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Item 2. Management’s Discussion and Analysis

2024-10-31 compared with 2024-08-01 · 126 added, 123 removed, 330 unchanged (43% of the section changed)

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Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (the “Form 10-K”).

There have been no material changes as of June 30, 2024 to the application of our critical accounting policies as described in Item 7 of the Form 10-K.

There have been no material changes as of September 29, 2024 to the application of our critical accounting policies as described in Item 7 of the Form 10-K.

Certain statements we make under this Item 2 constitute “forward-looking statements” under the Private Securities Litigation Reform Act of 1995.

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and 31 foreign countries and U.S.

territories as of June 30, 2024.

territories as of September 29, 2024.

Each Wendy’s restaurant offers an extensive menu specializing in hamburger sandwiches and featuring filet of chicken breast sandwiches, which are prepared to order with the customer’s choice of toppings and condiments.

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The Company’s fiscal reporting periods consist of 52 or 53 weeks ending on the Sunday closest to December 31.

All three- six-and month periods presented herein contain 13 weeks and 26 weeks, respectively.

All three- and nine-month periods presented herein contain 13 weeks and 39 weeks, respectively.

All references to years, quarters and months relate to fiscal periods rather than calendar periods.

Executive Overview

As of June 30, 2024, the Wendy’s restaurant system was comprised of 7,261 restaurants, with 6,013 Wendy’s restaurants in operation in the U.S.

As of September 29, 2024, the Wendy’s restaurant system was comprised of 7,292 restaurants, with 6,011 Wendy’s restaurants in operation in the U.S.

restaurants, 398 were operated by the Company and 5,613 were operated by a total of 210 franchisees.

In addition, at June 30, 2024, there were 1,248 Wendy’s restaurants in operation in 31 foreign countries and U.S.

In addition, at September 29, 2024, there were 1,281 Wendy’s restaurants in operation in 31 foreign countries and U.S.

Of the international restaurants, 1,268 were operated by a total of 109 franchisees and 13 were operated by the Company in the United Kingdom (the “U.K.”).

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(1) sales at Company-operated restaurants and (2) franchise-related revenues, including royalties, national advertising funds contributions, rents and franchise fees received from Wendy’s franchised restaurants.

Company-operated restaurants comprised approximately 5% of the total Wendy’s system as of June 30, 2024.

Company-operated restaurants comprised approximately 5% of the total Wendy’s system as of September 29, 2024.

Wendy’s operating results are impacted by a number of external factors, including commodity costs, labor costs, intense price competition, unemployment and consumer spending levels, general economic and market trends and weather.

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Because all companies do not calculate non-GAAP financial measures in the same way, this measure as used by other companies may not be consistent with the way the Company calculates such measure.

Second Quarter Financial Highlights

• Revenue increased 1.6% to $570.7 million in the second quarter of 2024 compared with $561.6 million in the second quarter of 2023;

Third Quarter Financial Highlights

• Revenue increased 2.9% to $566.7 million in the third quarter of 2024 compared with $550.6 million in the third quarter of 2023;

• Global same-restaurant sales increased 0.2%, U.S.

same-restaurant sales increased 0.6% and international same-restaurant sales increased 2.5% compared with the second quarter of 2023.

same-restaurant sales increased 0.2% and international same-restaurant sales increased 0.7% compared with the third quarter of 2023.

On a two-year basis, global same-restaurant sales increased 3.0%;

• Global Company-operated restaurant margin was 15.8% in the second quarter of 2024, a decrease of 70 basis points compared with the second quarter of 2023;

• Net income decreased 8.4% to $54.6 million in the second quarter of 2024 compared with $59.6 million in the second quarter of 2023.

• Global Company-operated restaurant margin was 15.1% in the third quarter of 2024, an increase of 10 basis points compared with the third quarter of 2023;

• Net income decreased 13.5% to $50.2 million in the third quarter of 2024 compared with $58.0 million in the third quarter of 2023.

Year-to-Date Financial Highlights

• Revenue increased 1.4% to $1.11 billion in the first six months of 2024 compared with $1.09 billion in the first six months of 2023;

• Revenue increased 1.9% to $1.67 billion in the first nine months of 2024 compared with $1.64 billion in the first nine months of 2023;

• Global same-restaurant sales increased 0.7%, U.S.

same-restaurant sales increased 0.6% and international same-restaurant sales increased 2.8% compared with the first six months of 2023.

same-restaurant sales increased 0.5% and international same-restaurant sales increased 2.1% compared with the first nine months of 2023.

On a two-year basis, global same-restaurant sales increased 5.9%;

• Global Company-operated restaurant margin was 15.3% in the first six months of 2024, an increase of 10 basis points compared with the first six months of 2023;

• Net income decreased 2.9% to $96.6 million in the first six months of 2024 compared with $99.5 million in the first six months of 2023.

• Global Company-operated restaurant margin was 15.2% in the first nine months of 2024, an increase of 10 basis points compared with the first nine months of 2023;

• Net income decreased 6.8% to $146.9 million in the first nine months of 2024 compared with $157.5 million in the first nine months of 2023.

Global Same-Restaurant Sales

Wendy’s long-term growth opportunities include driving same-restaurant sales across all dayparts through quality differentiation, exciting menu innovation and compelling value offerings.

Global same-restaurant sales increased 0.8% in the second quarter of 2024 and increased 5.9% on a two-year basis.

Global same-restaurant sales increased 0.9% in the first six months of 2024 and increased 7.4% on a two-year basis.

Global same-restaurant sales increased 0.2% in the third quarter of 2024 and increased 3.0% on a two-year basis.

Global same-restaurant sales increased 0.7% in the first nine months of 2024 and increased 5.9% on a two-year basis.

To drive same-restaurant sales across the breakfast daypart, the Company plans to fund approximately $22.0 million of incremental breakfast advertising in 2024.

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The Company is also continuing to make digital investments and is partnering with key technology providers to help execute our digital, restaurant technology and enterprise technology initiatives and support our technology innovation and growth.

During the second quarter of 2023, the Company revised its definition of digital sales to reflect our full digital portfolio by including in-restaurant mobile scans, in addition to our previously included delivery, mobile order and kiosk digital channels.

The Company’s digital business has continued to grow and, under the revised definition, digital sales as a percent of global systemwide sales increased from approximately 12.7% during the first six months of 2023 to approximately 16.9% during the first six months of 2024.

The Company’s digital business has continued to grow and digital sales as a percent of global systemwide sales increased from approximately 12.8% during the first nine months of 2023 to approximately 17.1% during the first nine months of 2024.

New Restaurant Development

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To promote new restaurant development, the Company has provided franchisees with certain incentive programs for qualifying new restaurants, in addition to our build to suit development fund.

In July 2024, Wendy’s announced a new development incentive structure in the U.S.

that provides for reductions in royalty and national advertising fees for qualifying new restaurants for two, three or four years of operation based on the number of restaurants committed to under the development agreement.

In July and September 2024, Wendy’s announced a new development incentive structure in the U.S.

and Canada and select international markets, respectively, that provides for reductions in royalty and national advertising fees for qualifying new restaurants for two, three or four years of operation based on the number of restaurants committed to under the development agreement.

In addition, the Company has development agreements in place with a number of franchisees that contractually obligate such franchisees to open additional Wendy’s restaurants over a specified timeframe.

During the six months ended June 30, 2024, Wendy’s added 21 net new restaurants across the system.

During the nine months ended September 29, 2024, Wendy’s added 52 net new restaurants across the system.

Organizational Redesign

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Of the total costs, approximately $15 million will be cash expenditures expected through 2026.

Costs related to the Organizational Redesign Plan are recorded to “Reorganization and realignment costs.” During the six months ended June 30, 2024, the Company recognized costs totaling $8.0 million, which primarily included severance and related employee costs.

The Company expects to incur additional costs aggregating approximately $1.2 million, comprised of (1) severance and related employee costs of approximately $0.4 million and (2) share-based compensation of approximately $0.8 million.

Costs related to the Organizational Redesign Plan are recorded to “Reorganization and realignment costs.” During the nine months ended September 29, 2024, the Company recognized costs totaling $8.3 million, which primarily included severance and related employee costs.

The Company expects to incur additional costs aggregating approximately $0.8 million, comprised primarily of share-based compensation.

The Company expects costs related to the Organizational Redesign Plan to continue into 2026.

Results of Operations

The tables included throughout this Results of Operations set forth in millions the Company’s condensed consolidated results of operations for the second quarter and the first six months of 2024 and 2023.

Second Quarter Six Months

The tables included throughout this Results of Operations set forth in millions the Company’s condensed consolidated results of operations for the third quarter and the first nine months of 2024 and 2023.

Third Quarter Nine Months

2024 2023 Change 2024 2023 Change

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Net income $ 50.2 $ 58.0 $ (7.8) $ 146.9 $ 157.5 $ (10.6)

Second Quarter Six Months

Third Quarter Nine Months

Total Revenues 2023 % of

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$ 566.7 100.0 % $ 550.6 100.0 % $ 1,672.2 100.0 % $ 1,640.9 100.0 %

Second Quarter Six Months

Third Quarter Nine Months

Sales 2023 % of

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Total cost of sales $ 195.6 84.9 % $ 199.5 85.0 % $ 587.6 84.8 % $ 597.1 84.9 %

Second Quarter Six Months

Third Quarter Nine Months

Sales 2023 % of

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The table below presents certain of the Company’s key business measures, which are defined and further discussed in the “Executive Overview” section included herein.

Second Quarter Six Months

Third Quarter Nine Months

2024 2023 2024 2023

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(a) Excludes Argentina due to the impact of that country’s highly inflationary economy.

(b) During the second quarter of 2024 and 2023, global systemwide sales increased 2.6% and 6.9%, respectively, U.S.

(b) During the third quarter of 2024 and 2023, global systemwide sales increased 1.8% and 4.8%, respectively, U.S.

systemwide sales increased 0.9% and 3.6%, respectively, and international systemwide sales increased 7.7% and 13.6%, respectively, on a constant currency basis.

During the first six months of 2024 and 2023, global systemwide sales increased 2.6% and 8.4% respectively, U.S.

During the first nine months of 2024 and 2023, global systemwide sales increased 2.3% and 7.2% respectively, U.S.

systemwide sales increased 1.4% and 6.0%, respectively, and international systemwide sales increased 8.3% and 15.6%, respectively, on a constant currency basis.

Second Quarter

Third Quarter

Company-operated U.S.

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Restaurant count:

Restaurant count at March 31, 2024

Restaurant count at June 30, 2024

399 5,614 12 1,236 7,261

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Closed — (24) — (9) (33)

Restaurant count at June 30, 2024

Net (sold to) purchased by franchisees (1) 1 — — —

Restaurant count at September 29, 2024

398 5,613 13 1,268 7,292

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Closed (6) (78) — (27) (111)

Restaurant count at June 30, 2024

Net (sold to) purchased by franchisees (1) 1 — — —

Restaurant count at September 29, 2024

398 5,613 13 1,268 7,292

Sales Second Quarter Six Months

Sales Third Quarter Nine Months

2024 2023 Change 2024 2023 Change

Sales $ 230.4 $ 234.7 $ (4.3) $ 693.1 $ 703.4 $ (10.3)

The decrease in sales during the second quarter and the first six months of 2024 was primarily due to (1) a 1.3% and 1.1% decrease in global Company-operated same-restaurant sales of $3.4 million and $5.2 million, respectively, and (2) net closures of Company-operated restaurants of $0.6 million and $2.3 million, respectively.

The decrease in sales during the third quarter and the first nine months of 2024 was primarily due to (1) a 1.6% and 1.3% decrease in global Company-operated same-restaurant sales of $4.1 million and $9.4 million, respectively, and (2) net closures of Company-operated restaurants of $0.3 million and $2.2 million, respectively.

Company-operated same-restaurant sales decreased due to a decrease in customer count, partially offset by higher average check.

Franchise Royalty Revenue and Fees Second Quarter Six Months

Franchise Royalty Revenue and Fees Third Quarter Nine Months

2024 2023 Change 2024 2023 Change

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$ 153.9 $ 149.4 $ 4.5 $ 458.0 $ 444.0 $ 14.0

Franchise royalty revenue during the second quarter of 2024 increased $4.2 million, of which (1) $1.7 million was due to net new restaurant development and (2) $1.5 million was due to a 1.0% increase in global franchise same-restaurant sales.

Franchise royalty revenue during the first six months of 2024 increased $7.7 million, of which (1) $3.4 million was due to net new restaurant development and (2) $3.1 million was due to a 1.0% increase in global franchise same-restaurant sales.

Franchise same-restaurant sales during the second quarter and first six months of 2024 increased due to higher average check, partially offset by a decrease in customer count.

The increase in franchise fees during the first six months of 2024 was primarily due to (1) higher fees for providing information technology services to franchisees of $0.8 million and (2) an increase in other miscellaneous franchise fees of $0.9 million.

Franchise Rental Income Second Quarter Six Months

Franchise royalty revenue during the third quarter of 2024 increased $2.5 million, of which (1) $2.1 million was due to net new restaurant development and (2) $0.7 million was due to a 0.4% increase in global franchise same-restaurant sales.

Franchise royalty revenue during the first nine months of 2024 increased $10.3 million, of which (1) $6.1 million was due to net new restaurant development and (2) $3.9 million was due to a 0.8% increase in global franchise same-restaurant sales.

Franchise same-restaurant sales during the third quarter and first nine months of 2024 increased due to higher average check, partially offset by a decrease in customer count.

The increase in franchise fees during the third quarter and the first nine months of 2024 was primarily due to (1) higher fees for providing information technology services to franchisees of $0.5 million and $1.3 million, respectively, and (2) an increase in other miscellaneous franchise fees of $1.5 million and $2.4 million, respectively.

Franchise Rental Income Third Quarter Nine Months

2024 2023 Change 2024 2023 Change

Franchise rental income $ 59.3 $ 57.6 $ 1.7 $ 177.9 $ 173.4 $ 4.5

The increase in franchise rental income during the second quarter and the first six months of 2024 was primarily due to amending certain existing leases and entering into new leases.

Advertising Funds Revenue Second Quarter Six Months

The increase in franchise rental income during the third quarter and the first nine months of 2024 was primarily due to (1) the impact of amending certain existing leases of $1.3 million and $2.8 million, respectively, (2) the impact of entering into new leases of $0.6 million and $1.6 million, respectively, and (3) an increase in executory costs of $0.3 million and $0.7 million, respectively.

See Note 11 to the Condensed Consolidated Financial Statements contained in Item 1 herein for further information.

Advertising Funds Revenue Third Quarter Nine Months

2024 2023 Change 2024 2023 Change

Advertising funds revenue $ 123.1 $ 108.9 $ 14.2 $ 343.2 $ 320.1 $ 23.1

The increase in advertising funds revenue during the second quarter and the first six months of 2024 was primarily due to (1) net new restaurant development of $1.7 million and $3.1 million, respectively, (2) an increase in franchise same-restaurant sales in the U.S.

and Canada of $1.0 million and $1.9 million, respectively, and (3) higher other miscellaneous advertising revenues of $1.5 million and $2.0 million, respectively.

Cost of Sales, as a Percent of Sales Second Quarter Six Months

The increase in advertising funds revenue during the third quarter of 2024 was primarily due to promotional activity of $12.0 million.

During the first nine months of 2024, advertising funds revenue also increased due to (1) net new restaurant development of $4.5 million and (2) an increase in franchise same-restaurant sales in the U.S.

and Canada of $2.3 million.

Cost of Sales, as a Percent of Sales Third Quarter Nine Months

2024 2023 Change 2024 2023 Change

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84.9 % 85.0 % (0.1) % 84.8 % 84.9 % (0.1) %

The increase in cost of sales, as a percent of sales, during the second quarter of 2024 was primarily due to (1) an increase in restaurant labor costs and (2) a decrease in customer count.

These impacts were partially offset by higher average check.

The decrease in cost of sales, as a percent of sales, during the first six months of 2024 was primarily due to (1) higher average check and (2) higher investments to support the entry into the U.K.

market and additional inflationary pressures in the U.K.

in the prior year.

These impacts were partially offset by (1) an increase in restaurant labor costs and (2) a decrease in customer count.

Franchise Support and Other Costs Second Quarter Six Months

The decrease in cost of sales, as a percent of sales, during the third quarter and the first nine months of 2024 was primarily due to (1) higher average check and (2) labor efficiencies.

These impacts were partially offset by (1) an increase in restaurant labor rates and (2) a decrease in customer count.

Franchise Support and Other Costs Third Quarter Nine Months

2024 2023 Change 2024 2023 Change

Franchise support and other costs $ 16.0 $ 14.8 $ 1.2 $ 47.0 $ 41.9 $ 5.1

The increase in franchise support and other costs during the second quarter and the first six months of 2024 was primarily due to an increase in costs incurred to provide information technology and other services to franchisees.

Franchise Rental Expense Second Quarter Six Months

The increase in franchise support and other costs during the third quarter and the first nine months of 2024 was primarily due to an increase in costs incurred to provide information technology and other services to franchisees.

Franchise Rental Expense Third Quarter Nine Months

2024 2023 Change 2024 2023 Change

Franchise rental expense $ 32.2 $ 31.9 $ 0.3 $ 96.4 $ 94.9 $ 1.5

The increase in franchise rental expense during the first six months of 2024 was primarily due to the impact of assigning certain leases to franchisees.

Advertising Funds Expense Second Quarter Six Months

The increase in franchise rental expense during the first nine months of 2024 was primarily due to an increase in executory costs.

See Note 11 to the Condensed Consolidated Financial Statements contained in Item 1 herein for further information.

Advertising Funds Expense Third Quarter Nine Months

2024 2023 Change 2024 2023 Change

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The Company expects advertising funds expense to be higher than advertising funds revenue by approximately $22.0 million for 2024, which represents the Company’s plan to fund incremental breakfast advertising.

The increase in advertising funds expense during the second quarter and the first six months of 2024 was primarily due to (1) the recognition of the expected Company breakfast advertising spend in excess of advertising funds revenue of $5.7 million and $8.2 million, respectively, and (2) an increase in franchise same-restaurant sales in the U.S.

General and Administrative Second Quarter Six Months

The increase in advertising funds expense during the third quarter and the first nine months of 2024 was primarily due to (1) the same factors as described above for “Advertising Funds Revenue” and (2) the recognition of the expected Company breakfast advertising spend in excess of advertising funds revenue of $6.6 million and $14.8 million, respectively.

General and Administrative Third Quarter Nine Months

2024 2023 Change 2024 2023 Change

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$ 62.8 $ 59.3 $ 3.5 $ 188.0 $ 184.3 $ 3.7

The decrease in general and administrative expenses during the second quarter of 2024 was primarily due to (1) a decrease in incentive compensation accruals, reflecting lower operating performance as compared to plan in 2024 versus 2023, and (2) a decrease in professional fees, primarily as a result of costs associated with the Company’s human capital management (“HCM”) system implementation completed in the third quarter of 2023.

These decreases were partially offset by higher employee compensation and benefits.

The increase in general and administrative expenses during the first six months of 2024 was primarily due to (1) higher employee compensation and benefits and (2) higher share-based compensation.

These increases were partially offset by (1) a decrease in incentive compensation accruals, reflecting lower operating performance as compared to plan in 2024 versus 2023, and (2) a decrease in professional fees, primarily as a result of costs associated with the Company’s HCM system implementation completed in the third quarter of 2023.

Depreciation and Amortization (exclusive of amortization of cloud computing arrangements shown separately below) Second Quarter Six Months

The increase in general and administrative expenses during the third quarter of 2024 was primarily due to (1) higher employee compensation and benefits and (2) an increase in professional fees.

These increases were partially offset by a decrease in incentive compensation accruals, reflecting lower operating performance as compared to plan in 2024 versus 2023.

The increase in general and administrative expenses during the first nine months of 2024 was primarily due to (1) higher employee compensation and benefits and (2) higher share-based compensation.

These increases were partially offset by a decrease in incentive compensation accruals, reflecting lower operating performance as compared to plan in 2024 versus 2023.

Depreciation and Amortization (exclusive of amortization of cloud computing arrangements shown separately below) Third Quarter Nine Months

2024 2023 Change 2024 2023 Change

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$ 37.0 $ 34.3 $ 2.7 $ 110.0 $ 101.3 $ 8.7

The increase in depreciation and amortization during the second quarter and the first six months of 2024 was primarily due to (1) asset additions for new and remodeled restaurants and (2) depreciation and amortization for technology investments.

Amortization of Cloud Computing Arrangements Second Quarter Six Months

The increase in depreciation and amortization during the third quarter and the first nine months of 2024 was primarily due to (1) asset additions for new and remodeled restaurants and (2) depreciation and amortization for technology investments.

Amortization of Cloud Computing Arrangements Third Quarter Nine Months

2024 2023 Change 2024 2023 Change

Amortization of cloud computing arrangements $ 3.6 $ 3.8 $ (0.2) $ 10.6 $ 7.7 $ 2.9

The increase in amortization of cloud computing arrangements during the second quarter and the first six months of 2024 was primarily due to amortization of assets associated with the Company’s HCM system implementation completed in the third quarter of 2023.

System Optimization Gains, Net Second Quarter Six Months

The increase in amortization of cloud computing arrangements during the first nine months of 2024 was primarily due to amortization of assets associated with the Company’s human capital management (“HCM”) system implementation completed in the third quarter of 2023.

System Optimization Gains, Net Third Quarter Nine Months

2024 2023 Change 2024 2023 Change

System optimization gains, net $ (0.4) $ (0.1) $ (0.3) $ (0.6) $ (0.1) $ (0.5)

System optimization gains, net for the second quarter and the first six months of 2024 were primarily comprised of post-closing adjustments on sales of restaurants.

System optimization gains, net for the third quarter and the first nine months of 2024 were primarily comprised of post-closing adjustments on sales of restaurants.

See Note 3 to the Condensed Consolidated Financial Statements contained in Item 1 herein for further information.

Reorganization and Realignment Costs Second Quarter Six Months

Reorganization and Realignment Costs Third Quarter Nine Months

2024 2023 Change 2024 2023 Change

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$ 0.4 $ 0.6 $ (0.2) $ 8.5 $ 8.1 $ 0.4

The increase in reorganization and realignment costs during the second quarter and the first six months of 2024 was primarily due to higher severance and related employee costs under the Organizational Redesign Plan.

During the first nine months of 2024 and 2023, the Company recognized costs under the Organizational Redesign Plan of $8.3 million and $8.0 million, respectively, which primarily included severance and related employee costs.

See Note 4 to the Condensed Consolidated Financial Statements contained in Item 1 herein for further information on the Organizational Redesign Plan.

Costs incurred under the Company’s other reorganization and realignment plans were not material during the three and six months ended June 30, 2024 and July 2, 2023.

Costs incurred under the Company’s other reorganization and realignment plans were not material during the three and nine months ended September 29, 2024 and October 1, 2023.

The Company does not expect to incur any material additional costs under these plans.

Impairment of Long-Lived Assets Second Quarter Six Months

Impairment of Long-Lived Assets Third Quarter Nine Months

2024 2023 Change 2024 2023 Change

Impairment of long-lived assets $ 0.2 $ 0.1 $ 0.1 $ 2.9 $ 0.5 $ 2.4

The increase in impairment of long-lived assets during the second quarter and the first six months of 2024 was primarily due to higher impairment charges as a result of the deterioration in operating performance of certain Company-operated restaurants.

Other Operating Income, Net Second Quarter Six Months

The increase in impairment of long-lived assets during the first nine months of 2024 was primarily due to higher impairment charges as a result of the deterioration in operating performance of certain Company-operated restaurants.

Other Operating Income, Net Third Quarter Nine Months

2024 2023 Change 2024 2023 Change

Lease buyout $ 1.7 $ (0.2) $ 1.9 $ 2.2 $ (0.2) $ 2.4

Equity in earnings in joint venture, net 3.1 3.0 0.1 8.6 8.0 0.6

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$ 5.1 $ 3.1 $ 2.0 $ 11.4 $ 9.4 $ 2.0

The increase in other operating income during the first six months of 2024 was primarily due to an increase in the equity in earnings from our TimWen joint venture.

Interest Expense, Net Second Quarter Six Months

The increase in other operating income during the third quarter and the first nine months of 2024 was primarily due to an increase in lease buyout activity.

Interest Expense, Net Third Quarter Nine Months

2024 2023 Change 2024 2023 Change

Interest expense, net $ 31.3 $ 31.0 $ 0.3 $ 92.8 $ 93.8 $ (1.0)

The decrease in interest expense, net during the second quarter and the first six months of 2024 was primarily due to lower outstanding long-term debt.

Loss on Early Extinguishment of Debt Second Quarter Six Months

The decrease in interest expense, net during the first nine months of 2024 was primarily due to lower outstanding long-term debt.

Loss on Early Extinguishment of Debt Third Quarter Nine Months

2024 2023 Change 2024 2023 Change

Loss on early extinguishment of debt $ — $ 0.3 $ (0.3) $ — $ 1.6 $ (1.6)

During the first quarter of 2023, the Company incurred a loss on early extinguishment of debt of $1.3 million related to the repurchase of $31.6 million in principal of the Company’s 7% debentures.

Investment Loss, Net Second Quarter Six Months

During the first nine months of 2023, the Company incurred a loss on early extinguishment of debt of $1.6 million related to the repurchase of $39.3 million in principal of the Company’s 7% debentures.

Investment Loss, Net Third Quarter Nine Months

2024 2023 Change 2024 2023 Change

Investment loss, net $ — $ — $ — $ — $ 10.4 $ (10.4)

During the second quarter and the first six months of 2023, the Company recorded a loss of $6.8 million and $10.4 million, respectively, due to impairment charges for the difference between the estimated fair value and the carrying value of an investment in equity securities.

Other Income, Net Second Quarter Six Months

During the first nine months of 2023, the Company recorded a loss of $10.4 million due to impairment charges for the difference between the estimated fair value and the carrying value of an investment in equity securities.

Other Income, Net Third Quarter Nine Months

2024 2023 Change 2024 2023 Change

Other income, net $ 6.3 $ 7.7 $ (1.4) $ 19.4 $ 22.5 $ (3.1)

The decrease in other income, net during the second quarter and the first six months of 2024 was primarily due to a decrease in interest income, reflecting lower balances of cash equivalents.

Provision for Income Taxes Second Quarter Six Months

The decrease in other income, net during the third quarter and the first nine months of 2024 was primarily due to a decrease in interest income, reflecting lower balances of cash equivalents.

Provision for Income Taxes Third Quarter Nine Months

2024 2023 Change 2024 2023 Change

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27.9 % 25.5 % 2.4 % 27.3 % 25.8 % 1.5 %

Our effective tax rates for the second quarter and the first six months of 2024 and 2023 were impacted by variations in income before income taxes, adjusted for recurring items such as non-deductible expenses and state income taxes, as well as non-recurring discrete items.

The increase in the effective tax rate for the second quarter and the first six months of 2024 was primarily due to (1) an increase in the tax effects of our foreign operations, (2) a decrease in the benefit from share-based compensation and (3) lower net income from our national advertising funds, which are not subject to tax.

During the first six months of 2024, these changes were partially offset by a one-time adjustment to our foreign deferred income taxes related to prior periods.

The effective tax rates for the third quarter and the first nine months of 2024 and 2023 were impacted by variations in income before income taxes, adjusted for recurring items such as non-deductible expenses and state income taxes, as well as non-recurring discrete items.

The increase in the effective tax rate for the third quarter of 2024 was primarily due to (1) an increase in the tax effects of our foreign operations, (2) a decrease in the benefit from share-based compensation and (3) an increase in state income taxes, including discrete changes to state deferred income taxes.

The increase in the effective tax rate for the first nine months of 2024 was primarily due to (1) an increase in the tax effects of our foreign operations and (2) a decrease in the benefit from share-based compensation.

These changes were partially offset by a one-time adjustment to our foreign deferred income taxes related to prior periods.

Numerous countries have enacted the Organization of Economic Corporation and Development’s framework on a global minimum tax (referred to as “Pillar 2”), with the earliest effective date for taxable years beginning after December 31, 2023.

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See Note 16 to the Condensed Consolidated Financial Statements contained in Item 1 herein for further information regarding the Company’s segments.

Second Quarter Six Months

Third Quarter Nine Months

2024 2023 Change 2024 2023 Change

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The increase in Wendy’s U.S.

revenues during the second quarter and the first six months of 2024 was primarily due to (1) net new franchise restaurant development and (2) an increase in franchise same-restaurant sales.

Franchise same-restaurant sales increased during the second quarter and the first six months of 2024 primarily due to higher average check, partially offset

by a decrease in customer count.

revenues during the third quarter and the first nine months of 2024 was primarily due to (1) higher advertising fund revenue and (2) net new franchise restaurant development.

During the first nine months of 2024, revenues also increased due to higher franchise same-restaurant sales.

Franchise same-restaurant sales increased during the first nine months of 2024 primarily due to higher average check, partially offset by a decrease in customer count.

These increases were partially offset by a decrease in Company-operated sales driven by the same factors as described above for “Sales.”

The decrease in Wendy’s U.S.

segment profit during the second quarter and the first six months of 2024 was primarily due to (1) an increase in the Company’s funding of incremental advertising, (2) a decrease in Company-operated sales and (3) higher franchise support and other costs.

segment profit during the third quarter and the first nine months of 2024 was primarily due to (1) an increase in the Company’s funding of incremental advertising and (2) a decrease in Company-operated sales.

During the first nine months of 2024, segment profit also decreased due to higher franchise support and other costs.

These changes were partially offset by an increase in franchise royalty revenue and fees.

Wendy’s International

Second Quarter Six Months

Third Quarter Nine Months

2024 2023 Change 2024 2023 Change

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Segment profit $ 11.0 $ 10.8 $ 0.2 $ 32.4 $ 26.8 $ 5.6

The increase in Wendy’s International revenues during the second quarter and the first six months of 2024 was primarily due to (1) an increase in franchise same-restaurant sales and (2) net new restaurant development.

Franchise same-restaurant sales increased during the second quarter and the first six months of 2024 due to higher average check, partially offset by a decrease in customer count.

The increase in Wendy’s International segment profit during the second quarter and the first six months of 2024 was primarily due to higher revenues.

This increase was partially offset by higher franchise support and other costs.

The increase in Wendy’s International revenues during the third quarter and the first nine months of 2024 was primarily due to (1) net new restaurant development and (2) an increase in franchise same-restaurant sales.

Franchise same-restaurant sales increased during the third quarter and the first nine months of 2024 due to higher average check, partially offset by a decrease in customer count.

The increase in Wendy’s International segment profit during the third quarter and the first nine months of 2024 was primarily due to higher revenues.

This increase was partially offset by higher advertising fund expenses.

Global Real Estate & Development

Second Quarter Six Months

Third Quarter Nine Months

2024 2023 Change 2024 2023 Change

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Segment profit $ 27.2 $ 24.4 $ 2.8 $ 79.5 $ 76.0 $ 3.5

The increase in Global Real Estate & Development revenues during the second quarter and the first six months of 2024 was primarily due to higher franchise rental income as a result of (1) amending certain existing leases and entering into new leases and (2) increases in percent rent and executory costs.

These increases were partially offset by lower development-related fees.

The increase in Global Real Estate & Development segment profit during the second quarter and the first six months of 2024 was primarily due to higher revenues.

During the first six months of 2024, this increase was partially offset by higher franchise rental expense driven by the same factors as described above for “Franchise Rental Expense.”

The increase in Global Real Estate & Development revenues during the third quarter and the first nine months of 2024 was primarily due to higher franchise rental income as a result of (1) amending certain existing leases, (2) entering into new leases and (3) an increase executory costs.

The increase in Global Real Estate & Development segment profit during the third quarter and the first nine months of 2024 was primarily due to (1) higher revenues and (2) an increase in lease buyout activity.

These increases were partially offset by higher franchise rental expense driven by the same factors as described above for “Franchise Rental Expense.”

Liquidity and Capital Resources

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However, there can be no assurance that additional liquidity will be readily available or available on terms acceptable to us.

The table below summarizes our cash flows from operating, investing and financing activities for the first six months of 2024 and 2023:

The table below summarizes our cash flows from operating, investing and financing activities for the first nine months of 2024 and 2023:

2024 2023 Change

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Cash provided by operating activities consists primarily of net income, adjusted for non-cash expenses such as depreciation and amortization, deferred income tax and share-based compensation, and the net change in operating assets and liabilities.

Cash provided by operating activities was $145.5 million and $141.5 million in the first six months of 2024 and 2023, respectively.

The change was primarily due to a decrease in cash paid for cloud computing arrangements, partially offset by lower net income, adjusted for non-cash expenses.

Cash provided by operating activities was $286.7 million and $269.5 million in the first nine months of 2024 and 2023, respectively.

The change was primarily due to (1) a decrease in cash paid for cloud computing arrangements and (2) the timing of payments for marketing expenses of the national advertising funds.

These changes were partially offset by lower net income, adjusted for non-cash expenses.

Investing Activities

Cash used in investing activities was $44.0 million and $28.9 million in the first six months of 2024 and 2023, respectively.

The change was primarily due to (1) an increase in expenditures associated with the Company’s franchise development fund of $11.1 million and (2) an increase in capital expenditures of $4.3 million.

Cash used in investing activities was $68.8 million and $55.5 million in the first nine months of 2024 and 2023, respectively.

The change was primarily due to an increase in expenditures associated with the Company’s franchise development fund of $19.1 million, partially offset by (1) a decrease in capital expenditures of $3.3 million and (2) an increase in proceeds from dispositions of $2.9 million.

Financing Activities

Cash used in financing activities was $162.4 million and $246.3 million in the first six months of 2024 and 2023, respectively.

The change was primarily due to (1) a decrease in repurchases of the Company’s common stock of $52.7 million and (2) a decrease in repayments of long-term debt of $31.8 million, reflecting the impact of repurchases of the Company’s 7% debentures in the first quarter of 2023.

Cash used in financing activities was $250.6 million and $373.2 million in the first nine months of 2024 and 2023, respectively.

The change was primarily due to (1) a decrease in repurchases of the Company’s common stock of $82.4 million and (2) a decrease in repayments of long-term debt of $39.3 million, reflecting the impact of repurchases of the Company’s 7% debentures during the first nine months of 2023.

Long-Term Debt, Including Current Portion

We may from time to time seek to repurchase portions of our outstanding long-term debt, including our 7% debentures and/or our senior secured notes, through open market purchases, privately negotiated transactions or otherwise.

No debt repurchases were made during the six months ended June 30, 2024.

No debt repurchases were made during the nine months ended September 29, 2024.

Future repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.

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There were no material changes to the Company’s debt obligations since December 31, 2023.

The Company was in compliance with its debt covenants as of June 30, 2024.

On March 15, 2024 and June 17, 2024, the Company paid quarterly cash dividends per share of $.25, aggregating $102.6 million.

On August 1, 2024, the Company announced a dividend of $.25 per share to be paid on September 17, 2024 to stockholders of record as of September 3, 2024.

If the Company pays regular quarterly cash dividends for the remainder of 2024 at the same rate as declared in the third quarter of 2024, the Company’s total cash requirement for dividends for the remainder of 2024 would be approximately $101.6 million based on the number of shares of its common stock outstanding at July 25, 2024.

The Company was in compliance with its debt covenants as of September 29, 2024.

On March 15, 2024, June 17, 2024, and September 17, 2024, the Company paid quarterly cash dividends per share of $.25, aggregating $153.4 million.

On October 31, 2024, the Company announced a dividend of $.25 per share to be paid on December 16, 2024 to stockholders of record as of December 2, 2024.

As a result, the Company expects that its total cash requirement for the fourth quarter of 2024 will be approximately $51.0 million based on the number of shares of its common stock outstanding at October 24, 2024.

The Company currently intends to continue to declare and pay quarterly cash dividends;

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In January 2023, our Board of Directors authorized a repurchase program for up to $500.0 million of our common stock through February 28, 2027, when and if market conditions warrant and to the extent legally permissible (the “January 2023 Authorization”).

During the six months ended June 30, 2024, the Company repurchased 2.0 million shares under the January 2023 Authorization with an aggregate purchase price of $34.4 million, of which $0.8 million was accrued as of June 30, 2024, and excluding excise tax and commissions.

As of June 30, 2024, the Company had $275.6 million of availability remaining under the January 2023 Authorization.

Subsequent to June 30, 2024 through July 25, 2024, the Company repurchased 0.9 million shares under the January 2023 Authorization with an aggregate purchase price of $15.6 million, excluding applicable excise tax and commissions.

During the nine months ended September 29, 2024, the Company repurchased 3.4 million shares under the January 2023 Authorization with an aggregate purchase price of $59.6 million, of which $0.2 million was accrued as of September 29, 2024, and excluding excise tax and commissions.

As of September 29, 2024, the Company had $250.4 million of availability remaining under the January 2023 Authorization.

Subsequent to September 29, 2024 through October 24, 2024, the Company repurchased 0.2 million shares under the January 2023 Authorization with an aggregate purchase price of $2.7 million, excluding applicable excise tax and commissions.

General Inflation, Commodities and Changing Prices

Inflationary pressures on labor directly impacted our consolidated results of operations during the six months ended June 30, 2024, and we expect this to continue throughout the remainder of 2024.

Inflationary pressures on labor directly impacted our consolidated results of operations during the nine months ended September 29, 2024, and we expect this to continue throughout the remainder of 2024.

We attempt to manage any inflationary costs and commodity price increases through selective menu price increases and product mix.

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Quantitative and Qualitative Disclosures about Market Risk.

As of June 30, 2024 there were no material changes from the information contained in the Company’s Form 10-K for the fiscal year ended December 31, 2023.

As of September 29, 2024 there were no material changes from the information contained in the Company’s Form 10-K for the fiscal year ended December 31, 2023.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis