What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-02-22 compared with 2022-02-16 · 84 added, 82 removed, 210 unchanged (44% 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 25, 2021, filed with the SEC on February 16, 2022.

We operate on a 52- or 53-week fiscal year ending on the last Saturday of each calendar year.

Our fiscal quarters are comprised of 13 weeks, with the exception of the fourth quarter of a 53-week year, which contains 14 weeks.

Fiscal year 2022 contains 53 weeks, while fiscal year 2021 contains 52 weeks.

Wingstop is the largest fast casual chicken wings-focused restaurant chain in the world and has demonstrated strong, consistent growth.

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We believe our asset-light, highly-franchised business model generates strong operating margins and requires low capital expenditures, creating shareholder value through strong and consistent operating cash flow and capital-efficient growth.

Change in Presentation

Beginning in the first quarter of 2021, headcount related expenses that support our national advertising fund are presented within “Advertising expenses” on the Consolidated Statements of Comprehensive Income.

Prior to the first quarter of 2021, these expenses were presented within “Selling, general and administrative.” Prior period amounts have been reclassified to conform to the current presentation.

This reclassification had no impact on operating income, balance sheets or statements of cash flows.

Impact of COVID-19

The COVID-19 pandemic has continued to have varying degrees of disruption on our business.

Throughout the pandemic, substantially all of our domestic restaurants have remained open, with the majority of our dining rooms closed and locations operating in an off-premise capacity, leveraging our carryout and delivery capabilities.

Our carryout and delivery capabilities have positioned us to continue our strong domestic same store sales growth through the end of the fourth quarter of 2021;

however, our business has been challenged by COVID-19-related labor availability and wage inflation, and while we have not had significant disruptions in our supply chain, we have experienced higher product costs and inflationary pressures.

While we do not know the future impact COVID-19 will have on our business, we expect labor and supply chain challenges and inflation to continue into at least fiscal year 2022.

Highlights for Fiscal Year 2021:

Highlights for Fiscal Year 2022, which included a 53rd operating week:

• System-wide sales increased 16.8% over the prior fiscal year to $2.7 billion;

• System-wide restaurant count increased 13.2% over the prior fiscal year to a total of 1,959 worldwide locations, driven by 228 net unit openings;

• Domestic same store sales increased 3.4% over the prior fiscal year;

• Two-year domestic same store sales increased 29.4%

• Company-owned restaurant same store sales increased 1.0% over the prior fiscal year;

• Digital sales continue to exceed 60%;

• Domestic AUV increased to approximately $1.6 million;

• System-wide sales increased 20.2% over the prior fiscal year to approximately $2.3 billion;

• Digital sales continue to exceed 60% of system-wide sales;

• Domestic AUV of $1.6 million;

• Total revenue increased 26.6% over the prior fiscal year to $357.5 million;

• Net income increased 24.1% over the prior fiscal year to $52.9 million, or $1.77 per diluted share, compared to $42.7 million, or $1.42 per diluted share in the prior fiscal year;

• Adjusted EBITDA increased 23.0% over the prior fiscal year to $88.4 million.

• Adjusted EBITDA, a non-GAAP measure, increased 23.1% to $108.8 million, compared to adjusted EBITDA of $88.4 million in the prior fiscal year.

Key Performance Indicators

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Beginning of period 36 32

Closures (1) —

Acquired from franchisees 3 3

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System-wide sales.

System-wide sales represents net sales for all of our company-owned and franchised restaurants.

System-wide sales represents net sales for all of our company-owned and franchised restaurants (as reported by franchisees).

This measure allows management to better assess changes in our royalty revenue, our overall store performance, the health of our brand and the strength of our market position relative to competitors.

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Domestic AUV allows management to assess our domestic company-owned and franchised restaurant economics.

Our domestic AUV growth is primarily driven by increases in same store sales and is also influenced by opening new restaurants.

Changes in domestic AUV are primarily driven by increases in same store sales and are also influenced by opening new restaurants.

Domestic same store sales.

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We define the same store base to include those restaurants open for at least 52 full weeks.

This measure highlights the performance of existing restaurants, while excluding the impact of new restaurant openings and closures.

This measure highlights the performance of existing restaurants, while excluding the impact of new restaurant openings and permanent closures.

We review same store sales for domestic company-owned restaurants as well as system-wide domestic restaurants.

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EBITDA and Adjusted EBITDA.

We define EBITDA as net income before interest expense, net, income tax expense, and depreciation and amortization.

We define Adjusted EBITDA as net income before interest expense, net, income tax expense, and depreciation and amortization, further adjusted for losses on debt extinguishment and refinancing transactions, transaction costs, costs and fees associated with investments in our strategic initiatives, gains and losses on the disposal of assets, and stock-based compensation expense.

We define EBITDA as net income before interest expense, net, income tax expense (benefit), and depreciation and amortization.

We define Adjusted EBITDA as net income before interest expense, net, income tax expense (benefit), and depreciation and amortization, further adjusted for losses on debt extinguishment and financing transactions, transaction costs, costs and fees associated with investments in our strategic initiatives, gains and losses on the disposal of assets, and stock-based compensation expense.

For a reconciliation of net income to EBITDA and Adjusted EBITDA and for further discussion of EBITDA and Adjusted EBITDA as non-GAAP measures and how we utilize them, see footnote 2 below.

Adjusted Net Income and Adjusted Earnings Per Diluted Share.

We define Adjusted net income as net income adjusted for losses on debt extinguishment and refinancing transactions, transaction costs, costs and fees associated with investments in our strategic initiatives, gains and losses on the disposal of assets, and related tax adjustments that management believes are not indicative of the Company’s core operating results or business outlook over the long-term.

We define Adjusted net income as net income adjusted for losses on debt extinguishment and financing transactions, transaction costs, costs and fees associated with investments in our strategic initiatives, gains and losses on the disposal of assets, and related tax adjustments that management believes are not indicative of the Company’s core operating results or business outlook over the long-term.

We define Adjusted earnings per diluted share as Adjusted net income divided by weighted average diluted share count.

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The remainder was generated by franchised restaurants, as reported by our franchisees.

(2) For fiscal 2022, same store sales percentages were calculated excluding the 53rd week.

(3) EBITDA and Adjusted EBITDA are supplemental measures of our performance that are not required by, or presented in accordance with, accounting principles generally accepted in the United States (“GAAP”).

EBITDA and Adjusted EBITDA should not be considered as an alternative to net income or any other performance measure derived in accordance with GAAP, or as an alternative to cash flows from operating activities as a measure of our liquidity.

EBITDA and Adjusted EBITDA should not be considered as an alternative to net income or any other performance measure derived in accordance with GAAP.

These should not be viewed as an alternative to cash flows from operating activities as a measure of our liquidity.

We caution investors that amounts presented in accordance with our definitions of EBITDA and Adjusted EBITDA may not be comparable to similar measures disclosed by our competitors, because not all companies and analysts calculate EBITDA and Adjusted EBITDA in the same manner.

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By providing these non-GAAP financial measures, together with a reconciliation to the most comparable GAAP measure, we believe we are enhancing investors’ understanding of our business and our results of operations, as well as assisting investors in evaluating how well we are executing our strategic initiatives.

In addition, the instruments governing our indebtedness use EBITDA (with additional adjustments) to measure our compliance with covenants, such as our fixed charge coverage, lease adjusted leverage, and debt incurrence.

EBITDA and Adjusted EBITDA have limitations as analytical tools and should not be considered in isolation, or as an alternative to, or a substitute for net income or other financial statement data presented in our consolidated financial statements as indicators of financial performance.

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Due to these limitations, EBITDA and Adjusted EBITDA should not be considered as measures of discretionary cash available to us to invest in the growth of our business.

We compensate for these limitations by relying primarily on our GAAP results and using these non-GAAP measures only supplementally.

As noted in the table below, Adjusted EBITDA includes adjustments for losses on debt extinguishment and refinancing transactions, transaction costs, costs and fees associated with investments in our strategic initiatives, gains and losses on the disposal of assets, and stock-based compensation expense.

It is reasonable to expect that these items will occur in future periods.

However, we believe these adjustments are appropriate because the amounts recognized can vary significantly from period to period, do not directly relate to the ongoing operations of our restaurants, and complicate comparisons of our internal operating results and operating results of other restaurant companies over time.

We compensate for these limitations by relying primarily on our GAAP results and using these non-GAAP measures only as performance measures and only supplementally.

As noted in the table below, Adjusted EBITDA includes adjustments for losses on debt extinguishment and financing transactions, transaction costs, costs and fees associated with investments in our strategic initiatives, gains and losses on the disposal of assets, and stock-based compensation expense.

We believe these adjustments are appropriate because the amounts recognized can vary significantly from period to period, do not directly relate to the ongoing operations of our restaurants, and complicate comparisons of our internal operating results and operating results of other restaurant companies over time.

Each of the normal recurring adjustments and other adjustments described in this paragraph and in the reconciliation table below help management measure our core operating performance over time by removing items that are not related to day-to-day operations.

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Additional adjustments:

Loss on debt extinguishment and refinancing transactions (a)

Gain on disposal of assets, net (b)

Loss on debt extinguishment and financing transactions (a)

Loss (gain) on disposal of assets (b)

1,164 (3,497)

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Adjusted EBITDA $ 108,808 $ 88,393

(a) Represents costs and expenses related to the refinancing of our securitized financing facility and payment of a special dividend;

all transaction costs are included in Loss on debt extinguishment and refinancing transactions on the Consolidated Statements of Comprehensive Income, with the exception of $151,000 during the year ended December 26, 2020 that is included in Selling, general and administrative on the Consolidated Statements of Comprehensive Income.

(b) Represents a gain resulting from the re-franchise of company-owned restaurants to franchisees, which is included in Gain on sale of restaurants and other expenses, net on the Consolidated Statements of Comprehensive Income.

(a) Represents costs and expenses related to our 2022 securitized financing facility and payment of a special dividend, as well as the extinguishment of our 2020 variable funding note facility;

all transaction costs are included in Loss on debt extinguishment and financing transactions during the year ended December 31, 2022, with the exception of $310,000 that is included in Selling, general and administrative on the Consolidated Statements of Comprehensive Income.

(b) Represents a loss (gain) resulting from the sale of assets to a franchisee.

The loss (gain) is included in Loss (gain) on disposal of assets on the Consolidated Statements of Comprehensive Income.

(c) Represents costs and expenses related to consulting projects to support the Company's strategic initiatives, which are included in Selling, general and administrative on the Consolidated Statements of Comprehensive Income.

(d) Includes non-cash, stock-based compensation.

(d) Includes non-cash, stock-based compensation, net of forfeitures.

(4) Adjusted net income and adjusted earnings per diluted share are supplemental measures of operating performance that do not represent and should not be considered alternatives to net income and earnings per share, as determined by GAAP.

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Net income $ 52,947 $ 42,658

Loss on debt extinguishment and refinancing transactions (a)

Gain on disposal of assets, net (b)

Loss on debt extinguishment and financing transactions (a)

Loss (gain) on disposal of assets (b)

1,164 (3,497)

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Adjusted earnings per diluted share $ 1.85 $ 1.35

(a) Represents costs and expenses related to the refinancing of our securitized financing facility and payment of a special dividend;

all transaction costs are included in Loss on debt extinguishment and refinancing transactions with the exception of $151,000 during the year ended December 26, 2020 that is included in Selling, general and administrative on the Consolidated Statements of Comprehensive Income.

(b) Represents a gain resulting from the re-franchise of company-owned restaurants to franchisees which is included in Gain on sale of restaurants and other expenses, net on the Consolidated Statements of Comprehensive Income.

(a) Represents costs and expenses related to our 2022 securitized financing facility and payment of a special dividend, as well as the extinguishment of our 2020 variable funding note facility;

(b) Represents a loss (gain) resulting from the sale of assets to a franchisee.

This loss (gain) is included in Loss (gain) on disposal of assets in the Consolidated Statements of Comprehensive Income.

(c) Represents costs and expenses related to a consulting project to support the Company's strategic initiatives, which are included in Selling, general and administrative on the Consolidated Statements of Comprehensive Income.

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Depreciation and amortization 10,899 7,943 2,956 37.2 %

Gain on sale of restaurants and other expenses, net (3,497) (3,093) (404) 13.1 %

Loss (gain) on disposal of assets 1,164 (3,497) 4,661 (133.3) %

Total costs and expenses 265,588 208,746 56,842 27.2 %

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Interest expense, net 21,230 14,984 6,246 41.7 %

Loss on debt extinguishment and refinancing transactions — 13,665 (13,665) (100.0) %

Other income (135) — (135) (100.0) %

Loss on debt extinguishment and financing transactions 814 — 814 100.0 %

Other (income) expense 573 (135) 708 (524.4) %

Income before income tax expense 69,316 58,907 10,409 17.7 %

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During fiscal year 2022, total revenue was $357.5 million, an increase of $75.0 million, or 26.6%, compared to $282.5 million in the prior fiscal year.

Royalty revenue, franchise fees and other increased $21.8 million primarily due to domestic same store sales growth of 8.0% as well as 189 net franchise restaurant openings since December 26, 2020.

Advertising fees increased $6.6 million primarily due to the 20.2% increase in system-wide sales during fiscal year 2021.

This was partially offset by a $6.9 million rebate of advertising surplus that was returned to franchisees during the third quarter of 2021 in an effort to mitigate record high wing price inflation.

Company-owned restaurant sales increased $5.3 million primarily due to the opening of seven new company-owned restaurants since the prior year comparable period, resulting in additional sales of $2.7 million.

Also contributing to the increase was company-owned same store sales growth of 3.4%, which was driven by an increase in average ticket.

Royalty revenue, franchise fees and other increased $27.9 million, of which $8.2 million was due to 221 net franchise restaurant openings since December 25, 2021, $12.3 million was due to domestic same store sales growth of 3.4%, and approximately $3.0 million was due to additional royalties from the 53rd week.

Other revenue increased by $4.1 million primarily due to an increase in vendor rebates.

Advertising fees increased $37.5 million, of which $17.0 million was due to a 16.8% increase in system-wide sales during fiscal year 2022, $10.9 million was due to an increase in the national advertising fund contribution rate to 5% from 4% effective the first day of the fiscal second quarter 2022, and approximately $2.7 million was due to additional advertising fees from the 53rd week.

Additionally, during the prior year fiscal period, a $6.9 million non-recurring rebate of advertising surplus was returned to franchisees, reducing the revenue recognized.

Company-owned restaurant sales increased $9.6 million, primarily due to an increase of $7.7 million related to the increase in the number of company-owned restaurants compared to the prior year comparable period.

Also contributing to the increase was company-owned same store sales growth of 1.0%, which was driven by an increase in average ticket, and approximately $1.5 million of additional sales from the 53rd week.

Cost of sales.

During fiscal year 2022, cost of sales was $63.4 million, an increase of $6.0 million, or 10.4%, compared to $57.4 million in fiscal 2021.

Cost of sales as a percentage of company-owned restaurant sales was 79.3% in the current year fiscal period, compared to 81.7% in the prior year fiscal period.

The table below presents the major components of Cost of sales (in thousands, except for percentages):

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Vendor rebates (1,798) (2.3) % (1,559) (2.2) %

Cost of sales (excluding pre-opening expenses) 56,932 81.0 % 48,568 74.7 %

Pre-opening expenses 484 0.7 % 15 — %

Total cost of sales 63,395 79.3 % 57,416 81.7 %

Pre-opening expenses (1)

935 1.2 % 484 0.7 %

Cost of sales (excluding pre-opening expenses) $ 62,460 78.2 % $ 56,932 81.0 %

Pre-opening expenses are incurred in conjunction with the opening of a new restaurant and are included within Other restaurant operating expenses in the table above.

Food, beverage and packaging costs as a percentage of company-owned restaurant sales were 38.3% in fiscal year 2022 compared to 44.8% in the prior fiscal year.

The increase is primarily due to a 40.9% increase in the cost of bone-in chicken wings, representing record-high wing inflation as compared to the prior fiscal year.

The decrease is primarily due to a 26.9% decrease in the cost of bone-in chicken wings as compared to the prior year period.

Labor costs as a percentage of company-owned restaurant sales were 24.1% in fiscal year 2022 compared to 22.8% in the prior fiscal year.

The decrease as a percentage of company-owned restaurant sales was primarily due to incentive pay provided to team members in response to the COVID-19 pandemic during the prior fiscal year, partially offset by a highly competitive labor market that resulted in increases in company-owned restaurant wages and hiring and training costs during the current fiscal year.

The increase as a percentage of company-owned restaurant sales was primarily due to higher wage rates in the restaurants recently opened in New York City, as well as increases in company-owned restaurant wages, hiring and training costs as a result of the ongoing competitive labor market during the current year fiscal period.

Other restaurant operating expenses as a percentage of company-owned restaurant sales were 19.3% in fiscal year 2022 compared to 16.3% in the prior fiscal year.

The decrease as a percentage of company-owned restaurant sales was primarily due to a decrease in delivery fees and other operating expenses.

Pre-opening expenses as a percentage of company-owned restaurant sales were 0.7% in fiscal year 2021 due to our investment in opening company-owned restaurants in Manhattan during the current fiscal year.

The increase as a percentage of company-owned restaurant sales was primarily a result of higher rent and occupancy costs associated with the opening of company-owned restaurants in New York City during the current year fiscal period.

Pre-opening expenses as a percentage of company-owned restaurant sales were 1.2% in fiscal year 2022 driven by our development of the New York City market.

Advertising expenses.

Advertising expenses were $84.0 million in fiscal year 2021 compared to $77.3 million in the prior fiscal year.

Advertising expenses were $123.1 million, an increase of $39.1 million, compared to $84.0 million in fiscal year 2021.

Advertising expenses are recognized at the same time the related revenue is recognized, which does not necessarily correlate to the actual timing of the related advertising spend.

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SG&A was $67.1 million in fiscal year 2022, an increase of $4.2 million, or 6.6%, compared to $62.9 million in the prior fiscal year.

The increase in SG&A was primarily due to an increase of $2.9 million in headcount-related expenses to support the growth in our business, inclusive of stock-based compensation expense, an increase of $1.4 million in travel expense, and an increase of $0.9 million in technology expenses.

These increases were partially offset by a decrease of $2.5 million related to COVID-19 and support provided to international franchisees in the prior year period, as well as $0.9 million related to strategic investments made in the prior year period.

The increase in SG&A was primarily due to an increase of $4.0 million in headcount-related expenses to support the growth in our business, an increase of $2.3 million in professional fees to support the Company’s strategic initiatives, an increase of $0.5 million in travel expenses, and approximately $1.0 million related to the 53rd week.

These increases were partially offset by a decrease of $5.4 million in stock-based compensation expense primarily related to stock awards forfeited in fiscal year 2022.

Depreciation and amortization.

Depreciation and amortization was $10.9 million in fiscal year 2022, an increase of $3.0 million, or 37.2%, compared to $7.9 million in the prior fiscal year.

The increase in depreciation and amortization was primarily due to capital expenditures related to our technology investments, as well as an estimated $0.3 million related to the 53rd week.

Interest expense, net.

Interest expense, net was $15.0 million in fiscal year 2021, a decrease of $1.8 million, or 10.7%, compared to $16.8 million in the prior fiscal year.

The decrease was due to the refinancing of our securitized financing facility on October 30, 2020, which increased our outstanding debt by $162.4 million and reduced our interest rate from 4.97% to 2.84%.

Loss on debt extinguishment and refinancing transactions.

Loss on debt extinguishment and refinancing transactions was $13.7 million during fiscal year 2020 due to costs and fees associated with the refinancing of our securitized financing facility on October 30, 2020.

Interest expense, net was $21.2 million in fiscal year 2022, an increase of $6.2 million, or 41.7%, compared to $15.0 million in the prior fiscal year.

The increase was due to the securitized financing transaction completed on March 9, 2022, which increased our outstanding debt by $250 million, as well as an estimated $0.4 million related to the 53rd week.

Loss on debt extinguishment and financing transactions.

Loss on debt extinguishment and financing transactions was $0.8 million during fiscal year 2022 due to costs and fees associated with the extinguishment of our 2020 Variable Funding Note on March 9, 2022.

Income tax expense.

Income tax expense was $16.4 million in fiscal year 2022, yielding an effective tax rate of 23.6%, compared to an effective tax rate of 27.6% in the prior fiscal year.

The increase in the effective tax rate was primarily due to the impact of excess tax benefits associated with stock options exercised during fiscal year 2020.

The decrease in the effective tax rate was primarily due to the impact of tax benefits associated with stock awards forfeited during fiscal year 2022.

Liquidity and Capital Resources

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Historically, we have operated with minimal positive working capital or with negative working capital.

We generally reinvest available cash flows from operations to invest in our business, service our debt obligations, and pay dividends.

Our primary sources of short-term and long-term liquidity are expected to be cash flows from operations and available borrowings under our Variable Funding Notes.

As of December 25, 2021, the Company had $54.9 million of cash and restricted cash on its balance sheet and $46.5 million of borrowing availability under its Variable Funding Notes.

We generally utilize available cash flows from operations to invest in our business, service our debt obligations, and pay dividends.

Our primary sources of short-term and long-term liquidity are expected to be cash flows from operations and available borrowings under our 2022 Variable Funding Notes (defined below).

As of December 31, 2022, the Company had $205.7 million of cash and restricted cash on its balance sheet.

Based upon current levels of operations and anticipated growth, we expect that cash flows from operations, combined with our securitized financing facility including our 2022 Variable Funding Notes, will be sufficient to meet our capital expenditure, working capital and debt service requirements for at least the next twelve months and the foreseeable future.

The following table shows summary cash flows information for the fiscal years 2021 and 2020 (in thousands):

The following table shows summary cash flows information for fiscal years 2022 and 2021 (in thousands):

2022 December 25,

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Operating activities .

Our cash flows from operating activities are principally driven by sales at both franchise restaurants and company-owned restaurants, as well as franchise and development fees.

Our cash flows from operating activities are principally driven by sales at both franchise restaurants and company-owned restaurants, as well as franchise fees.

We collect franchise royalties from our franchise owners on a weekly basis.

Restaurant-level operating costs at our company-owned restaurants, unearned franchise and development fees, and corporate overhead costs also impact our cash flows from operating activities.

Net cash provided by operating activities was $48.9 million in fiscal year 2021, a decrease of $16.7 million from cash provided by operating activities of $65.5 million in the prior fiscal year.

The decrease is primarily due to changes in Ad Fund cash and cash equivalents, directly related to the timing of payments for expenses incurred for national advertising, which is offset by an increase in operating income.

Restaurant-level operating costs at our company-owned restaurants, unearned franchise fees, and corporate overhead costs also impact our cash flows from operating activities.

Net cash provided by operating activities was $76.2 million in fiscal year 2022, an increase of $27.4 million from cash provided by operating activities of $48.9 million in the prior fiscal year.

The increase is primarily due to an increase in operating income, as well as changes in Ad Fund cash and cash equivalents, directly related to the timing of payments for expenses incurred for national advertising.

Investing activities .

Our net cash used in investing activities was $29.9 million in fiscal year 2021, an increase of $21.9 million, from $8.0 million in fiscal year 2020.

The increase in cash used in investing activities was primarily due to an increase in capital expenditures related to our investments in technology and the remodel of our corporate headquarters building, as well as a payment of $4.2 million related to a foreign investment (see Note 10 in the accompanying notes to our consolidated financial statements included elsewhere in this Annual Report).

Our net cash used in investing activities was $28.7 million in fiscal year 2022, a decrease of $1.2 million, from $29.9 million in fiscal year 2021.

The decrease in cash used in investing activities was primarily due to an investment in our United Kingdom franchisee made during fiscal year 2021, as well as a decrease in purchases of property and equipment during the current fiscal year, partially offset by changes in cash related to restaurant acquisition and asset disposal transactions as compared to the prior fiscal year.

Financing activities .

Our net cash used in financing activities was $23.4 million in fiscal year 2021, an increase of $3.9 million, from cash used in financing activities of $19.4 million in fiscal year 2020.

The increase was primarily due to an increase in the regular quarterly dividend, which totaled $18.5 million in fiscal year 2021, compared to $14.8 million in fiscal year 2020.

Additionally, in fiscal year 2020, we paid a special dividend in connection with the refinancing of our debt totaling $148.4 million and incurred deferred financing and other debt-related costs of $18.6 million, which were funded by additional net borrowings of $162.4 million.

Our net cash provided by financing activities was $103.3 million in fiscal year 2022, a change of $126.6 million, from cash used in financing activities of $23.4 million in fiscal year 2021.

The change was primarily due to additional borrowings under our 2022 Class A-2 Notes (as defined below) of $250 million, partially offset by the payment of a special dividend in connection with the securitized financing transaction totaling $119.5 million, as well as deferred financing and other debt related costs incurred of $5.4 million in fiscal year 2022.

The change was also driven by an increase in the regular quarterly dividend, which totaled $21.5 million in fiscal year 2022, compared to $18.5 million in fiscal year 2021.

Securitized financing facility .

On October 30, 2020, the Company completed a transaction to refinance its existing securitized financing facility with a new securitized financing facility, pursuant to which Wingstop Funding LLC (the “Issuer”), a limited-purpose, bankruptcy-remote, wholly-owned indirect subsidiary of the Company, issued $480.0 million of its Series 2020-1 2.84% Fixed Rate Senior Notes, Class A-2 (the “2020 Class A-2 Notes”).

The Issuer also entered into a revolving financing facility of Series 2020-1 Variable Funding Senior Notes, Class A-1 (the “2020 Variable Funding Notes,” and together with the 2020 Class A-2 Notes, the “2020 Notes”) which permits borrowings of up to a maximum principal amount of $50.0 million, which may be used to issue letters of credit.

A portion of the proceeds of the 2020 Class A-2 Notes was used to repay the $332.8 million of principal outstanding on the existing Series 2018-1 4.97% Fixed Rate Senior Secured Notes, Class A-2 and Series 2018-1 Variable Funding Senior Secured Notes, Class A-1 and to pay a special cash dividend of approximately $148.4 million to our stockholders.

The 2020 Class A-2 Notes are generally subject to 1% annual amortization, bear interest at a fixed rate of 2.84% per annum, and have an anticipated repayment date of December 2027.

We paid quarterly cash dividends of $0.14 per share of common stock aggregating $8.3 million for the first two quarters of 2021.

We paid quarterly cash dividends of $0.17 per share of common stock aggregating $10.1 million for the third and fourth quarters of 2021.

On March 9, 2022, the Company completed a securitized financing transaction, pursuant to which Wingstop Funding LLC (the “Issuer”), a limited purpose, bankruptcy-remote, indirect wholly owned subsidiary of the Company, issued $250 million of its Series 2022-1 3.734% Fixed Rate Senior Secured Notes, Class A-2 (the “2022 Class A-2 Notes”).

The Issuer also entered into a revolving financing facility of Series 2022-1 Variable Funding Senior Notes, Class A-1 (the “2022 Variable Funding Notes,” and together with the 2022 Class A-2 Notes, the “2022 Notes”), which permits borrowings of up to a maximum principal amount of $200 million, subject to certain borrowing conditions, a portion of which may be used to issue letters of credit.

The Company’s existing revolving financing facility of Series 2020-1 Class A-1 Notes was terminated in connection with the transaction.

The proceeds from the securitized financing transaction were used to pay related transaction fees and expenses, strengthen the Company's liquidity position and for general corporate purposes, which included a return of capital to the Company’s stockholders.

In addition to the 2022 Notes, the Company’s outstanding debt consists of its existing Series 2020-1 2.84% Fixed Rate Senior Secured Notes, Class A-2 (the “2020 Notes”).

No borrowings were outstanding under the 2022 Variable Funding Notes as of December 31, 2022.

We paid quarterly cash dividends of $0.17 per share of common stock in each of the first two quarters of 2022, and quarterly cash dividends of $0.19 per share of common stock in both the third and fourth quarters of 2022, resulting in aggregate dividend payments of $21.5 million in fiscal year 2022.

On February 21, 2023, the Company’s board of directors approved a dividend of $0.19 per share, to be paid on March 31, 2023 to stockholders of record as of March 10, 2023, totaling approximately $5.7 million.

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Indemnifications.

We are parties to certain indemnifications to third parties in the ordinary course of business.

We are parties to certain indemnification obligations to third parties in the ordinary course of business.

We believe the probability of incurring an actual liability under such indemnifications is sufficiently remote so that no liability has been recorded.

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It is possible that materially different amounts would be reported using different assumptions.

Our critical accounting policies and estimates are more fully described in Note 1 to the Consolidated Financial Statements.

Our critical accounting policies and estimates are more fully described in “Note 1 - Basis of Presentation and Summary of Significant Accounting Policies” of the Notes to the Consolidated Financial Statements.

However, we believe the accounting policies described below are particularly important to the portrayal and understanding of our financial position and results of operations.

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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-K

Item 7. Management’s Discussion and Analysis