The Wendys Company: Reports Q2-2023 Results

Dublin / OH. (twc) The Wendy’s Company reported unaudited results for the second quarter ended July 02, 2023. «I am proud of the entire «Wendy’s« system for delivering another quarter of meaningful sales and profit growth alongside sustained progress against our strategic growth pillars,» President and CEO Todd Penegor said. «We continued to drive significant profit expansion, supported by strong same-restaurant sales momentum, resulting in an over 200 basis point year-over-year increase in U.S. Company-operated restaurant margin. During the quarter, our breakfast and late-night dayparts delivered outsized growth and we sustained our digital strength. We also continued to make progress against our development goal with 80 global restaurant openings year to date. With the results we delivered in the first half of the year and the significant runway remaining for each of our strategic growth pillars, I am confident we will deliver our short and long-term outlook, driving meaningful global growth in 2023 and beyond.»

Second Quarter 2023 Summary

Operational Highlights

	Q2-2022		Q2-2023		YTD-2022		YTD-2023
Systemwide Sales Growth
U.S.	3.5	%	6.1	%	3.0	%	7.3	%
International	22.7	%	12.7	%	21.1	%	16.6	%
Global	5.6	%	6.9	%	4.9	%	8.4	%
Same-Restaurant Sales Growth
U.S.	2.3	%	4.9	%	1.7	%	6.0	%
International	15.2	%	7.2	%	14.7	%	10.3	%
Global	3.7	%	5.1	%	3.1	%	6.5	%
Systemwide Sales In USD Millions
U.S.	3,001	$	3,185	$	5,713	$	6,129	$
International	419	$	461	$	779	$	879	$
Global	3,420	$	3,646	$	6,491	$	7,009	$
Restaurant Openings In Units
U.S. – Total / Net	29 / 14		19 / 4		74 / 45		39 / (1)
International – Total / Net	18 / 10		22 / 16		66 / 46		41 / 21
Global – Total / Net	47 / 24		41 / 20		140 / 91		80 / 20
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Global Reimaging Completion Percentage					75	%	82	%

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Financial Highlights (Unaudited)

	Q2-2022		Q2-2023		B/(W)		YTD-2022		YTD-2023		B/(W)
(In Millions Except Per Share Amounts)
Total Revenues	537.8	$	561.6	$	4.4	%	1,026.4	$	1,090.4	$	6.2	%
Adjusted Revenues	432.9	$	451.8	$	4.4	%	829.0	$	879.2	$	6.1	%
U.S. Company-Operated Restaurant Margin	15.0	%	17.3	%	2.3	%	13.6	%	16.0	%	2.4	%
General and Administrative Expense	61.6	$	62.7	$	(1.8)	%	124.0	$	125.0	$	(0.8)	%
Operating Profit	96.3	$	109.3	$	13.5	%	171.2	$	193.8	$	13.2	%
Reported Effective Tax Rate	26.4	%	24.4	%	2.0	%	26.4	%	25.9	%	0.6	%
Net Income	48.2	$	59.6	$	23.7	%	85.6	$	99.5	$	16.2	%
Adjusted Ebitda	132.9	$	144.5	$	8.7	%	239.8	$	270.1	$	12.6	%
Reported Diluted Earnings Per Share	0.22	$	0.28	$	27.3	%	0.39$	$	0.46	$	17.9	%
Adjusted Earnings Per Share	0.24	$	0.28	$	16.7	%	0.40	$	0.49	$	22.5	%
Cash Flows from Operations							98.2	$	141.5	$	44.1	%
Capital Expenditures							(30.9)	$	(30.2)	$	2.5	%
Free Cash Flow							95.2	$	133.5	$	40.2	%

Second Quarter Financial Highlights

Total Revenues: The increase in revenues resulted primarily from higher sales at Company-operated restaurants, an increase in franchise royalty revenue, and an increase in advertising funds revenue. These increases were primarily driven by higher same-restaurant sales.

U.S. Company-Operated Restaurant Margin: The increase in U.S. Company-operated restaurant margin was primarily the result of a higher average check. This increase was partially offset by higher labor costs, customer count declines, and higher commodity costs.

General and Administrative Expense: The increase in general and administrative expense was primarily driven by a higher incentive compensation accrual.

Operating Profit: The increase in operating profit resulted primarily from higher franchise royalty revenue and an increase in U.S. Company-operated restaurant margin.

Net Income: The increase in net income resulted primarily from an increase in operating profit and higher other income primarily driven by an increase in interest income. These increases were partially offset by a decrease in investment income.

Adjusted Ebitda: The increase in adjusted Ebitda resulted primarily from higher franchise royalty revenue and an increase in U.S. Company-operated restaurant margin.

Adjusted Earnings Per Share: The increase in adjusted earnings per share was driven by an increase in adjusted Ebitda and higher interest income. These increases were partially offset by a decrease in investment income.

Year to Date Free Cash Flow: The increase in free cash flow resulted primarily from higher net income adjusted for non-cash expenses and a decrease in payments for incentive compensation. These increases were partially offset by an increase in cash paid for income taxes.

Company Declares Quarterly Dividend: The Company announced today the declaration of its regular quarterly cash dividend of 25 cents per share. The dividend is payable on September 15, 2023, to shareholders of record as of September 1, 2023. The number of common shares outstanding as of August 2, 2023 was approximately 209.3 million.

Share Repurchases: The Company repurchased 2.2 million shares for USD 49.5 million in the second quarter of 2023. In the third quarter of 2023, the Company has repurchased 0.7 million shares for USD 15.2 million through August 02. As of August 02, approximately USD 396.6 million remains available under the Company’s existing share repurchase authorization that expires in February 2027.

2023 Outlook and Long-Term Outlook for 2024-2025

This release includes forward-looking projections for certain non-GAAP financial measures, including systemwide sales, adjusted Ebitda, adjusted earnings per share and free cash flow. The Company excludes certain expenses and benefits from adjusted Ebitda, adjusted earnings per share and free cash flow, such as the impact from our advertising funds, including the net change in the restricted operating assets and liabilities and any excess or deficit of advertising fund revenues over advertising fund expenses, impairment of long-lived assets, reorganization and realignment costs, system optimization gains, net, amortization of cloud computing arrangements, and the timing and resolution of certain tax matters. Due to the uncertainty and variability of the nature and amount of those expenses and benefits, the Company is unable without unreasonable effort to provide projections of net income, earnings per share or net cash provided by operating activities, or a reconciliation of those projected measures.

During 2023 the Company Continues to Expect:

• Global systemwide sales growth: 6 to 8 percent
• Adjusted Ebitda: USD 530 to USD 540 million
• Adjusted earnings per share: USD 0.95 to USD 1.00
• Cash flows from operations: USD 340 to USD 360 million
• Capital expenditures: USD 75 to USD 85 million
• Free cash flow: USD 265 to USD 275 million

Company Maintains Long-Term Outlook for 2024-2025:

• Systemwide sales growth: Mid-Single Digits
• Free cash flow growth: High-Single to Low-Double Digits