Wendy's Company (The)

Good morning. Welcome to the Wendy's Company earnings results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there'll be a question and answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you'd like to withdraw your question, press the pound key. Thank you. Greg Lemenchuk, Senior Director, Investor Relations and Corporate FP&A.

You may begin your conference. Thank you and good morning, everyone. Today's conference call and webcast include the PowerPoint presentation, which is available on our investor relations website, irwendys.com. Before we begin, please take note of the safe harbor statement that appears at the end of our earnings release. This disclosure reminds investors that certain information we may discuss today is forward-looking. Various factors could affect our results and cause those results to differ materially from the projections set forth in our forward-looking statements. also some of today's comments will reference non-gap financial measures investors should refer to our reconciliations of non-gap financial measures to the most directly comparable gap measure at the end of this presentation or in our earnings release lastly i wanted to point out that our 2020 results contain a 53rd operating week we have included a listing of the financial impacts in our earnings release as well as in the appendix of this presentation please note that our 2021 outlook items exclude the impact of the 53rd week On our conference call today, our President and Chief Executive Officer, Todd Pettigore, will provide an update on our accelerating growth initiatives, and our Chief Financial Officer, Gunther Plush, will review our fourth quarter and full year 2020 results, as well as our 2021 outlook. From there, we will open up the line for questions. With that, I will hand things over to Todd. Thanks, Greg, and good morning, everyone. I could not be more proud of our results and the work that was done by the Wendy's system across the globe in 2020 with all the challenges we faced and overcame during the year. I am confident that we have emerged as a stronger, more unified brand that is poised to deliver outsized growth. I want to send a heartfelt thank you to all of our employees and franchisees for our ongoing partnership as we navigated through 2020 and in turn delivered a very strong performance. One of the things that we pride ourselves on has been our ability to deliver accelerating same restaurant sales year after year. And this continued again in 2020 with our 10th consecutive year of U.S. growth. This was driven by our highly successful breakfast launch and a significant acceleration in our digital business. An outcome of our success has resulted in us leaping into the position of the number two QSR hamburger chain in the U.S., which highlights our momentum and strengthening brand presence. On top of our growing sales, we continue to see underlying strength in our restaurant margin, which grew to almost 18% in the fourth quarter. Our focus remains on ensuring we have a strong restaurant economic model across our system, and we are delivering. We also made good progress in expanding our footprint in 2020 by opening approximately 150 restaurants, which was quite the feat in the face of COVID. As we look to the future, we remain committed to our long-term growth initiatives, which are to significantly build our breakfast day park, drive our digital business, and expand our footprint across the globe. Our goal remains the same, which is to invest in driving efficient, accelerated growth, and we are delivering on that commitment. We are extremely pleased to say that we have achieved our 10th consecutive year of U.S. same restaurant sales growth, which is a streak we planned on keeping alive in 2021 and beyond. We firmly believe that this is just the beginning of our growth journey. Remarkably, the third and fourth quarters of 2020 were our two highest global same restaurant sales growth quarters in over the last 15 years. And this was on top of very strong results in the back half of 2019. The momentum has continued into 2021 through the week ended February 21 our US name restaurant sales were up approximately 6% on a one year basis. And almost 10% on a two year basis, despite an approximately 1% adverse impact from weather and our global same restaurant sales was up approximately 5%. Given the strong start to the year, we are expecting Q1 USA restaurant sales growth of approximately 10%. We are heading into 2021 from a position of strength with the full support of the franchise system behind us. We believe that we are well positioned to win now and over the long term as we can deliver on the consumer need for speed, convenience and affordability while separating ourselves with quality. Our system is engaged and we are excited about our plans for the future. With that, I will now hand things over to GP, who will provide a few more details on our 2020 results.

Thanks, Todd. We were very pleased with our fourth quarter results as we closed out the year on a high note with core earnings growth that was ahead of our internal plan. Our global SRS remained strong on a one- and two-year basis in quarter four. Breakfast contributed approximately 6.5% to our U.S. same-restaurant sales, and our digital business accelerated across the globe. Once again, with two-year SOS growth in the U.S. of 10%, which was also driven by the launch of our new classic chicken sandwich, which added to the momentum from our pretzel launch. Attracted revenues increased by approximately 12% to $382 million, driven by higher sales at company-operated restaurants and an increase in franchise royalty revenue. These increases were due to the impact of the 53rd week and an increase in same restaurant sales. Year-over-year company restaurant margin increased by 330 basis points to almost 18%, primarily driven by a higher average check and low insurance cost as the result of better claims management. These benefits were partially offset by customer accounts declines as a result of the pandemic and labor cost increases largely driven by higher rates. The increase in G&A was driven by higher professional fees related to IT-related costs and the $2.5 million impact of the 53rd week. This was partially offset by reduced travel expenses. Attracted EBITDA increased by almost 40% to $115 million. This was driven by higher franchise royalty revenues and fees, lower franchise support costs as we lapped our investment to support our breakfast launch, and an increase in company-operated restaurant margin. These benefits were partially offset by our incremental investment in breakfast advertising of $6.3 million in 2020. Adjusted earnings per share increased over 100% to $0.17, driven by our higher adjusted EBITDA. Now let's turn to our full-year results. We are very proud of our 2020 results, which showcase the resiliency of our business model. Global same-western sales grew 1.2%, which marks a significant improvement in SRS in the back half of the year, as we were down approximately 3% to the end of the second quarter. Our trusted EBITDA increased 2% to approximately $420 million, which is remarkable given the pressures we had from the pandemic. Our trusted earnings per share decreased 2 cents to 57 cents. This was driven by an increase in our tax rate and lower other income, partially offset by fewer shares outstanding and an increase in our trusted EBITDA. Free cash flow came in at approximately 182 million dollars. The year-over-year decrease resulted from higher reorganization and realignment payments, a higher incentive compensation payout for the 2019 fiscal period paid in 2020, and rental payment timing. To round things out, I would like to highlight the progress we made on development throughout the year. We ended the year with net new unit growth across the globe, which was well ahead of our expectations post-COVID in March. We also sustain momentum in our image activation program as 64% of the system is now on the new image, which is ahead of schedule. Our 2020 results continue to showcase our ability to drive momentum on the top and bottom line as we move forward into 2021. With that, I'll pass things back over to Todd to talk about our plans to continue accelerating growth in 2021. Thanks, GP.