Wingstop Inc.

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Wingstop Fiscal Third Quarter 2024 Earnings Conference Call. All participants will be in 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, October 30th, 2024. On the call today are Michael Skipworth, President and Chief Executive Officer, and Alex Kolida, 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 our fiscal third quarter 2024 earnings conference call for Wingstop. Our results were published earlier this morning and are available on our investor relations website at ir.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 conditions. 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. Reconciliations to 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 in 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. We appreciate everyone joining our call. Our third quarter was another industry-leading quarter that showcases the staying power of our strategies and the multi-year benefits they provide. Before I dive into our results, I want to acknowledge that these results could not have been achieved without the tremendous effort by the entire Wingstop team. I want to thank team members in the restaurants and in our global support center, our brand partners, and our supplier partners for their relentless focus on executing our long-term strategy that has translated into another record quarter. Q3 domestic same-source sales growth was 20.9%, which continues to be primarily driven by transaction growth. putting us well on our way to our 21st consecutive year of same-store sales growth, an unprecedented track record. The AUV for our restaurants has now surpassed $2.1 million. This compares to $2 million just last quarter and $1.8 million in the prior year quarter, fueling our confidence in our ability to scale AUVs to $3 million over time. This AUV growth, combined with our supply chain strategy, continues to strengthen our industry-leading unit economics. The average investment to open a Wingstop remains at around $500,000, and our brand partners are seeing unlevered cash-on-cash returns in excess of 70%. This overall strength in the Wingstop business has translated to a record level of demand for growth from our brand partner community. And as we saw that excitement come to life in the third quarter, where we had a record Q3 for new restaurant development, we opened over 100 restaurants in the third quarter, delivering a unit growth rate of 17%. Truly remarkable. We are also seeing new unit productivity come out of the gates well ahead of the prior year vintage, which was already strong at roughly $1.6 million AUVs in the first year. This has translated into the strongest development pipeline on record for the brand. The effectiveness of our strategies and the excitement of our brand partner community to reinvest in Wingstop has allowed us to increase our net new restaurant target again. We now expect to open between 320 to 330 net new restaurants in 2024. Last quarter, we shared new targets for system AUVs and our total global restaurant opportunity. I'll spend a few minutes today discussing our path to achieving those targets, starting with our new AUV target of $3 million. While we have delivered some pretty remarkable growth over the past couple of years, we have incredible confidence in our long-term strategies as we look to the runway in front of us. These strategies consist of scaling brand awareness, menu innovation, expanding our delivery channel, data-driven marketing in our digital transformation. Brand awareness remains a huge opportunity for Wingstop. As we work toward our opportunity to scale brand awareness, we are leaning into our media strategy, focused on live sports and a very targeted approach in streaming and online video placements, combined with breakthrough creative that is proving to be highly effective. And this media strategy is being fueled by an ad fund that is growing at the same growth rate as system sales of approximately 40%. You've seen us show up in major events, including the start of the NFL and NBA season, as well as Thursday Night Football and Amazon Prime's pregame show. These media placements are helping us increase brand awareness and have contributed to record levels of new guest acquisitions. While we've delivered industry-leading same-store sales growth through the first three quarters of 2024, we have only moved brand awareness by a couple percentage points, highlighting the opportunity and potential we have in front of us. As we look to close out 2024, we're going to continue to invest our advertising dollars to expand our reach across platforms such as the NFL and NBA. We'll be on a lot more NFL and NBA games this year, and we're finding new ways to partner. A great example is an exciting new partnership we announced last week. Wingstop is now the official chicken partner and the official wing of the NBA. This is our first official sponsorship with a major professional sports league. The partnership will unlock opportunities we haven't been able to access in the past within the NBA, and it fits perfectly within our strategies. The past quarter marked our first full quarter with our proprietary tech stack, MyWingStop, which launched earlier this year. While we're still in the early days, I couldn't be more excited by what we're seeing in the results. As we have shared before, the first step was to operationalize the platform, moving over $2.5 billion of digital sales through our tech stack. Since the launch, we have introduced greater operational capabilities for our brand partners that increase visibility into their digital business and provide advanced analytics platform that drives insights across a variety of KPIs to drive restaurant-level profitability. I'm proud of the team and how seamless this transition was for our restaurants. My Wingstop also included enhancements to the guest experience. that focused on many of the insights we've developed over the years. We've made investments in our first-party database, building out rich guest profiles that allow us to unlock a whole new level of hyper-personalization. We're now beginning to welcome guests on our website and app with relevant, personalized, and optimized content that will only further improve over time. During the quarter, we hit a record level of app downloads and user sessions, both within our app and website. We measured a 10% improvement in order efficiency times, and product or flavors are now featured in AI-enabled personalized content. Digital sales mix is now at 69%, and our first-party database has increased by more than 35% compared to the prior year. Our technology investments advance an already best-in-class digital experience for our guests, and while enabling our aspirational goal of digitizing every transaction. I highlighted a couple of examples that give us confidence in our path to $3 million AUVs, which will just further strengthen our industry-leading unit economics. We also have made tremendous progress with our supply chain strategy in 2024 to mitigate the volatility in our core commodity. This is the first full year that strategy has taken effect. Historically, we had been anchored to a weekly spot market purchase for classic bone-in wings, and the spot market this year experienced a peak inflation window of nearly 200%. Our restaurants have been able to avoid that level of inflation and are seeing food costs within our targeted range of mid-30%. And we have line of sight into wing pricing into 2025 and 2026 as we continue to execute our strategy. This, coupled with our AUVs exceeding $2.1 million, has translated into record cash flows for our brand partners. And as a result, we're experiencing an unprecedented pace of growth for Wingstop. Q3 showcased this with a record 106 net new restaurants. To highlight the breadth and depth of our development, over 70 different brand partners have opened a restaurant this year, covering 28 states and 10 countries. To support our brand partners' aspirations for growth, We are executing market-level playbooks that match the trade area-level opportunities in our 6,000-plus domestic unit target to a schedule we feel will be sustainable as brand partners scale their infrastructure. Our international business also continues to be on fire. We recently capitalized on an opportunity to make our global presence known in France during the Olympics. showcasing our flavor in a big way by opening a pop-up restaurant that we called House of Flavor. We gave away nearly a half a million wings in just 10 days, with long lines of flavor fans wrapping around the venue, waiting to get into the pop-up to experience Wingstop for the first time. With the amount of excitement we generated, we believe this event will be a catalyst for future expansion in Western Europe. Shortly after our pop-up restaurant, we opened our first restaurants in Paris as we continue to execute a more aggressive development plan for the city and broader France. The opportunity in France is as large, if not greater, than what we're building towards in the UK. And when we combine our opportunity to expand France with other markets recently signed, we believe we can deliver over 750 restaurants across these new international markets alone. We have a clear playbook for international markets, and I truly believe our international business is supercharged for growth, which we expect to become a bigger part of our story as we scale Wingsop to more than 10,000 restaurants across the globe. It's pretty incredible to see the demand for growth from our brand partner community, as well as how guests are responding to the brand as we expand our footprint across the globe. Before I turn the call over to Alex, I'm excited to announce a new partnership for Wingstop. During the month of October, 100% of contributions received from our Roundup program will be donated to St. Jude's Children's Research Hospital. As our business continues to drive industry-leading growth, our obligation to give back grows as well. The work that is happening at St. Jude's is remarkable, and we believe our brand partners, team members, and fans will embrace the opportunity to contribute to St. Jude's life-saving mission, finding a cure for childhood cancer. 2024 is shaping up to be another record year for Wingstop, but yet we feel like we are just getting started. Our strategies have proven staying power, and we are laser-focused on execution as we scale Wingstop into a top 10 global restaurant brand. It is truly an exciting time at Wingstop. With that, I'd like to turn the call over to Alex.