Wendy's Co 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Introduction This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of The Wendy’s Company (“The Wendy’s Company” and, together with its subsidiaries, the “Company,” “we,” “us,” or “our”) should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and the related notes included elsewhere within this report and “Item 7. 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 29, 2024 (the “Form 10-K”). There have been no material changes as of March 30, 2025 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. See “Special Note Regarding Forward-Looking Statements and Projections” in “Part II. Other Information” of this report. You should consider our forward-looking statements in light of the risks discussed in “Item 1A. Risk Factors” in “Part II. Other Information” of this report and our unaudited condensed consolidated financial statements, related notes and other financial information appearing elsewhere in this report, the Form 10-K and our other filings with the Securities and Exchange Commission (the “SEC”). The Wendy’s Company is the parent company of its 100% owned subsidiary holding company, Wendy’s Restaurants, LLC (“Wendy’s Restaurants”). Wendy’s Restaurants is the parent company of Wendy’s International, LLC (formerly known as Wendy’s International, Inc). Wendy’s International, LLC is the indirect parent company of (1) Quality Is Our Recipe, LLC (“Quality”), which is the owner and franchisor of the Wendy’s restaurant system in the United States (the “U.S.”) and all international jurisdictions except for Canada, and (2) Wendy’s Restaurants of Canada Inc., which is the owner and franchisor of the Wendy’s restaurant system in Canada. As used herein, unless the context requires otherwise, the term “Company” refers to The Wendy’s Company and its direct and indirect subsidiaries, and “Wendy’s” refers to Quality when the context relates to the ownership or franchising of the Wendy’s restaurant system and to Wendy’s International, LLC when the context refers to the Wendy’s brand. Wendy’s is primarily engaged in the business of operating, developing and franchising a system of distinctive quick-service restaurants serving high quality food. Wendy’s opened its first restaurant in Columbus, Ohio in 1969. Today, Wendy’s is the second largest quick-service restaurant company in the hamburger sandwich segment in the U.S. based on traffic and dollar share, and the third largest globally with 7,308 restaurants in the U.S. and 34 foreign countries and U.S. territories as of March 30, 2025. Each Wendy’s restaurant offers an extensive menu specializing in hamburger sandwiches and featuring chicken sandwiches, which are prepared to order with the customer’s choice of toppings and condiments. Wendy’s menu also includes chicken nuggets, chili, french fries, baked potatoes, freshly prepared salads, soft drinks, Frosty ® desserts and kids’ meals. In addition, Wendy’s restaurants sell a variety of promotional products on a limited time basis. Wendy’s also offers breakfast across the U.S. system and in Canada. Wendy’s breakfast menu features a variety of breakfast sandwiches such as the Breakfast Baconator ® and sides such as seasoned potatoes. The Company is comprised of the following segments: (1) Wendy’s U.S., (2) Wendy’s International and (3) Global Real Estate & Development. Wendy’s U.S. includes the operation and franchising of Wendy’s restaurants in the U.S. and derives its revenues from sales at Company-operated restaurants and royalties, fees and advertising fund collections from franchised restaurants. Wendy’s International includes the operation and franchising of Wendy’s restaurants in countries and territories other than the U.S. and derives its revenues from sales at Company-operated restaurants and royalties, fees and advertising fund collections from franchised restaurants. Global Real Estate & Development includes real estate activity for owned sites and sites leased from third parties, which are leased and/or subleased to franchisees, and also includes our share of the income of our TimWen real estate joint venture. In addition, Global Real Estate & Development earns fees from facilitating franchisee-to-franchisee restaurant transfers (“Franchise Flips”) and providing other development-related services to franchisees. In this “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the Company reports on the segment profit for each of the three segments described above. The Company measures segment profit using segment adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”). Segment adjusted EBITDA excludes certain unallocated general and administrative expenses and other items that vary from period to period without correlation to 25 the Company’s core operating performance. See “Results of Operations” below and Note 17 to the Condensed Consolidated Financial Statements contained in Item 1 herein for segment financial information. The Company’s fiscal reporting periods consist of 52 or 53 weeks ending on the Sunday closest to 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. Executive Overview Our Business As of March 30, 2025, the Wendy’s restaurant system was comprised of 7,308 restaurants, with 5,958 Wendy’s restaurants in operation in the U.S. Of the U.S. restaurants, 387 were operated by the Company and 5,571 were operated by a total of 205 franchisees. In addition, at March 30, 2025, there were 1,350 Wendy’s restaurants in operation in 34 foreign countries and U.S. territories. Of the international restaurants, 1,337 were operated by a total of 110 franchisees and 13 were operated by the Company in the United Kingdom (the “U.K.”). The revenues from our restaurant business are derived from two principal sources: (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 March 30, 2025. 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. Wendy’s strategic framework includes providing fresh, famous food to consumers, delivering an exceptional customer experience through operational excellence and expanding the Company’s footprint across the globe. Our opportunities to execute on this framework for long-term profitable growth include (1) driving same-restaurant sales and share growth, (2) accelerating digital growth, (3) improving restaurant profitability and (4) driving global unit growth. Key Business Measures We track our results of operations and manage our business using the following key business measures: • Same-Restaurant Sales – We report same-restaurant sales commencing after new restaurants have been open for 15 continuous months and as soon as reimaged restaurants reopen. Restaurants temporarily closed for more than one week are excluded from same-restaurant sales. This methodology is consistent with the metric used by our management for internal reporting and analysis. The table summarizing same-restaurant sales below in “Results of Operations” provides the same-restaurant sales percent changes. • Company-Operated Restaurant Margin – We define Company-operated restaurant margin as sales from Company-operated restaurants less cost of sales divided by sales from Company-operated restaurants. Cost of sales includes food and paper, restaurant labor and occupancy, advertising and other operating costs. Cost of sales excludes certain costs that support restaurant operations that are not allocated to individual restaurants, which are included in “General and administrative.” Cost of sales also excludes depreciation and amortization expense and impairment of long-lived assets. Therefore, as Company-operated restaurant margin as presented excludes certain costs as described above, its usefulness may be limited and may not be comparable to other similarly titled measures of other companies in our industry. Company-operated restaurant margin is influenced by factors such as price increases, the effectiveness of our advertising and marketing initiatives, featured products, product mix, fluctuations in food and labor costs, restaurant openings, remodels and closures and the level of our fixed and semi-variable costs. • Systemwide Sales – Systemwide sales includes sales by both Company-operated restaurants and franchised restaurants. Franchised restaurants’ sales are reported by our franchisees and represent their revenues from sales at franchised Wendy’s restaurants. The Company’s consolidated financial statements do not include sales by franchised restaurants to their customers. The Company’s royalty and advertising funds revenues are computed as percentages of 26 sales made by Wendy’s franchisees. As a result, sales by Wendy’s franchisees have a direct effect on the Company’s royalty and advertising funds revenues and profitability. The Company calculates same-restaurant sales and systemwide sales growth on a constant currency basis. Constant currency results exclude the impact of foreign currency translation and are derived by translating current year results at prior year average exchange rates. The Company believes excluding the impact of foreign currency translation provides better year over year comparability. Same-restaurant sales and systemwide sales exclude sales from Argentina due to that country’s highly inflationary economy. The Company considers economies that have had cumulative inflation in excess of 100% over a three-year period as highly inflationary. The Company believes its presentation of same-restaurant sales, Company-operated restaurant margin and systemwide sales provide a meaningful perspective of the underlying operating performance of the Company’s current business and enables investors to better understand and evaluate the Company’s historical and prospective operating performance. The Company believes that these metrics are important supplemental measures of operating performance because they highlight trends in the Company’s business that may not otherwise be apparent when relying solely on GAAP financial measures. The Company believes investors, analysts and other interested parties use these metrics in evaluating issuers and that the presentation of these measures facilitates a comparative assessment of the Company’s operating performance. With respect to same-restaurant sales and systemwide sales, the Company also believes that the data is useful in assessing consumer demand for the Company’s products and the overall success of the Wendy’s brand. First Quarter Financial Highlights • Global systemwide sales decreased 1.1% to $3.39 billion in the first quarter of 2025 compared with $3.45 billion in the first quarter of 2024; • Revenues decreased 2.1% to $523.5 million in the first quarter of 2025 compared with $534.8 million in the first quarter of 2024; • Global same-restaurant sales decreased 2.1%, U.S. same-restaurant sales decreased 2.8% and international same-restaurant sales increased 2.3% compared with the first quarter of 2024. On a two-year basis, global same-restaurant sales decreased 1.2%; • Global Company-operated restaurant margin was 14.3% in the first quarter of 2025, a decrease of 40 basis points compared with the first quarter of 2024; and • Income before income taxes decreased 4.4% to $54.9 million in the first quarter of 2025 compared with $57.5 million in the first quarter of 2024. Digital Wendy’s long-term growth opportunities include accelerating consumer-facing digital platforms and technologies. Over the past several years, the Company has invested significant resources to focus on consumer-facing technology, including enhancements to Wendy’s mobile apps and loyalty programs and establishing delivery arrangements with third-party vendors for Wendy’s U.S. and Canadian restaurants. 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. The Company’s digital business has continued to grow and digital sales increased from approximately 16.8% of global systemwide sales during the first quarter of 2024 to approximately 20.3% during the first quarter of 2025. New Restaurant Development Wendy’s long-term growth opportunities include expanding the Company’s footprint across the globe. To promote new restaurant development, the Company has provided franchisees with certain incentive programs for qualifying new and existing restaurants, in addition to our build to suit development fund. In addition, the Company has development agreements in place 27 with a number of franchisees that contractually obligate such franchisees to open additional Wendy’s restaurants over a specified timeframe. During the three months ended March 30, 2025, Wendy’s added 68 net new restaurants across the system. Results of Operations The tables included throughout this Results of Operations section set forth in millions the Company’s condensed consolidated results of operations for the first quarter of 2025 and 2024. First Quarter 2025 2024 Change Revenues: Sales $ 219.5 $ 225.3 $ (5.8) Franchise royalty revenue and fees 145.1 146.6 (1.5) Franchise rental income 58.5 58.0 0.5 Advertising funds revenue 100.4 104.9 (4.5) 523.5 534.8 (11.3) Costs and expenses: Cost of sales 188.2 192.1 (3.9) Franchise support and other costs 16.6 14.7 1.9 Franchise rental expense 30.7 31.8 (1.1) Advertising funds expense 101.5 107.4 (5.9) General and administrative 68.2 63.8 4.4 Depreciation and amortization (exclusive of amortization of cloud computing arrangements shown separately below) 36.5 35.5 1.0 Amortization of cloud computing arrangements 4.2 3.5 0.7 System optimization losses, net 0.1 0.1 — Reorganization and realignment costs (0.7) 5.7 (6.4) Impairment of long-lived assets 1.4 2.0 (0.6) Other operating income, net (6.3) (3.0) (3.3) 440.4 453.6 (13.2) Operating profit 83.1 81.2 1.9 Interest expense, net (31.5) (30.5) (1.0) Investment loss, net (1.7) — (1.7) Other income, net 5.0 6.8 (1.8) Income before income taxes 54.9 57.5 (2.6) Provision for income taxes (15.7) (15.5) (0.2) Net income $ 39.2 $ 42.0 $ (2.8) 28 First Quarter 2025 % of Total Revenues 2024 % of Total Revenues Revenues: Sales $ 219.5 41.9 % $ 225.3 42.1 % Franchise royalty revenue and fees: Franchise royalty revenue 121.7 23.2 % 125.7 23.5 % Franchise fees 23.4 4.5 % 20.9 3.9 % Total franchise royalty revenue and fees 145.1 27.7 % 146.6 27.4 % Franchise rental income 58.5 11.2 % 58.0 10.8 % Advertising funds revenue 100.4 19.2 % 104.9 19.7 % Total revenues $ 523.5 100.0 % $ 534.8 100.0 % First Quarter 2025 % of Sales 2024 % of Sales Cost of sales: Food and paper $ 67.7 30.8 % $ 69.1 30.7 % Restaurant labor 70.8 32.3 % 73.6 32.7 % Occupancy, advertising and other operating costs 49.7 22.6 % 49.4 21.9 % Total cost of sales $ 188.2 85.7 % $ 192.1 85.3 % First Quarter 2025 % of Sales 2024 % of Sales Company-operated restaurant margin: U.S. $ 31.5 14.8 % $ 33.5 15.3 % Global 31.3 14.3 % 33.2 14.7 % 29 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. First Quarter 2025 2024 Key business measures: U.S. same-restaurant sales: Company-operated (1.2) % (0.8) % Franchised (2.9) % 0.7 % Systemwide (2.8) % 0.6 % International same-restaurant sales (a) 2.3 % 3.2 % Global same-restaurant sales: Company-operated (1.2) % (0.9) % Franchised (a) (2.2) % 1.1 % Systemwide (a) (2.1) % 0.9 % Systemwide sales (b): U.S. Company-operated $ 212.7 $ 219.5 U.S. franchised 2,703.4 2,774.5 U.S. systemwide 2,916.1 2,994.0 International Company-operated 6.8 5.9 International franchised (a) 466.4 448.1 International systemwide (a) 473.2 454.0 Global systemwide (a) $ 3,389.3 $ 3,448.0 _______________ (a) Excludes Argentina due to the impact of that country’s highly inflationary economy. (b) During the first quarter of 2025 and 2024, global systemwide sales decreased 1.1% and increased 2.6%, respectively, U.S. systemwide sales decreased 2.6% and increased 1.7%, respectively, and international systemwide sales increased 8.9% and 8.8%, respectively, on a constant currency basis. First Quarter U.S. Company-operated U.S. Franchised International Company-operated International Franchised Systemwide Restaurant count: Restaurant count at December 29, 2024 381 5,552 13 1,294 7,240 Opened 8 20 — 46 74 Closed — (3) — (3) (6) Net (sold to) purchased by franchisees (2) 2 — — — Restaurant count at March 30, 2025 387 5,571 13 1,337 7,308 30 Sales First Quarter 2025 2024 Change Sales $ 219.5 $ 225.3 $ (5.8) The decrease in sales during the first quarter of 2025 was primarily due to (1) net closures of Company-operated restaurants of $3.9 million and (2) a 1.2% decrease in Company-operated same-restaurant sales of $2.0 million. Company-operated same-restaurant sales decreased due to a decrease in traffic, partially offset by higher average check. Franchise Royalty Revenue and Fees First Quarter 2025 2024 Change Franchise royalty revenue $ 121.7 $ 125.7 $ (4.0) Franchise fees 23.4 20.9 2.5 $ 145.1 $ 146.6 $ (1.5) Franchise royalty revenue during the first quarter of 2025 decreased $4.0 million primarily due to a 2.2% decrease in global franchise same-restaurant sales. Franchise same-restaurant sales during the first quarter of 2025 decreased due to a decrease in traffic, partially offset by higher average check. The increase in franchise fees during the first quarter of 2025 was primarily due to higher fees for providing information technology services to franchisees. Franchise Rental Income First Quarter 2025 2024 Change Franchise rental income $ 58.5 $ 58.0 $ 0.5 The increase in franchise rental income during the first quarter of 2025 was primarily due to the impact of amending certain existing leases of $1.1 million, partially offset by the impact of terminating certain existing leases of $0.3 million. Advertising Funds Revenue First Quarter 2025 2024 Change Advertising funds revenue $ 100.4 $ 104.9 $ (4.5) The decrease in advertising funds revenue during the first quarter of 2025 was primarily due to (1) a net decrease in franchise same-restaurant sales in the U.S. and Canada of $2.6 million and (2) net closures of U.S. restaurants of $1.1 million. Cost of Sales, as a Percent of Sales First Quarter 2025 2024 Change Food and paper 30.8 % 30.7 % 0.1 % Restaurant labor 32.3 % 32.7 % (0.4) % Occupancy, advertising and other operating costs 22.6 % 21.9 % 0.7 % 85.7 % 85.3 % 0.4 % The increase in cost of sales, as a percent of sales, during the first quarter of 2025 was primarily due to (1) higher commodity costs, (2) a decrease in traffic and (3) an increase in restaurant labor rates. These impacts were partially offset by (1) higher average check and (2) labor efficiencies. 31 Franchise Support and Other Costs First Quarter 2025 2024 Change Franchise support and other costs $ 16.6 $ 14.7 $ 1.9 The increase in franchise support and other costs during the first quarter of 2025 was primarily due to (1) an increase in costs associated with the Company’s build to suit development fund and (2) an increase in other miscellaneous costs for providing services to franchisees. Franchise Rental Expense First Quarter 2025 2024 Change Franchise rental expense $ 30.7 $ 31.8 $ (1.1) The decrease in franchise rental expense during the first quarter of 2025 was primarily due to the impact of terminating certain existing leases. Advertising Funds Expense First Quarter 2025 2024 Change Advertising funds expense $ 101.5 $ 107.4 $ (5.9) On an interim basis, advertising funds expense is recognized in proportion to advertising funds revenue. The decrease in advertising funds expense during the first quarter of 2025 was primarily due to (1) the same factors as described above for “Advertising Funds Revenue” and (2) a decrease in the recognition of the Company breakfast advertising spend in excess of advertising funds revenue when compared to the prior year. General and Administrative First Quarter 2025 2024 Change Employee compensation and benefits $ 38.5 $ 34.6 $ 3.9 Other, net 29.7 29.2 0.5 $ 68.2 $ 63.8 $ 4.4 The increase in general and administrative expenses during the first quarter of 2025 was primarily due to higher employee compensation and benefits. Depreciation and Amortization (exclusive of amortization of cloud computing arrangements shown separately below) First Quarter 2025 2024 Change Restaurants $ 22.8 $ 22.5 $ 0.3 Technology support, corporate and other 13.7 13.1 0.6 $ 36.5 $ 35.5 $ 1.0 The increase in depreciation and amortization during the first quarter of 2025 was primarily due to depreciation and amortization for technology investments. Amortization of Cloud Computing Arrangements First Quarter 2025 2024 Change Amortization of cloud computing arrangements $ 4.2 $ 3.5 $ 0.7 The increase in amortization of cloud computing arrangements during the first quarter of 2025 was primarily due to amortization of assets associated with the Company’s digital investments. 32 System Optimization Losses, Net First Quarter 2025 2024 Change System optimization losses, net $ 0.1 $ 0.1 $ — System optimization losses, net for the first quarter of 2025 were primarily comprised of losses on the sale of restaurants. System optimization losses, net for the first quarter of 2024 were comprised of losses on the sale of surplus and other properties. See Note 10 to the Condensed Consolidated Financial Statements contained in Item 1 herein for further information. Reorganization and Realignment Costs First Quarter 2025 2024 Change Organizational Redesign Plan $ (1.0) $ 5.6 $ (6.6) Other reorganization and realignment plans 0.3 0.1 0.2 $ (0.7) $ 5.7 $ (6.4) During the first quarter of 2025, the Company recognized costs under the Organizational Redesign Plan of ($1.0) million, which primarily included a reversal of a severance accrual as a result of a change in estimate. During the first quarter of 2024, the Company recognized costs under the Organizational Redesign Plan of $5.6 million, which primarily included severance and related employee costs. See Note 11 to the Condensed Consolidated Financial Statements contained in Item 1 herein for further information on the Organizational Redesign Plan. Impairment of Long-Lived Assets First Quarter 2025 2024 Change Impairment of long-lived assets $ 1.4 $ 2.0 $ (0.6) The decrease in impairment of long-lived assets during the first quarter of 2025 was primarily due to lower impairment charges resulting from the deterioration in operating performance of certain Company-operated restaurants. Other Operating Income, Net First Quarter 2025 2024 Change Claim settlement $ 4.0 $ — $ 4.0 Other, net 2.3 3.0 (0.7) $ 6.3 $ 3.0 $ 3.3 The increase in other operating income, net during the first quarter of 2025 was primarily due to the settlement of a claim. Interest Expense, Net First Quarter 2025 2024 Change Interest expense, net $ 31.5 $ 30.5 $ 1.0 The increase in interest expense, net during the first quarter of 2025 was primarily due to lower interest income as a result of amending certain sales-type and direct financing leases. Investment Loss, Net First Quarter 2025 2024 Change Investment loss, net $ 1.7 $ — $ 1.7 During the first quarter of 2025, the Company recorded a loss of $1.7 million due to impairment charges for the difference between the estimated fair value and the carrying value of an investment in equity securities. 33 Other Income, Net First Quarter 2025 2024 Change Other income, net $ 5.0 $ 6.8 $ (1.8) The decrease in other income, net during the first quarter of 2025 was primarily due to a decrease in interest income, reflecting lower balances of cash equivalents. Provision for Income Taxes First Quarter 2025 2024 Change Income before income taxes $ 54.9 $ 57.5 $ (2.6) Provision for income taxes (15.7) (15.5) (0.2) Effective tax rate on income 28.6 % 26.9 % 1.7 % The effective tax rates for the first quarter of 2025 and 2024 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 first quarter of 2025 compared with the first quarter of 2024 was primarily due to (1) a one-time adjustment to our deferred income taxes related to prior periods, (2) an increase in the tax effects of our foreign operations and (3) an increase in state income taxes. Segment Information See Note 17 to the Condensed Consolidated Financial Statements contained in Item 1 herein for further information regarding the Company’s segments. Wendy’s U.S. First Quarter 2025 2024 Change Sales $ 212.7 $ 219.5 $ (6.8) Franchise royalty revenue 104.4 108.9 (4.5) Franchise fees 20.7 17.8 2.9 Advertising fund revenue 91.8 96.7 (4.9) Total revenues $ 429.6 $ 442.9 $ (13.3) Segment profit $ 121.0 $ 125.8 $ (4.8) The decrease in Wendy’s U.S. revenues during the first quarter of 2025 was primarily due to (1) a decrease in same-restaurant sales and (2) net closures of restaurants. Same-restaurant sales decreased during the first quarter of 2025 primarily due to a decrease in traffic, partially offset by higher average check. The decrease in Wendy’s U.S. segment profit during the first quarter of 2025 was primarily due to (1) higher general and administrative expense and (2) lower revenues. 34 Wendy’s International First Quarter 2025 2024 Change Sales $ 6.8 $ 5.9 $ 0.9 Franchise royalty revenue 17.3 16.8 0.5 Franchise fees 2.0 1.9 0.1 Advertising fund revenue 8.6 8.2 0.4 Total revenues $ 34.7 $ 32.8 $ 1.9 Segment profit $ 9.4 $ 10.7 $ (1.3) The increase in Wendy’s International revenues during the first quarter of 2025 was primarily due to net new restaurant development. The decrease in Wendy’s International segment profit during the first quarter of 2025 was primarily due to higher advertising fund expenses. Global Real Estate & Development First Quarter 2025 2024 Change Franchise fees $ 0.6 $ 1.1 $ (0.5) Franchise rental income 58.5 58.0 0.5 Total revenues $ 59.1 $ 59.1 $ — Segment profit $ 24.7 $ 24.1 $ 0.6 Global Real Estate & Development revenues during the first quarter of 2025 were flat compared with the first quarter of 2024, primarily due to higher franchise rental income driven by the same factors as described above for “Franchise Rental Income,” offset by a decrease in franchise fee revenue driven by lower development-related fees. The increase in Global Real Estate & Development segment profit during the first quarter of 2025 was primarily due to lower franchise rental expense driven by the same factors as described above for “Franchise Rental Expense.” Liquidity and Capital Resources As of March 30, 2025, cash, cash equivalents and restricted cash totaled $389.0 million. In addition, the Company maintains a revolving financing facility, which allows for the drawing of up to $300.0 million. Based on current levels of operations, the Company expects that available cash and cash flows from operations will provide sufficient liquidity to meet operating cash requirements for the next 12 months. We currently believe we have the ability to pursue additional sources of liquidity if needed or desired to fund operating cash requirements or for other purposes. However, there can be no assurance that additional liquidity will be readily available or available on terms acceptable to us. Stock Repurchases 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 three months ended March 30, 2025, the Company repurchased 8.2 million shares under the January 2023 Authorization with an aggregate purchase price of $124.1 million, of which $1.4 million was accrued as of March 30, 2025, and excluding excise tax of $1.2 million and commissions of $0.1 million. As of March 30, 2025, the Company had $110.9 million of availability remaining under the January 2023 Authorization. Subsequent to March 30, 2025 through April 25, 2025, the Company repurchased 3.8 million shares under the January 2023 Authorization with an aggregate purchase price of $50.9 million, excluding applicable excise tax and commissions. 35 Dividends On March 17, 2025, the Company paid a quarterly cash dividend per share of $.25, aggregating $49.4 million. On May 2, 2025, the Company announced a dividend of $.14 per share to be paid on June 16, 2025 to stockholders of record as of June 2, 2025. If the Company pays regular quarterly cash dividends for the remainder of 2025 at the same rate as declared in the second quarter of 2025, the Company’s total cash requirement for dividends for the remainder of 2025 would be approximately $80.7 million based on the number of shares of its common stock outstanding at April 25, 2025. The Company currently intends to continue to declare and pay quarterly cash dividends; however, there can be no assurance that any additional quarterly dividends will be declared or paid or of the amount or timing of such dividends, if any. Long-Term Debt, Including Current Portion Wendy’s U.S. advertising fund has a revolving line of credit of $15.0 million, which was established to support the Company’s advertising fund operations. During the three months ended March 30, 2025, the Company drew down $15.0 million under the revolving line of credit, of which the Company repaid $8.5 million in March 2025. As a result, as of March 30, 2025, the Company had outstanding borrowings of $6.5 million under the revolving line of credit. Except as described above, there were no material changes to the Company’s debt obligations since December 29, 2024. The Company was in compliance with its debt covenants as of March 30, 2025. See Note 5 to the Condensed Consolidated Financial Statements contained in Item 1 herein for further information related to our long-term debt obligations. Cash Flows from Operating, Investing and Financing Activities The table below summarizes our cash flows from operating, investing and financing activities for the first three months of 2025 and 2024: First Quarter 2025 2024 Change Net cash provided by (used in): Operating activities $ 85.4 $ 100.0 $ (14.6) Investing activities (21.5) (20.8) (0.7) Financing activities (179.3) (72.6) (106.7) Effect of exchange rate changes on cash 0.8 (2.3) 3.1 Net (decrease) increase in cash, cash equivalents and restricted cash $ (114.6) $ 4.3 $ (118.9) Operating Activities 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 $85.4 million and $100.0 million in the first three months of 2025 and 2024, respectively. The change was primarily due to the timing of payments for marketing expenses of the national advertising funds. Investing Activities Cash used in investing activities was $21.5 million and $20.8 million in the first three months of 2025 and 2024, respectively. The change was primarily due to an increase in expenditures associated with the Company’s franchise development fund of $1.1 million. Financing Activities Cash used in financing activities was $179.3 million and $72.6 million in the first three months of 2025 and 2024, respectively. The change was primarily due to an increase in repurchases of the Company’s common stock of $115.5 million, partially offset by a net increase in cash provided by long-term debt activities of $6.5 million, reflecting the impact of the draw on the Company’s U.S. advertising fund revolving line of credit. 36 General Inflation, Commodities and Changing Prices Inflationary pressures on labor directly impacted our consolidated results of operations during the three months ended March 30, 2025, and we anticipate continued labor inflation throughout the remainder of 2025. We attempt to manage any inflationary costs and commodity price increases through selective menu price increases, product mix and focused execution of operational excellence. Delays in implementing such menu price increases and competitive pressures may limit our ability to recover such cost increases in the future. Inherent volatility experienced in certain commodity markets, such as those for beef, chicken, eggs, pork, cheese and grains, could have a significant effect on our results of operations and may have an adverse effect on us in the future. The extent of any impact will depend on our ability to manage such volatility through product mix and selective menu price increases. Seasonality Wendy’s restaurant operations are moderately seasonal. Wendy’s average restaurant sales are normally higher during the summer months than during the winter months. Because our business is moderately seasonal, results for a particular quarter are not necessarily indicative of the results that may be achieved for any other quarter or for the full fiscal year. Item 3. Quantitative and Qualitative Disclosures about Market Risk. As of March 30, 2025 there were no material changes from the information contained in the Company’s Form 10-K for the fiscal year ended December 29, 2024.