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 Lemenchek, 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 includes a PowerPoint presentation, which is available on our investor relations website, irwendies.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-GAAP financial measures, Investors should refer to our reconciliations of non-GAAP financial measures to the most directly comparable GAAP measure at the end of this presentation or in our earnings release. On our conference call today, our President and Chief Executive Officer, Todd Pettigore, and our Chief Financial Officer, Gunter Plush, will give a business update, including some highlights from our corporate responsibility report, share our 2021 first quarter results, and provide an update on our financial outlook. From there, we will open up the line for questions. And with that, I will hand things over to Todd.

Thanks, Greg, and good morning, everyone. We could not be more pleased with the momentum in our business that continued in the first quarter of 2021, as sales significantly exceeded our expectations and fueled our restaurant economic model, leading to outsized profits. We delivered another double-digit, two-year same-restaurant sales growth result on the strength of our rest-a-day business, our breakfast-day part, and our growing digital business. Our digital business grew to approximately 7.5% of sales in the quarter and our breakfast business showed growth that was ahead of plan. This sales momentum led to significant year-over-year restaurant margin expansion of almost 700 basis points to 17%. Our focus remains on ensuring we have a strong restaurant economic model across our system and we are executing. We also continue to make great progress in the area of development. as we are seeing strong interest in our new incentive program that we launched earlier this year, and we remain on track to deliver on all of our long-term development targets. As a result of our strong top-line performance, we are meaningfully increasing our outlook for 2021 on all of our key financial metrics, which GP will talk through later in the presentation. Lastly, we remain fully committed to our long-term growth initiatives, and we continue to make great progress against these. We are confident that we have a lot of growth ahead of us behind these initiatives. Our goal remains the same, which is to invest in driving efficient, accelerated growth, and we are delivering on that commitment. Our global same restaurant sales growth of 13% that we delivered in the first quarter exceeded our expectations and highlights the strength and momentum of both our U.S. and international businesses. In the U.S., we once again posted one of our best one- and two-year same-restaurant sales numbers as we were up 13.5% on both metrics. The strength of our rest-of-day business, breakfast, digital, and stimulus payments boosted the results that were slightly offset by inclement weather in the quarter. This was our third consecutive quarter of double-digit two-year same-restaurant sales growth, which showcases the underlying strength in our business. Internationally, we saw same restaurant sales growth turn positive at 7.9%. We attribute this to the strength of our Canadian business, which continues to see digital acceleration, and to the business in Puerto Rico, which is firing on all cylinders, and they've added many of our U.S. breakfast items to their menu. This translated into 6.3% international growth on a two-year basis and a significant increase from our fourth quarter results as our international markets are continuing to emerge from severe COVID restrictions to pace ahead of plan in 2021. The strong start to the year and the momentum we are seeing in our global same restaurant sales has given us the confidence to take up our system-wide sales guidance for 2021 to 8% to 10%. Our franchise system is engaged across the globe. And we are excited about the plans we have in place for the remainder of 2021. Let's spend a few moments talking about our USA restaurant sales, which accelerated nicely in the first quarter on the strength of our rest of day business. We launched two new products within the quarter and the jalapeno popper chicken sandwich and salad, which were extremely successful. Our salad business saw a substantial improvement as the result of this launch, which we were very pleased with. Our recently renovated classic chicken, which was a key component of our two for five promotion within the quarter, is selling more than twice as much as our previous version and continues to drive very strong large sandwich sales mix and higher average checks alongside the continued strength of our made to crave platform. The strength of the classic chicken, along with the success of the jalapeno popper, has allowed us to compete very well in the chicken sandwich category. In fact, our share of breaded chicken sandwiches within QSR grew in the month of March, despite significant competitive activity. We wrapped up the quarter with a fan favorite in the $5 Biggie bag, which drove very strong results to close things out. As we look forward to the rest of 2021, we are very excited about our marketing calendar, which will continue to include a nice balance between our core items, and some new product offerings to ensure that we continue to drive customers into our most craveable products. We have now officially entered our second year of breakfast, and we could not be more excited. And the same sentiment is echoed by our franchisees as their energy and excitement is at an all-time high. In the first quarter, all our key breakfast metrics improved. Breakfast sales dollars grew, awareness increased, and we continue to see higher customer repeat. Breakfast was fueled by our continued marketing pressure, most notably with our presence as the official breakfast of March Madness, which drove a ton of awareness around our business and our successful two for four promotion, which drove a significant amount of trial. We also continue to see our customer satisfaction scores be our highest at the breakfast day part as customers are loving the offering that we have. Lastly, we are seeing some great results out of our legacy breakfast restaurants that had that before the national launch. They have already grown their breakfast businesses to over 10% of sales, giving us confidence in our long-term targets. Our results in the quarter were ahead of our expectations, and we remain fully committed to our breakfast advertising investment, putting us in a great position to grow our breakfast sales by 30% in 2021 and reach our goal of 10% of sales coming from breakfast by the end of 2022. Our digital business once again saw acceleration across the globe in the first quarter. Internationally, digital grew again this quarter to more than 10% of sales on the strength of our Canadian delivery business, which continues to grow rapidly. In the US, we exited the quarter at approximately 8% of our sales, up from just over 6% in the fourth quarter. This growth has been driven by increases in both delivery and mobile ordering. On the delivery front, we ran several successful promotions in the first quarter to continue to drive awareness and trial. Delivery has remained strong in markets that have reopened, which is very promising. Our mobile ordering business, which is powered by our loyalty program, continue to grow as we now have 13 million total members enrolled in the program. We continue to see positive benefits from our loyalty program in terms of higher frequency, and we are seeing more and more people take advantage of this program. In addition, we are starting to leverage the consumer data that we are seeing. and have begun to engage with customers on a more one-to-one basis, which we believe will play a major part in us reaching our digital goals. As consumer behaviors continue to change, along with the technology investments we are making as a brand, we are well on our way to achieving our goal of reaching 10% of US sales coming through digital channels by the end of this year. Our third strategic growth pillar is expanding our footprint. Just like the other two pillars, we continue to make great progress. As announced earlier this year, we launched a new incentive program and we are seeing substantial interest in it. As a reminder, our new incentives reward franchisees for new restaurant growth, accelerated timing, and making multi-year commitments to grow their operations. Franchisees have until the end of June to sign up and we are confident that we will see a meaningful uptick in commitments. We are also seeing some new franchisees build their way into the system through this program behind the strong economics, which is exciting to see. Speaking of new franchisees, we continue to see our franchise recruiting pipeline grow significantly on the heels of the investments we made last year to drive our recruitment efforts. We currently have about 150 new potential franchisees globally at different stages of our process, including over 20 that we are evaluating in the UK. On that note, we remain on track to open our first UK restaurant on June the 2nd. which will be operated by the company. We also recently signed new development agreements with franchisees in Central Asia to open over 50 New Wendy's restaurants by 2030, and in Quebec, Canada, which we expect will double our footprint in the province. These are more examples of where we continue to sign large development agreements to significantly grow our international footprint. The solid development foundation that we have built, the strong pipeline we have in place, and the progress we have made thus far in 2021 gives us confidence that we will deliver on our goal of reaching about 7,000 restaurants globally by the end of 2021 and accelerating to approximately 8,000 by the end of 2025. Our playbook of investing to drive accelerated growth behind our three long-term pillars to meaningfully build our breakfast day part, drive our digital business, and expand our footprint across the globe remains the same, and we are making great progress. These initiatives remain deeply rooted in the foundation of the restaurant economic model. The combination of strong sales and restaurant margins that we displayed in the first quarter will fuel reinvestments into people, technology, re-imaging, and new development, which drives our confidence in growth for the future. One of our three foundational items is good done right, which is our commitment to do the right thing in the area of environment, social, and governance. We recently launched our 2020 corporate responsibility report and I wanted to cover a few of those highlights. Good done right is the simple phrase that grounds Wendy's approach to three critical areas of our business food people and footprint. We made tremendous strides in 2020 in part because we completed our first ever comprehensive ESG materiality assessment to inform our overall strategy. We engaged nearly a thousand diverse stakeholders to identify Wendy's most material topics that provide the greatest opportunity to make a positive impact. These findings informed existing goals and helped us to create new ones. We recently released new ESG specific goals and alongside these we are sharing a new set of metrics based on established reporting frameworks to track and report our progress. We're committed to transparency through our corporate responsibility journey and we will continue to benchmark our progress against globally recognized frameworks such as SASB and GRI. For further information, please go to the What We Value section of Wendy's.com or the ESG section of our IR website. Everything we do at Wendy's is focused on bringing our vision to life, which is to become the world's most thriving and beloved restaurant brand. With the momentum that we have in our business and the partnership we have with our franchisees that has never been stronger, we are well on our way. I will now hand things over to GP to talk through our first quarter financial results.