Wingstop Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
May 1, 2024

There are 11 speakers on the call.

Operator

Please note that this conference is being Call. On the call today are Michael Skipworth, President and Chief Executive Officer and Alex Kaleida, Senior Vice President and Chief Financial Officer.

Operator

I would now like to turn the conference over to Alex. Please go ahead.

Speaker 1

Thank you, and welcome to the fiscal Q1 2024 earnings conference call for Wingstop. Our results were published earlier this morning and are available on our Investor Relations website at ir. Wingstop.com. Our discussion today includes forward looking statements. These statements are not guarantees of future performance and are subject to numerous risks and uncertainties that could cause our actual results to differ materially from what we currently expect.

Speaker 1

Our SEC filings describe various risks that could affect our future operating results and financial condition. We use certain non GAAP financial measures that we believe can be useful in evaluating our performance. Presentation of such information should not be considered in isolation or as a substitute Lastly, for Lastly, for the Q and A session, we ask that you please each keep the one question and a follow-up to allow as many participants as possible to ask a question. With that, I would like to turn the call over to Michael.

Speaker 2

Thank you, Alex, and good morning, everyone. Thank you for joining our call. Our Q1 results showcase the continued strength and staying power of the strategies we are executing against and further solidify Wingstop's category of 1 positioning. Coming off of an industry leading year in 2023, the momentum in our business continued into our Q1 as we delivered 21.6% same store sales growth, which was almost entirely driven by transaction growth. We opened 65 net restaurants, a 14% growth rate.

Speaker 2

Company owned restaurant margins were 25.5%, highlighting the effectiveness of our supply chain strategy and our best in class unit economics. And we delivered adjusted EBITDA of $50,300,000 representing a 45% growth rate over the prior year. As a result of the strength in our business and the strong start to the year, we are increasing our 2024 comp guidance from mid single digits to low double digit same store sales growth. I am extremely proud of our team members, brand partners and supplier partners for delivering these results and truly humbled to be part of a brand that is experiencing such unprecedented growth. And yet we believe we have so much more growth in front of us.

Speaker 2

It's hard to believe that just a little over 2 years ago, we hosted an Investor Day and outlined our path to grow average unit volumes to $2,000,000 from roughly $1,500,000 at the time. At that Investor Day, we shared our multi year sales driving strategies of scaling brand awareness, expanding our delivery channel, menu innovation, leveraging our digital guest database to fuel data driven marketing and digital transformation. Fast forward to today, 2 years later, and our AUVs are now over $1,900,000 and quickly approaching our $2,000,000 target. And while our execution against these strategies has delivered 2 year stack same store sales growth in Q1 alone in excess of 40%, we believe we have meaningful growth in each of these strategies as we look ahead. It's an incredibly exciting time at Wingstop.

Speaker 2

As we scale toward our vision of becoming a top 10 global restaurant brand, we remain anchored in the foundation of our strategy, our people and our culture, what we refer to as the Wingstop Way. The pillars of our strategy have not changed over the years. Sustaining same store sales growth, maintaining best in class returns and accelerating growth. We are very pleased with our Q1 results and excited to be measuring record levels within our brand health metrics. Importantly, we continue to measure record levels in value and quality scores as our brand partners and team members are focused on operational excellence and delivering a great guest experience.

Speaker 2

And our disciplined approach to menu pricing is paying dividends. The consumer continues to prioritize quality and value when deciding how to spend their discretionary dollars. We believe that indulgent Wingstop occasion delivers upon both quality and value and has us uniquely positioned, which you can see in our Q1 results where our 21.6% comp was almost entirely driven by transaction growth. We are making great progress in closing the gap in awareness to top QSRs, but our opportunity remains meaningful. During the quarter, system wide sales grew by 37%, which delivers additional firepower in our advertising fund to invest meaningful dollars behind our opportunity to expand brand awareness.

Speaker 2

Our increased media investment is providing new opportunities such as advertising in the NFL playoffs and becoming the presenting sponsor for the NBA's Wednesday primetime matchup, just to highlight a couple of examples. Our highly effective media strategy focused on live sports combined with breakthrough creative is driving brand awareness. We are making Wingstop more top of mind and filling the top of the funnel with new guests. It's especially evident with the expansion of our digital database, which has surged to more than 40,000,000 users. In fact, Q1 marked our highest level of new guest acquisition on record.

Speaker 2

While we are seeing growth across all cohorts and income levels, these new guests we're bringing into the brand are demonstrating a higher frequency than our traditional guests. But yet, I believe we are just scratching the surface on the opportunity to leverage our digital database. As our restaurant AUVs expand, digital sales also continue to increase, now accounting for 68% of sales in Q1. This record level of digital sales comes at a time when we are rolling out our proprietary tech stack, My Wingstop, which we believe is an enabler to our aspirational goal of digitizing every transaction. My Wingstop has created a great deal of excitement with our brand partners and restaurant team members.

Speaker 2

I'm excited to report our rollout is on track to be completed by the end of the Q2 and early results are encouraging. The investments we are making in technology allows us to leverage our growing database and create an entirely new level of personalization with our guests, one that we believe over time will drive conversion, retention rates and frequency. We believe the brands that will win drive the most relevant and personalized message as well as create ease of accessibility for the consumer. The database we have amassed combined with the investments we have made in technology provide an incredible advantage for Wingstop. Our top line sales growth in AUV expansion has strengthened the Wingstop unit economics.

Speaker 2

Brand partner returns have also been bolstered by the progress we have made against our supply chain strategy, a strategy that is designed to minimize volatility in food costs and create greater predictability within restaurant margins. With an AUV of $1,900,000 and a low upfront investment of around $500,000 on average, our brand partners are enjoying industry leading unlevered cash on cash returns of more than 70%, which has fueled significant demand for growth. Our brand partners recognize how unique these returns are and are focused on accelerating growth, which is showing up in our development pipeline. We had a record 1400 restaurant commitments under development agreements at the start of 2024. Brand partners are eager to put more restaurants in the ground and reinvest back into Wingstop.

Speaker 2

Our vision is to scale Wingstop into a global brand. And I've shared in prior calls how we believe our international business is supercharged for growth. There is tremendous excitement across the globe as consumers have the opportunity to experience our flavor for the first time. Same store sales trends resemble that of the U. S.

Speaker 2

Business, double digit growth stacked on top of double digit growth in the prior year and primarily driven by transaction. Averaging across all markets outside of the U. S, we have nearly doubled our AUV since the start of 2022. In the U. K, AUVs now exceed $2,500,000 leading our U.

Speaker 2

K. Brand partner to accelerate growth and expand to more than 40 units. Our newest markets, Canada, Puerto Rico, Korea, are executing that U. K. Playbook and achieving record sales weeks.

Speaker 2

We believe our new markets are scaling awareness on a curve that draws parallel to the success we are experiencing in the UK. The strength we're having in our global development and visibility into our pipeline gives us the confidence to increase our 2024 outlook to a range of 275 to 295 net new restaurants. This implies a unit growth rate well above our 3 to 5 year target of 10% plus. The strength of the Wingstop business and our execution against our strategy that has proven staying power continue to position us on a path to achieve our vision of becoming a top 10 global restaurant brand. I truly believe at Wingstop we have the most talented team in the industry.

Speaker 2

I want to thank the entire Wingstop team, all of our team members in the restaurants and in our global support center, our supplier partners and our brand partners for their dedication to serving the world's flavor. With that, I'd like to turn the call over to Alex.

Speaker 1

Thank you, Michael. As you just heard, our first quarter results showcase the incredible momentum of the Wingstop brand and the continued strength and focus we have in executing our strategy. We delivered 36.8% growth in system wide sales in the Q1, resulting in our first $1,000,000,000 quarter. Our AUV is now above $1,900,000 and we have clear line of sight to moving past our target of $2,000,000 System wide sales growth is providing us with incredible fuel in our advertising fund to invest behind our proven strategy to sustain same store sales growth. Total revenue increased 34.1 percent to $145,800,000 versus the prior year.

Speaker 1

Royalty revenues, franchise fees and other revenue increased by $18,900,000 in Q1, driven primarily by 2 76 net franchise openings since the prior year comparable period and a 21.6% increase in domestic same store sales, primarily driven by transaction growth. Company owned restaurant sales totaled $28,500,000 in Q1, an increase of $5,500,000 primarily due to a 6.2% increase in company owned same store sales, driven primarily by transaction growth and 7 net new restaurants versus the prior year comparable period. Included in our company owned restaurant portfolio is the original Wingstop, an almost 30 year old restaurant that is one of the highest selling restaurants in the system and is comping similar to the rest of our company owned portfolio, a testament to the fact we haven't found a ceiling yet. Central to our strategy is maintaining our best in class returns. We are encouraged by the progress we have made in our supply chain strategy.

Speaker 1

As you have heard us say over the past few calls, creating predictability and minimizing volatility in our core commodity bone in wings, we believe this can create a flywheel for development. Working with our strategic supplier partners, we have been able to move the majority of our buy away from the spot market to provide our brand partners with more predictable food costs. Our target remains in the mid-thirty percent food cost range, which translates to those industry leading unlevered cash on cash returns of more than 70% that Michael referenced earlier. Q1 results in company owned restaurants showcased the effectiveness of our strategy. In an environment where the bone and wing spot market increased 92% versus the prior year comparable period, company owned restaurant food costs were in line with our target.

Speaker 1

Now moving on to SG and A. In the Q1, SG and A increased by $1,500,000 versus the prior year comparable period to a total of $25,200,000 driven by investments to support the long term growth of the business and an increase in performance based stock compensation and were partially offset by non recurring consulting fees in the prior year. Adjusted EBITDA, a non GAAP measure, was $50,300,000 during the quarter, an increase of 45.3% versus the prior year. This was on top of a quarter in 2023 that grew by nearly 60% in the prior year. Adjusting for non recurring items, we delivered adjusted earnings per diluted share, a non GAAP measure of $0.98 a 66% increase versus the prior year.

Speaker 1

Another core tenant in our strategy is to enhance shareholder returns. Our highly franchised asset light model continues to deliver strong free cash flows. We are maintaining a strong cash balance that stands at over $100,000,000 And since our IPO, we have delivered a total shareholder return of nearly 2,005 100%, which clearly demonstrates our commitment to our strategy and our Category 1 position. Following the completion of our $125,000,000 accelerated share repurchase program in the second half of twenty twenty three, we remain committed to enhancing shareholder returns through a combination of our remaining $125,000,000 share repurchase authorization a demonstration a demonstration of the strength of our model. This dividend totaling approximately $6,500,000 will be paid on June 7, 2024 to stockholders of record as of May 17, 2024.

Speaker 1

Now shifting to our outlook for 2024. Based on the strong start to the year, we are providing the following updates to our outlook. Domestic same store sales growth of low double digits for fiscal year 2024, previously mid single digit same store sales growth net new restaurants between 275 and 295, previously approximately 270 net new restaurants. For modeling purposes, we also want to highlight that we anticipate our pace of openings to be weighted more towards the second half of the year based on the visibility into our pipeline at this point in the year. SG and A guidance is estimated to be approximately $111,000,000 previously $108,000,000 including an approximately $20,000,000 of stock based compensation expense, which was previously $19,000,000 Our Q1 results are a testament to the resiliency of our strategies and focus we have to execute against our long term vision.

Speaker 1

These results would not have been possible without the extraordinary efforts by our global support center team members, restaurant team members, brand partners and supplier partners. We are excited by the start to the year and results that demonstrate the category of 1 we believe we operate in. With that, I'd like to now turn to Q and A. Operator, please open the line for questions.

Operator

The first question today comes from David Tarantino with Baird. Please go ahead.

Speaker 3

Hi, good morning and congratulations on such a strong start to the year. My question is on the brand with all the things that you're doing

Speaker 4

in advertising.

Speaker 3

With all the things that you're doing in advertising and otherwise. I just wanted to ask Michael, if you could some metrics on what types of new customers you are attracting, where the brand awareness is, with that cohort versus maybe where it was when you began this journey and how much room for improvement on the brand awareness do you still have relative referenced earlier? Thanks.

Speaker 5

Hey, David, good morning. Thank you for the question.

Speaker 2

I think this is one

Speaker 5

of those really exciting components to our growth story and really what frames up the runway we have in front of us. This is a group we've talked about over the past few years when we started on this journey. This group represented roughly call it 60% of all QSR occasions and they had never heard of or tried Wingstop. And so we've made a lot of exciting progress with that group. And this group is they're a little bit higher income.

Speaker 5

They tend to be Gen Z, millennial. They're less likely to have kids at home. They over index to or prefer to engage with brands digitally. They actually over index to boneless, which we really like, and they are demonstrating a higher level of frequency. And so we're pretty excited about, as we mentioned on our prepared remarks, Q1 marked yet another record quarter of new guest acquisition.

Speaker 5

And so we're making great progress there, but yet we have a huge runway in front of us. When we look at just over the last year, the progress we've made in brand awareness, we're talking about moving at a couple percentage points, David. And we look at ourselves compared to other more mature QSR brands that are out there and our runway or the gap or opportunity we have in front of us is double digits, high double digits. So a pretty meaningful opportunity that we have to continue to execute against and we're excited about the progress we've made, fueling growth in our ad fund, allowing us to invest those dollars. Fueling growth in our ad fund, allowing us to invest those dollars.

Speaker 5

And we are seeing the frequency uptick a little bit, but yet Wingstop still remains a pretty low frequency brand where we're still averaging about 3 times a quarter, once a month. So we see a big opportunity to impact frequency over time.

Speaker 3

Great. Thank you very much.

Speaker 5

Thank you.

Operator

The next question comes from Jeffrey Bernstein with Barclays. Please go ahead.

Speaker 4

Great. Thank you very much. You guys raised your full year 'twenty four guidance for the comp from mid single to low double digit. It seems like a big increase into what many have noted as a slowing macro. So I'm just wondering if you could talk a little bit about your level of confidence.

Speaker 4

I'm assuming 1st and foremost that's acknowledging that you've sustained momentum into April and haven't really seen a change in trajectory. But as long as that's the case, I'm just wondering within your business and the metrics you track, I mean, what are you looking for as a leading indicator of any kind of slowdown, whether it's mix shift changes, frequency of visitation, just trying to assess how you would anticipate a potential slowdown? And then I had one follow-up. Thank you.

Speaker 5

Hey, Jeff. Good morning. We have a lot of confidence in the strength of the business. And I think we have a lot of unique, very brand specific growth drivers that we're executing against. I mentioned the one around brand awareness, but there's several other elements to that strategy that we call that in our prepared remarks where we have meaningful runway against those opportunities in front of us.

Speaker 5

And so we feel confident in our ability to continue to execute our strategy and drive outsized growth. And I think it really Q1 really is a testament to that where you saw us deliver a pretty outsized comp to the rest of the industry that's talking about consumer pullback and a lot of concern and we delivered a 21.6% same store sales growth that was almost entirely driven by transaction growth, which I think just speaks to the underlying health of the brand and the effectiveness of the strategy. As it relates to our outlook for the balance of the year, we're confident in our ability to deliver on that. Obviously, we have considered in that guide, the macro backdrop, what you've heard a lot of other brands talk about around a cautious consumer. So we have contemplated that in our guide.

Speaker 4

Understood. And then just as a follow-up, in terms of investing in the business, obviously, with 20 plus percent comp growth and a lot of that flowing through earnings and cash flow, it would seem like now is the time to double down on investments to strengthen the system for many years to come. And it seems like you guys are all about technology and whatnot. I'm just wondering if you can maybe prioritize what you think are the best returning investment priorities, whether it's the tech stack still or further supply chain investments or AI or whatnot? Again, what would you say are the top priorities in terms of incremental investments you should be making when the cash flow is so strong?

Speaker 4

Thank

Speaker 2

you. Yes.

Speaker 5

No, thank you. And Jeff, I would say it's a little bit of yes, yes and yes. We think those are all areas that we have a meaningful opportunity to invest. Technology, 1, we feel like we're quite a bit ahead of a lot of others and it's more than just the investments we've made in our proprietary tech stack, My Wingstop that we're in the middle of rolling out, but we've invested over the years in our data and enriching our data that we believe really gives us a competitive advantage for how we place media, how we market and lean into hyper personalization, which Mywingsupp will be an enabler of that. So you'll see us continue to invest there.

Speaker 5

And then I think as it relates to the rest of the business, I think that's a little bit of the beauty of our model. We've been a brand when we see an opportunity to invest, we'll put our foot on the gas and position this brand for the long term and for growth. But the reality is we're an asset light model that's generating a lot of cash flow that puts us in a position to what we believe is deliver outsized shareholder returns.

Operator

The next question comes from Jim Solera with Stephens. Please go ahead.

Speaker 1

Hi, guys. Thanks for taking our question and congrats on a nice quarter. We noticed on the app, at least in my area, $0.70 boneless wings special to join kind of the boneless meal deal in the all in bundles. At a time when QSR competitors seem to be leaning more into value, can you just talk a little bit about more about the strategy there? And particularly on the boneless awareness, is that promotional way to help improve the boneless mix and get it closer to kind of that fifty-fifty parity?

Speaker 5

Hey, Jim. Good morning. I would say our $0.70 boneless promotion that you called out on Monday, Tuesday, that's actually something that's been around for I think as long as I've been with the brand, which is at least 10 years. So not necessarily anything new and that's a day where we can promote boneless wings and it's been something that's been successful for us over the years. But generally speaking, it's not a high mix promotion by any means.

Speaker 5

And I think you really hit on a point that highlights the uniqueness of Wingstop in our category of 1 positioning is with the combination of the quality and the operating excellence that we deliver within the four walls of the restaurant, as well as just the attention to detail that goes into the cook to order matron scratch nature of our products and our disciplined approach to pricing, we've seen our quality and value scores quarter after quarter measure record levels. And I think that's really just putting us in a unique position in this environment to where that indulgent Wingstop occasion is something that we're able to deliver on. And as you can see in our Q1 results, consumers are choosing Wingstop when they do decide to spend some of those discretionary dollars on dining out. And so we're going to continue to lean in and execute on quality and value. And I think one other thing I would point out is if we look back over the years, we've been a brand that's been able to demonstrate growth regardless of the macroeconomic backdrop.

Speaker 5

Obviously 2023 marking our 20th consecutive year of same store sales growth and then our start to 2024 puts us well on our way to our 21st.

Speaker 1

Great. That's super helpful. And then if I can ask just a follow-up on some of the throughput. Given that the average unit volume has scaled so rapidly, can you just talk about what's required from kind of a back of the house perspective to support that growth? Should we think about some of the stronger units as having kind of additional back of the house investments to get to that above $1,000,000 $3,000,000 AUV?

Speaker 5

Yes, Jim, I think you just need more chicken. The reality is we haven't found the ceiling. We don't have a throughput issue within our brand, which is pretty incredible. Alex called out in his prepared remarks that the oldest restaurant in the system that is one of the highest volumes restaurants in the system that is in our company owned portfolio is continuing to grow transactions and comp. And so I think it just highlights the capacity that we have within that efficient box.

Speaker 5

And then what we really like is the strength of our model with that low occupancy cost with our small footprint. You can only fit so many bodies in the back of the house. And so at some point, you start to gain some really nice leverage on the labor line as well, which I think you're seeing show up in the strength of our unit economics and the level of demand we have from brand partners for more growth.

Operator

The next question comes from Danilo Gargiulo with Bernstein. Please go ahead.

Speaker 6

Thank you. I actually wanted to double down exactly on this topic of throughput. Most of your peers are focusing on expediting the service, increasing the speed of service, improving the throughput. So I'm wondering, what is the average service time today at a typical Wingstop? And what kind of levers do you think you can pull to potentially like increase the speed of service without compromising on the quality of your wings?

Speaker 5

Good morning. Thank you for the question. And it's actually an area that we see as we look longer term, we see as an opportunity for Wingstop is you're right, we can get faster. There are some opportunities. We focused a lot of our technology investments over time in the back of the house that could improve speed.

Speaker 5

But obviously with our low frequency indulgent occasion, consumers are okay with the speed of service we offer today. But as we look out longer term and as we're bringing in these new guests into the brand, we do see an strategy could be an enabler to impacting frequency over time, which is a really big opportunity. But our focus right now is being consistent and we're extremely focused on just operating within excellence operating excellence within the four walls of the restaurant to deliver a great guest experience.

Speaker 6

Thank you. And a quick follow-up on the same vein. Another opportunity that you didn't mention today, but it was mentioned in the past is expanding the relevance of tenders. So can you elaborate how you're planning to do so? Is it different combination of sauces?

Speaker 6

Is it more on the consistency of the tenders? Is it about awareness? So what is the plan, the specific plans that you have in mind to expand the relevance of tenders?

Speaker 5

Yes, I think tenders are a lot like chicken sandwich where we believe we have a unique value proposition where we can not only deliver an incredible product, cook to order, but do it at a great price, which I think would continue to differentiate us. And that's the success we've had with Chicken Sandwich since the launch of Chicken Sandwich. And you're right, tenders are an opportunity for us down the road. I think it's one of those levers that we have that we can lean into and pull when the time is right, when we feel like it's the right thing for the business. And obviously that does feed into our supply chain strategy as we continue to use more of the bird.

Speaker 5

And so it fits in and works into that the execution of that strategy as well. And as we get closer to the execution around us continuing to try to drive tenders mix, which today is low single digits, a meaningful opportunity for us. We'll obviously we'll talk about that when the time is right.

Operator

The next question comes from Sara Senatore with Bank of America. Please go ahead.

Speaker 7

Thank you. I have a quick follow-up on an earlier question from Jeff and then a question of my own, if I may. The first is, I just want to take the other side of the low double digit comp side, because I think it basically implies sort of high single digit run rate for the rest of the year. So again, is that more just caution or is it something you're seeing? I know you mentioned being cognizant of the consumer, but I just wanted to kind of understand a little bit further the dynamics there.

Speaker 7

And then I'll have a question about advertising, please.

Speaker 5

Hey, Sarah. Good morning. I think our guide, I mentioned it to Jeff earlier. We remain confident in our strategy. Obviously, that had a lot to do with the guide that we did issue.

Speaker 5

Obviously, we're one of the few brands out there that's increasing their outlook for the year, much less increasing it to something like low double digits. And so we have been cautious and considered the macro backdrop. You can even layer on top of that the uncertainty around an election later this year. We have contemplated all of that and we feel really good about our ability to deliver on what we guided to and quite frankly when you stack it on our results from 2023, it's something we're pretty proud of.

Speaker 7

Got it. Thank you. And then I wanted to ask about, I guess, advertising in the sense of, I think there's sort of a view that and you touched on this a little bit, not only have you seen quantitatively a much bigger ad spend as your system grows, but this is like the 1st year I think where qualitatively you talked about like being in the NFL playoffs and lead sponsor of NBA Pride Time. And it just feels like, or there's, I think, a perception that these are this is like a step change in visibility and you may have to lap them. So I guess is that the right interpretation that this is that you sort of have an unprecedented step up in visibility this year because of what you were able to sponsor and then it will be a little bit slower going forward or do you feel like you still have opportunity to have other further step changes?

Speaker 5

Yes, Sarah, it's a great question. And I'll provide a little bit more context to the exciting opportunity we had to show up for the first time as a brand in the NFL playoffs, which was a big deal for us. And we get a ton of feedback around how many people see our spots and they see us everywhere, which is great. But the reality is in a weekend where there were 4 playoff games, we had one spot on 2 of them. And so we had 2 spots that weekend.

Speaker 5

So there's still a ton of runway for us, particularly when you look at the opportunity around brand awareness, but we are a long ways away from some point of saturation as it relates to our presence on live sports. I think what you see in a lot of the comments we hear is just the fact that our creative is breakthrough and it's getting people's attention and we're being rewarded for that and it's shown up in the results.

Operator

The next question comes from Brian Harbour with Morgan Stanley. Please go ahead.

Speaker 8

Yes. Hi, good morning. Michael, what's you mentioned you were sort of encouraged by the My Wingstop tech stack rollout. What's encouraged you? I mean, is it just gone faster than you expected?

Speaker 8

Are you seeing sort of some of the tangible benefits of that so far? I was just curious about that.

Speaker 5

Yes, I would say it's a few things, Brian. The excitement within our brand partner community, within the team members in the restaurant around the tool, the functionality that it provides them, the visibility, that's far exceeded our expectations and is really encouraging to hear. And then obviously it's early days in the launch, but the launch is on schedule. We're not ahead of schedule. We're executing our plan and doing it at a very high level.

Speaker 5

But we are seeing early results around things like conversion that are exciting for us. And so we're really encouraged by what we see. And we think, as I mentioned in the comments earlier, as you couple this with the investments we've made in our data, this is an enabler for us to continue to drive our digital business. And we believe over time can impact frequency. So we're pretty excited.

Speaker 8

Okay, makes sense. What your development outlook for this year, is that mainly is the delta mainly U. S? Or is any part of that international or any kind of new markets that we should look forward to there?

Speaker 5

Yes, I think it's the true and honest answer, it's everywhere. As you think about your model, I would consider kind of a similar ratio between international and U. S. As we had in 2023.

Operator

Next question comes from Andrew Charles with TD Cowen. Please go ahead.

Speaker 9

Great. Thank you. My first question is to follow-up on the My Wingstop platform. It's been a month since the start of the launch there. And Michael, you mentioned that just with the improved CRM efforts, it's something over time that can lead to greater guest frequency.

Speaker 9

I imagine it can also help ticket too, as you can mention people, think they can add to their basket. So I'm curious, what just needs to happen though between now and ultimately driving guest frequency? What's kind of the nuts and bolts of what needs to happen before you can start to realize those check-in frequency driving benefits?

Speaker 5

Hey, Andrew. Good morning. I would say the main thing is once we complete the rollout of the engine, if you will, that will enable us to turn on or launch the guest ordering app and mobile web experience. So that's obviously a big catalyst for us continuing to optimize the experience with My Wingstop.

Speaker 9

Okay. And then my follow-up is that just for the better than expected same store sales and net restaurant growth performance in 1Q as well as the outlook for this year, This is undoubtedly going to help you lead to an add fund surplus versus what you had budgeted at the end of the year. Is the plan to deploy this surplus in 2024? Would you rather hold on to this deployed in 2025 to help you lap just another robust year?

Speaker 5

Yes, I don't think we have any plans on around building a surplus. Obviously, I mentioned earlier to Sarah, there's just a ton of opportunity and headroom for us to continue to lean in to a strategy that's working. And I think that's exactly what you'll see us do. We have a we believe we have a ton of momentum in the brand and to take these ad dollars and put them to work to continue to expand AUVs and enhance brand partner unit economics, I think will just kind of further fuel the flywheel that we're creating here.

Operator

The last question today comes from Chris O'Cull with Stifel. Please go ahead.

Speaker 10

Thanks. Good morning, guys. I had a question about international markets. And I was just wondering, are there any international markets where development has slowed or you've run into issues? And also have current events altered the progress, Michael, of just signing new agreements?

Speaker 10

Then if you could maybe talk a little bit about the commitments. I know you talked about the overall commitments that you have from franchisees, but what about the commitments in the pipeline for international development? That'd be helpful.

Speaker 5

Hey, Chris. Good morning. I guess I would actually say it's quite the opposite. In that Raj and I had dinner a few weeks ago with our partner for Canada, just to highlight an example. And that conversation over dinner centered around how happy they were with the returns, with how the brand was resonating.

Speaker 5

And the conversation quickly moved from well past their current development agreement of, call it, 100 restaurants to Canada has a much bigger opportunity than that and how can we go faster. And so we're encouraged by how the brand is resonating around the globe. And I wouldn't say any of the geopolitical or any of the unrest that's around the globe right now is impacting our progress or the level of interest we have from parties that are looking to grow with the brand. And we actually believe we'll have some with the strength we've talked about over the quarters in the development pipeline, we believe we'll have a few new deals to talk about over the coming quarters that we're pretty excited about. That will just further grow and strengthen that pipeline of commitments.

Speaker 10

Are all these deals going to be direct franchise to franchise relationships with you or are you looking at master arrangements?

Speaker 5

Yes, I would say generally speaking, Chris, they're all direct. Obviously, I think use the UK as a great example where we have AUVs north of $2,500,000 There's no need for us to dilute our economics on that. And so we're looking to just be direct.

Operator

This concludes our question and answer session and concludes the conference call today. Thank you for attending today's presentation. You may now disconnect.

Remove Ads
Powered by Quartr
Earnings Conference Call
Iovance Biotherapeutics Q1 2024
00:00 / 00:00
Remove Ads