On October 30, 2024, Wingstop Inc (WING, Financial) released its 8-K filing for the fiscal third quarter ended September 28, 2024. The company reported a significant increase in revenue and net income, showcasing robust growth and expansion in its operations.
Company Overview
Founded in 1994 in Garland, Texas, Wingstop Inc (WING, Financial) is a restaurant operator specializing in indulgent bone-in and boneless chicken wings, chicken tenders, fries, and chicken sandwiches. With over 2,200 global stores by the end of 2023, Wingstop ranks as the 31st-largest restaurant brand in the US by system sales. Operating on a 98% franchised model, the company primarily generates revenue from franchise royalties and advertising fees.
Financial Performance and Achievements
Wingstop Inc (WING, Financial) reported a 38.8% increase in total revenue to $162.5 million, surpassing the analyst estimate of $161.54 million. Net income rose by 31.9% to $25.7 million, or $0.88 per diluted share, below the estimated earnings per share of $0.95. The company's system-wide sales surged by 39.4% to $1.2 billion, driven by a 20.9% increase in domestic same-store sales.
Operational Highlights
Wingstop achieved a record 106 net new openings during the quarter, reflecting a 17.1% growth in system-wide restaurants. The domestic average unit volume (AUV) increased to $2.1 million, and digital sales accounted for 69.0% of system-wide sales. These metrics underscore the company's successful expansion strategy and digital transformation efforts.
Income Statement and Key Metrics
The company's revenue growth was fueled by a $21.2 million increase in royalty revenue, franchise fees, and other income, primarily due to domestic same-store sales growth and net new franchise development. Advertising fees rose by $16.8 million, reflecting a 39.4% increase in system-wide sales and a higher national advertising fund contribution rate.
| Metric | Q3 2024 | Q3 2023 |
|---|---|---|
| Total Revenue | $162.5 million | $117.1 million |
| Net Income | $25.7 million | $19.5 million |
| Adjusted EBITDA | $53.7 million | $38.5 million |
Challenges and Cost Management
Despite the positive results, Wingstop faced challenges with increased costs. The cost of sales rose to $24.4 million, driven by higher food, beverage, and packaging costs, particularly for bone-in chicken wings. Selling, general, and administrative expenses increased by $9.2 million due to higher performance-based stock compensation and incentive expenses.
Our third quarter results demonstrated the staying power of our multi-year strategies we are executing against, delivering 20.9% same store sales growth, primarily driven by transaction growth," said Michael Skipworth, President and Chief Executive Officer.
Balance Sheet and Cash Flow
Wingstop's balance sheet showed total assets of $484.8 million, with cash and cash equivalents of $84 million. The company maintained a strong cash flow, enabling it to declare a quarterly dividend of $0.27 per share and repurchase 93,617 shares of its common stock during the quarter.
Analysis and Outlook
Wingstop's impressive growth in revenue and store openings highlights its effective expansion strategy and strong market position. The company's focus on digital sales and franchise development continues to drive its performance. However, rising costs, particularly in food and packaging, may pose challenges in maintaining profit margins. Overall, Wingstop's strategic initiatives and robust financial results position it well for future growth in the competitive restaurant industry.
Explore the complete 8-K earnings release (here) from Wingstop Inc for further details.
