about to seen is faster. the those what readiness and are and or at them going user to during of believe than to Wingstop now customer frequent that efforts more towards pandemic, past,

our continue to believe continued and growth business. it that Over And with seen long-term momentum we on I is nationally them them for as We you over trend that agree the work. dollars year, last time. to improve retention rates new and as into retention sales can saw increase increasing momentum store a think alluded the Which coming same to so to even rates and we've and upon far, marketing those we an the take for and brand. the put expect driver new these we consolidate we course of guests of

Operator

Jeff from Gordon Farmer of is question Haskett. next The

Jeff Farmer

Good morning shift wanted gears and you and to bit. thank a

So XXXX. the think with was concept, introduction of Thighstop June I virtual that the of

have between that September question Wingstop is as what hoped? shift thighs? to done thighs everything Question have I seen thigh followed item guys you there is, the the up I the menu wings introduction the of has core in wings, boneless you've of prominent of believe, So bigger bone-in You mix a with introduction sales XXXX.

Charlie Morrison

good Yes, morning, Jeff.

got full I hoped seen bird to mix, think then optimized of actually wing us help it's job definitely of to or use done the that sure more we've product and what continually how some reduce in the because the make at product acquire. menu. food are parts the cadence success. we to cheaper which of volatility mitigate mix it's We've its for helped in we launched product brought prices, understand long-term to it working onto we've performance with our product the cost, consistent the least the is since it And is our done in

So of success have thigh I for into played those stock. think things all

think mean question what will we do the of we'll I impact that next product to what franchisees we have believe one. sales that of question to have the we about royalties, year? free to just that And because know is help come itself that X.X% for probably as the the I a product. the for XXXX be provided year royalty the expect does about that on an thigh it from current impact full our And with with

Jeff Farmer

just But just I you follow that. just have on up that that of the Yes, got one to advantage this. would take to with fact answered

provide but provide of cost level the you bone-in across is products, much of just know sold wings thinking meaning of you of too high sort thighs, I strokes, broad there commentary any sort of in So terms there? about three different goods thinking in and detail, can about terms can't

Charlie Morrison

this way making us. it chain rate the us marketplace. wings time a to we expect it birds fine optimizing us that the whole with buy we're that and the of It's and is of And a terms in is build. us that. of some and back impact deal I negotiate certainly launched cadence talked would expect, an follow when It before a in big perhaps It's slow we for think the we put helping for can product for about the best there. number we've supply It's this the at is way expect to to, we ago. not growing, that long boneless

this term, to long we expect continue product grow. to So

that continue mix, it'll to some that's at think time. going the I we're size optimize And we mentioned, take get been from to consistent the into go. look our can I As ways message but

Operator

Charles is question next Cowen. The of Andrew from

Andrew Charles

Awesome.

we zone because is we talk prototype you formats from much the target increased X,XXX to new think prior versus how a the talk like to target like expectation. Can royalty. I'm What ultimate increased out to should it store increased the your don't penetration about figure Charlie, trying X,XXX or So about geography US restaurant of as stores about or ghost the ties foresee the new certain new trade feature we previously? kitchens,

Charlie Morrison

Andrew. you, Thank

why had great achievable. we a growing our XX that I in and we're You sequence we still say, Fort we And at for would X,XXX extrapolation like restaurants if look -- look, I are proper Core to when you domestic, X,XXX XX at had talked believe and to went look sitting be about certainly public, question. the restaurants. that we which Worth back we would a today focus. markets right Dallas to restaurants market is here XXX

we long of because So MSA that question The and those is where expand they lot to complimented efficient focus. the we've haven't upon the is that over are And Good City of which the to the of at here still rooms way, country an going the that experience ghost mix execution going that we ghost and positioned we'd well we brand delivery proper that fact lot And to a focus into a assets vast kitchen Manhattan in open be continue is excellent do stealth, learned both. started we and street with markets seen going locations. much a with up believe then major with with to seen generally to transaction it's far we New that then able going to penetrate more mix in had in the we those we've forward location, will a first, we're What term. example across means beginning. fortress kitchen, back dining smaller, of where We of show we model. about brand, a US, your when no fit reverted to like anywhere. And what the digital, we're the our will more in seats, our Dallas. to to ultimately can a efforts be execute. handle those the brand launched playing volume have heavy that's majority our London the new a only be we York so is with in business. UK factor kitchens to the something here unveiled advancement the the done in more be format almost we've point started XX% refocus very believe It's is we just And grew all about that more of productivity about counter and side our efforts a kitchen that efficient.

Andrew Charles

And this project at the I SG&A last in think allow system lifting hopefully the to as and beyond? we will you. SG&A when That's question really look Thanks. XXXX of percentage ‘XX international stack behind as the then for you that tech behind mean, sales, of guidance heavy helpful. lever you development peek investments should a

Charlie Morrison

Yes, those areas to development. long that Andrew, peers leverage in we're strategic other that is to in comparable going to we and technology we're pointed the business going where think feel I support continue to that investments are, the make we've term, areas, gain to like

as to the continue we term. So support this long to I the us year it see you'll got up invest think business for to

Operator

James from The Stephens. of is next question Rutherford

James Rutherford

you off are of volumes, the those historical volumes curious they compared pattern just of build whether could the unit talk kind Thank you're producing and and where out what And kind performance classes if of restaurants prior seeing you. vintages. base. I about of open to of and of kind was play your steadily just XXXX XXXX that

Charlie Morrison

past Good still was we morning, them three and shift seeing growing, about in yes, that been increase a what $X.X mature. from $X.X million are years range. the And or in over big has two $XXX,XXX opening still the the to million

As we $X.X mentioned, million. our average unit volume for the system in is the US

opening So seen the continue we causes back. expected that restaurants honeymoon as same as to to we've with there's them to that to fall of not the way expect these say there's these restaurants grow associated a different cadence

James Rutherford

to the impact to if suppliers over favorable I'm then about year go contract not we mistaken, since of and good it's just should it's with give think you forward pricing your a kind How hear largest Okay, those on you entered into coming should been the bone-in and we as wing but expect much. delta do are still exposure how prices but spot about a you what we and that price Thank that down, you to your movements know just we spot of duration contract the very think are between paying? something wings.

Charlie Morrison

inflationary those And working to are our are for on thankful effect. still see which really a to getting and to subside, with people their suppliers of very with mitigation. that expect maintain those we until which will work has back this believe largest Yes, capacity, we we most environment And highly we practical expanding us in these help. lot in do to plants

continued in P&L do wings, course of price over seen I continue up, chicken the even a things some benefit Urner the $X.XX wings. in price to the that decline Barry week, we've see chicken Over are certainly, such about for the think should which of our lining improvement and year, so past this will we

on can expected to term, continues. lot the suppliers partner be I evaluating chain, Wingstop. But in what closer to volume bit strategies production ourselves to the think to certain going in Bowl, take Super the of we're to long we of with has we whether with to Whether the acquiring do ways various that which that or involve supply effort towards building be dedicating through product. more or over we can really So control we that that to hope do post case, little a a the exercise

more But they're prices and just about now, good in the very feel the we're that. to heading. So come spot going lot on right direction they're where a

Operator

The next from Chris of is question Stifel. O'Cull

Chris O'Cull

Thanks. be was mentioned promotional less reliant Good you the on morning, guys. activity. company Charlie, expecting to

So other benefit for the to are supply it -- create chicken new does if there of introduce testing example? this to change if chain the a And determine could of products, be sauces, willingness lot that the demand? could company's your cuts or

Charlie Morrison

statement, as a for launched quite it a XXXX, products to was that otherwise. necessity to promotional, Wingstop, the in the frankly, so people new promote favorite, last and part which want Good I any of new flavor, macro to level, less fan the relates morning. clarify about still was brand call Szechuan, action or that By there's there's And we a the being to know that at innovations, Orange successful us.

sequence do. time. that, our continue lineup we've do for to and that's we'll been we'll so a to some of opportunities And that flavor continue got cadence quite And

that we we being a to meat that example as Going the the the think of think high of develop key lot we've bites those. love of where innovation is continue guests bird, example, chicken, cuts we The existing product, a leverage meat their really do that a on wing, a forward, certainly, only our which all dark think of boneless of we drum. in and on use product. mix boneless solid it our version was great side terms the a creating out item the long-term white not evaluated innovation is And an thigh through effect to I the of as has

look bird ladder continue which supply. to going should to at the the ways chain expand can bird and that the and to So of whole supply control how to about, we've concept overall, we're use up more whole our other strategies we the talked

Operator

The Tamas next from Michael of question is Oppenheimer.

Michael Tamas

morning, everyone. Good Thanks.

the one-to-one drive mentioned You the of advertising shifting national to greater marketing benefit help capabilities. you

just information change. this you like of It talk be? can supporting lot sounds you impactful can this have a So about how

that just Thanks. or from or in customer you're so help you that decision? anything share And can frequency general drive just spend either what seeing

Charlie Morrison

were scale to to more efficiently brand. to I transfers demonstration the marketing as sense increase efficiency we're the of doing analysis a than more more I a creating efficiencies exercise a much in ways more TRPs think deploy dollars in impressions And which of says that's we if local on just math, our markets. of earlier, there effectiveness just our the on two are meaningfully the dollars, The more marketing back Yes, any can without to we commented go I what benefits that spending it.

delivering than we our I have can our frequency, promotional relates they example, cetera, one to advertising we precise, just or our our a of increase to restaurant now it of messages a can our do strategy Facebook will of believe most becomes And new their lot tech tailored. us, of a base marketing very who and take, be on we effective, advantage user quite to to start long term, it product scattershot frequency lot a nationally directly this how which continuing approach is them, ads, not, are, all flavor that use to mix a advertising it our unique different preferences to but our consumer shift more higher customer means make frankly we're really directly and will spin what not increase with to that's consumers, a doing segments brands focused going et and mark a it what that is is are, based now they platform to of frequency, really on Martec As potential now the so more to brands. Facebook and higher whether regardless for that to start point the directly we're that's more

Michael Tamas

that some down incremental then delivery And quarter, if you about talked needed option And XX%. to Thanks. you flex you pricing premium to you about help think traffic. the of drive to, Great. last thought sort had

you still So thinking that XX% lever? to are XXXX? do in expect about And you that how premium? flex And a is it maybe Thanks.

Charlie Morrison

held play. will hold time. have I premium it that in we would And for Yes, that some expect

is enjoy utilize and would I to to time to think where being. benefit enjoy maintain the prices and have two wingstop.com, is where they our And value. the the customer the And a brand. think other that come is One exists for menu that marketplace premium that going then through choices. for I go standard our to we're they

way it's negative demonstrated a volume. that having I transaction not we've in think effect if any on

And profitability. out franchisees environment, and think, for inflationary their so our we hold the that the better I there, this longer in well

Operator

of is Sachs. question Jared next Goldman Garber The from

Jared Garber

operating getting about restaurant the wing couple margins. maybe for thanks it estimation, Obviously, are Or about those ways maybe of think the pre-COVID, back matter efficiencies I'm can back maybe to that part efficiencies things think in that. especially sort and several of circle really there just years then of thinking that piece margin longer how Charlie, down? level other Hi, last about and of coming is the specifically, question. wanted it, flowing over through think we I was And a how you about think the and over wondering years, nature. your Is of boxes? reducing next sort of big the to prices to I we pre-COVID the as automation taking strategy menu the a discussion the skews of term,

should thinking those just be So we longer over about wondering how term. some of margin Thanks. items the

Charlie Morrison

time. wing Certainly, down we come prices to good do Yes, expect over morning.

bone-in needed wings work keep have as that, it prices to we menu thigh We said That our made that. side mitigate to and of go get we're on impact stop seen. the needed chain that That's and lower $X mentioned, we to. supply product on price impact strategies That's know take much as said, than the we be way the to stabilize we took P&L and another mitigate we I'd to range. mentioned impact, to closer the continue a a more the I as at what believe continue our really as to P&L, time, that, of we to of down and dependent not to we will decisions overall the market, pricing control wing the the the didn't going spot and great also, just which before, evaluating same As that volatility huge but we upon it. are with impact when wait for that we've

When codes much of And us it the of transact and at innovations, to it, for lot our digital, transactions. goal transaction higher are to other in its this restaurant today. on our their as continue that to the other or find ticket think their we to we the digitizing sales, for highly because to with new believe, automation, which our restaurant opportunities still boards is of the our still driving of by to we Notably, QR future what about drive at a prototype encourage On restaurant in pocket, and be front way or digital biggest side transactions. mechanisms use exceeds the in well phone, working on digital we strategies their is we'd of look play. That we we people through terms able within restaurants the of XX% mentioned indicative counter, every digital use to we we guests the brand. menu stated telephone. and solves do on digitally we labor to opportunity is, earlier, transactions. our towards take alone And in kiosk volume a represents enjoy which is transaction or That's $X as even to XX% of average stores can create dependency efficiencies like those reduce ways either redeploy know the is

is and pace think, set restaurant, that, operate why this for record so be are our roster still simple to franchisees, still the average, a hence beyond size at And a unit our now exceptional exceeding and model on developing a to able a product they very up volume average low deliver million, today. execution, the returns you in the brand I low way investment, setup, if $X.X look at

Operator

UBS. next Dennis question Geiger The is from of

Dennis Geiger

speak Great. drivers year, growth a maybe there to highlighted digit the you of points that support a in considerations operating focus on question. commentary could the most but environment, a key bit I about any call Wondering difficult first bit more excited Thank if few are additional to appreciate if is of Charlie. momentum, would you, some already, comp the you biggest the could more to about that pricing, this despite mid-single addition for you the you that talk

Charlie Morrison

growing the with I those customers, and our this to growth. towards deployment XX summarize and sustainable, love to a spoken able that of to areas of are that database same our dollars drive against be marketing sales Well, transition about have Martec include and business building we're strong effort million alone that the those And I it. to X% think national then the long-term any be great next one-to-one levers we're that that levers platform two basis about would we've store efficient more that would bullish of to

by And puts our pull us be keys. the there, all the momentum putting you then think best-in-class. just year, in if in out $XXX brand. up those together of I two those the market, continued going spend of million we're well which So the the marketing are level This over dollars, to

we're increase way that brand, efforts, a to grow just our awareness higher of then ability the grow and excited to those frequency the engage about so customers effort. top continue And and line, marketing by of the one-to-one drive

Dennis Geiger

a is quick way about just think year. then And the you. clarification, a mentioned two of thank think consistent you comp fairly Great, point year to the and I

if two of consistency, your or meant So I wanted of through if the consistency on to basis Thank year. kind to relative you just meant confirm, a you three you. XXXX sort please year

Charlie Morrison

yes. Well,

going an be should cause that. that's continuity a it. So QX, a we're And natural, look I support drop. from will obviously, at same, to But in there number that over to roll comp three but two the still the year way do years exceptional big to

Operator

Bank. Mullan The Deutsche Brian of next question is from

Brian Mullan

you. Thank

evaluation China. some joint some just are with of there potential laying on elaborate a bit. been on just the progress in pandemic you color you in And any groundwork will of process call Last partners, the Totally mentioned you delayed Maybe the where be question market could you've Just lately. of great. understandable. the venture

Charlie Morrison

for international for brand, mean, markets of excited international, if the excited the getting they our we've quarter. about international probably markets. expansion and our potential pandemic. Good that X,XXX are really And our probably early I'm where XXXX a the Canada, new to We're for for this also second pipeline international, I first, the big on sites of here worst we've now international combine the morning. really in you those gotten back ready you through Thank in are deals. pipeline were our I'm late potential question about levels. chunk got open with domestic over to

us record our of time on for a UK, long Indonesia for strong development average are million $X as partners with volumes have well Singapore. as unit per development, been the our over proposed year continuing new cadence a We and in in their our in store, have coming restaurant Mexico partners

strong the very an So international is brand basis. on right now,

to of great and potential challenging, Europe, looking let opportunities well. continued more there of for the well. in China. looking as it in imagine in a there. great certainly off have at East, Asian is we also present at been hone in but still get expanding are not there. and to starting foot strategy lot us can really we to pipeline We're as lot China's expansion We're Middle gas on it's spending our effort the not market right Markets developing there. going believe has Western expansion, a a Our the But been Korea, as time I started only like radar, for also our we've but relationships growth you the

years and momentum getting our where for the that when on internationally the couple about excited very are back track horizons a ago. started pandemic business we're So had it

Brian Mullan

you Thanks. expect your maybe And do partner big you maybe to as longer agreement. development opportunity But could could in that go the over to just be see I a what unit there? how know market? a And you then term the term the speak Canada, would you pace, -- have longer because XXX follow up,

Charlie Morrison

is be Yes, the we restaurants brand. for it big a a XXX representation potential great market, think the could of

first what we of deals in say four, by talked sustain to development one from then three year followed our to slow is, through what have beyond international I they restaurants XX haven't up years, as three, and ramp pacing get about there. the usually that, and operation, will that X two, includes to restaurants a We a see

the UK with the they're case that been That's, same would the right to growing saw for consistent expect we Canada. now cadence, the that's and quickly. and So we be on fire

potential I if would of use is So there follow the what you that benchmark think we suit. as a UK think

Operator

is Setyan next The from Wedbush. question of Nick

Nick Setyan

you. Thank

the I think as as and the terms costs, early QX into you prices expect away, of that the ’XX pricing in wing why can’t half deflation QX? going of second given see we where you you've deflation in taken just are mentioned

Charlie Morrison

wing there. I, cost, deflation in potential I is just look, think wing you're Nick, Yes, make I think, deflation. I the about want sure talking

control lot for do factors outside that. that. drive a it -- of there's that there I has believe But of Yes. I think that our potential

Nick Setyan

improved Was Okay. terms Has And then last that comp I that just from of the we challenges? Does staffing know staffing bit. in continue of in a levels? about improve? to terms year, an there impact quite talked staffing the on

Charlie Morrison

which staff able number. it hiring seeing terms full relates a bit much the more, as exceeded filling where an roster we're restaurant Yes, up the we've seen, volume, associated we're the of That's more. achieving with to sizes small Today, Overall, to isolated, a rosters roster our staff is very like been is those the the it's having fill to But a restaurants, or levels. is in comp seen on be rate, and XX% anybody to very they and enough there had are very, XX% like done. small. little we are in about have trim challenge the we'd beauty numbers are rate Wingstop quite plenty market which of people restaurants we've higher, be and impact few not opened an hours, experiences getting the else to but wage we've seen that's inflation

the So that to going subside second quarter. issue I that into expect

Nick Setyan

we basis in When for ongoing know from royalties said you XX year. And there's just a I contracts think step about you uptick a the royalty still us benefit from last points back, up, I newer a the rate gave follow contributing. take

so just years of XXXX we XX end and quite obviously it the that can higher And that thigh be bps us international. what sort bps pick versus Could from royalty ‘XX. from have higher a impact the offsetting XXXX were few royalty XX terms once of ‘XX? higher, much rate, beyond like royalty That's look in golden moratorium to say

Charlie Morrison

It's that an half excellent the question wane say to I in the would I back year. expect do thigh this, size of impact the

earlier. all effective rate. the royalty But that increase so would that's into factored And I help that provided the number

do should out long So lot, clear be I just than want incentive Other does impact the based royalty and We some as that. we development, cadence royalty back existing It's seeing that, franchisees be have to drives impact not there. cadence increase a and on their near-term of term. some that we but X% it efficiency. that's within approach on

effect of in So impact the of hopefully answer but that that does half year. I you earlier down take the X,X thigh stop into mentioned the settling gives back the

Operator

of is The from next Andrew BMO. question Strelzik

Andrew Strelzik

normal certainly the could Thanks York morning. you and good stores. know a share some not the it's question. early But hoping for City New was I Hey, I learnings still environment. from taking

would company any share Thanks. So I there's you then differently, if ghost far, or don't you And and sites. two could be had the think there's the well. the or think in as typical formats split expected between between differences ‘XX know kitchens helpful openings, if traditional reason be I to nuances the the similar that stores, to for will that performance

Charlie Morrison

so to little visibility. side and advertise purely on location tend of start because ghost street in go when they a own a Yes, kitchens, the their especially slower on the than

very coming collectively would stores consistent are we restaurants, on with these However, new on what with see cadence board. a

to very earlier pattern the that or having Manhattan to get we AUV discussed $X Wingstop not yet performance opportunity historically to that's a follow far. and people is of in the the of think solid seeing great Manhattan they it city And so range Notably going growing, as we're with So an performance occupied happy good has as well. we're been. work, for Borough still be as back mid low of as the million we

will have the locations So kitchens. probably more we both. year, side a three XX% to ghost side But investment ghost little forward. go up all and skew pleased probably go ghost very than the at street sides pick a course But kitchen kitchens we'll XX% systems street of to toward street that complement with the I we're heavier right over as think now of the one we're on of a to

Operator

The Bartlet Jake Truist. is from next of question

Jake Bartlet

stores to up. a maybe quite of margins thanks maybe is Manhattan you first assuming restaurant the Great, how confirm And new for they My as last I'm question. follow specifically level how follow as bit, taking near the And but new are that wondering pressuring term. mature? stores the those a will the those I'm over a your that. on stores. And trend up much performance I expectation the is can what about margins for have one time

Charlie Morrison

the attention It's QX our Thank on the to in sure. improvement you falling QX, improvement important so to the the the pricing for and margins, that of has P&L, you thought off sequential understand the Urner impact question. associated expenses from Barry. we understand opportunity to improvement EBITDA you for a Okay, quarter-over-quarter seeing typically are it that with and cost better sequential not good we in was sales that especially shown are pre-opening in can the call because restaurant that given of to

to that will but about comment out some we're anything? I continue. will think and operating restaurants But Manhattan. on Alex newness you slight things want happy a term, yes, margin those mix of advantage Do of long drag, it. it's costs more costs it because to there. associated and a locations, and efficient costs over add and restaurants I great kind the street than expect operate. good kitchen a So reason side can I simply much the are to the let out location, term, of to the to we of a impact a in effective washes There be kitchens And complement having and with advantages less we Wingstop that of ghost it have also less side Those like build that, But things has associated of will those balance operating with two the a lot run a in near street think of why is out there two ghost time. that,

Alex Kaleida

that's our near restaurants we've with and think openings seen add challenge And brands uptick confidence confidence long XXXX. our in they we through you see. because year. I the development returns, quarters franchisees in No, restaurants about end of to steady Jake, term, inflation just this we'll in the opening see have But the that think the have record I think the just last points of can the -- in franchisees our

Jake Bartlet

up was quarter. looking actually last was got kind basis points, of at labor, I whereas XXX it Great. leverage

those we the that's new it because after But assuming I'm maybe of stores. can So touch call. on

Charlie Morrison

Yes.

didn't talk Let me related that labor. compensation and specific retention in is your meaning that. There number because address I about talk food. some that for to I COVID training that didn't real drove quick, expenses,

Omicron is with a noise little was and XXX there in bps that even difference out. important sequentially, the call that year-over-year think bit of onset, from I of basis So a there to it on so

Jake Bartlet

you and into stores to three then – I and this the incremental years. new open But amount the better new that the in commitments, gotten for you've commitments at that question to retained commitments. the years, if look the of the see the Great next is it's on lowest of few last nice you've backing commitments is

given there's how mean, you So or, new signed? any getting some that of you decrease of bit the in Because because of that little sort would commitment? of frame stores of new the a just think I in are terms maybe did environment it, delay in it incremental commitments, the confident

Charlie Morrison

question Well, to get on that is X,XXX opportunity to best to answer way now. I the we're bullish the very think restaurants

of within Last of XXX and net units, bigger we up. indicative that ago I was refill it to that's that the have the the size years the pipeline, the its more pipeline, of opened actually pipelines pipeline. open, to if feel really were the that is momentum compare than pipeline more with year So the back like you that those meaning a net in not absolute to year, you form of new is fill stores something prior out depleted

So see I concern whatsoever. as that a don't

Jake Bartlet

is this XXX, clarify, to just domestic. and this it, is Got all

this, that about this that year domestic talking we're the were deplete, So we stores XXX be domestically, right? than last opened about should year thinking so XXX

Charlie Morrison

Correct. Yes. correct. true. Yes, That's

Operator

Carril RBC. from Chris The is of next question

Chris Carril

transactional? it missed I if Mentioned have Apologies seen any you Hi. channels? [Indiscernible] -- cross

Charlie Morrison

really getting Yes. is Chris, phone only you try about Can We're again? syllable. your talk every We'll choppy. Hey, later. third

Sorry.

the to caller, next go Let's Peter Saleh.

Operator

Saleh of from BTIG. is The Peter next question

Peter Saleh

of you seeing And future? you to house me, ease any elaborate out Can Thank the that in opportunities Great, a And around Excellent. automation, phone pressures? Or I guys thanks. Charlie, the that? Can in maybe to automate some you automation these mentioned the any hear focus in something of of are the on orders. something in further labor Is is back you just some you. think okay? that ‘XX? kitchen. for mentioned the that

Charlie Morrison

anything believe peak back perfect for Yes, a we artificial but automation been the in, operate all five in of the ability said, in house. at the that perfected, number of And as in burden that which some about mean, my any with to that, a I restaurant substantial house people include there, calls the back and telephone would I of can the time, intercept to house, the suggested it flow testing apologies, phone automated That come restaurant. back I Wingstop that reduce if that did the few necessarily, engine it's four to the intelligence not. we the can we automate optimize once of and the we we've not relates did to the the still trying the as volumes as specific

that's a required. lot So of not it's labor

are So not to there be a that the satisfied a that any primary adjustments our have platform And quality fryer. we there efficiencies automation of true yet that or it's a important would expect. yield out big cooking to the of process is Also, that note deal. lot technologies

front we So the the I front greatest really, believe the can telephones the we of counter the at and it's think achieve efficiencies. more house, where

Peter Saleh

fact have when sense it Is push you you're I strategies. guys to harder you of Great. kind any pulse And Do trying you down, this get whole chain the supply just still now, of on whole think will on come your this bird bird that evaluating when on kind then mentioned more strategy, the XXXX? to starting this Or put is strategy? just on strategy? the prices are backburner in on

Charlie Morrison

allow supply terms with we on what a Yes, working long this. hard of experts for the we Wingstop have can keep generate to prices, we the long what more we're on in find other ourselves term sideline Right initiative. in lot outside term once understand chain. we ways deep of strategy of more we're to alleviate us specific We're pressing is that frankly, expect to going from now the clearly of control taking the very right control the spot wing drop not front efficiencies ability generate the a us, meantime, achieve right But Quite anything system we don't of than for for which think to to control. in that it's brand, continue the take again, we see and market. thing and more do to, on the on to to the dig in

Operator

Northcoast question The of Research. is Sanderson next from Jim

Jim Sanderson

Hey, change the declines wanted the understand to if wing I dig of cost chicken how to chicken sort will sensitivity margins, a half to improve And year, as any store back costs. us the could of type done in analysis bit you've help thanks to margins how of of bone-in for more store little the fluctuations. the that wings question.

Charlie Morrison

every is $X.XX is P&L. a chicken improvement that thumb bone-in for Yes, Barry rule price the XX in wings, to of the James, Urner of bps good about of

down. these And come so it very as prices moves quickly

Jim Sanderson

compared any, Did mix your that up. have follow to quick about versus think your I a prior still delivery mix you quarter? Is Also, of declined about XX%? percentage that digital What quarter. good. third sales Very sales slightly

Charlie Morrison

where correct. the comparable to is it in That quarter. It's prior was

Jim Sanderson

wingstop.com follow to the that or that quick marketplaces a placed up has similar just the and between is balance all? And orders through through also changed at

Charlie Morrison

presentation. ended. That Thank also is similar, for has concludes today's yes. you our now question-and-answer This conference session. attending The

may now disconnect. You

Wingstop (WING) 16 Feb 222021 Q4 Earnings call transcript