Wendy's Company (The)

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 you may begin your conference good morning and thank you for joining our fiscal 2024 fourth quarter and full year earnings conference call after this brief introduction kirk tanner president and chief executive officer

We'll provide a business update and then Ken Cook, Chief Financial Officer, will review our fourth quarter results and share our 2025 financial outlook and capital allocation priorities. From there, we will open up the line for questions. Today's conference call and webcast includes a presentation, which is available on our investor relations website, ir.wendys.com. Before we begin, Please take note of the safe harbor statement that appears at the end of today's earnings release this disclosure reminds investors that certain information we discussed today is forward looking and reflects our current expectations about future plans and performance. Various factors could affect our results and cause those results to differ materially from the projection 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-GAAP financial measures to the most directly comparable GAAP measure at the end of this presentation or in today's earnings release. If you have questions following today's conference call, please contact me. I will now hand the call over to Kirk.

Thank you, Aaron, and good morning, everyone. I'm going to start by discussing our results for the fourth quarter and highlight progress we made in 2024. I'll then share our updated capital allocation policy and some of the initiatives underway to deliver sales and EBITDA growth in 2025. Our Q4 results were in line with the expectations that we shared with you on our last earnings call. I am pleased to report global system-wide sales increased over 5% and same restaurant sales grew over 4%. In the U.S., our traffic and dollar growth outpaced the QSR burger category. Growth was led by the success of our collaboration with Paramount, celebrating SpongeBob's 25th anniversary. At its peak, this fan favorite drove an impressive 20% lift in same restaurant sales, with increased traffic and an average check including a Krabby Patty with nearly double our typical size. This was a great example of what sets Wendy's apart, showcasing our approach to partnerships, innovation on our core offerings, supported by strong marketing and execution capabilities. Growth in the quarter was also supported by innovative, limited time offerings, including our salted caramel frosty and mushroom bacon cheeseburger. The morning day part continued to be a strong contributor to U.S. growth, with sales up over 4% compared to the prior year. Internationally, we achieved 11% system-wide sales growth on a constant currency basis, led by strong net unit growth. We continue to gain momentum with our strategy to increase digital mix, which grew 130 basis points from the prior quarter to 19% globally. This generated valuable insights, which we use to enhance the customer experience and provide more relevant in-app offers for our customers. Global digital sales grew nearly 40% year over year and loyalty member growth was up 25% from a year ago. We now have over 46 million reward members enrolled and continue to scale this program. We strengthened our system footprint by opening 113 new restaurants in the fourth quarter. In addition, we delivered on the initiative we announced last quarter to close underperforming restaurants. Moving on to our full year 2024 results. We delivered full year sales growth driven by breakfast, innovation, and technology. achieving our 14th consecutive year of global same restaurant sales growth. Additionally, we delivered profit growth and restaurant-level margin expansion. Importantly, we also opened 276 new restaurants across the globe. Total system-wide sales reached $14.5 billion, reflecting over 3% growth compared to the prior year. The U.S. business delivered 1.4% same restaurant sales growth and we maintained or grew dollar and traffic share in the QSR burger category in every quarter. Our international system-wide sales grew 9% and same restaurant sales grew 2.8%. This overall sales performance drove adjusted EBITDA and free cash flow growth, and we returned over $280 million to shareholders through dividends and share repurchases. For the full year, our breakfast sales grew over 6%, which outpaced the QSR burger category. This was driven by increased awareness and impactful innovation. Our innovation extended beyond the breakfast day part with a series of new menu items, including our saucy nugs that expanded our chicken offerings. We also featured new limited time frosty flavors tailored to each season to provide fresh, exciting experiences that resonated with our customers throughout the year. We invested in our mobile app to improve the customer experience and accelerate growth in our loyalty program. This resulted in full year digital sales growing by nearly 40%. We also advanced our digital journey with the implementation of digital menu boards at over 300 company and franchisee locations. We deployed voice enabled AI order taking at nearly 100 locations. And we are pleased with the results we are seeing in improving accuracy and driving labor efficiency. Our execution in all of these areas drove a higher average check and provided labor efficiency that led to an 80 basis point improvement to our global company operated restaurant level margin compared to the prior year. We also made great progress on our strategy to expand the Wendy's brand to more customers around the world. Joe Trumpey, opening 276 new restaurants. Joe Trumpey, As planned, we close underperforming restaurants, this is a headwind to sales growth in 2025 but absolutely the right thing to do to strengthen the windy system. Joe Trumpey, As many closures will be replaced by new restaurants in stronger trade areas and where we expect to see double the AUVs of the restaurants that we closed. We are supporting franchisees with incentives to develop higher performing restaurants that will enhance the customer experience and increase profitability. As expected, we ended the year with flat net unit growth and are well positioned to accelerate unit growth in 2025. In 2024, we established a new Wendy's promise, fresh famous food made right for you. This is a commitment we are making to our customers to build more love for Wendy's. Our team is committed to deliver on the shared goals of always putting the customer first, making every restaurant the star, operating the one best way, and owning the responsibility to grow the Wendy's brand. In 2024, we achieved our results in a year we adopted a new organizational structure and onboarded a new leadership team for the company. These changes will drive improved accountability and operational excellence long into the future, and our new structure is already yielding positive results. While we are proud of our progress in 2024, we have a lot of work ahead of us. We will deliver on the Wendy's promise by continuing to provide the highest quality food and QSR and increasing operational intensity to deliver an exceptional experience for our customers. These two areas of focus will drive long-term value for the company, franchisees, and our shareholders. To support our growth initiatives and ensure their success, it's critical that our capital allocation strategy aligns with our objectives. As such, we have made the decision to right-size our quarterly dividend payment. Our updated dividend policy provides the flexibility to increase growth investment in 2025 and beyond. This year, we will increase our investment in unit development around the world through both traditional CapEx and by increasing our Build to Suit program. We will also accelerate investments in technology to enhance the customer experience and drive productivity. In addition, our updated capital allocation policy enables us to flex up share repurchases when the market provides attractive opportunities, and we believe an attractive opportunity exists today. As a sign of confidence in our growth plans, we are increasing share repurchases in 2025. Ken will share more details shortly. We are confident this updated policy enables us to maximize shareholder value over the long term. Now, let me share our outlook for 2025. Our plan is built to drive continued sales and adjusted EBITDA growth and accelerate net unit development. We have three strategic initiatives to execute on in 2025, fresh famous food, delivering an exceptional customer experience and accelerating global unit development. Our fresh famous food strategy will focus on craveable core items, impactful innovation and relevant value. This year we have plans to expand in fast-growing categories including chicken and beverages. We know customers will continue to look for value throughout 2025 and Wendy's is uniquely positioned to lead with this important customer need. At Wendy's, value starts with quality. Our iconic Biggie Bag is uniquely Wendy's, delivering industry-leading quality at attractive price points. We have plans to further strengthen our value leadership position through continuous innovation and the strategic expansion of our Biggie Bag platform. We will deepen connections with our loyalty members and attract new ones by offering exclusive, limited-time, unbeatable deals available only through the Wendy's app. Breakfast remains a top priority at Wendy's and will provide a tailwind to our growth. In 2025, we will invest in innovation to drive continued momentum around this day part. Breakfast will continue to receive a higher share of total advertising dollars compared to its percentage of sales. We expect the next stage of growth in breakfast to be driven by product innovation, which we will share more about later this year. You also see us continue to leverage strategic partnerships and promotions that inspire customer passion points and attract new audiences. An example is our partnership with the Girl Scouts of the USA on a new limited time Thin Mints Frosty. This is another example of how we can delight customers with core offerings by bringing together our innovation, marketing, and outstanding execution capabilities. As part of our commitment to deliver a perfect every time customer experience, we are increasing operational intensity across every restaurant. This includes a framework of operating the one best way with clear standards, consistency, and accountability. We are investing in field resources to provide enhanced support for franchisees, their teams, and their restaurants. These initiatives will provide an exceptional experience for our customer and drive restaurant level margins. We are accelerating the implementation of digital menu boards, AI voice enabled ordering, and digital kiosks in 2025 across company and franchisee restaurants. This technology simplifies ordering and frees up crew members to focus on quality and accuracy. Now let's talk about new unit growth. Based on new builds underway and franchisee commitments to add additional restaurants this year, we are confident in our goal for net unit growth of 2% to 3% in 2025. At the midpoint of the range, this represents our highest net unit growth rate in over 15 years. And I'm excited to share some recent news. In Australia, Flynn Restaurant Group opened the first Wendy's earlier this year and it's off to an amazing start. In closing, we have a clear vision for Wendy's to reach the full potential of this great brand. You will see our resources allocated to drive long-term growth and our plans executed with a heightened operational intensity. I have confidence in our franchisees and the team we have assembled to lead this growth. I look forward to sharing more details about our plans for 2025 and beyond at our Investor Day on March 6th. I want to thank our Wendy's employees, our partners at QSEC and our franchisees for their outstanding efforts in delivering for our customers every single day. With that, I'll turn it over to Ken.