What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-08-02 compared with 2023-05-03 · 84 added, 46 removed, 223 unchanged (37% of the section changed)

34 unchanged sentences

100,000,000 shares authorized;

29,968,872 and 29,932,668 shares issued and outstanding as of April 1, 2023 and December 31, 2022, respectively

29,977,614 and 29,932,668 shares issued and outstanding as of July 1, 2023 and December 31, 2022, respectively

Additional paid-in-capital 2,038 2,797

8 unchanged sentences

(amounts in thousands, except per share data)

Thirteen Weeks Ended

2023 March 26,

Thirteen Weeks Ended Twenty-Six Weeks Ended

2023 June 25,

Royalty revenue, franchise fees and other $ 47,984 $ 36,044 $ 96,172 $ 71,114

13 unchanged sentences

Loss on debt extinguishment — — — 814

Other expense 188 65

Other (income) expense ( 46 ) 26 142 91

Income before income tax expense 22,258 16,362 43,169 27,898

17 unchanged sentences

Consolidated Statements of Stockholders' Deficit

For the Thirteen Weeks Ended March 26, 2022 and April 1, 2023

For the Twenty-Six Weeks Ended June 25, 2022

(amounts in thousands, except share data)

10 unchanged sentences

Balance at March 26, 2022 29,876,820 299 409 ( 424,613 ) ( 322 ) ( 424,227 )

Net income — — — 13,307 — 13,307

Shares issued under stock plans 37,594 — 1,838 — — 1,838

Tax payments for restricted stock upon vesting ( 46 ) — — ( 4 ) — ( 4 )

Stock-based compensation expense, net of forfeitures — — ( 1,601 ) — — ( 1,601 )

Dividends declared on common stock and equivalents — — — ( 4,512 ) — ( 4,512 )

Currency translation adjustment — — — — ( 271 ) ( 271 )

Balance at June 25, 2022 29,914,368 $ 299 $ 646 $ ( 415,822 ) $ ( 593 ) $ ( 415,470 )

See accompanying notes to consolidated financial statements.

WINGSTOP INC.

AND SUBSIDIARIES

Consolidated Statements of Stockholders' Deficit

For the Twenty-Six Weeks Ended July 1, 2023

(amounts in thousands, except share data)

Shares Amount Additional

8 unchanged sentences

Balance at April 1, 2023 29,968,872 300 809 ( 380,409 ) ( 490 ) ( 379,790 )

Net income — — — 16,181 — 16,181

Shares issued under stock plans 9,084 — 362 — — 362

Tax payments for restricted stock upon vesting ( 342 ) — — ( 69 ) — ( 69 )

Stock-based compensation expense — — 3,546 — — 3,546

Dividends declared on common stock and equivalents — — ( 2,679 ) ( 3,030 ) — ( 5,709 )

Currency translation adjustment — — — — 128 128

Balance at July 1, 2023 29,977,614 $ 300 $ 2,038 $ ( 367,327 ) $ ( 362 ) $ ( 365,351 )

See accompanying notes to consolidated financial statements.

3 unchanged sentences

(amounts in thousands)

Thirteen Weeks Ended

2023 March 26,

Twenty-Six Weeks Ended

2023 June 25,

Operating activities

17 unchanged sentences

Purchases of property and equipment ( 17,002 ) ( 12,695 )

Acquisition of restaurants from franchisee ( 4,396 ) —

Proceeds from sales of assets — 3,637

Payments for investments ( 808 ) —

Cash used in investing activities ( 22,206 ) ( 9,058 )

19 unchanged sentences

Wingstop Inc., together with its consolidated subsidiaries (collectively, “Wingstop” or the “Company”), is in the business of franchising and operating Wingstop restaurants.

As of April 1, 2023, the Company had a total of 1,996 restaurants in its system.

The Company’s restaurant base is approximately 98 % franchised, with 1,953 franchised locations (including 243 international locations) and 43 company-owned restaurants as of April 1, 2023.

As of July 1, 2023, the Company had a total of 2,046 restaurants in its system.

The Company’s restaurant base is approximately 98 % franchised, with 2,001 franchised locations (including 252 international locations) and 45 company-owned restaurants as of July 1, 2023.

Basis of presentation.

1 unchanged sentence

Consequently, financial information and disclosures normally included in financial statements prepared annually in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted.

Balance sheet amounts are as of April 1, 2023 and December 31, 2022, and operating results are for the thirteen weeks ended April 1, 2023 and March 26, 2022.

Balance sheet amounts are as of July 1, 2023 and December 31, 2022, and operating results are for the thirteen and twenty-six weeks ended July 1, 2023 and June 25, 2022.

In the Company’s opinion, all necessary adjustments have been made for the fair presentation of the results of the interim periods presented.

4 unchanged sentences

Cash, Cash Equivalents, and Restricted Cash.

Cash, cash equivalents, and restricted cash within the Consolidated Balance Sheets and the Consolidated Statements of Cash Flows as of April 1, 2023 and December 31, 2022 were as follows (in thousands):

April 1, 2023 December 31, 2022

Cash, cash equivalents, and restricted cash within the Consolidated Balance Sheets and the Consolidated Statements of Cash Flows as of July 1, 2023 and December 31, 2022 were as follows (in thousands):

July 1, 2023 December 31, 2022

Cash and cash equivalents $ 188,500 $ 184,496

12 unchanged sentences

Basic weighted average shares outstanding is reconciled to diluted weighted average shares outstanding as follows (in thousands):

Thirteen Weeks Ended

2023 March 26,

Thirteen Weeks Ended Twenty-Six Weeks Ended

2023 June 25,

Basic weighted average shares outstanding 29,972 29,882 29,959 29,866

1 unchanged sentence

Diluted weighted average shares outstanding 30,049 29,914 30,043 29,944

For the thirteen weeks ended April 1, 2023 and March 26, 2022, equity awards representing approximately 13,000 and 8,000 shares, respectively, were excluded from the dilutive earnings per share calculation because the effect would have been anti-dilutive.

For the thirteen weeks ended July 1, 2023 and June 25, 2022, equity awards representing approximately 1,000 and 77,000 shares, respectively, were excluded from the dilutive earnings per share calculation because the effect would have been anti-dilutive.

For the twenty-six weeks ended July 1, 2023 and June 25, 2022, equity awards representing approximately 3,000 and 38,000 shares, respectively, were excluded from the dilutive earnings per share calculation because the effect would have been anti-dilutive.

(3) Dividends

In connection with the Company’s regular dividend program, on February 21, 2023, our Board of Directors declared a quarterly dividend of $ 0.19 per share of common stock, resulting in a total dividend of approximately $ 5.7 million.

This dividend was paid on March 31, 2023 to stockholders of record as of March 10, 2023.

Subsequent to the first quarter, on May 2, 2023, the Company’s Board of Directors declared a quarterly dividend of $ 0.19 per share of common stock for stockholders of record as of May 19, 2023.

The regular quarterly dividend is to be paid on June 9, 2023, totaling approximately $ 5.7 million.

In connection with the Company’s regular dividend program, in each of the first two quarters of 2023, our Board of Directors declared a quarterly dividend of $ 0.19 per share of common stock, which, in aggregate, totaled $ 11.4 million, or $ 0.38 per share of common stock, and which was paid during the twenty-six weeks ended July 1, 2023.

Subsequent to the second quarter, on August 1, 2023, the Company’s Board of Directors declared a quarterly dividend of $ 0.22 per share of common stock for stockholders of record as of August 18, 2023.

The regular quarterly dividend is to be paid on September 8, 2023, totaling approximately $ 6.6 million.

(4) Fair Value Measurements

4 unchanged sentences

Level 3 — Unobservable inputs reflecting management’s estimates and assumptions.

WINGSTOP INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The carrying values of cash and cash equivalents, accounts receivable, and accounts payable approximate fair value due to their short-term nature.

1 unchanged sentence

(“LPH”), are determined on a non-recurring basis, which results are summarized as follows (in thousands):

April 1, 2023 December 31, 2022

July 1, 2023 December 31, 2022

Fair Value Carrying

9 unchanged sentences

The Company also measures certain non-financial assets (primarily long-lived assets, intangible assets, and goodwill) at fair value on a non-recurring basis in connection with its periodic evaluations of such assets for potential impairment.

WINGSTOP INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(5) Income Taxes

Income tax expense and the effective tax rate were $ 5.2 million and 25.1 %, respectively, for the thirteen weeks ended April 1, 2023, and $ 2.9 million and 24.8 %, respectively, for the thirteen weeks ended March 26, 2022.

The effective tax rate remained comparable to the prior fiscal first quarter.

Income tax expense and the effective tax rate were $ 6.1 million and 27.3 %, respectively, for the thirteen weeks ended July 1, 2023, and $ 3.1 million and 18.7 %, respectively, for the thirteen weeks ended June 25, 2022.

Income tax expense and the effective tax rate were $ 11.3 million and 26.2 %, respectively, for the twenty-six weeks ended July 1, 2023, and $ 5.9 million and 21.2 %, respectively, for the twenty-six weeks ended June 25, 2022.

The main component of the year-over-year increase in effective tax rates was the impact of stock awards forfeited during the thirteen and twenty-six weeks ended June 25, 2022.

(6) Debt Obligations

Long-term debt consisted of the following components (in thousands):

April 1, 2023 December 31, 2022

July 1, 2023 December 31, 2022

2020-1 Class A-2 Senior Secured Notes $ 472,800 $ 475,200

6 unchanged sentences

and consists of (i) Series 2020-1 2.84 % Fixed Rate Senior Secured Notes, Class A-2 (the “2020 Class A-2 Notes”), (ii) Series 2022-1 3.734 % Fixed Rate Senior Secured Notes, Class A-2 (the “2022 Class A-2 Notes”), and (iii) 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.

No borrowings were outstanding under the 2022 Variable Funding Notes as of April 1, 2023 and December 31, 2022.

No borrowings were outstanding under the 2022 Variable Funding Notes as of July 1, 2023 and December 31, 2022.

As of July 1, 2023, the Company’s leverage ratio under the 2020 Class A-2 Notes and the 2022 Class A-2 Notes was less than 5.0 x.

Per the terms of the Company’s debt agreements, principal payments can be suspended at the borrower’s election until the repayment date as long as the Company maintains a leverage ratio of less than 5.0 x.

Accordingly, the Company elected to suspend payments following the principal payment made in the second quarter of 2023, and the entire outstanding balance of $ 720.9 million of the 2020 Class A-2 Notes and the 2022 Class A-2 Notes has been classified as long-term debt due after fiscal year 2026.

WINGSTOP INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The 2020 Class A-2 Notes and 2022 Notes were issued in securitization transactions, and are guaranteed by certain limited-purpose, bankruptcy-remote, wholly-owned indirect subsidiaries of the Company and secured by a security interest in substantially all of their assets, including certain domestic and foreign revenue-generating assets, consisting principally of franchise-related agreements, intellectual property, and vendor rebate contracts.

(7) Commitments and Contingencies

The Company is subject to legal proceedings, claims, and liabilities, such as employment-related claims and premises-liability cases, which arise in the ordinary course of business and are generally covered by insurance.

The Company is subject to legal proceedings, claims, and liabilities, including claims and actions resulting from employment-related and franchise-related matters, which arise in the ordinary course of business and are generally covered by insurance.

In the opinion of management, the amount of ultimate liability with respect to such actions is not likely to have a material adverse impact on the Company’s financial position, results of operations, or cash flows.

(8) Stock-Based Compensation

During the thirteen weeks ended April 1, 2023, the Company granted 38,338 restricted stock units (“RSUs”) to certain employees.

During the twenty-six weeks ended July 1, 2023, the Company granted 41,885 restricted stock units (“RSUs”) to certain employees.

The RSUs granted to certain employees generally vest in equal annual amounts over a three-year period, subsequent to the grant date and had a weighted-average grant-date fair value of $ 172.73 per unit.

In addition, the Company granted 34,242 performance stock units (“PSUs”) to certain employees during the thirteen weeks ended April 1, 2023.

In addition, the Company granted 37,414 performance stock units (“PSUs”) to certain employees during the twenty-six weeks ended July 1, 2023.

Of the total PSUs granted, 30,430 PSUs are subject to a service condition and a performance vesting condition based on return on incremental invested capital (“ROI PSUs”).

4 unchanged sentences

Total compensation cost for the PSUs is determined based on the most likely outcome of the performance condition and the number of awards expected to vest based on the outcome.

WINGSTOP INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Total compensation expense related to all share-based awards was $ 3.3 million and $ 2.2 million for the thirteen weeks ended April 1, 2023 and March 26, 2022, respectively, and was included in Selling, general and administrative (“SG&A”) expense in the Consolidated Statements of Comprehensive Income.

Total compensation expense related to all share-based awards, net of forfeitures recognized, was $ 6.9 million and $ 0.6 million for the twenty-six weeks ended July 1, 2023 and June 25, 2022, respectively, and was included in Selling, general and administrative (“SG&A”) expense in the Consolidated Statements of Comprehensive Income.

(9) Revenue from Contracts with Customers

The following table represents a disaggregation of revenue from contracts with customers for the thirteen weeks ended April 1, 2023 and March 26, 2022 (in thousands):

Thirteen Weeks Ended

April 1, 2023 March 26, 2022

The following table represents a disaggregation of revenue from contracts with customers for the thirteen and twenty-six weeks ended July 1, 2023 and June 25, 2022 (in thousands):

Thirteen Weeks Ended Twenty-Six Weeks Ended

July 1, 2023 June 25, 2022 July 1, 2023 June 25, 2022

Royalty revenue $ 43,271 $ 33,037 $ 86,785 $ 65,241

3 unchanged sentences

Deferred revenue is reduced as fees are recognized in revenue over the term of the franchise license for the respective restaurant.

As the term of the franchise license is typically ten years , substantially all of the franchise fee revenue recognized in the thirteen weeks ended April 1, 2023 was included in the deferred revenue balance as of December 31, 2022.

Approximately $ 8.4 million and $ 7.7 million of deferred revenue as of April 1, 2023 and December 31, 2022, respectively, relates to restaurants that have not yet opened, so the fees are not yet being amortized.

As the term of the franchise license is typically ten years , substantially all of the franchise fee revenue recognized in the thirteen and twenty-six weeks ended July 1, 2023 was included in the deferred revenue balance as of December 31, 2022.

Approximately $ 8.8 million and $ 7.7 million of deferred revenue as of July 1, 2023 and December 31, 2022, respectively, relates to restaurants that have not yet opened, so the fees are not yet being amortized.

The weighted average remaining amortization period for deferred franchise and renewal fees related to open restaurants is 7.1 years.

The Company did not have any material contract assets as of April 1, 2023.

(10) Subsequent Event

Subsequent to the end of first fiscal quarter 2023, the Company acquired two existing restaurants in the Dallas, TX market from a franchisee.

The total purchase price was $ 4.4 million, funded by cash on hand.

The restaurant acquisitions are accounted for as business combinations and the Company is still determining the estimated fair value of assets acquired and liabilities assumed.

The excess of the purchase price over the aggregate fair value of assets acquired will be allocated to goodwill.

The results of operations of these locations will be included in our Consolidated Statements of Comprehensive Income as of the respective dates of acquisition.

The Company did not have any material contract assets as of July 1, 2023.

WINGSTOP INC.

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(10) Acquisitions of Company-owned Restaurants

In the second fiscal quarter 2023, the Company acquired two existing restaurants from a franchisee.

The combined purchase price was $ 4.4 million and was funded by cash flow from operations.

The following table summarizes the allocations of the purchase price to the estimated fair value of assets acquired and liabilities assumed at the date of the acquisition (in thousands):

Purchase Price Allocation

Working capital $ 13

Property and equipment 92

Reacquired franchise rights 1,630

Goodwill 2,661

Total purchase price $ 4,396

The excess of the purchase price over the aggregate fair value of assets acquired was allocated to goodwill and is attributable to the benefits expected as a result of the acquisition, including sales and unit growth opportunities.

All of the goodwill from the acquisition is expected to be deductible for federal income tax purposes.

Pro-forma financial information of the combined entities is not presented due to the immaterial impact of the financial results of the acquired restaurants on our consolidated financial statements.

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

What changed 10-Q

Item 1. Financial Statements