EX-99.1 2 d908356dex991.htm EX-99.1 EX-99.1

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THE WENDY’S COMPANY REPORTS THIRD QUARTER 2024 RESULTS

Dublin, Ohio (October 31, 2024) - The Wendy’s Company (Nasdaq: WEN) today reported unaudited results for the third quarter ended September 29, 2024.

“Wendy’s restaurants continued to deliver sales growth during the third quarter, maintaining overall traffic and dollar share in the QSR burger category,” said Kirk Tanner, President and Chief Executive Officer. “We continued to strengthen the relationship with our customers through our digital and loyalty platforms while driving growth for the breakfast and late-night dayparts. We expect to build on this progress into the close of this year with exciting new programming to showcase our craveable core, impactful innovation, and relevant value offerings.”

Third Quarter 2024 Summary

See “Disclosure Regarding Non-GAAP Financial Measures” and the reconciliation tables that accompany this release for a discussion and reconciliation of certain non-GAAP financial measures included in this release.

 

Operational Highlights    Third Quarter     Year-to-Date  
     2023     2024     2023     2024  

Systemwide Sales Growth(1)

        

U.S.

     3.6%       0.9%       6.0%       1.4%  

International(2)

     13.6%       7.7%       15.6%       8.3%  

Global

     4.8%       1.8%       7.2%       2.3%  

Same-Restaurant Sales Growth(1)

        

U.S.

     2.2%       0.2%       4.7%       0.5%  

International(2)

     7.8%       0.7%       9.4%       2.1%  

Global

     2.8%       0.2%       5.2%       0.7%  

Systemwide Sales (In US$ Millions)(3)

        

U.S.

     $3,113       $3,141       $9,242       $9,375  

International(2)

     $467       $495       $1,347       $1,439  

Global

     $3,580       $3,636       $10,589       $10,813  

Restaurant Openings

        

U.S. - Total / Net

     27 / 17       22 / (2)       66 / 16       65 / (19)  

International - Total / Net

     45 / 34       42 / 33       86 / 55       98 / 71  

Global - Total / Net

     72 / 51       64 / 31       152 / 71       163 / 52  

Quarter End Restaurant Count

        

U.S.

         6,010       6,011  

International

         1,156       1,281  

Global

         7,166       7,292  

Global Reimaging Completion Percentage

         83%       89%  

(1) Systemwide sales growth and same-restaurant sales growth are calculated on a constant currency basis and include sales by both Company-operated and franchise restaurants.

(2) Excludes Argentina.

(3) Systemwide sales include sales at both Company-operated and franchise restaurants.

 

 

 

 

 

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Financial Highlights    Third Quarter   Year-to-Date
     2023   2024   B / (W)   2023   2024   B / (W)
($ In Millions Except Per Share Amounts)    (Unaudited)   (Unaudited)

Total Revenues

   $550.6   $566.7   2.9%   $1,640.9   $1,672.2   1.9%

Adjusted Revenues(1)

   $441.6   $443.6   0.5%   $1,320.8   $1,329.1   0.6%

U.S. Company-Operated Restaurant Margin

   15.6%   15.6%   — %   15.9%   15.8%   (0.1)%

General and Administrative Expense

   $59.3   $62.8   (5.9)%   $184.3   $188.0   (2.0)%

Operating Profit

   $101.6   $94.7   (6.8)%   $295.4   $275.3   (6.8)%

Reported Effective Tax Rate

   25.5%   27.9%   (2.4)%   25.8%   27.3%   (1.5)%

Net Income

   $58.0   $50.2   (13.4)%   $157.5   $146.9   (6.7)%

Adjusted EBITDA

   $139.2   $135.2   (2.9)%   $409.3   $406.1   (0.8)%

Reported Diluted Earnings Per Share

   $0.28   $0.25   (10.7)%   $0.74   $0.71   (4.1)%

Adjusted Earnings Per Share

   $0.27   $0.25   (7.4)%   $0.76   $0.75   (1.3)%

Cash Flows from Operations

         $269.5   $286.7   6.4%

Capital Expenditures

         $(55.7)   $(52.4)   6.0%

Free Cash Flow(2)

         $226.4   $234.1   3.4%

(1)  Total revenues less advertising funds revenue.

(2)  Cash flows from operations minus capital expenditures and the impact of our advertising funds.

Third Quarter Financial Highlights

Total Revenues

The increase in revenues resulted primarily from an increase in advertising funds revenue, an increase in franchise royalty revenue, and an increase in franchise fees. These were partially offset by lower Company-operated restaurant sales.

U.S. Company-Operated Restaurant Margin

U.S. Company-operated restaurant margin remained flat to the prior year. The impact of a higher average check and labor efficiencies was offset by labor rate inflation and customer count declines.

General and Administrative Expense

The increase in general and administrative expense was primarily driven by an increase in employee compensation and benefits and an increase in professional fees. These were partially offset by a decrease in incentive compensation accruals.

Operating Profit

The decrease in operating profit resulted primarily from an increase in the Company’s incremental investment in breakfast advertising, higher general and administrative expense, and higher depreciation. These were partially offset by higher franchise royalty revenue, higher other operating income, and higher franchise net rental income.

Net Income

The decrease in net income resulted primarily from a decrease in operating profit and a higher effective tax rate.

 

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Adjusted EBITDA

The decrease in adjusted EBITDA resulted primarily from the Company’s incremental investment in breakfast advertising and higher general administrative expense, partially offset by an increase in franchise royalty revenue, higher other operating income, and higher franchise net rental income.

Adjusted Earnings Per Share

The decrease in adjusted earnings per share was driven by a decrease in adjusted EBITDA, an increase in depreciation and a higher effective tax rate. These were partially offset by fewer shares outstanding as a result of the Company’s share repurchase program.

Year to Date Free Cash Flow

The increase in free cash flow resulted primarily from a decrease in cash paid for cloud computing arrangements and a decrease in capital expenditures. These were partially offset by the Company’s incremental investment in breakfast advertising.

Company Declares Quarterly Dividend

The Company announced today the declaration of its regular quarterly cash dividend of 25 cents per share. The dividend is payable on December 16, 2024, to shareholders of record as of December 2, 2024. The number of common shares outstanding as of October 24, 2024 was approximately 203.8 million.

Share Repurchases

The Company repurchased 1.5 million shares for $25.2 million in the third quarter of 2024. In the fourth quarter of 2024, the Company has repurchased 0.2 million shares for $2.7 million through October 24. As of October 24, approximately $247.7 million remains available under the Company’s existing share repurchase authorization that expires in February 2027.

2024 Outlook    

This release includes forward-looking projections for certain non-GAAP financial measures, including systemwide sales, adjusted EBITDA, adjusted earnings per share and free cash flow. The Company excludes certain expenses and benefits from adjusted EBITDA, adjusted earnings per share and free cash flow, such as the impact from our advertising funds, including the net change in the restricted operating assets and liabilities and any excess or deficit of advertising fund revenues over advertising fund expenses, impairment of long-lived assets, reorganization and realignment costs, system optimization gains, net, amortization of cloud computing arrangements, gain on early extinguishment of debt, net, and the timing and resolution of certain tax matters. Due to the uncertainty and variability of the nature and amount of those expenses and benefits, the Company is unable without unreasonable effort to provide projections of net income, earnings per share or net cash provided by operating activities, or a reconciliation of those projected measures.

During 2024 the Company Now Expects:

 

   

Global systemwide sales growth: ~3 percent

 

   

Adjusted earnings per share: $0.99 to $1.01

In Addition, the Company Continues to Expect:

 

   

Adjusted EBITDA: $535 to $545 million

 

   

Cash flows from operations: $365 to $385 million

 

   

Capital expenditures: $90 to $100 million

 

   

Free cash flow: $275 to $285 million

 

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Conference Call and Webcast Scheduled for 8:30 a.m. Today, October 31

The Company will host a conference call on Thursday, October 31 at 8:30 a.m. ET, with a simultaneous webcast from the Company’s Investor Relations website at www.irwendys.com. The related presentation materials are now available on the Company’s Investor Relations website. The live conference call will be available by telephone at (844) 200-6205 for domestic callers and (929) 526-1599 for international callers, both using event ID 838590. An archived webcast and presentation materials will be available on the Company’s Investor Relations website.

Company to Host Investor Day on March 5, 2025

The Company announced it will host an Investor Day on Wednesday, March 5, 2025. Due to limited capacity, attendance will be by invitation only. Additional details will be provided at a later date. The event will be accessible to all interested parties via live webcast from the Company’s Investor Relations website at www.irwendys.com.

Forward-Looking Statements

This release contains certain statements that are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Reform Act”). Generally, forward-looking statements include the words “may,” “believes,” “plans,” “expects,” “anticipates,” “intends,” “estimate,” “goal,” “upcoming,” “outlook,” “guidance” or the negation thereof, or similar expressions. In addition, all statements that address future operating, financial or business performance, strategies or initiatives, future efficiencies or savings, anticipated costs or charges, future capitalization, anticipated impacts of recent or pending investments or transactions and statements expressing general views about future results or brand health are forward-looking statements within the meaning of the Reform Act. Forward-looking statements are based on the Company’s expectations at the time such statements are made, speak only as of the dates they are made and are susceptible to a number of risks, uncertainties and other factors. For all such forward-looking statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Reform Act. The Company’s actual results, performance and achievements may differ materially from any future results, performance or achievements expressed or implied by the Company’s forward-looking statements.

Many important factors could affect the Company’s future results and cause those results to differ materially from those expressed in or implied by the Company’s forward-looking statements. Such factors include, but are not limited to, the following: (1) the impact of competition or poor customer experiences at Wendy’s restaurants; (2) adverse economic conditions or disruptions, including in regions with a high concentration of Wendy’s restaurants; (3) changes in discretionary consumer spending and consumer tastes and preferences; (4) the disruption to the Company’s business from COVID-19 and its impact on the Company’s results of operations, financial condition and prospects; (5) impacts to the Company’s corporate reputation or the value and perception of the Company’s brand; (6) the effectiveness of the Company’s marketing and advertising programs and new product development; (7) the Company’s ability to manage the impact of social media; (8) the Company’s ability to protect its intellectual property; (9) food safety events or health concerns involving the Company’s products; (10) our ability to deliver accelerated global sales growth and achieve or maintain market share across our dayparts; (11) the Company’s ability to achieve its growth strategy through new restaurant development and its Image Activation program; (12) the Company’s ability to effectively manage the acquisition and disposition of restaurants or successfully implement other strategic initiatives; (13) risks associated with leasing and owning significant amounts of real estate, including environmental matters; (14) risks associated with the Company’s international operations, including the ability to execute its international growth strategy; (15) changes in commodity and other operating costs; (16) shortages or interruptions in

 

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the supply or distribution of the Company’s products and other risks associated with the Company’s independent supply chain purchasing co-op; (17) the impact of increased labor costs or labor shortages; (18) the continued succession and retention of key personnel and the effectiveness of the Company’s leadership and organizational structure; (19) risks associated with the Company’s digital commerce strategy, platforms and technologies, including its ability to adapt to changes in industry trends and consumer preferences; (20) the Company’s dependence on computer systems and information technology, including risks associated with the failure or interruption of its systems or technology or the occurrence of cyber incidents or deficiencies; (21) risks associated with the Company’s securitized financing facility and other debt agreements, including compliance with operational and financial covenants, restrictions on its ability to raise additional capital, the impact of its overall debt levels and the Company’s ability to generate sufficient cash flow to meet its debt service obligations and operate its business; (22) risks associated with the Company’s capital allocation policy, including the amount and timing of equity and debt repurchases and dividend payments; (23) risks associated with complaints and litigation, compliance with legal and regulatory requirements and an increased focus on environmental, social and governance issues; (24) risks associated with the availability and cost of insurance, changes in accounting standards, the recognition of impairment or other charges, changes in tax rates or tax laws and fluctuations in foreign currency exchange rates; (25) conditions beyond the Company’s control, such as adverse weather conditions, natural disasters, hostilities, social unrest, health epidemics or pandemics or other catastrophic events; and (26) other risks and uncertainties cited in the Company’s releases, public statements and/or filings with the Securities and Exchange Commission, including those identified in the “Risk Factors” sections of the Company’s Forms 10-K and 10-Q.

In addition to the factors described above, there are risks associated with the Company’s predominantly franchised business model that could impact its results, performance and achievements. Such risks include the Company’s ability to identify, attract and retain experienced and qualified franchisees, the Company’s ability to effectively manage the transfer of restaurants between and among franchisees, the business and financial health of franchisees, the ability of franchisees to meet their royalty, advertising, development, reimaging and other commitments, participation by franchisees in brand strategies and the fact that franchisees are independent third parties that own, operate and are responsible for overseeing the operations of their restaurants. The Company’s predominantly franchised business model may also impact the ability of the Wendy’s system to effectively respond and adapt to market changes.

All future written and oral forward-looking statements attributable to the Company or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements contained or referred to above. New risks and uncertainties arise from time to time, and factors that the Company currently deems immaterial may become material, and it is impossible for the Company to predict these events or how they may affect the Company.

The Company assumes no obligation to update any forward-looking statements after the date of this release as a result of new information, future events or developments, except as required by federal securities laws, although the Company may do so from time to time. The Company does not endorse any projections regarding future performance that may be made by third parties.

There can be no assurance that any additional regular quarterly cash dividends will be declared or paid after the date hereof, or of the amount or timing of such dividends, if any. Future dividend payments, if any, are subject to applicable law, will be made at the discretion of the Board of Directors and will be based on factors such as the Company’s earnings, financial condition and cash requirements and other factors.

 

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Disclosure Regarding Non-GAAP Financial Measures

In addition to the financial measures presented in this release in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), the Company has included certain non-GAAP financial measures in this release, including adjusted revenue, adjusted EBITDA, adjusted earnings per share, free cash flow and systemwide sales.

The Company uses adjusted revenue, adjusted EBITDA, adjusted earnings per share and systemwide sales as internal measures of business operating performance and as performance measures for benchmarking against the Company’s peers and competitors. Adjusted EBITDA and systemwide sales are also used by the Company in establishing performance goals for purposes of executive compensation. The Company believes its presentation of adjusted revenue, adjusted EBITDA, adjusted earnings per share and systemwide sales provides a meaningful perspective of the underlying operating performance of our current business and enables investors to better understand and evaluate our historical and prospective operating performance. The Company believes these non-GAAP financial measures are important supplemental measures of operating performance because they eliminate items that vary from period to period without correlation to our core operating performance and highlight trends in our business that may not otherwise be apparent when relying solely on GAAP financial measures. Due to the nature and/or size of the items being excluded, such items do not reflect future gains, losses, expenses or benefits and are not indicative of our future operating performance. The Company believes investors, analysts and other interested parties use adjusted revenue, adjusted EBITDA, adjusted earnings per share and systemwide sales in evaluating issuers, and the presentation of these measures facilitates a comparative assessment of the Company’s operating performance in addition to the Company’s performance based on GAAP results.

This release also includes disclosure regarding the Company’s free cash flow. Free cash flow is a non-GAAP financial measure that is used by the Company as an internal measure of liquidity. Free cash flow is also used by the Company in establishing performance goals for purposes of executive compensation. The Company defines free cash flow as cash flows from operations minus (i) capital expenditures and (ii) the net change in the restricted operating assets and liabilities of the advertising funds and any excess/deficit of advertising funds revenue over advertising funds expense included in net income, as reported under GAAP. The impact of our advertising funds is excluded because the funds are used solely for advertising and are not available for the Company’s working capital needs. The Company may also make additional adjustments for certain non-recurring or unusual items to the extent identified in the reconciliation tables that accompany this release. The Company believes free cash flow is an important liquidity measure for investors and other interested persons because it communicates how much cash flow is available for working capital needs or to be used for repurchasing shares, paying dividends, repaying or refinancing debt, financing possible acquisitions or investments or other uses of cash.

Adjusted revenue, adjusted EBITDA, adjusted earnings per share, free cash flow and systemwide sales are not recognized terms under GAAP, and the Company’s presentation of these non-GAAP financial measures does not replace the presentation of the Company’s financial results in accordance with GAAP. Because all companies do not calculate adjusted revenue, adjusted EBITDA, adjusted earnings per share, free cash flow and systemwide sales (and similarly titled financial measures) in the same way, those measures as used by other companies may not be consistent with the way the Company calculates such measures. The non-GAAP financial measures included in this release should not be construed as substitutes for or better indicators of the Company’s performance than the most directly comparable GAAP financial measures. See the reconciliation tables that accompany this release for additional information regarding certain of the non-GAAP financial measures included herein.

 

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Key Business Measures

The Company tracks its results of operations and manages its business using certain key business measures, including same-restaurant sales, systemwide sales and Company-operated restaurant margin, which are measures commonly used in the quick-service restaurant industry that are important to understanding Company performance.

Same-restaurant sales and systemwide sales each include sales by both Company-operated and franchise restaurants. The Company reports same-restaurant sales for new restaurants after they have been open for 15 continuous months and for reimaged restaurants as soon as they reopen. Restaurants temporarily closed for more than one fiscal week are excluded from same-restaurant sales.

Franchise restaurant sales are reported by our franchisees and represent their revenues from sales at franchised Wendy’s restaurants. Sales by franchise restaurants are not recorded as Company revenues and are not included in the Company’s consolidated financial statements. However, the Company’s royalty revenues are computed as percentages of sales made by Wendy’s franchisees and, as a result, sales by franchisees have a direct effect on the Company’s royalty revenues and profitability.

Same-restaurant sales and systemwide sales exclude sales from Argentina due to the highly inflationary economy of that country.

The Company calculates same-restaurant sales and systemwide sales growth on a constant currency basis. Constant currency results exclude the impact of foreign currency translation and are derived by translating current year results at prior year average exchange rates. The Company believes excluding the impact of foreign currency translation provides better year over year comparability.

U.S. Company-operated restaurant margin is defined as sales from U.S. Company-operated restaurants less cost of sales divided by sales from U.S. Company-operated restaurants. Cost of sales includes food and paper, restaurant labor and occupancy, advertising and other operating costs. Cost of sales excludes certain costs that support restaurant operations that are not allocated to individual restaurants, which are included in “General and administrative.” Cost of sales also excludes depreciation and amortization expense and impairment of long-lived assets. Therefore, as restaurant margin as presented excludes certain costs as described above, its usefulness may be limited and may not be comparable to other similarly titled measures of other companies in our industry.

About Wendy’s

Wendy’s® was founded in 1969 by Dave Thomas in Columbus, Ohio. Dave built his business on the premise, “Quality is our Recipe®,” which remains the guidepost of the Wendy’s system. Wendy’s is best known for its made-to-order square hamburgers, using fresh, never frozen beef*, freshly-prepared salads, and other signature items like chili, baked potatoes and the Frosty® dessert. The Wendy’s Company (Nasdaq: WEN) is committed to doing the right thing and making a positive difference in the lives of others. This is most visible through the Company’s support of the Dave Thomas Foundation for Adoption® and its signature Wendy’s Wonderful Kids® program, which seeks to find a loving, forever home for every child waiting to be adopted from the North American foster care system. Today, Wendy’s and its franchisees employ hundreds of thousands

 

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of people across over 7,000 restaurants worldwide with a vision of becoming the world’s most thriving and beloved restaurant brand. For details on franchising, connect with us at www.wendys.com/franchising. Visit www.wendys.com and www.squaredealblog.com for more information and connect with us on X and Instagram using @wendys, and on Facebook at www.facebook.com/wendys.

*Fresh beef available in the contiguous U.S., Alaska, and Canada.

Investor Contact:

Aaron Broholm

Head of Investor Relations

(614) 764-3345; aaron.broholm@wendys.com

Media Contact:

Heidi Schauer

Vice President – Communications, Public Affairs & Customer Care

(614) 764-3368; heidi.schauer@wendys.com

 

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The Wendy’s Company and Subsidiaries

Condensed Consolidated Statements of Operations

Three and Nine Month Periods Ended October 1, 2023 and September 29, 2024

(In Thousands Except Per Share Amounts)

(Unaudited)

 

     Three Months Ended     Nine Months Ended  
     2023     2024     2023     2024  

Revenues:

        

Sales

   $ 234,721     $ 230,403     $ 703,358     $ 693,081  

Franchise royalty revenue

     130,088       132,601       384,366       394,599  

Franchise fees

     19,257       21,267       59,704       63,439  

Franchise rental income

     57,567       59,314       173,407       177,938  

Advertising funds revenue

     108,922       123,154       320,092       343,162  
  

 

 

   

 

 

   

 

 

   

 

 

 
     550,555       566,739       1,640,927       1,672,219  
  

 

 

   

 

 

   

 

 

   

 

 

 

Costs and expenses:

        

Cost of sales

     199,522       195,638       597,068       587,637  

Franchise support and other costs

     14,806       16,047       41,853       47,011  

Franchise rental expense

     31,876       32,237       94,901       96,405  

Advertising funds expense

     107,895       129,732       319,174       357,923  

General and administrative

     59,288       62,794       184,306       188,047  

Depreciation and amortization (exclusive of amortization of cloud computing arrangements shown separately below)

     34,288       36,996       101,258       110,006  

Amortization of cloud computing arrangements

     3,844       3,576       7,692       10,637  

System optimization gains, net

     (120     (420     (119     (573

Reorganization and realignment costs

     611       354       8,100       8,479  

Impairment of long-lived assets

     59       178       513       2,873  

Other operating income, net

     (3,117     (5,068     (9,174     (11,564
  

 

 

   

 

 

   

 

 

   

 

 

 
     448,952       472,064       1,345,572       1,396,881  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating profit

     101,603       94,675       295,355       275,338  

Interest expense, net

     (30,957     (31,270     (93,798     (92,800

Loss on early extinguishment of debt

     (319     —        (1,585     —   

Investment (loss) income, net

     —        —        (10,389     11  

Other income, net

     7,637       6,246       22,546       19,382  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     77,964       69,651       212,129       201,931  

Provision for income taxes

     (19,915     (19,427     (54,627     (55,071
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 58,049     $ 50,224     $ 157,502     $ 146,860  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income per share:

        

Basic

   $ .28     $ .25     $ .75     $ .72  

Diluted

     .28       .25       .74       .71  

Number of shares used to calculate basic income per share

     208,834       203,264       210,668       204,518  
  

 

 

   

 

 

   

 

 

   

 

 

 

Number of shares used to calculate diluted income per share

     210,602       204,254       212,853       205,803  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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The Wendy’s Company and Subsidiaries

Condensed Consolidated Balance Sheets

As of December 31, 2023 and September 29, 2024

(In Thousands Except Par Value)

(Unaudited)

 

     December 31,
2023
    September 29,
2024
 

ASSETS

    

Current assets:

    

Cash and cash equivalents

   $ 516,037     $ 482,224  

Restricted cash

     35,848       35,180  

Accounts and notes receivable, net

     121,683       111,413  

Inventories

     6,690       6,251  

Prepaid expenses and other current assets

     39,640       32,816  

Advertising funds restricted assets

     117,755       115,329  
  

 

 

   

 

 

 

Total current assets

     837,653       783,213  

Properties

     891,080       894,200  

Finance lease assets

     228,936       235,780  

Operating lease assets

     705,615       686,286  

Goodwill

     773,727       773,187  

Other intangible assets

     1,219,129       1,199,413  

Investments

     34,445       31,758  

Net investment in sales-type and direct financing leases

     313,664       285,711  

Other assets

     178,577       183,675  
  

 

 

   

 

 

 

Total assets

   $ 5,182,826     $ 5,073,223  
  

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

    

Current liabilities:

    

Current portion of long-term debt

   $ 29,250     $ 29,250  

Current portion of finance lease liabilities

     20,250       21,952  

Current portion of operating lease liabilities

     49,353       50,578  

Accounts payable

     27,370       29,047  

Accrued expenses and other current liabilities

     135,149       128,734  

Advertising funds restricted liabilities

     120,558       113,511  
  

 

 

   

 

 

 

Total current liabilities

     381,930       373,072  

Long-term debt

     2,732,814       2,716,486  

Long-term finance lease liabilities

     568,767       567,242  

Long-term operating lease liabilities

     739,340       712,570  

Deferred income taxes

     270,353       270,089  

Deferred franchise fees

     90,132       89,300  

Other liabilities

     89,711       84,611  
  

 

 

   

 

 

 

Total liabilities

     4,873,047       4,813,370  

Commitments and contingencies

    

Stockholders’ equity:

    

Common stock, $0.10 par value; 1,500,000 shares authorized; 470,424 shares issued; 205,397 and 203,089 shares outstanding, respectively

     47,042       47,042  

Additional paid-in capital

     2,960,035       2,967,927  

Retained earnings

     409,863       403,259  

Common stock held in treasury, at cost; 265,027 and 267,335 shares, respectively

     (3,048,786     (3,097,785

Accumulated other comprehensive loss

     (58,375     (60,590
  

 

 

   

 

 

 

Total stockholders’ equity

     309,779       259,853  
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 5,182,826     $ 5,073,223  
  

 

 

   

 

 

 

 

10


The Wendy’s Company and Subsidiaries

Condensed Consolidated Statements of Cash Flows

Nine Month Periods Ended October 1, 2023 and September 29, 2024

(In Thousands)

(Unaudited)

 

     Nine Months Ended  
     2023     2024  

Cash flows from operating activities:

    

Net income

   $ 157,502     $ 146,860  

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation and amortization (exclusive of amortization of cloud computing arrangements shown separately below)

     101,258       110,006  

Amortization of cloud computing arrangements

     7,692       10,637  

Share-based compensation

     16,769       18,491  

Impairment of long-lived assets

     513       2,873  

Deferred income tax

     (502     (465

Non-cash rental expense, net

     30,724       31,973  

Change in operating lease liabilities

     (35,319     (36,461

Net receipt of deferred vendor incentives

     4,007       1,449  

System optimization (gains), net

     (119     (573

Distributions received from joint ventures, net of equity in earnings

     1,349       2,055  

Long-term debt-related activities, net

     7,310       5,609  

Cloud computing arrangements expenditures

     (25,154     (10,583

Changes in operating assets and liabilities and other, net

     3,495       4,810  
  

 

 

   

 

 

 

Net cash provided by operating activities

     269,525       286,681  
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Capital expenditures

     (55,689     (52,361

Franchise development fund

     (1,947     (21,040

Dispositions

     280       3,222  

Notes receivable, net

     1,825       1,383  
  

 

 

   

 

 

 

Net cash used in investing activities

     (55,531     (68,796
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Repayments of long-term debt

     (61,280     (21,937

Repayments of finance lease liabilities

     (16,947     (15,421

Repurchases of common stock

     (142,413     (60,056

Dividends

     (157,871     (153,411

Proceeds from stock option exercises

     9,113       4,651  

Payments related to tax withholding for share-based compensation

     (3,827     (4,395
  

 

 

   

 

 

 

Net cash used in financing activities

     (373,225     (250,569
  

 

 

   

 

 

 

Net cash used in operations before effect of exchange rate changes on cash

     (159,231     (32,684

Effect of exchange rate changes on cash

     307       (1,603
  

 

 

   

 

 

 

Net decrease in cash, cash equivalents and restricted cash

     (158,924     (34,287

Cash, cash equivalents and restricted cash at beginning of period

     831,801       588,816  
  

 

 

   

 

 

 

Cash, cash equivalents and restricted cash at end of period

   $ 672,877     $ 554,529  
  

 

 

   

 

 

 

 

11


The Wendy’s Company and Subsidiaries

Reconciliations of Net Income to Adjusted EBITDA and Revenues to Adjusted Revenues

Three and Nine Month Periods Ended October 1, 2023 and September 29, 2024

(In Thousands)

(Unaudited)

 

     Three Months Ended     Nine Months Ended  
     2023     2024     2023     2024  

Net income

   $ 58,049     $ 50,224     $ 157,502     $ 146,860  

Provision for income taxes

     19,915       19,427       54,627       55,071  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     77,964       69,651       212,129       201,931  

Other income, net

     (7,637     (6,246     (22,546     (19,382

Investment loss (income), net

     —        —        10,389       (11

Loss on early extinguishment of debt

     319       —        1,585       —   

Interest expense, net

     30,957       31,270       93,798       92,800  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating profit

     101,603       94,675       295,355       275,338  

Plus (less):

        

Advertising funds revenue

     (108,922     (123,154     (320,092     (343,162

Advertising funds expense (a)

     107,834       122,963       316,583       342,510  

Depreciation and amortization (exclusive of amortization of cloud computing arrangements shown separately below)

     34,288       36,996       101,258       110,006  

Amortization of cloud computing arrangements

     3,844       3,576       7,692       10,637  

System optimization gains, net

     (120     (420     (119     (573

Reorganization and realignment costs

     611       354       8,100       8,479  

Impairment of long-lived assets

     59       178       513       2,873  
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 139,197     $ 135,168     $ 409,290     $ 406,108  
  

 

 

   

 

 

   

 

 

   

 

 

 

Revenues

   $ 550,555     $ 566,739     $ 1,640,927     $ 1,672,219  

Less:

        

Advertising funds revenue

     (108,922     (123,154     (320,092     (343,162
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted revenues

   $ 441,633     $ 443,585     $ 1,320,835     $ 1,329,057  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(a)

Excludes advertising funds expense of $596 and $1,802 for the three and nine months ended October 1, 2023, respectively, and $6,599 and $14,773 for the three and nine months ended and September 29, 2024, respectively, related to the Company’s funding of incremental advertising. In addition, excludes other international-related advertising surplus (deficit) of $535 and $(789) for the three and nine months ended October 1, 2023, respectively, and $(170) and $(640) for the three and nine months ended September 29, 2024, respectively.

 

12


The Wendy’s Company and Subsidiaries

Reconciliation of Net Income and Diluted Earnings Per Share to

Adjusted Income and Adjusted Earnings Per Share

Three and Nine Month Periods Ended October 1, 2023 and September 29, 2024

(In Thousands Except Per Share Amounts)

(Unaudited)

 

     Three Months Ended     Nine Months Ended  
     2023     2024     2023     2024  

Net income

   $ 58,049     $ 50,224     $ 157,502     $ 146,860  
  

 

 

   

 

 

   

 

 

   

 

 

 

Plus (less):

        

Advertising funds revenue

     (108,922     (123,154     (320,092     (343,162

Advertising funds expense (a)

     107,834       122,963       316,583       342,510  

System optimization gains, net

     (120     (420     (119     (573

Reorganization and realignment costs

     611       354       8,100       8,479  

Impairment of long-lived assets

     59       178       513       2,873  

Loss on early extinguishment of debt

     319       —        1,585       —   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total adjustments

     (219     (79     6,570       10,127  

Income tax impact on adjustments (b)

     (187     (5     (2,272     (2,253
  

 

 

   

 

 

   

 

 

   

 

 

 

Total adjustments, net of income taxes

     (406     (84     4,298       7,874  
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted income

   $ 57,643     $ 50,140     $ 161,800     $ 154,734  
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted earnings per share

   $ .28     $ .25     $ .74     $ .71  

Total adjustments per share, net of income taxes

     (.01     —        .02       .04  
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted earnings per share

   $ .27     $ .25     $ .76     $ .75  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(a)

Excludes advertising funds expense of $596 and $1,802 for the three and nine months ended October 1, 2023, respectively, and $6,599 and $14,773 for the three and nine months ended September 29, 2024, respectively, related to the Company’s funding of incremental advertising. In addition, excludes other international-related advertising surplus (deficit) of $535 and $(789) for the three and nine months ended October 1, 2023, respectively, and $(170) and $(640) for the three and nine months ended September 29, 2024, respectively.

(b)

Adjustments relate to the tax effect of non-GAAP adjustments, which were determined based on the nature of the underlying non-GAAP adjustments and their relevant jurisdictional tax rates.

 

13


The Wendy’s Company and Subsidiaries

Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow

Nine Month Periods Ended October 1, 2023 and September 29, 2024

(In Thousands)

(Unaudited)

 

     Nine Months Ended  
     2023     2024  

Net cash provided by operating activities

   $ 269,525     $ 286,681  

Plus (less):

    

Capital expenditures

     (55,689     (52,361

Advertising funds impact (a)

     12,613       (244
  

 

 

   

 

 

 

Free cash flow

   $ 226,449     $ 234,076  
  

 

 

   

 

 

 

 

(a)

Represents the net change in the restricted operating assets and liabilities of our advertising funds, which is included in “Changes in operating assets and liabilities and other, net,” and the excess of advertising funds expense over advertising funds revenue, which is included in “Net income.”

 

14