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Wingstop Inc. Reports Fiscal Second Quarter 2015 Financial Results

DALLAS, Aug. 6, 2015 (GLOBE NEWSWIRE) -- Wingstop Inc. (NASDAQ:WING) today announced fiscal second quarter 2015 financial results for the period ended June 27, 2015 and also issued annual guidance for fiscal year 2015.

Highlights for the fiscal second quarter 2015 compared to the fiscal second quarter 2014:

  • System-wide restaurant count increased 19.5% to 785, with 40 net franchised restaurant openings in the quarter
  • Domestic same store sales increased 9.0%
  • Total revenue increased 18.0% to $19.2 million
  • Net income was $584,000, or $0.02 per diluted share, compared to $2.5 million, or $0.10 per diluted share
  • Adjusted EBITDA*, a non-GAAP measure, increased 18.6% to $7.2 million
  • Adjusted net income*, a non-GAAP measure, increased 19.6% to $3.2 million
  • Adjusted earnings per pro-forma diluted shares*, a non-GAAP measure, was $0.11, an increase of 10.0% from the prior year

* Adjusted EBITDA, adjusted net income and adjusted earnings per pro-forma diluted shares are non-GAAP measures. Reconciliations of adjusted EBITDA, adjusted net income and adjusted pro-forma diluted EPS to the most directly comparable financial measures presented in accordance with GAAP, are set forth in the schedules accompanying this release. See "Non-GAAP Financial Measures."

President and Chief Executive Officer Charlie Morrison stated, "Wingstop enjoyed a strong quarter characterized by robust top-line growth as well as strong increases in adjusted EBITDA and adjusted net income. We have had a great start to the year with 73 net franchised restaurant openings. We are on track to deliver our 12th consecutive year of domestic same store sales growth with a 9.0% increase for the quarter. This demonstrates our ability to broaden our consumer appeal while driving repeat business and loyalty from our core demographic of millennials and families. We appreciate our team and franchise partners for their contributions to these outstanding achievements."

Morrison continued, "We believe Wingstop is well positioned to deliver sustainable and profitable growth, and that our brand has a significant expansion opportunity. We believe there is opportunity to grow up to 2,500 domestic restaurants longer-term through development in our existing markets as well as in new markets."

Initial Public Offering

On June 11, 2015, we priced the initial public offering of 6,670,000 shares of our common stock pursuant to a registration statement, file number 333-203891, that was declared effective by the SEC on June 11, 2015. Under the Registration Statement, (1) we registered, issued and sold an aggregate of 2,150,000 shares of our common stock at a price to the public of $19.00 per share for aggregate gross offering proceeds of $40.8 million and (2) we registered and the selling stockholders sold 4,520,000 shares of our common stock at a price to the public of $19.00 per share for aggregate gross offering proceeds of $85.9 million. After underwriter discounts and commissions and offering expenses of $3.2 million, we received net proceeds from the offering of approximately $34.8 million. We did not receive any proceeds from the sale of shares of common stock by the selling stockholders. A portion of these proceeds were used to prepay $32.0 million of the outstanding balance under our second amended and restated credit facility. The remainder of the proceeds were used to pay a one-time fee in consideration for the termination of our management agreement with Roark Capital Management, LLC (Roark Capital Management) and other transaction related expenses.

Key Operating Metrics
Thirteen Weeks Ended
June 27,
2015
June 28,
2014
Number of system-wide restaurants open at end of period 785 657
Number of domestic franchise restaurants open at end of period 714 612
Number of international franchise restaurants open at end of period 52 26
System-wide sales (in thousands) $ 202,793 $ 165,563
System-wide domestic same store sales growth 9.0% 15.3%
Adjusted EBITDA (in thousands) $ 7,247 $ 6,113

Fiscal Second Quarter 2015 Financial Results

Total revenue for fiscal second quarter 2015 increased 18.0% to $19.2 million from $16.3 million in the fiscal second quarter last year.

  • Royalty revenue and franchise fees increased 24.6% to $11.4 million from $9.2 million in the fiscal second quarter last year. This is primarily due to a 20.1% increase in the number of franchised restaurants and domestic same store sales growth of 9.0%.
  • Company-owned restaurant sales increased $0.7 million to $7.8 million from $7.1 million in the fiscal second quarter last year. The increase is the result of company-owned domestic same store sales growth of 9.5%.

Cost of sales increased 11.0% to $5.5 million from $5.0 million in the prior fiscal year's second quarter. As a percentage of company-owned restaurant sales, cost of sales increased 100 basis points to 70.5% from 69.5%. The increase was primarily driven by a 26% increase in the commodity cost of bone-in chicken wings, which was partially offset by lower labor costs and other restaurant operating expenses as a percentage of restaurant sales.

Selling, general & administrative expenses (SG&A) increased to $10.7 million from $5.6 million in the prior fiscal year's second quarter. The increase in SG&A was primarily due to a one-time fee of $3.3 million paid in consideration for the termination of our management agreement with Roark Capital Management, other one-time IPO expenses of $0.7 million, and headcount additions to support our future growth.

Net income in the fiscal second quarter 2015 was $584,000, or $0.02 per diluted share, compared to net income of $2.5 million, or $0.10 per diluted share in the prior fiscal year's second quarter.

Adjusted net income increased 19.6% to $3.2 million, or $0.11 per pro-forma diluted share, compared to $2.7 million, or $0.10 per pro-forma diluted share, in the prior fiscal year's second quarter. A reconciliation between net income and adjusted net income as well as diluted shares to pro-forma diluted shares is included in the accompanying financial data.

Restaurant Development

At June 27, 2015, there were 785 Wingstop restaurants system-wide. This included 733 restaurants in the United States, of which 714 are franchised restaurants and 19 are company-owned. Our international footprint consisted of 52 franchised restaurants across six countries. During the second quarter, there were 41 system-wide Wingstop openings, including 34 domestic franchised and 7 international franchised locations.

Fiscal Year 2015 Financial Outlook

Based on current information, we are providing the following guidance for fiscal year 2015, which ends on December 26, 2015:

  • 120-130 net system-wide franchise restaurant openings
  • Domestic same store sales increase of 6.5% to 7.0%
  • Total revenue between $75.5 million and $76.0 million
  • SG&A expenses between $33.0 million and $34.0 million (includes $3.3 million in management agreement termination fee, $0.2 million in management fees and $2.0 million in transaction costs related to March 2015 refinancing our credit agreement and our initial public offering)
  • Adjusted EBITDA, a non-GAAP measure, between $26.8 million and $27.3 million
  • Adjusted net income, a non-GAAP measure, between $11.8 million and $12.1 million
  • Pro-forma diluted share count, a non-GAAP measure, of approximately 28.8 million

The following definitions apply to these terms as used in this release:

Same store sales reflects the change in year-over-year sales for the comparable restaurant base. We define the comparable restaurant base to include those restaurants open for at least 52 full weeks. This measure highlights the performance of existing restaurants, while excluding the impact of new restaurant openings and closures.

System-wide sales represents net sales for all of our company-owned and franchised restaurants, as reported by franchisees.

Adjusted EBITDA is defined as net income before interest expense, net, income tax expense, and depreciation and amortization (EBITDA) further adjusted for management fees and expense reimbursement, transaction costs, gains and losses on the disposal of assets, stock-based compensation expense and earn-out obligation. We caution investors that amounts presented in accordance with our definitions of EBITDA and Adjusted EBITDA may not be comparable to similar measures disclosed by our competitors, because not all companies and analysts calculate EBITDA and Adjusted EBITDA in the same manner. There were no gains and losses on the disposal of assets or earn-out obligations during the fiscal quarters ended June 27, 2015 and June 28, 2014.

Adjusted net income is defined as net income plus management fees and transactions costs minus related adjustments to income tax expense.

Pro-forma diluted share count gives historical effect to the additional 2,150,000 shares of our common stock issued in the IPO as if all shares had been outstanding as of December 28, 2013.

Adjusted earnings per pro-forma diluted shares is defined as adjusted net income divided by pro-forma diluted share count.

Conference Call & Webcast

Charlie Morrison, President and Chief Executive Officer, and Mike Mravle, Chief Financial Officer will host a conference call today to discuss fiscal second quarter 2015 financial results at 5:00 PM Eastern Time. The conference call can be accessed live over the phone by dialing (855) 327-6837 or for international callers by dialing (631) 982-4565. A replay will be available after the call and can be accessed by dialing (877) 870-5176 or for international callers by dialing (858) 384-5517; the passcode is 115255. The replay will be available until August 13, 2015.

The conference call will also be webcast live and later archived on the investor relations section of Wingtop's corporate website at ir.wingstop.com under the 'News & Events' section.

About Wingstop

Founded in 1994 and headquartered in Dallas, Texas, Wingstop Inc. (NASDAQ:WING) operates and franchises 785 restaurants across the United States, Mexico, Russia, Singapore, the Philippines, Indonesia, and the United Arab Emirates as of the end of the second quarter 2015. The Wing Experts' menu features classic and boneless wings with 11 bold, distinctive flavors including Original Hot, Cajun, Atomic, Mild, Teriyaki, Lemon Pepper, Hawaiian, Garlic Parmesan, Hickory Smoked BBQ, Louisiana Rub and Mango Habanero. Wingstop's wings are always cooked to order, sauced and tossed and served with a variety of house-made sides including Wingstop's hand-cut, seasoned fries. For more information visit www.wingstop.com or www.wingstopfranchise.com. Become a fan of Wingstop by visiting facebook.com/Wingstop or twitter.com/wingstop.

Non-GAAP Financial Measures

To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use non-GAAP financial measures including those indicated above. By providing non-GAAP financial measures, together with a reconciliation to the most comparable GAAP measure, we believe we are enhancing investors' understanding of our business and our results of operations, as well as assisting investors in evaluating how well we are executing our strategic initiatives. These measures are not intended to be considered in isolation or as substitutes for, or superior to, financial measures prepared and presented in accordance with GAAP. The non-GAAP measures used in this press release may be different from the measures used by other companies. A reconciliation of each measure to the most directly comparable GAAP measure is available in this news release. In addition, the Current Report on Form 8-K furnished to the SEC concurrent with the issuance of this press release includes a more detailed description of each of these non-GAAP financial measures, together with a discussion of the usefulness and purpose of such measures.

Forward-looking Information

Certain statements contained in this news release, as well as other information provided from time to time by Wingstop Inc. or its employees, may contain forward looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward looking statements. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as "guidance," "anticipate," "estimate," "expect," "forecast," "project," "plan," "intend," "believe," "confident," "may," "should," "can have," "likely," "future" and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. Examples of forward-looking statements in this news release include our full year 2015 outlook for new franchise restaurant openings, domestic same store sales growth, total revenue, SG&A costs, adjusted EBITDA, adjusted net income and our pro-forma diluted share count, as well as our anticipated potential domestic restaurant expansion opportunity and positioning to deliver sustainable and profitable growth.

Any such forward looking statements are not guarantees of performance or results, and involve risks, uncertainties (some of which are beyond the Company's control) and assumptions. Although we believe any forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect our actual financial results and cause them to differ materially from those anticipated in any forward-looking statements. Please refer to the risk factors discussed in our Registration Statement on Form S-1, as amended, which can be found at the SEC's website www.sec.gov. The discussion of these risks is specifically incorporated by reference into this news release.

Any forward-looking statement made by Wingstop Inc. in this press release speaks only as of the date on which it is made. We undertake no obligation to update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

WINGSTOP INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(amounts in thousands, except share and per share amounts)
June 27,
2015
December 27,
2014
(Unaudited)
Assets
Current assets
Cash and cash equivalents $ 4,875 $ 9,723
Accounts receivable, net 2,577 2,380
Prepaid expenses and other current assets 4,988 2,848
Advertising fund assets, restricted 3,805 3,170
Total current assets 16,245 18,121
Property and equipment, net 3,328 3,622
Goodwill 45,128 45,128
Trademarks 32,700 32,700
Customer relationships, net 18,982 19,668
Other non-current assets 996 997
Total assets $ 117,379 $ 120,236
Liabilities and stockholders' deficit
Current liabilities
Accounts payable 1,193 1,502
Other current liabilities 5,220 6,895
Current portion of debt -- 4,869
Advertising fund liabilities, restricted 3,805 3,170
Total current liabilities 10,218 16,436
Long-term debt, net of current 100,500 88,852
Deferred revenues, net of current 7,333 7,159
Deferred income tax liabilities, net 14,804 15,250
Other non-current liabilities 1,971 1,533
Total liabilities 134,826 129,230
Stockholders' deficit
Common stock, $0.01 par value; 100,000,000 shares authorized; 28,581,182 and 26,101,755 shares issued and outstanding as of June 27, 2015 and December 27, 2014, respectively 286 261
Additional paid-in-capital 36,064 2,313
Accumulated deficit (53,797) (11,568)
Total stockholders' deficit (17,447) (8,994)
Total liabilities and stockholders' deficit $ 117,379 $ 120,236
WINGSTOP INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
(amounts in thousands, except per share data)
Thirteen Weeks Ended
June 27,
2015
June 28,
2014
Revenue
Royalty revenue and franchise fees $ 11,400 $ 9,151
Company-owned restaurant sales 7,832 7,150
Total revenue 19,232 16,301
Costs and expenses
Cost of sales (*) 5,516 4,968
Selling, general and administrative 10,665 5,562
Depreciation and amortization 645 727
Total costs and expenses 16,826 11,257
Operating income 2,406 5,044
Interest expense, net 1,177 979
Other (income) expense, net 257 73
Income before income tax expense 972 3,992
Income tax expense 388 1,484
Net income $ 584 $ 2,508
Earnings per share
Basic $ 0.02 $ 0.10
Diluted $ 0.02 $ 0.10
Weighted average shares outstanding
Basic 26,689 25,809
Diluted 26,970 26,117
(*) exclusive of depreciation and amortization, shown separately
WINGSTOP INC. AND SUBSIDIARIES
Unaudited Supplemental Information
Thirteen Weeks Ended
June 27,
2015
June 28,
2014
Domestic Franchised Activity:
Beginning of period 681 587
Openings 34 26
Closures and relocations (1) (1)
Restaurants end of period 714 612
Domestic Company-Owned Activity:
Beginning of period 19 19
Openings -- --
Closures and relocations -- --
Restaurants end of period 19 19
Total Domestic Restaurants 733 631
International Franchised Activity:
Beginning of period 45 21
Openings 7 5
Closures and relocations -- --
Restaurants end of period 52 26
Total System-wide Restaurants 785 657
WINGSTOP INC. AND SUBSIDIARIES
Non-GAAP Financial Measures - EBITDA and Adjusted EBITDA
(Unaudited)
(in thousands)
Thirteen Weeks Ended
June 27,
2015
June 28,
2014
Net income $ 584 $ 2,508
Interest expense, net 1,177 979
Income tax expense 388 1,484
Depreciation and amortization 645 727
EBITDA $ 2,794 $ 5,698
Additional adjustments
Management agreement termination fee (a) 3,297 --
Management fees (b) 120 113
Transaction costs (c) 883 195
Stock-based compensation expense (d) 153 107
Adjusted EBITDA $ 7,247 $ 6,113
(a) Represents a one-time fee of $3.3 million that was paid in consideration for the termination of our management agreement with Roark Capital Management during the thirteen weeks ended June 27, 2015.
(b) Includes management fees and other out-of-pocket expenses paid to Roark Capital Management.
(c) Represents costs and expenses related to refinancings of our credit agreement and our initial public offering; all transaction costs are included in SG&A with the exception of $172,000 that is included in Other (income) expense, net.
(d) Includes non-cash, stock-based compensation.
WINGSTOP INC. AND SUBSIDIARIES
Non-GAAP Financial Measures - Adjusted Net Income, Pro-forma Diluted Shares and Adjusted EPS
(Unaudited)
(in thousands, except per share data)
Thirteen Weeks Ended
June 27,
2015
June 28,
2014
Numerator:
Net income $ 584 $ 2,508
Adjustments
Management agreement termination fee (a) 3,297 --
Management fees (b) 120 113
Transaction costs (c) 883 195
Tax effect of adjustments (d) (1,659) (120)
Adjusted net income $ 3,225 $ 2,696
Denominator:
Weighted-average shares outstanding - diluted 26,970 26,117
Adjustments
Assumed issuance of shares in connection with the IPO (e) 1,772 2,150
Pro-forma weighted-average shares outstanding - diluted 28,742 28,267
Adjusted earnings per pro-forma diluted shares $ 0.11 $ 0.10
(a) Represents a one-time fee of $3.3 million that was paid in consideration for the termination of our management agreement with Roark Capital Management during the thirteen weeks ended June 27, 2015.
(b) Includes management fees and other out-of-pocket expenses paid to Roark Capital Management.
(c) Represents costs and expenses related to refinancings of our credit agreement and our initial public offering; all transaction costs are included in SG&A with the exception of $172,000 that is included in Other (income) expense, net.
(d) Represents the tax effect of the aforementioned adjustments to reflect corporate income taxes at assumed effective tax rates of 38.6% and 39.0% for the thirteen weeks ended June 27, 2015 and June 28, 2014, respectively, which includes provisions for U.S. federal income taxes, and assumes the respective statutory rates for applicable state and local jurisdictions.
(e) Adjustment to give effect to shares issued in the Company's initial public offering as if the shares were issued and outstanding as of December 28, 2013.

CONTACT: Media Contact Kristina Jorge 646-277-1234 wingstop@icrinc.com Investor Contact Raphael Gross 203-682-8253 raphael.gross@icrinc.com

Source:Wingstop