THE WENDY'S COMPANY REPORTS FOURTH QUARTER AND FULL YEAR 2023 RESULTS
- 13th consecutive year of global same-restaurant sales growth
- Opened nearly 250 new restaurants worldwide
- Accelerated digital sales
- Expanded U.S. Company-operated restaurant margin despite inflationary headwinds
- Investments planned to drive global growth and shareholder value
- None.
Insights
The reported financial results from The Wendy's Company indicate a robust performance in terms of systemwide sales growth and net income, which are key metrics closely monitored by investors. The company's 13th consecutive year of global same-restaurant sales growth suggests a resilient business model and effective strategic initiatives. Notably, the acceleration of digital sales and the opening of new restaurants could imply a strong competitive position and expansion strategy.
From a financial standpoint, the increase in U.S. Company-operated restaurant margin back to pre-COVID levels, despite inflationary pressures, signifies effective cost management and pricing strategies. The reported net income increase of 15.2% for the full year and the 13.6% for the fourth quarter, coupled with a rise in adjusted EBITDA, are indicative of operational efficiency and could signal positive future performance. However, the slight decline in adjusted earnings per share in the fourth quarter may warrant analysis of amortization costs and tax rate impacts.
The declaration of a regular quarterly cash dividend and share repurchases reflect a shareholder-friendly capital allocation policy, which might be attractive to investors looking for income and a sign of management's confidence in the company's financial health. The announced investments in breakfast advertising, digital growth and digital menu boards are strategic moves that could enhance customer experience and drive future sales growth.
The expansion of The Wendy's Company's digital capabilities and the rollout of digital menu boards are particularly noteworthy as the fast-food industry increasingly shifts towards technology integration to enhance customer engagement and streamline operations. The company's focus on personalized marketing capabilities through mobile app enhancements could lead to increased customer loyalty and higher sales per customer.
Additionally, the strategic investment in breakfast advertising in the U.S. and Canada reflects a targeted approach to capture more of the breakfast market share, a competitive and high-margin daypart in the quick-service restaurant (QSR) industry. This initiative could potentially increase same-restaurant sales and average check sizes, contributing to the overall growth trajectory of the company.
The international systemwide sales growth outpacing U.S. growth suggests that Wendy's international markets could be a significant growth driver. The notable net increase in restaurant openings internationally indicates successful market penetration and brand acceptance, which is crucial for long-term global expansion.
The context of extreme inflationary headwinds mentioned in the report is a critical factor affecting the entire restaurant industry. Wendy's ability to expand its U.S. Company-operated restaurant margin in such an economic environment may demonstrate strong pricing power and operational resilience. This is particularly important as consumer spending can be sensitive to price changes during inflationary periods.
The company's forward-looking projections, including systemwide sales growth and free cash flow, suggest optimism about its future performance despite economic uncertainties. These projections are important indicators for investors as they assess the potential for sustainable growth and returns. The planned capital expenditures also highlight the company's commitment to reinvesting in its business, which could lead to further efficiency gains and revenue growth in the long run.
It is important to note that the economic landscape, including consumer behavior and input costs, will continue to play a significant role in the company's ability to achieve its projected growth and profitability targets. The fast-food industry is highly competitive and Wendy's strategic investments and operational performance will need to adapt to changing economic conditions.
"The Wendy's® system delivered strong sales, profit, and cash flow growth in 2023, all supported by progress on our strategic growth pillars," President and Chief Executive Officer Kirk Tanner said. "2023 marked the brand's 13th consecutive year of global same-restaurant sales growth, highlighting the system's consistent execution and strong franchisee alignment as the team continued to grow the beloved Wendy's brand. The team also significantly accelerated digital sales, opened nearly 250 new restaurants across the globe, and expanded
"I am excited to begin this next chapter for Wendy's with new plans and investments to accelerate our global growth, deliver significant restaurant margin expansion, and drive long-term shareholder value. I am looking forward to working with the team to deliver on the significant opportunities ahead."
Fourth Quarter and Full Year 2023 Summary
See "Disclosure Regarding Non-GAAP Financial Measures" and the reconciliation tables that accompany this release for a discussion and reconciliation of certain non-GAAP financial measures included in this release.
Operational Highlights | Fourth Quarter | Full Year | |||||
2022 | 2023 | 2022 | 2023 | ||||
Systemwide Sales Growth(1) | |||||||
7.2 % | 2.3 % | 5.3 % | 5.1 % | ||||
International(2) | 16.8 % | 9.7 % | 19.2 % | 14.1 % | |||
Global | 8.4 % | 3.2 % | 6.8 % | 6.1 % | |||
Same-Restaurant Sales Growth(1) | |||||||
5.9 % | 0.9 % | 3.9 % | 3.7 % | ||||
International(2) | 9.9 % | 4.3 % | 12.4 % | 8.1 % | |||
Global | 6.4 % | 1.3 % | 4.9 % | 4.3 % | |||
Systemwide Sales (In US$ Millions)(3) | |||||||
International(2) | |||||||
Global | |||||||
Restaurant Openings | |||||||
38 / (3) | 31 / 20 | 139 / 56 | 97 / 36 | ||||
International - Total / Net | 40 / 18 | 65 / 54 | 137 / 90 | 151 / 109 | |||
Global - Total / Net | 78 / 15 | 96 / 74 | 276 / 146 | 248 / 145 | |||
Global Reimaging Completion Percentage | 79 % | 86 % | |||||
(1) Systemwide sales growth and same-restaurant sales growth are calculated on a constant currency basis and include sales | |||||||
(2) Excludes | |||||||
(3) Systemwide sales include sales at both Company-operated and franchise restaurants. | |||||||
Financial Highlights | Fourth Quarter | Full Year | |||||||||
2022 | 2023 | B / (W) | 2022 | 2023 | B / (W) | ||||||
($ In Millions Except Per Share Amounts) | (Unaudited) | (Unaudited) | |||||||||
Total Revenues | $ 536.5 | $ 540.7 | 0.8 % | 4.1 % | |||||||
Adjusted Revenues(1) | $ 431.3 | $ 431.7 | 0.1 % | 3.7 % | |||||||
15.1 % | 13.5 % | (1.6) % | 14.3 % | 15.3 % | 1.0 % | ||||||
General and Administrative Expense | $ 68.5 | $ 65.7 | 4.1 % | $ 255.0 | $ 250.0 | 2.0 % | |||||
Operating Profit | $ 84.0 | $ 86.6 | 3.1 % | $ 353.3 | $ 382.0 | 8.1 % | |||||
Reported Effective Tax Rate | 29.0 % | 30.2 % | (1.2) % | 27.2 % | 26.8 % | 0.4 % | |||||
Net Income | $ 41.3 | $ 46.9 | 13.6 % | $ 177.4 | $ 204.4 | 15.2 % | |||||
Adjusted EBITDA | $ 123.5 | $ 126.6 | 2.5 % | $ 497.8 | $ 535.9 | 7.7 % | |||||
Reported Diluted Earnings Per Share | $ 0.19 | $ 0.23 | 21.1 % | $ 0.82 | $ 0.97 | 18.3 % | |||||
Adjusted Earnings Per Share | $ 0.22 | $ 0.21 | (4.5) % | $ 0.86 | $ 0.97 | 12.8 % | |||||
Cash Flows from Operations | $ 259.9 | $ 345.4 | 32.9 % | ||||||||
Capital Expenditures | $ (85.5) | $ (85.0) | 0.6 % | ||||||||
Free Cash Flow(2) | $ 213.1 | $ 274.3 | 28.7 % | ||||||||
(1) Total revenues less advertising funds revenue. | |||||||||||
(2) Cash flows from operations minus capital expenditures and the impact of our advertising funds. | |||||||||||
Fourth Quarter Financial Highlights
Total Revenues
The increase in revenues resulted primarily from an increase in advertising funds revenue and an increase in franchise royalty revenue, both primarily driven by higher same-restaurant sales. These increases were partially offset by lower franchise rental income primarily driven by fewer lease assignments.
The decrease in
General and Administrative Expense
The decrease in general and administrative expense was primarily driven by a decrease in employee compensation and benefits.
Operating Profit
The increase in operating profit resulted primarily from higher franchise royalty revenue, a decrease in the Company's incremental investment in breakfast advertising, and lower general and administrative expense. These were partially offset by a decrease in
Net Income
The increase in net income resulted primarily from a gain on early extinguishment of debt related to the repurchase of securitized debt in the fourth quarter of 2023 and an increase in operating profit.
Adjusted EBITDA
The increase in adjusted EBITDA resulted primarily from higher franchise royalty revenue, a decrease in the Company's incremental investment in breakfast advertising, and lower general and administrative expense. These were partially offset by a decrease in
Adjusted Earnings Per Share
The decrease in adjusted earnings per share was driven by higher amortization of cloud computing arrangement costs and a higher tax rate. These were partially offset by an increase in adjusted EBITDA.
Full Year 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.
The increase in
General and Administrative Expense
The decrease in general and administrative expense was primarily driven by a decrease in employee compensation and benefits, a decrease in stock compensation, and lower professional fees resulting primarily from the completion of the Company's ERP implementation. These were partially offset by a higher incentive compensation accrual.
Operating Profit
The increase in operating profit resulted primarily from higher franchise royalty revenue, a decrease in the Company's incremental investment in breakfast advertising, an increase in
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, a decrease in the Company's incremental investment in breakfast advertising, and an increase in
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 and higher amortization of cloud computing arrangement costs.
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.
Company Declares Quarterly Dividend
The Company announced today the declaration of its regular quarterly cash dividend of
Share Repurchases
The Company repurchased 2.4 million shares for
Company Announces Investments to Drive Accelerated Global Growth
The Company announced today investments that are expected to accelerate global growth, deliver significant restaurant margin expansion, and drive long-term shareholder value. The Company plans to invest:
- Approximately
$55 million U.S. andCanada split evenly over the next two years; - Approximately
$15 million - Approximately
$30 million U.S. Company-operated restaurants by the end of 2025 and digital menu board enhancements for the global system over the next two years.
2024 Outlook
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, gain on early extinguishment of debt, net, 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 2024 the Company Expects:
- Global systemwide sales growth: 5 to 6 percent
- Adjusted EBITDA:
$535 $545 million - Adjusted earnings per share:
$0.98 $1.02 - Cash flows from operations:
$370 $390 million - Capital expenditures:
$90 $100 million - Free cash flow:
$280 $290 million
Conference Call and Webcast Scheduled for 8:30 a.m. Today, February 15
The Company will host a conference call on Thursday, February 15 at 8:30 a.m. ET, with a simultaneous webcast from the Company's Investor Relations website at www.irwendys.com. The related presentation materials will also be available on the Company's Investor Relations website. The live conference call will be available by telephone at (844) 200-6205 for domestic callers and (929) 526-1599 for international callers, both using event ID 796998. An archived webcast and presentation materials will be available on the Company's Investor Relations website.
Forward-Looking Statements
This release contains certain statements that are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform Act"). Generally, forward-looking statements include the words "may," "believes," "plans," "expects," "anticipates," "intends," "estimate," "goal," "upcoming," "outlook," "guidance" or the negation thereof, or similar expressions. In addition, all statements that address future operating, financial or business performance, strategies or initiatives, future efficiencies or savings, anticipated costs or charges, future capitalization, anticipated impacts of recent or pending investments or transactions and statements expressing general views about future results or brand health are forward-looking statements within the meaning of the Reform Act. Forward-looking statements are based on the Company's expectations at the time such statements are made, speak only as of the dates they are made and are susceptible to a number of risks, uncertainties and other factors. For all such forward-looking statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Reform Act. The Company's actual results, performance and achievements may differ materially from any future results, performance or achievements expressed or implied by the Company's forward-looking statements.
Many important factors could affect the Company's future results and cause those results to differ materially from those expressed in or implied by the Company's forward-looking statements. Such factors include, but are not limited to, the following: (1) the impact of competition or poor customer experiences at Wendy's restaurants; (2) adverse economic conditions or disruptions, including in regions with a high concentration of Wendy's restaurants; (3) changes in discretionary consumer spending and consumer tastes and preferences; (4) the disruption to the Company's business from COVID-19 and its impact on the Company's results of operations, financial condition and prospects; (5) impacts to the Company's corporate reputation or the value and perception of the Company's brand; (6) the effectiveness of the Company's marketing and advertising programs and new product development; (7) the Company's ability to manage the impact of social media; (8) the Company's ability to protect its intellectual property; (9) food safety events or health concerns involving the Company's products; (10) our ability to deliver accelerated global sales growth and achieve or maintain market share across our dayparts; (11) the Company's ability to achieve its growth strategy through new restaurant development and its Image Activation program; (12) the Company's ability to effectively manage the acquisition and disposition of restaurants or successfully implement other strategic initiatives; (13) risks associated with leasing and owning significant amounts of real estate, including environmental matters; (14) risks associated with the Company's international operations, including the ability to execute its international growth strategy; (15) changes in commodity and other operating costs; (16) shortages or interruptions in the supply or distribution of the Company's products and other risks associated with the Company's independent supply chain purchasing co-op; (17) the impact of increased labor costs or labor shortages; (18) the continued succession and retention of key personnel and the effectiveness of the Company's leadership and organizational structure; (19) risks associated with the Company's digital commerce strategy, platforms and technologies, including its ability to adapt to changes in industry trends and consumer preferences; (20) the Company's dependence on computer systems and information technology, including risks associated with the failure or interruption of its systems or technology or the occurrence of cyber incidents or deficiencies; (21) risks associated with the Company's securitized financing facility and other debt agreements, including compliance with operational and financial covenants, restrictions on its ability to raise additional capital, the impact of its overall debt levels and the Company's ability to generate sufficient cash flow to meet its debt service obligations and operate its business; (22) risks associated with the Company's capital allocation policy, including the amount and timing of equity and debt repurchases and dividend payments; (23) risks associated with complaints and litigation, compliance with legal and regulatory requirements and an increased focus on environmental, social and governance issues; (24) risks associated with the availability and cost of insurance, changes in accounting standards, the recognition of impairment or other charges, changes in tax rates or tax laws and fluctuations in foreign currency exchange rates; (25) conditions beyond the Company's control, such as adverse weather conditions, natural disasters, hostilities, social unrest, health epidemics or pandemics or other catastrophic events; and (26) other risks and uncertainties cited in the Company's releases, public statements and/or filings with the Securities and Exchange Commission, including those identified in the "Risk Factors" sections of the Company's Forms 10-K and 10-Q.
In addition to the factors described above, there are risks associated with the Company's predominantly franchised business model that could impact its results, performance and achievements. Such risks include the Company's ability to identify, attract and retain experienced and qualified franchisees, the Company's ability to effectively manage the transfer of restaurants between and among franchisees, the business and financial health of franchisees, the ability of franchisees to meet their royalty, advertising, development, reimaging and other commitments, participation by franchisees in brand strategies and the fact that franchisees are independent third parties that own, operate and are responsible for overseeing the operations of their restaurants. The Company's predominantly franchised business model may also impact the ability of the Wendy's system to effectively respond and adapt to market changes.
All future written and oral forward-looking statements attributable to the Company or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements contained or referred to above. New risks and uncertainties arise from time to time, and factors that the Company currently deems immaterial may become material, and it is impossible for the Company to predict these events or how they may affect the Company.
The Company assumes no obligation to update any forward-looking statements after the date of this release as a result of new information, future events or developments, except as required by federal securities laws, although the Company may do so from time to time. The Company does not endorse any projections regarding future performance that may be made by third parties.
There can be no assurance that any additional regular quarterly cash dividends will be declared or paid after the date hereof, or of the amount or timing of such dividends, if any. Future dividend payments, if any, are subject to applicable law, will be made at the discretion of the Board of Directors and will be based on factors such as the Company's earnings, financial condition and cash requirements and other factors.
Disclosure Regarding Non-GAAP Financial Measures
In addition to the financial measures presented in this release in accordance with
The Company uses adjusted revenue, adjusted EBITDA, adjusted earnings per share and systemwide sales as internal measures of business operating performance and as performance measures for benchmarking against the Company's peers and competitors. Adjusted EBITDA and systemwide sales are also used by the Company in establishing performance goals for purposes of executive compensation. The Company believes its presentation of adjusted revenue, adjusted EBITDA, adjusted earnings per share and systemwide sales provides a meaningful perspective of the underlying operating performance of our current business and enables investors to better understand and evaluate our historical and prospective operating performance. The Company believes these non-GAAP financial measures are important supplemental measures of operating performance because they eliminate items that vary from period to period without correlation to our core operating performance and highlight trends in our business that may not otherwise be apparent when relying solely on GAAP financial measures. Due to the nature and/or size of the items being excluded, such items do not reflect future gains, losses, expenses or benefits and are not indicative of our future operating performance. The Company believes investors, analysts and other interested parties use adjusted revenue, adjusted EBITDA, adjusted earnings per share and systemwide sales in evaluating issuers, and the presentation of these measures facilitates a comparative assessment of the Company's operating performance in addition to the Company's performance based on GAAP results.
This release also includes disclosure regarding the Company's free cash flow. Free cash flow is a non-GAAP financial measure that is used by the Company as an internal measure of liquidity. Free cash flow is also used by the Company in establishing performance goals for purposes of executive compensation. The Company defines free cash flow as cash flows from operations minus (i) capital expenditures and (ii) the net change in the restricted operating assets and liabilities of the advertising funds and any excess/deficit of advertising funds revenue over advertising funds expense included in net income, as reported under GAAP. The impact of our advertising funds is excluded because the funds are used solely for advertising and are not available for the Company's working capital needs. The Company may also make additional adjustments for certain non-recurring or unusual items to the extent identified in the reconciliation tables that accompany this release. The Company believes free cash flow is an important liquidity measure for investors and other interested persons because it communicates how much cash flow is available for working capital needs or to be used for repurchasing shares, paying dividends, repaying or refinancing debt, financing possible acquisitions or investments or other uses of cash.
Adjusted revenue, adjusted EBITDA, adjusted earnings per share, free cash flow and systemwide sales are not recognized terms under GAAP, and the Company's presentation of these non-GAAP financial measures does not replace the presentation of the Company's financial results in accordance with GAAP. Because all companies do not calculate adjusted revenue, adjusted EBITDA, adjusted earnings per share, free cash flow and systemwide sales (and similarly titled financial measures) in the same way, those measures as used by other companies may not be consistent with the way the Company calculates such measures. The non-GAAP financial measures included in this release should not be construed as substitutes for or better indicators of the Company's performance than the most directly comparable GAAP financial measures. See the reconciliation tables that accompany this release for additional information regarding certain of the non-GAAP financial measures included herein.
Key Business Measures
The Company tracks its results of operations and manages its business using certain key business measures, including same-restaurant sales, systemwide sales and Company-operated restaurant margin, which are measures commonly used in the quick-service restaurant industry that are important to understanding Company performance.
Same-restaurant sales and systemwide sales each include sales by both Company-operated and franchise restaurants. The Company reports same-restaurant sales for new restaurants after they have been open for 15 continuous months and for reimaged restaurants as soon as they reopen. Restaurants temporarily closed for more than one fiscal week are excluded from same-restaurant sales.
Franchise restaurant sales are reported by our franchisees and represent their revenues from sales at franchised Wendy's restaurants. Sales by franchise restaurants are not recorded as Company revenues and are not included in the Company's consolidated financial statements. However, the Company's royalty revenues are computed as percentages of sales made by Wendy's franchisees and, as a result, sales by franchisees have a direct effect on the Company's royalty revenues and profitability.
Same-restaurant sales and systemwide sales exclude sales from
The Company calculates same-restaurant sales and systemwide sales growth on a constant currency basis. Constant currency results exclude the impact of foreign currency translation and are derived by translating current year results at prior year average exchange rates. The Company believes excluding the impact of foreign currency translation provides better year over year comparability.
About Wendy's
Wendy's® was founded in 1969 by Dave Thomas in
*Fresh beef available in the contiguous
Investor Contact:
Kelsey Freed
Director - Investor Relations
(614) 764-3345; kelsey.freed@wendys.com
Media Contact:
Heidi Schauer
Vice President – Communications, Public Affairs & Customer Care
(614) 764-3368; heidi.schauer@wendys.com
The Wendy's Company and Subsidiaries | |||||||
Three Months Ended | Twelve Months Ended | ||||||
2022 | 2023 | 2022 | 2023 | ||||
Revenues: | |||||||
Sales | $ 227,655 | $ 226,725 | $ 896,585 | $ 930,083 | |||
Franchise royalty revenue | 124,173 | 127,793 | 485,488 | 512,159 | |||
Franchise fees | 19,917 | 20,468 | 72,747 | 80,172 | |||
Franchise rental income | 59,521 | 56,761 | 234,465 | 230,168 | |||
Advertising funds revenue | 105,244 | 108,904 | 406,220 | 428,996 | |||
536,510 | 540,651 | 2,095,505 | 2,181,578 | ||||
Costs and expenses: | |||||||
Cost of sales | 194,663 | 197,425 | 773,169 | 794,493 | |||
Franchise support and other costs | 12,280 | 15,390 | 46,736 | 57,243 | |||
Franchise rental expense | 31,384 | 30,470 | 124,083 | 125,371 | |||
Advertising funds expense | 113,718 | 108,829 | 430,760 | 428,003 | |||
General and administrative | 68,473 | 65,658 | 254,979 | 249,964 | |||
Depreciation and amortization (exclusive of | 32,503 | 34,531 | 133,414 | 135,789 | |||
Amortization of cloud computing arrangements | 1,506 | 5,086 | 2,394 | 12,778 | |||
System optimization gains, net | (2,641) | (761) | (6,779) | (880) | |||
Reorganization and realignment costs | 70 | 1,100 | 698 | 9,200 | |||
Impairment of long-lived assets | 3,738 | 888 | 6,420 | 1,401 | |||
Other operating income, net | (3,201) | (4,594) | (23,683) | (13,768) | |||
452,493 | 454,022 | 1,742,191 | 1,799,594 | ||||
Operating profit | 84,017 | 86,629 | 353,314 | 381,984 | |||
Interest expense, net | (31,913) | (30,263) | (122,319) | (124,061) | |||
Gain on early extinguishment of debt, net | — | 3,868 | — | 2,283 | |||
Investment income (loss), net | — | 31 | 2,107 | (10,358) | |||
Other income, net | 6,048 | 7,024 | 10,403 | 29,570 | |||
Income before income taxes | 58,152 | 67,289 | 243,505 | 279,418 | |||
Provision for income taxes | (16,877) | (20,351) | (66,135) | (74,978) | |||
Net income | $ 41,275 | $ 46,938 | $ 177,370 | $ 204,440 | |||
Net income per share: | |||||||
Basic | $ .19 | $ .23 | $ .83 | $ .98 | |||
Diluted | .19 | .23 | .82 | .97 | |||
Number of shares used to calculate basic income | 212,967 | 205,938 | 213,766 | 209,486 | |||
Number of shares used to calculate diluted income | 215,346 | 207,578 | 215,839 | 211,534 | |||
The Wendy's Company and Subsidiaries Consolidated Balance Sheets As of January 1, 2023 and December 31, 2023 (In Thousands Except Par Value) (Unaudited) | |||
January 1, | December 31, | ||
ASSETS | |||
Current assets: | |||
Cash and cash equivalents | $ 745,889 | $ 516,037 | |
Restricted cash | 35,203 | 35,848 | |
Accounts and notes receivable, net | 116,426 | 121,683 | |
Inventories | 7,129 | 6,690 | |
Prepaid expenses and other current assets | 26,963 | 39,640 | |
Advertising funds restricted assets | 126,673 | 117,755 | |
Total current assets | 1,058,283 | 837,653 | |
Properties | 895,778 | 891,080 | |
Finance lease assets | 234,570 | 228,936 | |
Operating lease assets | 754,498 | 705,615 | |
Goodwill | 773,088 | 773,727 | |
Other intangible assets | 1,248,800 | 1,219,129 | |
Investments | 46,028 | 34,445 | |
Net investment in sales-type and direct financing leases | 317,337 | 313,664 | |
Other assets | 170,962 | 178,577 | |
Total assets | $ 5,499,344 | $ 5,182,826 | |
LIABILITIES AND STOCKHOLDERS' EQUITY | |||
Current liabilities: | |||
Current portion of long-term debt | $ 29,250 | $ 29,250 | |
Current portion of finance lease liabilities | 18,316 | 20,250 | |
Current portion of operating lease liabilities | 48,120 | 49,353 | |
Accounts payable | 43,996 | 27,370 | |
Accrued expenses and other current liabilities | 116,010 | 135,149 | |
Advertising funds restricted liabilities | 132,307 | 120,558 | |
Total current liabilities | 387,999 | 381,930 | |
Long-term debt | 2,822,196 | 2,732,814 | |
Long-term finance lease liabilities | 571,877 | 568,767 | |
Long-term operating lease liabilities | 792,051 | 739,340 | |
Deferred income taxes | 270,421 | 270,353 | |
Deferred franchise fees | 90,231 | 90,132 | |
Other liabilities | 98,849 | 89,711 | |
Total liabilities | 5,033,624 | 4,873,047 | |
Commitments and contingencies | |||
Stockholders' equity: | |||
Common stock, issued; 213,101 and 205,397 shares outstanding, respectively | 47,042 | 47,042 | |
Additional paid-in capital | 2,937,885 | 2,960,035 | |
Retained earnings | 414,749 | 409,863 | |
Common stock held in treasury, at cost; 257,323 and 265,027 shares, respectively | (2,869,780) | (3,048,786) | |
Accumulated other comprehensive loss | (64,176) | (58,375) | |
Total stockholders' equity | 465,720 | 309,779 | |
Total liabilities and stockholders' equity | $ 5,499,344 | $ 5,182,826 | |
The Wendy's Company and Subsidiaries Consolidated Statements of Cash Flows Twelve Month Periods Ended January 1, 2023 and December 31, 2023 (In Thousands) (Unaudited) | |||
Twelve Months Ended | |||
2022 | 2023 | ||
Cash flows from operating activities: | |||
Net income | $ 177,370 | $ 204,440 | |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Depreciation and amortization (exclusive of amortization of cloud computing arrangements shown separately below) | 133,414 | 135,789 | |
Amortization of cloud computing arrangements | 2,394 | 12,778 | |
Share-based compensation | 24,538 | 23,747 | |
Impairment of long-lived assets | 6,420 | 1,401 | |
Deferred income tax | 4,305 | (807) | |
Non-cash rental expense, net | 33,915 | 40,655 | |
Change in operating lease liabilities | (45,682) | (47,212) | |
Net (recognition) receipt of deferred vendor incentives | (1,060) | 1,034 | |
System optimization gains, net | (6,779) | (880) | |
Gain on sale of investments, net | — | (31) | |
Distributions received from TimWen joint venture | 12,612 | 12,901 | |
Equity in earnings in joint ventures, net | (9,422) | (10,819) | |
Long-term debt-related activities, net | 7,762 | 5,320 | |
Cloud computing arrangements expenditures | (30,220) | (32,902) | |
Other, net | (4,554) | 22,883 | |
Changes in operating assets and liabilities: | |||
Accounts and notes receivable, net | (5,857) | 430 | |
Inventories | (1,203) | 439 | |
Prepaid expenses and other current assets | 6,769 | (672) | |
Advertising funds restricted assets and liabilities | (30,503) | (18,210) | |
Accounts payable | (1,533) | (8,826) | |
Accrued expenses and other current liabilities | (12,782) | 3,958 | |
Net cash provided by operating activities | 259,904 | 345,416 | |
Cash flows from investing activities: | |||
Capital expenditures | (85,544) | (85,021) | |
Franchise development fund | (3,605) | (7,951) | |
Dispositions | 8,237 | 2,115 | |
Proceeds from sale of investments | — | 31 | |
Notes receivable, net | 3,136 | 4,280 | |
Net cash used in investing activities | (77,776) | (86,546) | |
Cash flows from financing activities: | |||
Proceeds from long-term debt | 500,000 | — | |
Repayments of long-term debt | (26,750) | (94,702) | |
Repayments of finance lease liabilities | (17,312) | (21,588) | |
Deferred financing costs | (10,232) | — | |
Repurchases of common stock, including accelerated share repurchase | (51,950) | (189,554) | |
Dividends | (106,779) | (209,253) | |
Proceeds from stock option exercises | 4,865 | 14,667 | |
Payments related to tax withholding for share-based compensation | (3,168) | (3,873) | |
Net cash provided by (used in) financing activities | 288,674 | (504,303) | |
Net cash provided by (used in) operations before effect of exchange rate changes on cash | 470,802 | (245,433) | |
Effect of exchange rate changes on cash | (5,967) | 2,448 | |
Net increase (decrease) in cash, cash equivalents and restricted cash | 464,835 | (242,985) | |
Cash, cash equivalents and restricted cash at beginning of period | 366,966 | 831,801 | |
Cash, cash equivalents and restricted cash at end of period | $ 831,801 | $ 588,816 | |
The Wendy's Company and Subsidiaries Reconciliations of Net Income to Adjusted EBITDA and Revenues to Adjusted Revenues Three and Twelve Month Periods Ended January 1, 2023 and December 31, 2023 (In Thousands) (Unaudited) | |||||||
Three Months Ended | Twelve Months Ended | ||||||
2022 | 2023 | 2022 | 2023 | ||||
Net income | $ 41,275 | $ 46,938 | $ 177,370 | $ 204,440 | |||
Provision for income taxes | 16,877 | 20,351 | 66,135 | 74,978 | |||
Income before income taxes | 58,152 | 67,289 | 243,505 | 279,418 | |||
Other income, net | (6,048) | (7,024) | (10,403) | (29,570) | |||
Investment (income) loss, net | — | (31) | (2,107) | 10,358 | |||
Gain on early extinguishment of debt, net | — | (3,868) | — | (2,283) | |||
Interest expense, net | 31,913 | 30,263 | 122,319 | 124,061 | |||
Operating profit | 84,017 | 86,629 | 353,314 | 381,984 | |||
Plus (less): | |||||||
Advertising funds revenue | (105,244) | (108,904) | (406,220) | (428,996) | |||
Advertising funds expense (a) | 109,512 | 108,069 | 414,545 | 424,652 | |||
Depreciation and amortization (exclusive of | 32,503 | 34,531 | 133,414 | 135,789 | |||
Amortization of cloud computing arrangements | 1,506 | 5,086 | 2,394 | 12,778 | |||
System optimization gains, net | (2,641) | (761) | (6,779) | (880) | |||
Reorganization and realignment costs | 70 | 1,100 | 698 | 9,200 | |||
Impairment of long-lived assets | 3,738 | 888 | 6,420 | 1,401 | |||
Adjusted EBITDA | $ 123,461 | $ 126,638 | $ 497,786 | $ 535,928 | |||
Revenues | $ 536,510 | $ 540,651 | $ 2,095,505 | $ 2,181,578 | |||
Less: | |||||||
Advertising funds revenue | (105,244) | (108,904) | (406,220) | (428,996) | |||
Adjusted revenues | $ 431,266 | $ 431,747 | $ 1,689,285 | $ 1,752,582 | |||
(a) | Excludes advertising funds expense of |
The Wendy's Company and Subsidiaries Reconciliation of Net Income and Diluted Earnings Per Share to Adjusted Income and Adjusted Earnings Per Share Three and Twelve Month Periods Ended January 1, 2023 and December 31, 2023 (In Thousands Except Per Share Amounts) (Unaudited) | |||||||
Three Months Ended | Twelve Months Ended | ||||||
2022 | 2023 | 2022 | 2023 | ||||
Net income | $ 41,275 | $ 46,938 | $ 177,370 | $ 204,440 | |||
Plus (less): | |||||||
Advertising funds revenue | (105,244) | (108,904) | (406,220) | (428,996) | |||
Advertising funds expense (a) | 109,512 | 108,069 | 414,545 | 424,652 | |||
System optimization gains, net | (2,641) | (761) | (6,779) | (880) | |||
Reorganization and realignment costs | 70 | 1,100 | 698 | 9,200 | |||
Impairment of long-lived assets | 3,738 | 888 | 6,420 | 1,401 | |||
Gain on early extinguishment of debt, net | — | (3,868) | — | (2,283) | |||
Total adjustments | 5,435 | (3,476) | 8,664 | 3,094 | |||
Income tax impact on adjustments (b) | 109 | 849 | 298 | (1,423) | |||
Total adjustments, net of income taxes | 5,544 | (2,627) | 8,962 | 1,671 | |||
Adjusted income | $ 46,819 | $ 44,311 | $ 186,332 | $ 206,111 | |||
Diluted earnings per share | $ .19 | $ .23 | $ .82 | $ .97 | |||
Total adjustments per share, net of income taxes | .03 | (.02) | .04 | — | |||
Adjusted earnings per share | $ .22 | $ .21 | $ .86 | $ .97 | |||
(a) | Excludes advertising funds expense of |
(b) | Adjustments relate to the tax effect of non-GAAP adjustments, which were determined based on the nature of the underlying non-GAAP adjustments and their relevant jurisdictional tax rates. |
The Wendy's Company and Subsidiaries Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow Twelve Month Periods Ended January 1, 2023 and December 31, 2023 (In Thousands) (Unaudited) | |||
Twelve Months Ended | |||
2022 | 2023 | ||
Net cash provided by operating activities | $ 259,904 | $ 345,416 | |
Plus (less): | |||
Capital expenditures | (85,544) | (85,021) | |
Advertising funds impact (a) | 38,765 | 13,866 | |
Free cash flow | $ 213,125 | $ 274,261 | |
(a) | Advertising funds impact for 2022 and 2023 includes the net change in the restricted operating assets and liabilities of the funds of |
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SOURCE The Wendy’s Company
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