Wingstop Inc.

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Wing Stop Fiscal First Quarter 2024 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. Please note that this conference is being recorded today, Wednesday, May 1, 2024. On the call today are Michael Skipworth, President and Chief Executive Officer, and Alex Kalida, Senior Vice President and Chief Financial Officer. I would now like to turn the conference over to Alex. Please go ahead.

Thank you and welcome to the Fiscal First Quarter 2024 earnings conference call for Wing Stop. Our results were published earlier this morning and are available on our Investor Relations website at .WingStop.com. Our discussion today includes forward-looking statements. These statements are not guarantees of future performance and are subject to numerous risks and uncertainties that could cause our actual results to differ materially from what we currently expect. Our SEC filings describe various risks that could affect our future operating results and financial condition. We use certain non-GAAP financial measures that we believe can be useful in evaluating our performance. Presentation of such information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. Reconciliation of the comparable GAAP measures are contained in our earnings release. Lastly, for the Q&A session, we ask that you please each keep the one question and a follow-up to allow as many participants as possible to ask a question. With that, I would like to turn the call over to Michael.

Thank you, Alex, and good morning, everyone. Thank you for joining our call. Our first quarter results showcase the continued strength and staying power of the strategies we are executing against and further solidify Wing Stop's category of one positioning. Coming off of an industry-leading year in 2023, the momentum in our business continued into our first quarter as we delivered .6% same-store sales growth, which was almost entirely driven by transaction growth. We opened 65 new restaurants, a 14% growth rate. Company-owned restaurant margins were 25.5%, highlighting the effectiveness of our supply chain strategy and our -in-class unit economics. We delivered adjusted EBITDA of $50.3 million, representing a 45% growth rate over the prior year. As a result of the strength in our business and the strong start to the year, we are increasing our 2024 comp guidance from mid-single digits to low double-digit same-store sales growth. I am extremely proud of our team members, brand partners, and supplier partners for delivering these results and truly humbled to be part of a brand that is experiencing such unprecedented growth. And yet, we believe we have so much more growth in front of us. It's hard to believe that just a little over two years ago, we hosted an investor day and outlined our path to grow average unit volumes to $2 million, from roughly $1.5 million at the time. At that investor day, we shared our multi-year sales-driving strategies of scaling brand awareness, expanding our delivery channel, menu innovation, leveraging our digital guest database to fuel data-driven marketing and digital transformation. Fast forward to today, two years later, and our AUVs are now over $1.9 million and quickly approaching our $2 million target. And while our execution against these strategies has delivered two-year stacked same-store sales growth in Q1 alone, in excess of 40%, we believe we have meaningful growth in each of these strategies as we look ahead. It's an incredibly exciting time at Wingstop. As we scale toward our vision of becoming a top-10 global restaurant brand, we remain anchored in the foundation of our strategy, our people, and our culture, what we refer to as the Wingstop way. The pillars of our strategy have not changed over the years, sustaining same-store sales growth, maintaining -in-class returns, and accelerating growth. We are very pleased with our first quarter results and excited to be measuring record levels within our brand health metrics. Importantly, we continue to measure record levels in value and quality scores as our brand partners and team members are focused on operational excellence and delivering a great guest experience. And our disciplined approach to menu pricing is paying dividends. The consumer continues to prioritize quality and value when deciding how to spend their discretionary dollars. We believe that indulgent Wingstop occasion delivers upon both quality and value and has us uniquely positioned. Which you can see in our first quarter results where our .6% comp was almost entirely driven by transaction growth. We are making great progress in closing the gap in awareness to top QSRs, but our opportunity remains meaningful. During the quarter, system-wide sales grew by 37%, which delivers additional firepower in an advertising fund to invest meaningful dollars behind our opportunity to expand brand awareness. Our increased media investment is providing new opportunities such as advertising in the NFL playoffs and becoming the presenting sponsor for the NBA's Wednesday primetime matchup. Just to highlight a couple of examples, our highly effective media strategy focused on live sports combined with breakthrough creative is driving brand awareness. We are making Wingstop more top of mind and filling the top of the funnel with new guests. It's especially evident with the expansion of our digital database, which has surged to more than 40 million users. In fact, Q1 marked our highest level of new guest acquisition on record. While we are seeing growth across all cohorts and income levels, these new guests we're bringing into the brand are demonstrating a higher frequency than our traditional guests. But yet, I believe we are just scratching the surface on the opportunity to leverage our digital database. As our restaurant AUVs expand, digital sales also continue to increase, now accounting for 68% of sales in Q1. This record level of digital sales comes at a time when we are rolling out our proprietary tech stack, MyWingstop, which we believe is an enabler to our aspirational goal of digitizing every transaction. MyWingstop has created a great deal of excitement with our brand partners and restaurant team members. I'm excited to report our rollout is on track to be completed by the end of the second quarter, and early results are encouraging. The investments we are making in technology allows us to leverage our growing database and create an entirely new level of personalization with our guests, one that we believe over time will drive conversion, retention rates, and frequency. We believe the brands that will win drive the most relevant and personalized message, as well as create ease of accessibility for the consumer. The database we have amassed, combined with the investments we have made in technology, provide an incredible advantage for Wingstop. Our top line sales growth and AUV expansion has strengthened the Wingstop unit economics. Brand partner returns have also been bolstered by the progress we have made against our supply chain strategy, a strategy that is designed to minimize volatility and food costs and create greater predictability within restaurant margins. With an AUV of $1.9 million and a low upfront investment of around $500,000 on average, our brand partners are enjoying industry-leading, unlevered -on-cash returns of more than 70%, which has fueled significant demand for growth. Our brand partners recognize how unique these returns are and are focused on accelerating growth, which is showing up in our development pipeline. We had a record 1,400 restaurant commitments under development agreements at the start of 2024. Brand partners are eager to put more restaurants in the ground and reinvest back into Wingstop. Our vision is to scale Wingstop into a global brand, and I've shared in prayer calls how we believe our international business is supercharged for growth. There is tremendous excitement across the globe as consumers have the opportunity to experience our flavor for the first time. Same-store sales trends resemble that of the U.S. business. Double-digit growth stacked on top of double-digit growth in the prior year, and primarily driven by transactions. Averaging across all markets outside of the U.S., we have nearly doubled our AUV since the start of 2022. In the UK, AUVs now exceed $2.5 million, leading our UK brand partner to accelerate growth and expand to more than 40 units. Our newest markets, Canada, Puerto Rico, Korea, are executing that UK playbook and achieving record sales weeks. We believe our new markets are scaling awareness on a curve that draws parallels to the success we are experiencing in the UK. The strength we're having in our global development and visibility into our pipeline gives us the confidence to increase our 2024 outlook to a range of 275 to 295 net new restaurants. This implies a unit growth rate well above our three- to five-year target of 10% plus. The strength of the Wingstop business and our execution against our strategy that has proven us a strong standing power continue to position us on a path to achieve our vision of becoming a top-10 global restaurant brand. I truly believe at Wingstop, we have the most talented team in the industry. I want to thank the entire Wingstop team, all of our team members in the restaurant, and in our global support center, our supplier partners, and our brand partners for their dedication to serving the world's flavor. With that, I'd like to turn the call over to Alan.

Thank you, Michael. As you just heard, our first quarter results showcase the incredible momentum of the Wingstop brand and the continued strength and focus we have in executing our strategy. We delivered .8% growth in system-wide sales in the first quarter, resulting in our first billion-dollar quarter. Our AUV is now above $1.9 million, and we have a clear line of sight to moving past our target of $2 million. System-wide sales growth is providing us with incredible fuel in our advertising fund to invest behind our proven strategy to sustain same-source growth. Total revenue increased .1% to $145.8 million versus the prior year. Royalty revenues, franchise fees, and other revenue increased by $18.9 million in Q1, driven primarily by 276 net franchise openings since the prior year comparable period, and a .6% increase in domestic same-store sales, primarily driven by transaction growth. Company-owned restaurant sales totaled $28.5 million in Q1, an increase of $5.5 million, primarily due to a .2% increase in company-owned same-store sales, driven primarily by transaction growth, and seven net new restaurants versus the prior year comparable period. Included in our company-owned restaurant portfolio is the original Wingstock, an almost -year-old restaurant that is one of the highest-selling restaurants in the system and is copying similar to the rest of our company-owned portfolio, a testament to the fact we haven't found a ceiling yet. Central to our strategy is maintaining our -in-class returns. We are encouraged by progress we have made in our supply chain strategy. As you have heard us say over the past few calls, creating predictability and minimizing volatility in our core commodity, bone-in wings, we believe this can create a flywheel for development. Working with our strategic supplier partners, we have been able to move the majority of our buy away from the spot market to provide our brand partners with more predictable food costs. Our target remains in the -30% food cost range, which translates to those industry-leading unleveraged -on-cash returns of more than 70% that Michael referenced earlier. Q1 results in company-owned restaurants showcase the effectiveness of our strategy. In an environment where that bone-in wing spot market increased 92% versus the prior year comparable period, company-owned restaurant food costs were in line with our target. Now moving on to SG&A. In the first quarter, SG&A increased by $1.5 million versus the prior year comparable period to a total of $25.2 million, driven by investments to support the long-term growth of the business and an increase in performance-based stock compensation, and were partially offset by non-recurring consulting fees in the prior year. The adjusted EBITDA, a non-GAAP measure, was $50.3 million during the quarter, an increase of .3% versus the prior year. This was on top of a quarter in 2023 that grew by nearly 60% in the prior year. Adjusting for non-recurring items, we delivered adjusted earnings per diluted share, a non-GAAP measure of $0.98, a 66% increase versus the prior year. Another core tenet in our strategy is to enhance shareholder returns. Our highly franchised asset-light model continues to deliver strong free cash flows. We are maintaining a strong cash balance that stands at over $100 million. And since our IPO, we have delivered a total shareholder return of nearly 2,500%, which clearly demonstrates our commitment to our strategy and our category one position. Following the completion of our $125 million accelerated share repurchase program in the second half of 2023, we remain committed to enhancing shareholder returns through a combination of our remaining $125 million share repurchase authorization and our regular quarterly dividend program. On April 30, our board of directors approved a dividend of 22 cents per share of common stock, a demonstration of the strength of our model. This dividend, totaling approximately $6.5 million, will be paid on June 7, 2024, to stockholders of record as of May 17, 2024. Now shifting to our outlook for 2024. Based on the strong start to the year, we are providing the following updates to our outlook. Domestic same-store sales growth of low double digits for fiscal year 2024, previously mid-single digits same-store sales growth, net new restaurants between 275 and 295, previously approximately 270 net new restaurants. For modeling purposes, we also want to highlight that we anticipate our pace of openings to be weighted more towards the second half of the year based on the visibility of our pipeline at this point in the year. SG&A guidance is estimated to be approximately $111 million, previously $108 million, including an approximately $20 million of stock-based compensation expense, which was previously $19 million. Our Q1 results are a testament to the resiliency of our strategies and focus we have to execute against our long-term vision. These results would not have been possible without the extraordinary efforts by our global support center team members, restaurant team members, brand partners, and supplier partners. We are excited by the start to the year and results that demonstrate the category one we believe we operate in. With that, I'd like to now turn to Q&A. Operator, please open the line for questions.

We will now begin the question and answer session. To ask a question, you may press star, then one, on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. We ask that you please limit yourself to one question and one follow-up. At this time, we will pause the Q&A session and ask momentarily to assemble our roster. The first question today comes from David Tarantino with Baird. Please go ahead.

Hi, good morning and congratulations on such a strong start to the year. My question is on the brand adoption curve that you're seeing. It seems like you're attracting a very new audience to the brand with all the things that you're doing in advertising and otherwise. I just wanted to ask, Michael, if you could share some metrics on what types of new customers you are attracting, where the brand awareness is with that cohort versus maybe where it was when you began this journey, and how much room for improvement on the brand awareness do you still have relative to the top QSR brands you might have referenced earlier?

Hey, David. Good morning. Thank you for the question. I think this is one of those really exciting components to our growth story and really what frames up the runway we have in the past. This is a group we've talked about over the past few years when we started on this journey. This group represented roughly, call it 60% of all QSR occasions and they had never heard of or tried Wingstop. We've made a lot of exciting progress with that group. This group is a little bit higher income. They tend to be Gen Z millennial. They're less likely to have kids at home. They over index to or prefer to engage with brands digitally. They actually over index to Boneless, which we really like, and they are demonstrating a higher level of frequency. We're pretty excited about, as we mentioned on our prepared remarks, Q1 marked yet another record quarter of new guest acquisition. We're making great progress there, but yet we have a huge runway in front of us. When we look at just over the last year, the progress we've made in brand awareness, we're talking about moving at a couple percentage points, David. We look at ourselves compared to other more mature QSR brands that are out there and our runway or the gap or opportunity we have in front of us is double digits, high double digits. A pretty meaningful opportunity that we have to continue to execute against. We're excited about the progress we've made, the growth that we're seeing in system cells that's fueling growth in our ad fund, allowing us to invest those dollars. We are seeing the frequency uptick a little bit, but yet Wingstop still remains a pretty low frequency brand where we're still averaging about three times a quarter once a month. We see a big opportunity to impact frequency over time.

Great. Thank you very much.

Thank you.

The next question comes from Jeffrey Bernstein with Barclays. Please go ahead.

Great. Thank you very much. You guys raised your full year 24 guidance for the comp from mid single to low double digit. It seems like a big increase into what many have noted as a slowing macro. I'm just wondering if you could talk a little bit about your level of confidence. I'm assuming first and foremost that's acknowledging that you've sustained momentum into April and you haven't really seen a change in trajectory. As long as that's the case, I'm just wondering within your business and the metrics you track, what are you looking for as a leading indicator of any kind of slowdown? Whether it's mix shift changes, frequency of visitation, just trying to follow up. Thank you.

Hey, Jeff. Good morning. We have a lot of confidence in the strength of the business and I think we have a lot of unique, very brand specific growth drivers that we're executing against. I mentioned the one around brand awareness, but there's several other elements to that strategy that we called that in our prepared remarks where we have meaningful runway against those opportunities in front of us. And so we feel confident in our ability to continue to execute our strategy and drive outsized growth. And I think it really, Q1 really is a testament to that where you saw us deliver a pretty outsized comp to the rest of the industry that's talking about consumer pullback and a lot of concern. And we delivered a .6% same source sales growth that almost entirely driven by transaction growth, which I think just speaks to the underlying health of the brand and the effectiveness of the strategy as it relates to our outlook for the balance of the year. We're confident in our ability to deliver on that. Obviously we have considered in that guide the macro backdrop, what you've heard a lot of other brands talk about around a consumer. So we have contemplated that in our guide.

Understood. And in terms of the follow up, in terms of investing in the business, obviously with 20 plus percent comp growth and a lot of that flowing through earnings and cash flow, it would seem like now is the time to double down on investments to strengthen the system for many years to come. And it seems like you guys are all about technology and whatnot. I'm just wondering if you could maybe prioritize what you think of the best returning investment priorities, whether it's the tech stack still or further supply chain investments or AI or whatnot. Again, what would you say are the top priorities in terms of incremental investments you should be making when the cash flow is so strong? Thank you.

Yeah, no, thank you. And Jeff, I would say it's a little bit of yes, yes, and yes. We think those are all areas that we have a meaningful opportunity to invest technology. One, we feel like we're quite a bit ahead of a lot of others. And it's more than just the investments we've made in our proprietary tech stack, MyWingStop, that we're in the middle of rolling out. But we've invested over the years in our data and enriching our data that we believe really gives us a competitive advantage for how we place media, how we market and lean into hyper-personalization, which MyWingStop will be an enabler of that. And so you'll see us continue to invest there. And then I think as it relates to the rest of the business, I think that's a little bit of the beauty of our model. We've been a brand when we see an opportunity to invest, we'll put our foot on the gas and position this brand for the long term and for growth. But the reality is we're an asset-like model that's generating a lot of cash flow that puts us in a position to what we believe is deliver outside shareholder returns.

The next question comes from Jim Solera with Stevens. Please go ahead.

Hi guys. Thanks for taking our question and congrats on the nice quarter. We noticed on the app, at least in my area, 70 cent boneless wing special to join kind of the boneless meal deal in the all-in bundles. At a time when QSR competitors seem to be leaning more into value, can you talk a little bit more about the strategy there, and particularly on the boneless awareness? Is that promotion a way to help improve the boneless mix and get it closer to kind of that 50-50 parity?

Hey Jim, good morning. I would say our 70 cent boneless promotion that you called out on Monday, Tuesday, that's actually something that's been around for I think as long as I've been with the brand, which is at least 10 years. So not necessarily anything new. That's a day where we can promote boneless wings and it's been something that's been successful for us over the years. But generally speaking, it's not a high mix promotion by any means. And I think you really hit on a point that highlights the uniqueness of Wingstop in our category of one positioning is with the combination of the quality and the operating excellence that we deliver within the four walls of the restaurant, as well as just the attention to detail that goes into the cook to order made from scratch nature of our products, and our disciplined approach to pricing, we've seen our quality and value scores quarter after quarter measure record levels. And I think that's really just putting us in a unique position in this environment to where that indulgent Wingstop occasion is something that we're able to deliver on. And as you can see in our Q1 results, consumers are choosing Wingstop when they do decide to spend some of those discretionary dollars on dining out. And so we're going to continue to lean in and execute on quality and value. And I think one other thing I would point out is if we look back over the years, we've been a brand that's been able to demonstrate growth, regardless of the macro economic backdrop, obviously 2023, marking our 20th consecutive year of same store sales growth, and then our start to 2024, puts us well on our way to our 21st.

Great, that's super helpful. And then if I can ask just a follow up on some of the throughput, you know, given that the average unit volume has scaled so rapidly, can you just talk about what's required from kind of a back of the house perspective to support that growth? You know, should we think about some of the stronger units as having kind of additional back of the house investments

to get to that, you know, above 2 million, 3 million AUV?

Yeah, Jim, I think you just need more chicken. The reality is, we haven't found the ceiling. We don't have a throughput issue within our brand, which is pretty incredible. Alex called out in his prepared remarks that the oldest restaurant in the system that is one of the highest volume restaurants in the system that is in our company owned portfolio is continuing to grow transactions and comp. And so I think it just highlights the capacity that we have within that efficient box. And then what we really like is the strength of our model with that low occupancy cost with our small footprint. You can only fit so many bodies in the back of the house. And so at some point, you start to gain some really nice leverage on the labor line as well, which I think you're seeing show up in the strength of our unit economics and the level of demand we have from brand partners for more growth.

The next question comes from Danello with Berenstein. Please go ahead.

Thank you. I actually wanted to double down exactly on this topic of throughput. You know, most of your peers are focusing on expediting the service, you know, increasing the speed of service, improving the throughput. So I'm wondering, you know, what is the average service time today at a typical wing stop and what kind of levers do you think you can pull, you know, to potentially like increase the speed of service without compromising on the quality of your wings?

Good morning. Thank you for the question. And it's actually an area that we see as we look longer term, we see as an opportunity for wing stop is you're right, we can get faster. There are some opportunities. We focused a lot of our technology investments over the year to the digital ordering experience, the consumer facing experience. And we see an opportunity to leverage technology over time in the back of the house that could improve speed. But obviously with our low frequency indulgent occasion, consumers are okay with the speed of service we offer today. But as we look out longer term, and as we're bringing in these new guests into the brand, we do see an opportunity to work on getting faster, which we believe combined with some of the other elements within our strategy could be an enabler to impacting frequency over time, is a really big opportunity. But our focus right now is being consistent and we're extremely focused on just operating within excellence, operating excellence within the four walls of the restaurant to deliver a great guest experience.

Thank you. And a quick follow up on the same vein. Another opportunity that you didn't mention today, but it was mentioned in the past is expanding the combination of sauces. Is it more on the consistency of the tenders? Is it about awareness? So what is the plan, the specific plans that you have in mind to expand the relevance of tenders?

Yeah, I think tenders are a lot like chicken sandwich where we believe we have a unique value proposition where we can not only deliver an incredible product cooked to order, but do it at a great price, which I think will continue to differentiate us. And that's the success we've had with chicken sandwich since the launch of chicken sandwich. And you're right, tenders are an opportunity for us down the road. I think it's one of those levers that we have that we can lean into and pull when the time is right, when we feel like it's the right thing for the business. And obviously that does feed into our supply chain strategy as we continue to use more of the bird. And so it fits in and works into the execution of that strategy as well. And as we get closer to the execution around us continuing to try to drive tenders mix, which today is low single digits, a meaningful opportunity for us. Well, obviously we'll talk about that when the time's right.

The next question comes from Sarah Senator with Bank of America. Please go ahead.

Thank you. I have a quick follow up on an earlier question from Jeff and then a question of my own, if I may. The first is I just want to take the other side of the low double digit comp side because I think it basically implies sort of a high single digit run rates for the rest of the year. So again, is that more just caution or is it something you're seeing? I know you mentioned being cognizant of the consumer, but I just wanted to kind of understand a little bit further the dynamics there. And then I'll have a question about advertising, please.

Hey, Sarah, good morning. You know, I think our guide, I mentioned it to Jeff earlier, we remain confident in our strategy. Obviously that had a lot to do with the guide that we did issue. You know, obviously we're one of the few brands out there that's increasing their outlook for the year, much less increasing it to something like low double digits. And so we have been cautious and considered the macro backdrop. You can even layer on top of that the uncertainty around an election later this year. We have contemplated all of that and we feel really good about our ability to deliver on what we guided to. And quite frankly, when you stack it on our results from 2023, it's something we're pretty proud of.

Got it. Thank you. And then I wanted to ask about, I guess, advertising in the sense of, I think there's sort of a view that and you touched on this a little bit, not only have you seen, you know, quantitatively, a much bigger ad spend as your system grows. But this is like the first year, I think, where qualitatively, you know, you talked about like being in the NFL playoffs and lead sponsor of NBA Prytime. And it just feels like, or there's, I think, a perception that these are, you know, this is like a step change in visibility, and you may have to lap them. So I guess, is that the right interpretation that this is, you know, that you sort of have an unprecedented step up in invisibility this year because of what you were able to sponsor and then, you know, it'll be a little bit slower going forward? Or, or do you feel like you still have, you know, opportunity to have other further step changes?

Yes, there. It's a great question. And, you know, I'll provide a little bit more context to our the exciting opportunity we had to show up for the first time as a brand in the NFL playoffs, which was a big deal for us. And we get a ton of feedback around how many people see our spots. And they see us everywhere, which is great. But the reality is, in a weekend where there were four playoff games, we had one spot on two of them. And so we had two spots that weekend. So there's still a ton of runway for us, particularly when you look at the opportunity around brand awareness. But we are a long ways away from some point of saturation as it relates to our presence on live sports. I think what you see in a lot of the comments we hear is just the fact that our creative is breakthrough, and it's getting people's attention. And we're being rewarded for that. And shown up in the results.

The next question comes from Brian Harbor with Morgan Stanley. Please go ahead.

Yeah, good morning. Michael, what's you mentioned you're sort of encouraged by the my wing stop tech stack rollout. What's encouraged you? I mean, is it just gone faster than you expected? Are you seeing sort of some of the tangible benefits of that so far? I was just curious about that.

Yeah, I would say it's a few things. Brian, the excitement within our brand partner community, within the team members in the restaurant, around the tool, the functionality that it provides them, the visibility, that's far exceeded our expectations and is really encouraging to hear. And then obviously, it's early days in the launch. But the launch is on schedule. We're not ahead of schedule. We're executing our plan and doing it at a very high level. But we are seeing early results around things like conversion that are exciting for us. And so we're really encouraged by what we see. And, you know, we think, as I mentioned in the comments earlier, as you couple this with the investments we've made in our data, this is an abler for us to continue to drive our digital business. And we believe over time can impact frequency. So we're pretty excited.

Okay, makes sense. What your development outlook for this year, is that mainly, you know, is the Delta mainly US or is any part of that international or any kind of new markets that we should look forward to there?

Yeah, I think it's the true and honest answer. It's everywhere. As you think about your model, I would consider kind of a similar ratio between international and US as we had in 2023.

Next question comes from Andrew Charles with TD Cowan. Please go ahead.

Great. Thank you. My first question is to follow up on my Wingstop platform. You know, it's been a month since the start of the launch there. And Michael, you mentioned that just with the improved CRM efforts, it's something over time that can lead to greater guest frequency. I imagine it can help kick it too, as you can mention people think they can add to their basket. So, you know, curious, what just needs to happen though, between now and ultimately driving guest frequency? What's kind of the nuts and bolts of what needs to happen before you can start to realize those check and frequency driving benefits?

Hey, Andrew. Good morning. I would say the main thing is once we complete the rollout of the engine, if you will, that will enable us to turn on or launch the guest ordering app and mobile web experience. So that's obviously a big catalyst for us continuing to optimize the experience with my Wingstop.

Okay. And then my thought is that just for the better than expected same-source sales and net restaurant growth performance in one queue as well as the outlook for this year, this is undoubtedly going to help you lead to an ad fund surplus versus what you'd budget at the beginning of the year. Is the plan to deploy this surplus in 2024? Would you rather hold on to this to deploy in 2025 to help you lap just another robust year?

Yeah, I don't think we have any plans on around building a surplus. Obviously, I mentioned earlier to Sarah, there's just a ton of opportunity and headroom for us to continue to lean in to a strategy that's working. And I think that's exactly what you'll see us do. We have, we believe we have a ton of momentum in the brand and to take these ad dollars and put them to work to continue to expand AUVs and enhance brand partner unit economics, I think will just kind of further fuel the flywheel that we're creating here.

The last question today comes from Chris McCall with Steeple. Please go ahead.

Thanks. Good morning, guys. I had a question about international markets and I was just wondering, are there any international markets where development has slowed or you've run into issues? And also, have current events altered the progress, Michael, of just signing new agreements? And then if you could maybe talk a little bit about the commitments, I know you talked about the overall commitments that you have from franchisees, but what about commitments in the pipeline for international development? That'd be helpful.

Hey, Chris. Good morning. I guess I would actually say it's quite the opposite in that Raj and I had dinner a few weeks ago with our partner for Canada, just to highlight an example. That conversation over dinner centered around how happy they were with the returns, with how the brand was resonating. And the conversation quickly moved from well past their current development agreement of call it 100 restaurants to Canada is a much bigger opportunity than that. And how can we go faster? And so we're encouraged by how the brand is resonating around the globe. And I wouldn't say any of the geopolitical or any of the unrest that's around the globe right now is impacting our progress or the level of interest we have from parties that are looking to grow with the brand. And we actually believe we'll have some with the strength we've talked about over the quarters in the development pipeline, we believe we'll have a few new deals to talk about over the coming quarters that we're pretty excited about that will just further grow and strengthen that pipeline of commitments.

All these deals going to be direct franchise to franchise relationships with you? Are you looking at master arrangements?

Yeah, I would say generally speaking, Chris, they're all direct. Obviously, I think use the UK as a great example where we have AUVs north of two and a half million dollars. There's no need for us to dilute our economics on that. And so we're looking to just be direct.

This concludes our question and answer session and concludes the conference call today. Thank you for attending today's presentation. You may now disconnect.