Wendy's Co 10-Q

Item 1. Financial Statements. THE WENDY’S COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands Except Par Value) March 30, 2025 December 29, 2024 ASSETS (Unaudited) Current assets: Cash and cash equivalents $ 335,259 $ 450,512 Restricted cash 34,644 34,481 Accounts and notes receivable, net 102,474 99,926 Inventories 6,200 6,529 Prepaid expenses and other current assets 48,428 45,563 Advertising funds restricted assets 117,193 99,129 Total current assets 644,198 736,140 Properties 907,444 907,787 Finance lease assets 251,093 244,954 Operating lease assets 661,077 679,777 Goodwill 771,645 771,468 Other intangible assets 1,184,334 1,192,264 Investments 26,770 29,006 Net investment in sales-type and direct financing leases 285,936 288,048 Other assets 186,985 185,399 Total assets $ 4,919,482 $ 5,034,843 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Current portion of long-term debt $ 78,334 $ 78,163 Current portion of finance lease liabilities 23,035 22,509 Current portion of operating lease liabilities 50,348 50,068 Accounts payable 24,856 28,455 Accrued expenses and other current liabilities 138,945 118,224 Advertising funds restricted liabilities 117,987 100,212 Total current liabilities 433,505 397,631 Long-term debt 2,656,519 2,662,130 Long-term finance lease liabilities 584,238 575,363 Long-term operating lease liabilities 683,639 704,333 Deferred income taxes 262,549 263,420 Deferred franchise fees 88,057 88,387 Other liabilities 80,736 84,227 Total liabilities 4,789,243 4,775,491 Commitments and contingencies Stockholders’ equity: Common stock, $ 0.10 par value; 1,500,000 shares authorized; 470,424 shares issued; 195,846 and 203,834 shares outstanding, respectively 47,042 47,042 Additional paid-in capital 2,984,865 2,982,102 Retained earnings 389,481 399,700 Common stock held in treasury, at cost; 274,578 and 266,590 shares, respectively ( 3,218,308 ) ( 3,094,739 ) Accumulated other comprehensive loss ( 72,841 ) ( 74,753 ) Total stockholders’ equity 130,239 259,352 Total liabilities and stockholders’ equity $ 4,919,482 $ 5,034,843 See accompanying notes to condensed consolidated financial statements. 4 Table of Contents THE WENDY’S COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In Thousands Except Per Share Amounts) Three Months Ended March 30, 2025 March 31, 2024 (Unaudited) Revenues: Sales $ 219,510 $ 225,323 Franchise royalty revenue and fees 145,148 146,500 Franchise rental income 58,454 57,986 Advertising funds revenue 100,360 104,944 523,472 534,753 Costs and expenses: Cost of sales 188,169 192,113 Franchise support and other costs 16,596 14,742 Franchise rental expense 30,701 31,778 Advertising funds expense 101,528 107,374 General and administrative 68,204 63,757 Depreciation and amortization (exclusive of amortization of cloud computing arrangements shown separately below) 36,549 35,518 Amortization of cloud computing arrangements 4,167 3,542 System optimization losses, net 90 127 Reorganization and realignment costs ( 692 ) 5,673 Impairment of long-lived assets 1,421 2,006 Other operating income, net ( 6,387 ) ( 3,033 ) 440,346 453,597 Operating profit 83,126 81,156 Interest expense, net ( 31,477 ) ( 30,535 ) Investment loss, net ( 1,718 ) — Other income, net 4,986 6,836 Income before income taxes 54,917 57,457 Provision for income taxes ( 15,685 ) ( 15,464 ) Net income $ 39,232 $ 41,993 Net income per share: Basic $ .20 $ .20 Diluted $ .19 $ .20 See accompanying notes to condensed consolidated financial statements. 5 Table of Contents THE WENDY’S COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands) Three Months Ended March 30, 2025 March 31, 2024 (Unaudited) Net income $ 39,232 $ 41,993 Other comprehensive income (loss): Foreign currency translation adjustment 1,912 ( 4,586 ) Other comprehensive income (loss) 1,912 ( 4,586 ) Comprehensive income $ 41,144 $ 37,407 See accompanying notes to condensed consolidated financial statements. 6 Table of Contents THE WENDY’S COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (In Thousands) Common Stock Additional Paid-In Capital Retained Earnings Common Stock Held in Treasury Accumulated Other Comprehensive Loss Total (Unaudited) Balance at December 29, 2024 $ 47,042 $ 2,982,102 $ 399,700 $ ( 3,094,739 ) $ ( 74,753 ) $ 259,352 Net income — — 39,232 — — 39,232 Other comprehensive income — — — — 1,912 1,912 Cash dividends — — ( 49,432 ) — — ( 49,432 ) Repurchases of common stock — — — ( 125,399 ) — ( 125,399 ) Share-based compensation — 5,572 — — — 5,572 Common stock issued upon exercises of stock options — ( 130 ) — 326 — 196 Common stock issued upon vesting of restricted shares — ( 2,702 ) — 1,453 — ( 1,249 ) Other — 23 ( 19 ) 51 — 55 Balance at March 30, 2025 $ 47,042 $ 2,984,865 $ 389,481 $ ( 3,218,308 ) $ ( 72,841 ) $ 130,239 Balance at December 31, 2023 $ 47,042 $ 2,960,035 $ 409,863 $ ( 3,048,786 ) $ ( 58,375 ) $ 309,779 Net income — — 41,993 — — 41,993 Other comprehensive loss — — — — ( 4,586 ) ( 4,586 ) Cash dividends — — ( 51,374 ) — — ( 51,374 ) Repurchases of common stock — — — ( 7,216 ) — ( 7,216 ) Share-based compensation — 5,853 — — — 5,853 Common stock issued upon exercises of stock options — 179 — 1,036 — 1,215 Common stock issued upon vesting of restricted shares — ( 3,855 ) — 1,778 — ( 2,077 ) Other — 29 ( 17 ) 55 — 67 Balance at March 31, 2024 $ 47,042 $ 2,962,241 $ 400,465 $ ( 3,053,133 ) $ ( 62,961 ) $ 293,654 See accompanying notes to condensed consolidated financial statements. 7 Table of Contents THE WENDY’S COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) Three Months Ended March 30, 2025 March 31, 2024 (Unaudited) Cash flows from operating activities: Net income $ 39,232 $ 41,993 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) 36,549 35,518 Amortization of cloud computing arrangements 4,167 3,542 Share-based compensation 5,572 5,853 Impairment of long-lived assets 1,421 2,006 Deferred income tax 306 603 Non-cash rental expense, net 10,350 10,974 Change in operating lease liabilities ( 12,131 ) ( 12,112 ) Net receipt of deferred vendor incentives 11,178 8,584 System optimization losses, net 90 127 Distributions received from joint ventures, net of equity in earnings 717 430 Long-term debt-related activities, net 1,873 1,870 Cloud computing arrangements expenditures ( 2,417 ) ( 2,865 ) Changes in operating assets and liabilities and other, net ( 11,492 ) 3,464 Net cash provided by operating activities 85,415 99,987 Cash flows from investing activities: Capital expenditures ( 17,679 ) ( 17,354 ) Franchise development fund ( 5,813 ) ( 4,741 ) Dispositions 55 26 Notes receivable, net 1,949 1,256 Net cash used in investing activities ( 21,488 ) ( 20,813 ) Cash flows from financing activities: Proceeds from long-term debt 15,000 — Repayments of long-term debt ( 15,813 ) ( 7,313 ) Repayments of finance lease liabilities ( 5,238 ) ( 5,465 ) Repurchases of common stock ( 122,784 ) ( 7,295 ) Dividends ( 49,432 ) ( 51,374 ) Proceeds from stock option exercises 273 932 Payments related to tax withholding for share-based compensation ( 1,326 ) ( 2,115 ) Net cash used in financing activities ( 179,320 ) ( 72,630 ) Net cash (used in) provided by operations before effect of exchange rate changes on cash ( 115,393 ) 6,544 Effect of exchange rate changes on cash 744 ( 2,274 ) Net (decrease) increase in cash, cash equivalents and restricted cash ( 114,649 ) 4,270 Cash, cash equivalents and restricted cash at beginning of period 503,608 588,816 Cash, cash equivalents and restricted cash at end of period $ 388,959 $ 593,086 See accompanying notes to condensed consolidated financial statements. 8 Table of Contents THE WENDY’S COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In Thousands Except Per Share Amounts) (1) Basis of Presentation The accompanying unaudited condensed consolidated financial statements (the “Financial Statements”) of The Wendy’s Company (“The Wendy’s Company” and, together with its subsidiaries, the “Company,” “we,” “us” or “our”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and, therefore, do not include all information and footnotes required by GAAP for complete financial statements. In our opinion, the Financial Statements contain all adjustments of a normal recurring nature necessary to present fairly our financial position as of March 30, 2025, the results of our operations for the three months ended March 30, 2025 and March 31, 2024 and cash flows for the three months ended March 30, 2025 and March 31, 2024. The results of operations for the three months ended March 30, 2025 are not necessarily indicative of the results to be expected for the full 2025 fiscal year. The Financial Statements should be read in conjunction with the audited consolidated financial statements for The Wendy’s Company and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 29, 2024 (the “Form 10-K”). The principal 100% owned subsidiary of the Company is Wendy’s International, LLC and its subsidiaries (“Wendy’s”). The Company manages and internally reports its business in the following segments: (1) Wendy’s U.S., (2) Wendy’s International and (3) Global Real Estate & Development. See Note 17 for further information. We report on a fiscal year consisting of 52 or 53 weeks ending on the Sunday closest to or on December 31. All three-month periods presented herein contain 13 weeks. All references to years, quarters and months relate to fiscal periods rather than calendar periods. Our significant interim accounting policies include the recognition of advertising funds expense in proportion to advertising funds revenue. (2) Revenue Disaggregation of Revenue The following tables disaggregate revenue by segment and source: Wendy’s U.S. Wendy’s International Global Real Estate & Development Total Three Months Ended March 30, 2025 Sales at Company-operated restaurants $ 212,744 $ 6,766 $ — $ 219,510 Franchise royalty revenue 104,406 17,269 — 121,675 Franchise fees 20,704 2,086 683 23,473 Franchise rental income — — 58,454 58,454 Advertising funds revenue 91,760 8,600 — 100,360 Total revenues $ 429,614 $ 34,721 $ 59,137 $ 523,472 Three Months Ended March 31, 2024 Sales at Company-operated restaurants $ 219,468 $ 5,855 $ — $ 225,323 Franchise royalty revenue 108,853 16,827 — 125,680 Franchise fees 17,826 1,889 1,105 20,820 Franchise rental income — — 57,986 57,986 Advertising funds revenue 96,700 8,244 — 104,944 Total revenues $ 442,847 $ 32,815 $ 59,091 $ 534,753 9 Table of Contents THE WENDY’S COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In Thousands Except Per Share Amounts) Contract Balances The following table provides information about receivables and contract liabilities (deferred franchise fees) from contracts with customers: March 30, 2025 (a) December 29, 2024 (a) Receivables, which are included in “Accounts and notes receivable, net” (b) $ 60,870 $ 55,601 Receivables, which are included in “Advertising funds restricted assets” 65,677 73,223 Deferred franchise fees (c) 99,001 99,411 _______________ (a) Excludes funds collected from the sale of gift cards, which are primarily reimbursed to franchisees upon redemption at franchised restaurants and do not ultimately result in the recognition of revenue in the Company’s condensed consolidated statements of operations. (b) Includes receivables related to “Sales” and “Franchise royalty revenue and fees.” (c) Deferred franchise fees are included in “Accrued expenses and other current liabilities” and “Deferred franchise fees” and totaled $ 10,944 and $ 88,057 , respectively, as of March 30, 2025, and $ 11,024 and $ 88,387 , respectively, as of December 29, 2024. Significant changes in deferred franchise fees are as follows: Three Months Ended March 30, 2025 March 31, 2024 Deferred franchise fees at beginning of period $ 99,411 $ 100,805 Revenue recognized during the period ( 2,345 ) ( 2,804 ) New deferrals due to cash received and other 1,935 2,263 Deferred franchise fees at end of period $ 99,001 $ 100,264 Anticipated Future Recognition of Deferred Franchise Fees The following table reflects the estimated franchise fees to be recognized in the future related to performance obligations that are unsatisfied at the end of the period: Estimate for fiscal year: 2025 (a) $ 9,262 2026 6,681 2027 6,553 2028 6,423 2029 6,321 Thereafter 63,761 $ 99,001 _______________ (a) Represents franchise fees expected to be recognized for the remainder of 2025, which includes development-related franchise fees expected to be recognized over a duration of one year or less. 10 Table of Contents THE WENDY’S COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In Thousands Except Per Share Amounts) (3) Leases Nature of Leases The Company operates restaurants that are located on sites owned by us and sites leased by us from third parties. In addition, the Company owns sites and leases sites from third parties, which it leases and/or subleases to franchisees. The Company also leases restaurant, office and transportation equipment. As of March 30, 2025, the nature of restaurants operated by the Company and its franchisees was as follows: March 30, 2025 Company-operated restaurants: Owned land and building 155 Owned building and held long-term land leases 138 Leased land and building 107 Total Company-operated restaurants 400 Franchisee-operated restaurants: Company-owned properties leased to franchisees 489 Company-leased properties subleased to franchisees 1,156 Other franchisee-operated restaurants 5,263 Total franchisee-operated restaurants 6,908 Total Company-operated and franchisee-operated restaurants 7,308 Company as Lessee The components of lease cost are as follows: Three Months Ended March 30, 2025 March 31, 2024 Finance lease cost: Amortization of finance lease assets $ 5,145 $ 4,297 Interest on finance lease liabilities 10,877 10,658 16,022 14,955 Operating lease cost 20,517 21,701 Variable lease cost (a) 16,213 16,488 Short-term lease cost 1,266 1,394 Total operating lease cost (b) 37,996 39,583 Total lease cost $ 54,018 $ 54,538 _______________ (a) Includes expenses for executory costs of $ 10,394 and $ 10,221 for the three months ended March 30, 2025 and March 31, 2024, respectively, for which the Company is reimbursed by sublessees. (b) Includes $ 30,652 and $ 31,718 for the three months ended March 30, 2025 and March 31, 2024, respectively, recorded to “Franchise rental expense” for leased properties that are subsequently leased to franchisees. Also includes $ 6,941 and $ 7,388 for the three months ended March 30, 2025 and March 31, 2024, respectively, recorded to “Cost of sales” for leases for Company-operated restaurants. 11 Table of Contents THE WENDY’S COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In Thousands Except Per Share Amounts) Company as Lessor The components of lease income are as follows: Three Months Ended March 30, 2025 March 31, 2024 Sales-type and direct-financing leases: Selling loss $ ( 11 ) $ ( 16 ) Interest income (a) 6,915 7,719 Operating lease income 42,421 41,497 Variable lease income 16,033 16,489 Franchise rental income (b) $ 58,454 $ 57,986 _______________ (a) Included in “Interest expense, net.” (b) Includes sublease income of $ 42,784 and $ 42,783 recognized during the three months ended March 30, 2025 and March 31, 2024, respectively. Sublease income includes lessees’ variable payments to the Company for executory costs of $ 10,197 and $ 10,089 for the three months ended March 30, 2025 and March 31, 2024, respectively. (4) Investments The following is a summary of the carrying value of our investments: March 30, 2025 December 29, 2024 Equity method investment $ 26,770 $ 27,288 Other investments in equity securities — 1,718 $ 26,770 $ 29,006 Equity Method Investment Wendy’s has a 50 % share in a partnership in a Canadian restaurant real estate joint venture (“TimWen”) with a subsidiary of Restaurant Brands International Inc., a quick-service restaurant company that owns the Tim Hortons ® brand (Tim Hortons is a registered trademark of Tim Hortons USA Inc.). The Company has significant influence over this investee. Such investment is accounted for using the equity method, under which our results of operations include our share of the income of the investee in “Other operating income, net.” 12 Table of Contents THE WENDY’S COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In Thousands Except Per Share Amounts) Presented below is activity related to our investment in TimWen included in our condensed consolidated financial statements: Three Months Ended March 30, 2025 March 31, 2024 Balance at beginning of period $ 27,288 $ 32,727 Equity in earnings for the period 2,843 3,151 Amortization of purchase price adjustments (a) ( 591 ) ( 629 ) 2,252 2,522 Distributions received ( 2,969 ) ( 2,952 ) Foreign currency translation adjustment included in “Other comprehensive income (loss)” 199 ( 785 ) Balance at end of period $ 26,770 $ 31,512 _______________ (a) Purchase price adjustments that impacted the carrying value of the Company’s investment in TimWen are being amortized over the average original aggregate life of 21 years. Other Investments in Equity Securities During the three months ended March 30, 2025, the Company recorded an impairment charge of $ 1,718 for the difference between the estimated fair value and the carrying value of an investment in equity securities. As a result, the carrying value of the investment was reduced to zero as of March 30, 2025. (5) Long-Term Debt Long-term debt consisted of the following: March 30, 2025 December 29, 2024 Class A-2 Notes: 4.236 % Series 2022-1 Class A-2-I Notes, anticipated repayment date 2029 $ 97,250 $ 97,500 4.535 % Series 2022-1 Class A-2-II Notes, anticipated repayment date 2032 385,134 386,134 2.370 % Series 2021-1 Class A-2-I Notes, anticipated repayment date 2029 417,644 418,769 2.775 % Series 2021-1 Class A-2-II Notes, anticipated repayment date 2031 625,405 627,030 3.783 % Series 2019-1 Class A-2-I Notes, anticipated repayment date 2026 352,673 353,673 4.080 % Series 2019-1 Class A-2-II Notes, anticipated repayment date 2029 397,498 398,623 3.884 % Series 2018-1 Class A-2-II Notes, anticipated repayment date 2028 435,162 436,349 7 % debentures, due in December 2025 49,084 48,913 Unamortized debt issuance costs ( 24,997 ) ( 26,698 ) 2,734,853 2,740,293 Less amounts payable within one year ( 78,334 ) ( 78,163 ) Total long-term debt $ 2,656,519 $ 2,662,130 13 Table of Contents THE WENDY’S COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In Thousands Except Per Share Amounts) Other Long-Term Debt Wendy’s U.S. advertising fund has a revolving line of credit of $ 15,000 , which was established to support the Company’s advertising fund operations and bears interest at the Secured Overnight Financing Rate (“SOFR”) plus 2.25 %. Borrowings under the line of credit are guaranteed by Wendy’s. During the three months ended March 30, 2025, the Company drew down $ 15,000 under the revolving line of credit, of which the Company repaid $ 8,500 in March 2025. As a result, as of March 30, 2025, the Company had outstanding borrowings of $ 6,500 under the revolving line of credit, which is included in “Advertising funds restricted liabilities.” (6) Fair Value Measurements Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Valuation techniques under the accounting guidance related to fair value measurements are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions. These inputs are classified into the following hierarchy: • Level 1 Inputs - Quoted prices for identical assets or liabilities in active markets. • Level 2 Inputs - Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable. • Level 3 Inputs - Pricing inputs are unobservable for the assets or liabilities and include situations where there is little, if any, market activity for the assets or liabilities. The inputs into the determination of fair value require significant management judgment or estimation. Financial Instruments The following table presents the carrying amounts and estimated fair values of the Company’s financial instruments: March 30, 2025 December 29, 2024 Carrying Amount Fair Value Carrying Amount Fair Value Fair Value Measurements Financial assets Cash equivalents $ 201,742 $ 201,742 $ 319,212 $ 319,212 Level 1 Other investments in equity securities (a) — — 1,718 1,718 Level 2 Financial liabilities Series 2022-1 Class A-2-I Notes (b) 97,250 91,379 97,500 93,744 Level 2 Series 2022-1 Class A-2-II Notes (b) 385,134 362,438 386,134 371,855 Level 2 Series 2021-1 Class A-2-I Notes (b) 417,644 377,738 418,769 376,256 Level 2 Series 2021-1 Class A-2-II Notes (b) 625,405 538,661 627,030 551,981 Level 2 Series 2019-1 Class A-2-I Notes (b) 352,673 346,060 353,673 345,093 Level 2 Series 2019-1 Class A-2-II Notes (b) 397,498 379,491 398,623 387,039 Level 2 Series 2018-1 Class A-2-II Notes (b) 435,162 419,931 436,349 418,027 Level 2 U.S. advertising fund revolving line of credit 6,500 6,500 — — Level 2 7 % debentures, due in 2025 (b) 49,084 49,488 48,913 50,034 Level 2 _______________ 14 Table of Contents THE WENDY’S COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In Thousands Except Per Share Amounts) (a) The fair value of our other investments in equity securities is based on our review of information provided by the investment manager, which is based on observable price changes in orderly transactions for a similar investment of the same issuer. (b) The fair values were based on quoted market prices in markets that are not considered active markets. The carrying amounts of cash, accounts payable and accrued expenses approximate fair value due to the short-term nature of those items. The carrying amounts of accounts and notes receivable, net (both current and non-current) approximate fair value due to the effect of the related allowance for doubtful accounts. Our cash equivalents are the only financial assets measured and recorded at fair value on a recurring basis. Non-Recurring Fair Value Measurements Assets and liabilities remeasured to fair value on a non-recurring basis resulted in impairment that we have recorded to “Impairment of long-lived assets” in our condensed consolidated statements of operations. Total impairment losses may reflect the impact of remeasuring long-lived assets held and used (including land, buildings, leasehold improvements, favorable lease assets and right-of-use assets) to fair value as a result of (1) the deterioration in operating performance of certain Company-operated restaurants and (2) the Company’s decision to lease and/or sublease the land and/or buildings to franchisees in connection with the sale or anticipated sale of restaurants, including any subsequent lease modifications. The fair values of long-lived assets held and used presented in the tables below represent the remaining carrying value and were estimated based on either discounted cash flows of future anticipated lease and sublease income or discounted cash flows of future anticipated Company-operated restaurant performance. Total impairment losses may also include the impact of remeasuring long-lived assets held for sale. The fair values of long-lived assets held for sale presented in the tables below represent the remaining carrying value and were estimated based on current market values. See Note 12 for further information on impairment of our long-lived assets. Fair Value Measurements March 30, 2025 Level 1 Level 2 Level 3 Held and used $ 6 $ — $ — $ 6 Held for sale 2,048 — — 2,048 Total $ 2,054 $ — $ — $ 2,054 Fair Value Measurements December 29, 2024 Level 1 Level 2 Level 3 Held and used $ 2,391 $ — $ — $ 2,391 Held for sale 1,558 — — 1,558 Total $ 3,949 $ — $ — $ 3,949 (7) Income Taxes The Company’s effective tax rate for the three months ended March 30, 2025 and March 31, 2024 was 28.6 % and 26.9 %, respectively. The Company’s effective tax rate varied from the U.S. federal statutory rate of 21 % for the three months ended March 30, 2025 primarily due to state income taxes and the tax effects of our foreign operations. 15 Table of Contents THE WENDY’S COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In Thousands Except Per Share Amounts) (8) Net Income Per Share The calculation of basic and diluted net income per share was as follows: Three Months Ended March 30, 2025 March 31, 2024 Net income $ 39,232 $ 41,993 Common stock: Weighted average basic shares outstanding 200,643 205,372 Dilutive effect of stock options and restricted shares 974 1,599 Weighted average diluted shares outstanding 201,617 206,971 Net income per share: Basic $ .20 $ .20 Diluted $ .19 $ .20 Basic net income per share for the three months ended March 30, 2025 and March 31, 2024 was computed by dividing net income amounts by the weighted average number of shares of common stock outstanding. Diluted net income per share was computed by dividing net income by the weighted average number of basic shares outstanding plus the potential common share effect of dilutive stock options and restricted shares. We excluded potential common shares of 8,288 and 6,789 for the three months ended March 30, 2025 and March 31, 2024, respectively, from our diluted net income per share calculation as they would have had anti-dilutive effects. (9) Stockholders’ Equity Dividends During both the first quarter of 2025 and the first quarter of 2024, the Company paid dividends per share of $ .25 . Repurchases of Common Stock In January 2023, our Board of Directors authorized a repurchase program for up to $ 500,000 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 three months ended March 30, 2025, the Company repurchased 8,182 shares under the January 2023 Authorization with an aggregate purchase price of $ 124,070 , of which $ 1,401 was accrued as of March 30, 2025, and excluding excise tax of $ 1,214 and commissions of $ 115 . As of March 30, 2025, the Company had $ 110,930 of availability remaining under the January 2023 Authorization. Subsequent to March 30, 2025 through April 25, 2025, the Company repurchased 3,843 shares under the January 2023 Authorization with an aggregate purchase price of $ 50,895 , excluding applicable excise tax and commissions. During the three months ended March 31, 2024, the Company repurchased 392 shares under the January 2023 Authorization with an aggregate purchase price of $ 7,187 , of which $ 470 was accrued as of March 31, 2024, and excluding excise tax of $ 24 and commissions of $ 5 . 16 Table of Contents THE WENDY’S COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In Thousands Except Per Share Amounts) Accumulated Other Comprehensive Loss The following table provides a rollforward of accumulated other comprehensive loss, which is entirely comprised of foreign currency translation: Three Months Ended March 30, 2025 March 31, 2024 Balance at beginning of period $ ( 74,753 ) $ ( 58,375 ) Foreign currency translation 1,912 ( 4,586 ) Balance at end of period $ ( 72,841 ) $ ( 62,961 ) (10) System Optimization Losses, Net The Company’s system optimization initiative included a shift from Company-operated restaurants to franchised restaurants over time, through acquisitions and dispositions, as well as facilitating franchisee-to-franchisee restaurant transfers (“Franchise Flips”). As of March 30, 2025, Company-operated restaurant ownership was approximately 5 % of the total system. While the Company has no plans to move its ownership away from approximately 5 % of the total system, the Company expects to continue to optimize the Wendy’s system through Franchise Flips, as well as evaluating strategic acquisitions of franchised restaurants and strategic dispositions of Company-operated restaurants to existing and new franchisees, to further strengthen the franchisee base and drive new restaurant development. During the three months ended March 30, 2025, the Company did not facilitate any Franchise Flips. During the three months ended March 31, 2024, the Company facilitated 11 Franchise Flips. Additionally, during the three months ended March 30, 2025, the Company completed the sale of two Company-operated restaurants to franchisees. No Company-operated restaurants were sold to or purchased from franchisees during the three months ended March 31, 2024. Gains and losses recognized on dispositions are recorded to “System optimization losses, net” in our condensed consolidated statements of operations. Costs related to acquisitions and dispositions under our system optimization initiative are recorded to “Reorganization and realignment costs.” All other costs incurred related to facilitating Franchise Flips are recorded to “Franchise support and other costs.” The following is a summary of the disposition activity recorded as a result of our system optimization initiative: Three Months Ended March 30, 2025 March 31, 2024 Number of restaurants sold to franchisees 2 — Proceeds from sales of restaurants $ 55 $ — Net assets sold (a) ( 169 ) — Other ( 25 ) — Loss on sales of restaurants, net ( 139 ) — Gain (loss) on sales of other assets, net (b) 49 ( 127 ) System optimization losses, net $ ( 90 ) $ ( 127 ) _______________ (a) Net assets sold consisted primarily of equipment. (b) During the three months ended March 31, 2024, the Company received net cash proceeds of $ 26 , primarily from the sale of surplus and other properties. 17 Table of Contents THE WENDY’S COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In Thousands Except Per Share Amounts) Assets Held for Sale As of March 30, 2025 and December 29, 2024, the Company had assets held for sale of $ 3,727 and $ 2,833 , respectively, primarily consisting of surplus properties. Assets held for sale are included in “Prepaid expenses and other current assets.” (11) Reorganization and Realignment Costs The following is a summary of the initiatives included in “Reorganization and realignment costs:” Three Months Ended March 30, 2025 March 31, 2024 Organizational Redesign Plan $ ( 950 ) $ 5,622 Other reorganization and realignment plans 258 51 Reorganization and realignment costs $ ( 692 ) $ 5,673 Organizational Redesign In February 2023, the Board of Directors approved a plan to redesign the Company’s organizational structure to better support the execution of the Company’s long-term growth strategy by maximizing organizational efficiency and streamlining decision making (the “Organizational Redesign Plan”). Additionally, in January 2024, the Board of Directors announced the appointment of Kirk Tanner as the Company’s new President and Chief Executive Officer, effective February 5, 2024. Mr. Tanner succeeded Todd A. Penegor, the Company’s previous President and Chief Executive Officer, who departed from the Company in February 2024. The Company expects to incur total costs of approximately $ 17,000 related to the Organizational Redesign Plan, including costs related to the succession of the President and Chief Executive Officer role. During the three months ended March 30, 2025, the Company recognized costs totaling $( 950 ), which primarily included a reversal of a severance accrual. During the three months ended March 31, 2024, the Company recognized costs totaling $ 5,622 , which primarily included severance and related employee costs. The Company expects to incur additional costs aggregating approximately $ 600 , comprised primarily of share-based compensation. The Company expects costs related to the Organizational Redesign Plan to continue into 2026. The following is a summary of the costs recorded as a result of the Organizational Redesign Plan: Three Months Ended Total Incurred Since Inception March 30, 2025 March 31, 2024 Severance and related employee costs (a) $ ( 1,088 ) $ 5,362 $ 12,408 Recruitment and relocation costs 13 82 736 Third-party and other costs — 50 1,116 ( 1,075 ) 5,494 14,260 Share-based compensation (b) 125 128 2,221 Total organizational redesign $ ( 950 ) $ 5,622 $ 16,481 _______________ (a) The three months ended March 30, 2025 includes a reversal of an accrual as a result of a change in estimate. (b) Total incurred since inception primarily represents the accelerated recognition of share-based compensation resulting from the termination of employees under the Organizational Redesign Plan. 18 Table of Contents THE WENDY’S COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In Thousands Except Per Share Amounts) As of March 30, 2025, the accruals for the Organizational Redesign Plan are included in “Accrued expenses and other current liabilities.” The tables below present a rollforward of our accruals for the Organizational Redesign Plan. Balance December 29, 2024 Charges Payments Balance March 30, 2025 Severance and related employee costs $ 4,257 $ ( 1,088 ) $ ( 1,410 ) $ 1,759 Recruitment and relocation costs — 13 ( 13 ) — Third-party and other costs — — — — $ 4,257 $ ( 1,075 ) $ ( 1,423 ) $ 1,759 Balance December 31, 2023 Charges Payments Balance March 31, 2024 Severance and related employee costs $ 1,692 $ 5,362 $ ( 977 ) $ 6,077 Recruitment and relocation costs — 82 ( 82 ) — Third-party and other costs — 50 ( 50 ) — $ 1,692 $ 5,494 $ ( 1,109 ) $ 6,077 Other Reorganization and Realignment Plans Costs incurred under the Company’s other reorganization and realignment plans were not material during the three months ended March 30, 2025 and March 31, 2024. The Company does not expect to incur any material additional costs under these plans. (12) Impairment of Long-Lived Assets The Company records impairment charges as a result of (1) the deterioration in operating performance of certain Company-operated restaurants, (2) the Company’s decision to lease and/or sublease properties to franchisees in connection with the sale or anticipated sale of Company-operated restaurants, including any subsequent lease modifications and (3) classifying surplus properties as held for sale. The following is a summary of impairment losses recorded, which represent the excess of the carrying amount over the fair value of the affected assets and are included in “Impairment of long-lived assets:” Three Months Ended March 30, 2025 March 31, 2024 Company-operated restaurants $ 1,187 $ 1,775 Surplus properties 234 231 $ 1,421 $ 2,006 (13) Supplemental Cash Flow Information The following table includes supplemental non-cash investing and financing activities: Three Months Ended March 30, 2025 March 31, 2024 Supplemental non-cash investing and financing activities: Capital expenditures included in accounts payable $ 7,197 $ 9,161 Finance leases 17,849 3,749 19 Table of Contents THE WENDY’S COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In Thousands Except Per Share Amounts) The following table includes a reconciliation of cash, cash equivalents and restricted cash: March 30, 2025 December 29, 2024 Reconciliation of cash, cash equivalents and restricted cash at end of period: Cash and cash equivalents $ 335,259 $ 450,512 Restricted cash 34,644 34,481 Restricted cash, included in Advertising funds restricted assets 19,056 18,615 Total cash, cash equivalents and restricted cash $ 388,959 $ 503,608 (14) Guarantees and Other Commitments and Contingencies Except as described below, the Company did not have any significant changes in guarantees and other commitments and contingencies during the current fiscal period since those reported in the Form 10-K. Refer to the Form 10-K for further information regarding the Company’s additional commitments and obligations. Lease Guarantees Wendy’s has guaranteed the performance of certain leases and other obligations, primarily from former Company-operated restaurant locations now operated by franchisees, amounting to $ 100,858 as of March 30, 2025. These leases extend through 2045. We have had no judgments against us as guarantor of these leases as of March 30, 2025. In the event of default by a franchise owner where Wendy’s is called upon to perform under its guarantee, Wendy’s has the ability to pursue repayment from the franchise owner. The liability recorded for our probable exposure associated with these lease guarantees was not material as of March 30, 2025. Letters of Credit As of March 30, 2025, the Company had outstanding letters of credit with various parties totaling $ 28,985 . Substantially all of the outstanding letters of credit include amounts outstanding against the 2021-1 Variable Funding Senior Secured Notes, Class A-1. We do not expect any material loss to result from these letters of credit. (15) Transactions with Related Parties Except as described below, the Company did not have any significant changes in or transactions with its related parties during the current fiscal period since those reported in the Form 10-K. TimWen Lease and Management Fee Payments A wholly-owned subsidiary of Wendy’s leases restaurant facilities from TimWen, which are then subleased to franchisees for the operation of Wendy’s/Tim Hortons combo units in Canada. Wendy’s paid TimWen $ 4,798 and $ 5,030 under these lease agreements during the three months ended March 30, 2025 and March 31, 2024, respectively, which has been recorded to “Franchise rental expense.” In addition, TimWen paid Wendy’s a management fee under the TimWen joint venture agreement of $ 56 and $ 60 during the three months ended March 30, 2025 and March 31, 2024, respectively, which is included as a reduction to “General and administrative.” Transactions with QSCC Wendy’s has a purchasing co-op relationship structure with its franchisees that establishes Quality Supply Chain Co-op, Inc. (“QSCC”). QSCC manages, for the Wendy’s system in the U.S. and Canada, contracts for the purchase and distribution of food, proprietary paper, operating supplies and equipment under national agreements with pricing based upon total system volume. QSCC’s supply chain management facilitates continuity of supply and provides consolidated purchasing efficiencies while monitoring and seeking to minimize possible obsolete inventory throughout the Wendy’s supply chain in the U.S. and Canada. 20 Table of Contents THE WENDY’S COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In Thousands Except Per Share Amounts) Wendy’s and its franchisees pay sourcing fees to third-party vendors on certain products sourced by QSCC. Such sourcing fees are remitted by these vendors to QSCC and are the primary means of funding QSCC’s operations. In addition, QSCC collects certain rebates, price variance and other recoveries, technology fees, convention fees and other funding from third-party vendors as part of the administration and management of the Wendy’s supply chain in the U.S. and Canada. Should QSCC’s sourcing fees exceed its expected needs, QSCC’s board of directors may return some or all of the excess to its members in the form of a patronage dividend. Wendy’s recorded its share of patronage dividends of $ 3,096 during the three months ended March 31, 2024, of which $ 2,909 is included in “Other operating income, net” and $ 187 is included as a reduction of “Cost of sales.” There were no patronage dividends recorded during the three months ended March 30, 2025. Transactions with Yellow Cab Certain family members and/or affiliates of Mr. Nelson Peltz, our former Chairman and Chairman Emeritus, Mr. Peter May, our Senior Vice Chairman, and Mr. Matthew Peltz, our Vice Chairman, hold minority ownership interests in Yellow Cab Holdings, LLC (“Yellow Cab”), a Wendy’s franchisee that, as of March 30, 2025 owned and operated 89 Wendy’s restaurants, and/or certain of the operating companies managed by Yellow Cab. During the three months ended March 30, 2025 and March 31, 2024, the Company recognized $ 3,664 and $ 3,612 , respectively, in royalty, advertising fund, lease and other income from Yellow Cab and related entities. In all transactions involving Yellow Cab, the Company’s standard franchisee recruiting and approval processes were followed, no modifications were made to the Company’s standard franchise agreements or related documents, and all deal terms and transaction documents were negotiated and executed on an arm’s-length basis, consistent with the Company’s comparable franchise transactions and relationships. As of March 30, 2025 and December 29, 2024, $ 1,156 and $ 1,132 , respectively, was due from Yellow Cab for such income, which is included in “Accounts and notes receivable, net” and “Advertising funds restricted assets.” Transactions with AMC In February 2023, Ms. Kristin Dolan, a director of the Company, was appointed as the Chief Executive Officer of AMC Networks Inc. (“AMC”). During the three months ended March 30, 2025 and March 31, 2024, the Company purchased approximately $ 300 and $ 500 , respectively, of advertising time from a subsidiary of AMC. The Company’s advertising spend with AMC was made in the ordinary course of business and approved on an arm’s-length basis, consistent with the Company’s comparable advertising decisions. As of March 30, 2025 and December 29, 2024, approximately $ 26 and $ 17 , respectively, was due to AMC for such advertising time, which is included in “Advertising funds restricted liabilities.” (16) Legal and Environmental Matters The Company is involved in litigation and claims incidental to our business. We provide accruals for such litigation and claims when we determine it is probable that a liability has been incurred and the loss is reasonably estimable. The Company believes it has adequate accruals for all of its legal and environmental matters. We cannot estimate the aggregate possible range of loss for our existing litigation and claims due to various reasons, including, but not limited to, many proceedings being in preliminary stages, with various motions either yet to be submitted or pending, discovery yet to occur and significant factual matters unresolved. In addition, most cases seek an indeterminate amount of damages and many involve multiple parties. Predicting the outcomes of settlement discussions or judicial or arbitral decisions is thus inherently difficult and future developments could cause these actions or claims, individually or in aggregate, to have a material adverse effect on the Company’s financial condition, results of operations, or cash flows of a particular reporting period. 21 Table of Contents THE WENDY’S COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In Thousands Except Per Share Amounts) (17) Segment Information Wendy’s U.S. revenue, significant segment expenses and segment adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”) are as follows: Three Months Ended March 30, 2025 March 31, 2024 Wendy’s U.S. revenue $ 429,614 $ 442,847 Wendy’s U.S. expense Cost of sales 181,237 185,933 Franchise support and other costs 13,178 12,694 Advertising fund expense (a) 91,760 99,025 General and administrative 22,424 19,326 Other segment items (b) 38 45 Wendy’s U.S. adjusted EBITDA $ 120,977 $ 125,824 _______________ (a) Includes advertising fund expense of $ 2,325 for the three months ended March 31, 2024 related to the Company’s funding of incremental advertising. There was no funding of incremental advertising during the three months ended March 30, 2025. (b) Other segment items for the three months ended March 30, 2025 primarily include lease buyout activity and professional fees. Other segment items for the three months ended March 31, 2024 primarily include professional fees. Wendy’s International revenue, significant segment expenses and segment adjusted EBITDA are as follows: Three Months Ended March 30, 2025 March 31, 2024 Wendy’s International revenue $ 34,721 $ 32,815 Wendy’s International expense Cost of sales 6,932 6,180 Advertising fund expense (a) 9,912 8,556 General and administrative 6,437 5,941 Other segment items (b) 1,996 1,448 Wendy’s International adjusted EBITDA $ 9,444 $ 10,690 _______________ (a) Includes advertising fund expense of $ 159 and $ 162 for the three months ended March 30, 2025 and March 31, 2024, respectively, related to the Company’s funding of incremental advertising. In addition, includes other international-related advertising deficit of $ 1,153 and $ 150 for the three months ended March 30, 2025 and March 31, 2024, respectively. (b) Other segment items for the three months ended March 30, 2025 and March 31, 2024 primarily include franchise support and other costs. 22 Table of Contents THE WENDY’S COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In Thousands Except Per Share Amounts) Global Real Estate & Development revenue, significant segment expenses and segment adjusted EBITDA are as follows: Three Months Ended March 30, 2025 March 31, 2024 Global Real Estate & Development revenue $ 59,137 $ 59,091 Global Real Estate & Development expense Franchise rental expense 30,701 31,778 General and administrative 5,220 5,100 Other segment items (a) ( 1,460 ) ( 1,848 ) Global Real Estate & Development adjusted EBITDA $ 24,676 $ 24,061 _______________ (a) Other segment items primarily include equity in earnings from our TimWen joint venture, franchise support and other costs and gains on sales-type leases. Equity in earnings from our TimWen joint venture was $ 2,252 and $ 2,522 for the three months ended March 30, 2025 and March 31, 2024, respectively. The following table reconciles profit by segment to the Company’s consolidated income before income taxes: Three Months Ended March 30, 2025 March 31, 2024 Wendy’s U.S. $ 120,977 $ 125,824 Wendy’s International 9,444 10,690 Global Real Estate & Development 24,676 24,061 Total segment adjusted EBITDA 155,097 160,575 Unallocated franchise support and other costs ( 587 ) ( 26 ) Advertising funds surplus 144 207 Unallocated general and administrative (a) ( 34,123 ) ( 33,390 ) Depreciation and amortization (exclusive of amortization of cloud computing arrangements shown separately below) ( 36,549 ) ( 35,518 ) Amortization of cloud computing arrangements ( 4,167 ) ( 3,542 ) System optimization losses, net ( 90 ) ( 127 ) Reorganization and realignment costs 692 ( 5,673 ) Impairment of long-lived assets ( 1,421 ) ( 2,006 ) Unallocated other operating income, net 4,130 656 Interest expense, net ( 31,477 ) ( 30,535 ) Investment loss, net ( 1,718 ) — Other income, net 4,986 6,836 Income before income taxes $ 54,917 $ 57,457 _______________ (a) Includes corporate overhead costs, such as employee compensation and related benefits. 23 Table of Contents THE WENDY’S COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In Thousands Except Per Share Amounts) (18) New Accounting Standards Disaggregation of Income Statement Expenses In November 2024, the Financial Accounting Standards Board (“FASB”) issued an amendment to expand disclosure requirements related to certain income statement expenses. The amendment requires disaggregation of certain expense captions into specified categories in disclosures within the notes to the financial statements. We are currently evaluating the impact of the adoption of this guidance on our condensed consolidated financial statements. In January 2025, the FASB issued an update that clarified that the amendment is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with early adoption permitted. 24