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 will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star followed by the number two. Thank you. Kelsey Freed, Director of Investor Relations. 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, 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-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 Penagor, will give a business update, and our Chief Financial Officer, Gunter Plush, will review our 2022 third quarter results and provide an update on our outlook for the year. From there, we will open up the line for questions. With that, I will hand things over to Todd.

Thanks, Kelsey, and good morning, everyone. I am proud of the Wendy system for delivering a significant same-restaurant sales acceleration on a one-year basis. Our consistent sales growth underscores our brand's ability to resonate with our customers and resulted in our fourth consecutive quarter of double-digit global same-restaurant sales on a two-year basis. These results highlight how our high-quality food compelling value and convenience continue to deliver against our fans' expectations, making the Wendy's brand more relevant than ever. During the third quarter, our dollar and traffic growth ranked amongst the top performers in our competitive set, and we maintained our total day dollar and traffic share of the QSR burger category in the U.S. On the breakfast front, we launched French toast sticks, our first major menu innovation in the U.S., which drove a meaningful acceleration in the U.S. breakfast sales over the course of the quarter. We have received an overwhelmingly positive reception from our customers, proving just how much growth is ahead of us at the breakfast day part. Our digital business momentum held strong as we delivered global digital sales mix of approximately 10%. And we expect to grow this even further with a heightened focus on digital and delivery marketing to close out the year. We remain fully committed to driving the restaurant economic model through our three long-term growth initiatives to build our breakfast day part, accelerate our digital business, and expand our global footprint. We are united with our franchisees as one system to continue delivering growth for years to come. We delivered significant global same restaurant sales acceleration on a one-year basis in the third quarter as both our international and U.S. business continued to compete well. Our international business achieved another outstanding quarter with widespread success. marking a six consecutive quarter of double digit one and two year same restaurant sales growth with two year growth reaching over 25%. We continue to see strong results across our Latin America and Caribbean region with markets like the Bahamas and the Dominican Republic showcasing remarkable year over year acceleration. This growth was compounded by ongoing strength in Canada where we are growing dollar and traffic share faster than any of our QSR burger competitors due in part to our breakfast launch. Our U.S. business delivered same restaurant sales of 6.4% on a one-year basis, accelerating over four percentage points versus the prior quarter as we held our strong dollar and traffic share position within the QSR burger category. Our consistent track record of strong results is a testament to our balanced marketing calendar. which drove a sequential improvement in customer counts in Q2 and Q3, in addition to a strong average check supported by our system's strategic pricing actions. Throughout the quarter, we continue to promote craveable products across a variety of price points and occasions, including the continuation of Strawberry Frosty, our compelling and ownable $5 Biggie Bag, and the relaunch of the much-loved Pretzel Bacon Pub, delighting our customers with a fan favorite for fall. We plan to further build on the sales momentum with the launch of our fresh Italian mozzarella sandwiches and peppermint frosty, positioning us for a strong close to the year. Now let's turn to our breakfast business. We continue to be pleased with our breakfast performance in Canada and are working hard to ingrain the breakfast habit and give our Canadian customers the high quality offering they deserve. We're still early in our breakfast journey, but we remain confident that the addition of this day part will drive significant sales and profits for our Canadian franchisees. Turning to the U.S., we are incredibly proud of the success of our French toast sticks launch. This sweet, craveable morning treat has quickly become our number one selling breakfast item. The launch helped us maintain our morning meal dollar share in the QSR burger category and drove a meaningful acceleration in U.S. breakfast sales over the course of the quarter. with average weekly sales approaching $3,000 as we exited Q3. This success, alongside our recently launched $3 croissant promotion, gives us confidence in reaching our goal of $3,000 average weekly breakfast sales by year end. We remain committed to our $16 million global investment in breakfast advertising this year, just as we remain committed to fighting for our fair share of the QSR breakfast business. We held our digital momentum in the third quarter, with global digital sales mix holding strong at approximately 10%. Our international digital sales mix was approximately 15%, bolstered by exceptional results across all of our regions. We expect these results to accelerate even further in the coming quarters, as we launched our loyalty program in Canada just days ago, which we are incredibly excited about. In the US, digital sales mix accelerated throughout the quarter, exiting at almost 9.5% of our overall sales. Our momentum was driven by several successful delivery promotions, which we are continuing to lean into throughout the fourth quarter when delivery demand seasonality typically peaks. We also drove a sequential increase in total rewards members of approximately 10% to a new record high. We are committed to expanding delivery and mobile order access and efficiency, fine-tuning our user experience, and further developing our one-to-one marketing program to accelerate our digital business even further across the globe. We continue to make progress against our global unit expansion in the third quarter, having now opened approximately 200 new restaurants during the year. I couldn't be prouder of the team and our franchisees for once again achieving growth in this difficult environment. As we approach year end, we have increased visibility into a few factors that are impacting our plans for the fourth quarter. We now expect a shift of approximately 30 new dark kitchens in India into 2023. This timing adjustment was agreed upon with Rebel Foods, one of our franchisees in the India market, who successfully operates approximately 90 dark kitchens today. They are leaning into an omni-channel strategy by developing more traditional restaurants near term, which will then be supplemented with additional dark kitchens. Additionally, we continue to experience development delays that are impacting the entire industry, contributing to a slight reduction in reef delivery kitchen openings and in the US traditional development in 2022. Due to these changes, we now expect 2022 unit growth of two to two and a half percent primarily stemming from the reduction in non traditional restaurants. We still believe that non traditional concepts will be part of our growth story moving forward and will continue to be targeted and strategic and how we bring these concepts to life. Our 2022 unit outlook continues to represent an increase in our net unit growth versus our historical rate of 1% to 2%. We expect our net new growth will continue to accelerate through 2025, and our team continue to make progress against fortifying our long-term development pipeline throughout the third quarter. We continued our UK expansion with nine traditional company-operated restaurants and a total of 25 restaurants in the market at quarter end. Additionally, we expect our first traditional franchisees will begin opening restaurants, including our first drive-through location in the coming months. We are garnering excitement from the system on our global next-gen restaurant design, which we believe will improve unit economics and increase returns. Our potential franchisee pipeline remains strong at over 250 candidates, and we expect this to continue to increase with ever-expanding response to our Own Your Opportunity campaign. We've seen an uptick in our build-a-suit pipeline and are actively recruiting more franchisees into the program. And finally, the percentage of our long-term goal that is under a development commitment remains at approximately 65%, giving us confidence in our expansion plans. Our playbook of investing to drive accelerated growth behind our three long-term pillars to build our breakfast day part, drive our digital business, and expand our footprint across the globe remains the same. Our continued growth and success would not be possible without the partnership we have with our franchisees. We recently received the results of the 2022 Franchise Business Review Survey, reflecting another year of Wendy's exceeding industry benchmarks. I am particularly pleased with our rating on overall satisfaction, which paces more than 10 percentage points ahead of the industry in both the US and internationally. These results once again highlight how our strong franchise relationships have been a differentiator for the Wendy's brand. And I had the opportunity to experience this firsthand at our annual franchise convention in September, where the system was able to come together in person to celebrate our wins over the year and look forward towards all the growth that's still ahead. Through this partnership and the dedication of our restaurant crews and support center teams, we will continue to march towards achieving our vision of becoming the world's most striving and beloved restaurant brand. I will now hand things over to GP to talk through our third quarter financial results.