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. You may begin your conference.

Good morning, and thank you for joining our fiscal 2026 first quarter earnings conference call. After this brief introduction can cook interim chief executive officer and chief financial officer will provide a business update and then susie Turk chief accounting officer and global head of fp and a. will review our quarter results share capital allocation priorities and our 2026 outlook 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 discuss 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 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 today's earnings release. If you have questions following today's conference call, please contact me. I will now hand the call over to Ken.

Thank you Aaron and good morning everyone, let me start by thanking our franchisees restaurant teams and company employees who together as one Wendy's have stayed focused on improving restaurant operations. elevating the customer experience and enhancing franchisee economics our focus in the US continues to be on advancing our project fresh turnaround strategy. we're confident our actions will drive continuous improvement as we move through the year. Internationally, our business continues to expand in key growth markets, and we are excited to have recently signed a franchise agreement to expand into China, further strengthening our development pipeline. I'll share more on this in a moment. Starting with the first quarter, results were largely in line with our expectations, though still not where we need to be, and we continued to execute on the early phase of our turnaround plan. We're focused on the customer and seeing progress on our key priorities. Global system-wide sales declined 5.5% in the quarter, driven by same restaurant sales in the U.S., reflecting a challenging competitive environment. Results were also impacted by severe weather and the actions we're taking to optimize our restaurant footprint and operating hours. These factors were partially offset by international system-wide sales growth of 6%, driven by net unit growth. Adjusted EBITDA was $111 million and adjusted EPS was 12 cents for the quarter. Before I discuss our progress in the US, I'll start with an update on our international business. We're excited to announce today that we recently signed a new franchise agreement to build up to 1000 restaurants across China over the next 10 years. Our franchise partner is a large restaurant operator with decades of experience in China. They're known for strong hospitality and have a deep understanding of the Chinese consumer. We could not ask for a better partner. Together, we are well positioned to deliver an exceptional experience for Chinese consumers, and we can't wait for them to taste the best hamburgers in QSR alongside locally inspired menu innovation. Additionally, we're rolling out our future fresh restaurant design to help drive growth across international markets. This bold modern format enhances our visual identity through a blue color scheme and a digital first layout that makes us stand out from the competition. A great example is in the Philippines, where we use this new future fresh restaurant design to open our 100th restaurant in the country. These actions support our globally great locally love strategy driving continued expansion around the world. Now turning to the U.S. and the progress we are making on our Project Fresh turnaround strategy. The first pillar of Project Fresh is brand revitalization, which is about reestablishing Wendy's as the highest quality choice in QSR and connecting with our customers in more culturally relevant and distinctive ways. Through the customer segmentation study we completed at the end of 2025, we now know our customers better than ever. And during the first quarter, we used those learnings to create a brand essence framework that will improve the consistency of our messaging to consumers. We are beginning to incorporate that into our menu and messaging efforts, which will increasingly show up throughout the year as we focus on the consumer segments that represent our greatest opportunities for growth. In January, we launched Biggie Deals to provide everyday value that our customers can count on at $4, $6, and $8 price points. This platform provides a foundation for us to compete on value by emphasizing the quality of our products and we plan to introduce exciting innovation here later this year. We are also reestablishing our leadership in delivering the highest quality hamburgers in the industry. In addition to using fresh never frozen beef a key differentiator for Wendy's we recently introduced new buttons and upgraded ketchup and Mayo to make our hamburgers taste even better. These upgrades will be featured across our core hamburgers and upcoming LTOs supported by messaging throughout the year. We're also leaning into quality differentiation with our new chicken sandwiches. Wendy's has served spicy chicken sandwiches since 1995 and they're an important part of our brand legacy. To reestablish their popularity, we've modernized this fan favorite with the most significant quality upgrade in its history, which we rolled out at the end of the first quarter. The upgrade includes a new marinade, crispy panko style breading with nine distinctive spices and bold heat to deliver intense flavor in every bite. Paired with a new bun and updated toppings, this new sandwich is resonating with customers. Both our hamburger and chicken sandwich enhancements are important steps that build on our heritage and align with our brand essence to deliver the highest quality food for our customers and be squarely better than anyone else in QSR. And there's more to come. We're strengthening our innovation pipeline with a rigorous screening of ideas, a more robust testing process, and more in-market trials. We'll prioritize the best ideas and move quickly on what's working to build promotions and programming that resonates with our target customers. Our March Madness Dunks campaign is an example of how we're beginning to connect with our customers in a more culturally relevant way. Built around the iconic duo of crispy fries and frosty, along with the dunkable chicken tenders and nuggets, paired with our new sauce lineup, this program targeted snacking occasions in a way that's distinctively Wendy's. In addition, during the height of March Madness, we introduced the bring it back bracket, allowing fans to vote on which Wendy's item from the past they wanted to see return. This was a great opportunity to engage with our customers and give them more of what they want. Fans chose the pretzel bacon pub cheeseburger as the clear favorite, and we'll bring it back to the menu later this year. Next month, we're partnering with Illumination and Universal Pictures on the upcoming Minions and Monsters movie with a collaboration designed to show up in the Everyday Moments family share. We're bringing together a widely beloved multi-generational entertainment franchise with a distinctly Wendy's meal complete with themed packaging and collectible items. We are also focused on reaching our customers more efficiently. To help us achieve this, we recently completed a media agency RFP And we are switching to a new partner to improve our marketing effectiveness and maximize the impact of every dollar of ad spend. We're off to a strong start and expect the transition to be completed in the third quarter. On social media, we expanded our presence in the first quarter with the president of our U.S. business, Pete Serkin, joining the wave of viral hamburger taste tests, as well as our chief tasting officer contest, both generating strong earned media and engagement. Our chief tasting officer will serve as a brand ambassador, delivering social content that showcases the quality of our food while increasing cultural relevance. While we are still in the early stages of our brand revitalization work, the initial results are encouraging. We're seeing improvement in key leading indicators, including top of mind awareness and visitation intent, and our brand essence framework will increasingly be integrated into our menu and messaging approach as we move throughout the year. Our next pillar is operational excellence, which is about delivering consistently great experiences for our customers. The restaurants with the highest customer satisfaction scores are outperforming the lowest tier locations in same restaurant sales by approximately 4 to 500 basis points. In addition, company operated restaurants, which have fully implemented our operational initiatives outperform the system by 310 basis points in the first quarter. We're continuing to roll out our people activation, enhanced training and performance management programs, and we'll continue to see adoption expand across the US system throughout the year. As we do that, we're particularly focused on the areas with the greatest near term opportunity to improve customer satisfaction, order accuracy and clean restaurants. We're expanding the use of our menu item label printers, which helps customers in two ways. First, it helps ensure that customers receive their food exactly as they've ordered it. And second, it helps customers quickly identify each item without unwrapping their sandwiches. Over the past six months, we've expanded implementation from less than half of restaurants using menu item label printers to 85% of restaurants using them now. We're also accelerating our efforts to ensure sparkling clean restaurants. In the first quarter, we launched our White Glove program with our field teams working closely with franchisees to reinforce consistency and provide support, ensuring every restaurant delivers on the clear standards that we have outlined day in and day out. Moving to our technology and digital initiatives. US digital sales grew 8.4% in the first quarter, with US digital mix reaching 22.7%. During the quarter, we integrated our AI recommendation engine into our mobile app, enabling order recommendations based on items in the cart, restaurant location, and seasonality. We're continuing to invest in the end-to-end digital experience, leveraging consumer insights to drive frequency and engagement in the app, while expanding payment options at checkout to create a more seamless experience and improve conversion. Together, these in-restaurant and digital initiatives will create a cycle of improvement, elevating the customer experience, which drives better sales performance and strengthens restaurant economics. Our next pillar is system optimization. which is about enhancing franchisee economics and improving the customer experience. During the first quarter, we worked closely with franchisees and completed more than half of our planned footprint optimization and remain on track to be substantially complete by the end of the second quarter. This is unchanged from the expectation that we shared with you in February. In parallel, we're continuing to work with franchisees to optimize hours of operation. including reducing hours during the morning day part and extending late night hours where the opportunity is greater. While we're making targeted adjustments, the large majority of the US system continues to serve breakfast. Together, these actions will strengthen the system by enabling restaurants to consistently deliver the quality and service Wendy's was built on while strengthening franchisee economics. Turning to capital allocation, we remain focused on driving long-term value creation. In the US, we have prioritized investments that support profitable AUV growth ahead of new unit development. This includes investing in more field team resources, digital infrastructure, and restaurant technology to increase product and promotion testing, accelerate deployment timelines, and bring innovation to life more efficiently. Internationally, we continue to invest in the expansion of our global footprint, including building in-market capabilities to support that expansion. Now, turning to our outlook. We are maintaining our full year 2026 outlook. Our outlook reflects the actions underway to strengthen the system and position the business for long-term success. We expect performance to continuously improve as these initiatives take hold while recognizing that the exact timing is difficult to predict. Our project fresh initiatives are designed to build on one another with the benefits compounding over time as additional actions are implemented. I'll now turn it over to Susie to provide more details on our first quarter results 2025 franchisee economics and our outlook and expected cadence throughout the year. Susie, over to you.