What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-07-31 compared with 2024-05-01 · 138 added, 91 removed, 211 unchanged (52% of the section changed)

12 unchanged sentences

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

First Quarter of 2024 Highlights

• System-wide sales increased 36.8% over the prior fiscal first quarter to $1.1 billion;

• 65 net new openings in the fiscal first quarter 2024 for a total of 2,279 worldwide locations;

• Domestic same store sales increased 21.6% over the prior fiscal first quarter;

• Company-owned restaurant same store sales increased 6.2% over the prior fiscal first quarter;

• Digital sales increased to 68.3% of system-wide sales;

Second Quarter of 2024 Highlights

• System-wide sales increased 45.2% over the prior fiscal second quarter to $1.2 billion;

• 73 net new openings in the fiscal second quarter 2024 for a total of 2,352 worldwide locations;

• Domestic same store sales increased 28.7% over the prior fiscal second quarter;

• Company-owned restaurant same store sales increased 14.1% over the prior fiscal second quarter;

• Digital sales increased to 68.3% of system-wide sales, as compared to 65.2% in the prior fiscal second quarter;

• Domestic AUV increased to $2.0 million;

• Total revenue increased 34.1% over the prior fiscal first quarter to $145.8 million;

• Net income increased 83.5% to $28.7 million, or $0.98 per diluted share, compared to net income of $15.7 million, or $0.52 per diluted share in the prior fiscal first quarter;

• Adjusted net income and adjusted earnings per diluted share, both non-GAAP measures, increased 61.8% to $28.7 million, or $0.98 per diluted share, compared to $17.8 million, or $0.59 per diluted share in the prior fiscal first quarter;

• Adjusted EBITDA, a non-GAAP measure, increased 45.3% to $50.3 million, compared to adjusted EBITDA of $34.6 million in the prior fiscal first quarter.

• Total revenue increased 45.3% over the prior fiscal second quarter to $155.7 million;

• Net income increased 69.9% to $27.5 million, or $0.93 per diluted share, compared to net income of $16.2 million, or $0.54 per diluted share, in the prior fiscal second quarter;

• Adjusted EBITDA, a non-GAAP measure, increased 50.7% to $51.8 million, compared to adjusted EBITDA of $34.4 million in the prior fiscal second quarter.

Year-to-Date Second Quarter of 2024 Highlights

• System-wide sales increased 41.0% to $2.3 billion;

• 138 net new openings in the year-to-date second quarter of 2024;

• Domestic same store sales increased 25.1% over the prior fiscal year-to-date period;

• Total revenue increased 39.6% to $301.5 million over the prior fiscal year-to-date period;

• Net income increased 76.6% to $56.2 million, or $1.91 per diluted share, compared to net income of $31.9 million, or $1.06 per diluted share, in the prior fiscal year-to-date period;

• Adjusted EBITDA, a non-GAAP measure, increased 48.0% to $102.0 million, compared to adjusted EBITDA of $68.9 million in the prior fiscal year-to-date period.

Key Performance Indicators

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Management reviews the number of new restaurants, the number of closed restaurants, and the number of acquisitions and divestitures of restaurants to assess net new restaurant growth.

Thirteen Weeks Ended

2024 April 1,

Thirteen Weeks Ended Twenty-Six Weeks Ended

2023 June 29,

Domestic Franchised Activity:

1 unchanged sentence

Openings 65 42 112 74

Closures — (1) — (1)

Acquired by Company (1) (2) (1) (2)

Restaurants end of period 1,988 1,749 1,988 1,749

1 unchanged sentence

Beginning of period 50 43 49 43

Openings 1 — 2 —

Closures — — — —

Acquired by Company 1 2 1 2

Restaurants end of period 52 45 52 45

26 unchanged sentences

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, with further adjustments for losses on debt extinguishment and financing transactions, transaction costs, costs and fees associated with investments in our strategic initiatives, and stock-based compensation expense.

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

Adjusted EBITDA may not be comparable to other similarly titled captions of other companies due to differences in methods of calculation.

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 financing transactions, transaction costs, costs and fees associated with investments in our strategic initiatives, 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.

For a reconciliation of net income to Adjusted net income and for further discussion of Adjusted net income and Adjusted earnings per diluted share as non-GAAP measures and how we utilize them, see footnote 3 below.

The following table sets forth our key performance indicators for the thirteen weeks ended March 30, 2024 and April 1, 2023 (in thousands, except unit data):

Thirteen Weeks Ended

March 30, 2024 April 1, 2023

The following table sets forth our key performance indicators for the thirteen and twenty-six weeks ended June 29, 2024 and July 1, 2023 (in thousands, except unit data):

Thirteen Weeks Ended Twenty-Six Weeks Ended

June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023

Number of system-wide restaurants open at end of period 2,352 2,046 2,352 2,046

8 unchanged sentences

$ 51,778 $ 34,350 $ 102,041 $ 68,933

Adjusted net income (3)

$ 28,747 $ 17,771

(1) The percentage of system-wide sales attributable to company-owned restaurants was 2.5% and 2.8% for the thirteen weeks ended March 30, 2024 and April 1, 2023, respectively.

(1) The percentage of system-wide sales attributable to company-owned restaurants was 2.5% and 2.8% for the thirteen weeks ended June 29, 2024 and July 1, 2023, respectively.

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

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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.

The following table reconciles net income to EBITDA and Adjusted EBITDA for the thirteen weeks ended March 30, 2024 and April 1, 2023 (in thousands):

Thirteen Weeks Ended

2024 April 1,

The following table reconciles net income to EBITDA and Adjusted EBITDA for the thirteen and twenty-six weeks ended June 29, 2024 and July 1, 2023 (in thousands):

Thirteen Weeks Ended Twenty-Six Weeks Ended

2023 June 29,

Net income $ 27,485 $ 16,181 $ 56,232 $ 31,850

5 unchanged sentences

Consulting fees (a)

— 1,084 — 3,850

Stock-based compensation expense (b)

4,926 3,546 8,738 6,890

Adjusted EBITDA $ 51,778 $ 34,350 $ 102,041 $ 68,933

(a) Represents non-recurring consulting fees that are not part of our ongoing operations and are incurred to execute discrete, project-based strategic initiatives, which are included in Selling, general and administrative on the Consolidated Statements of Comprehensive Income.

The costs incurred in the thirteen weeks ended April 1, 2023 include consulting fees relating to a comprehensive review of our long-term growth strategy for our domestic business to explore potential future initiatives, which review was completed in fiscal year 2023.

Given the magnitude and scope of this strategic review

initiative that is not expected to recur in the foreseeable future, the Company considers the incremental consulting fees incurred with respect to the initiative not reflective of the ongoing costs to operate its business.

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

(3) 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.

These measures have not been prepared in accordance with Article 11 of Regulation S-X promulgated under the Securities Act of 1933, as amended (the “Securities Act”).

Management believes adjusted net income and adjusted earnings per diluted share supplement GAAP measures and enable management to more effectively evaluate the Company’s performance period-over-period and relative to competitors.

The following table reconciles net income to Adjusted net income and calculates adjusted earnings per diluted share for the thirteen weeks ended March 30, 2024 and April 1, 2023 (in thousands):

Thirteen Weeks Ended

2024 April 1,

Net income $ 28,747 $ 15,669

Consulting fees (a)

Tax effect of adjustments (b)

Adjusted net income $ 28,747 $ 17,771

Weighted-average shares outstanding - diluted 29,478 30,031

Adjusted earnings per diluted share $ 0.98 $ 0.59

The costs incurred in the thirteen and twenty-six weeks ended July 1, 2023 include consulting fees relating to a comprehensive review of our long-term growth strategy for our domestic business to explore potential future initiatives, which review was completed in fiscal year 2023.

Given the magnitude and scope of this strategic review initiative that is not expected to recur in the foreseeable future, the Company considers the incremental consulting fees incurred with respect to the initiative not reflective of the ongoing costs to operate its business.

(b) Represents the tax effect of the aforementioned adjustments to reflect corporate income taxes at an assumed effective tax rate of 24% for the thirteen weeks ended April 1, 2023, which includes provisions for U.S.

federal income taxes, and assumes the respective statutory rates for applicable state and local jurisdictions.

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

Results of Operations

Thirteen Weeks Ended March 30, 2024 compared to Thirteen Weeks Ended April 1, 2023

The following table sets forth our results of operations for the thirteen weeks ended March 30, 2024 and April 1, 2023 (dollars in thousands):

Thirteen Weeks Ended June 29, 2024 compared to Thirteen Weeks Ended July 1, 2023

The following table sets forth our results of operations for the thirteen weeks ended June 29, 2024 and July 1, 2023 (dollars in thousands):

Thirteen Weeks Ended Increase / (Decrease)

2024 April 1,

Royalty revenue, franchise fees and other $ 71,160 $ 47,984 $ 23,176 48.3 %

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Depreciation and amortization 5,161 3,218 1,943 60.4 %

Loss on disposal of assets — 77 (77) (100.0) %

Total costs and expenses 114,479 80,717 33,762 41.8 %

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(1) Cost of sales includes all operating expenses of company-owned restaurants, including advertising expenses, but excludes depreciation and amortization, which are presented separately.

During the thirteen weeks ended March 30, 2024, total revenue was $145.8 million, an increase of $37.1 million, or 34.1%, compared to $108.7 million in the comparable period in 2023.

During the thirteen weeks ended June 29, 2024, total revenue was $155.7 million, an increase of $48.5 million, or 45.3%, compared to $107.2 million in the comparable period in 2023.

Royalty revenue, franchise fees and other increased $23.2 million, of which $12.1 million was due to domestic same store sales growth of 28.7%, and $8.1 million was due to net new franchise restaurant development.

Other revenue increased by $1.9 million primarily due to an increase in vendor rebates.

Advertising fees increased $12.7 million due to a 36.8% increase in system-wide sales during the fiscal first quarter 2024.

Company-owned restaurant sales increased $5.5 million, due to an increase of $3.3 million related to the addition of seven net new company-owned restaurants since the prior fiscal first quarter.

Advertising fees increased $18.1 million primarily due to a 45.2% increase in system-wide sales during the fiscal second quarter 2024.

$3.1 million of the increase was due to an increase in the national advertising fund contribution rate to 5.3% from 5.0% effective the first day of the fiscal second quarter 2024.

Company-owned restaurant sales increased $7.3 million, due to an increase of $3.6 million related to the addition of seven net new company-owned restaurants since the prior fiscal second quarter.

The remainder of the increase was due to company-owned same store sales growth of 14.1%, which was driven primarily by an increase in transactions.

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Thirteen Weeks Ended

March 30, 2024 April 1, 2023

June 29, 2024 July 1, 2023

In dollars As a % of company-owned restaurant sales In dollars As a % of company-owned restaurant sales

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Total cost of sales $ 22,673 75.9 % $ 16,642 73.7 %

Food, beverage and packaging costs as a percentage of company-owned restaurant sales were 34.7% in the thirteen weeks ended March 30, 2024, compared to 32.4% in the comparable period in 2023.

Food, beverage and packaging costs as a percentage of company-owned restaurant sales were 35.8% in the thirteen weeks ended June 29, 2024, compared to 32.2% in the comparable period in 2023.

This increase was primarily due to a 46.3% increase in the cost of bone-in chicken wings as compared to the prior year period.

Our purchases in the prior fiscal first quarter were tied primarily to the spot market, which benefited from significant deflation in the cost of bone-in chicken wings.

Labor costs as a percentage of company-owned restaurant sales were 23.4% for the thirteen weeks ended March 30, 2024, compared to 23.9% in the comparable period in 2023.

The decrease as a percentage of company-owned restaurant sales was primarily due to sales leverage as a result of company-owned domestic same store sales growth of 6.2%.

Other restaurant operating expenses as a percentage of company-owned restaurant sales were 19.0% for the thirteen weeks ended March 30, 2024 compared to 18.3% for the thirteen weeks ended April 1, 2023.

The increase as a percentage of company-owned restaurant sales was primarily due to increases in restaurant level operating expenses.

Our purchases in the prior fiscal second quarter were tied primarily to the spot market, which benefited from significant deflation in the cost of bone-in chicken wings.

Labor costs as a percentage of company-owned restaurant sales were 23.4% for the thirteen weeks ended June 29, 2024, compared to 24.4% in the comparable period in 2023.

The decrease as a percentage of company-owned restaurant sales was primarily due to leverage as a result of company-owned domestic same store sales growth of 14.1%.

Other restaurant operating expenses as a percentage of company-owned restaurant sales were 19.3% for the thirteen weeks ended June 29, 2024, compared to 19.5% for the thirteen weeks ended July 1, 2023.

The decrease as a percentage of company-owned restaurant sales was primarily due to leverage related to the company-owned domestic same store sales increase of 14.1%, partially offset by an increase in pre-opening expenses in the current fiscal quarter and an increase in the national advertising fund contribution rate to 5.3% from 5.0% effective the first day of the fiscal second quarter 2024.

Advertising expenses

During the thirteen weeks ended March 30, 2024, advertising expenses were $53.2 million, an increase of $13.5 million compared to $39.6 million in the comparable period in 2023.

During the thirteen weeks ended June 29, 2024, advertising expenses were $58.5 million, an increase of $19.8 million compared to $38.7 million in the comparable period in 2023.

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.

Selling, general and administrative (“SG&A”)

During the thirteen weeks ended March 30, 2024, SG&A expense was $25.2 million, an increase of $1.5 million compared to $23.6 million in the comparable period in 2023.

The increase in SG&A expense was driven by an increase in headcount related expenses of $2.1 million to support the growth in our business, professional fees of $1.4 million associated with the Company’s strategic initiatives, and an increase in performance-based stock compensation expense of $0.5 million primarily related to the Company’s prior year performance.

These increases were partially offset by $2.8 million in non-recurring consulting fees incurred in the prior fiscal first quarter.

During the thirteen weeks ended June 29, 2024, SG&A expense was $28.1 million, an increase of $6.0 million compared to $22.1 million in the comparable period in 2023.

The increase in SG&A expense was driven by an increase in headcount related expenses of $1.9 million to support the growth in our business, an increase in incentive compensation and performance-based stock compensation expense of $1.9 million primarily related to the Company’s performance, and an increase in consulting and other professional fees of $1.0 million associated with our strategic initiatives.

Depreciation and amortization

During the thirteen weeks ended March 30, 2024, depreciation expense was $3.4 million, an increase of $0.4 million compared to $3.0 million in the comparable period in 2023.

The increase in depreciation and amortization was primarily due to capital expenditures related to our technology investments.

During the thirteen weeks ended June 29, 2024, depreciation and amortization was $5.2 million, an increase of $1.9 million compared to $3.2 million in the comparable period in 2023.

The increase in depreciation and amortization was primarily due to depreciation expense for the software assets placed in service related to our MyWingstop technology platform during the thirteen weeks ended June 29, 2024.

Interest expense, net

During the thirteen weeks ended March 30, 2024, interest expense, net was $4.5 million, which was comparable to the prior year period.

During the thirteen weeks ended June 29, 2024, interest expense, net was $5.2 million, an increase of $1.0 million compared to $4.2 million of interest expense, net in the comparable period in 2023.

The increase was primarily driven by additional interest income earned on our cash balances during the thirteen weeks ended July 1, 2023.

Income tax expense

During the thirteen weeks ended March 30, 2024, we recognized income tax expense of $9.8 million yielding an effective tax rate of 25.3%, comparable to an effective tax rate of 25.1% in the prior year period.

During the thirteen weeks ended June 29, 2024, we recognized income tax expense of $9.0 million, yielding an effective tax rate of 24.7%, compared to an effective tax rate of 27.3% in the prior year period.

The decrease in the effective tax rate is

primarily related to an increase in excess tax benefits recognized from stock-based compensation in income tax expense as compared to the prior fiscal quarter.

Twenty-Six Weeks Ended June 29, 2024 compared to Twenty-Six Weeks Ended July 1, 2023

The following table sets forth our results of operations for the twenty-six weeks ended June 29, 2024 and July 1, 2023 (dollars in thousands):

Twenty-Six Weeks Ended Increase / (Decrease)

Royalty revenue, franchise fees and other $ 138,257 $ 96,172 $ 42,085 43.8 %

Advertising fees 104,803 74,059 30,744 41.5 %

Company-owned restaurant sales 58,428 45,663 12,765 28.0 %

Total revenue 301,488 215,894 85,594 39.6 %

Costs and expenses:

Cost of sales (1)

43,944 33,337 10,607 31.8 %

Advertising expenses 111,740 78,372 33,368 42.6 %

Selling, general and administrative 53,275 45,773 7,502 16.4 %

Depreciation and amortization 8,571 6,207 2,364 38.1 %

Loss on disposal of assets — 77 (77) (100.0) %

Total costs and expenses 217,530 163,766 53,764 32.8 %

Operating income 83,958 52,128 31,830 61.1 %

Interest expense, net 9,744 8,817 927 10.5 %

Other (income) expense (774) 142 (916) (645.1) %

Income before income tax expense 74,988 43,169 31,819 73.7 %

Income tax expense 18,756 11,319 7,437 65.7 %

Net income $ 56,232 $ 31,850 $ 24,382 76.6 %

(1) Cost of sales includes all operating expenses of company-owned restaurants, including advertising expenses, and excludes depreciation and amortization, which are presented separately.

During the twenty-six weeks ended June 29, 2024, total revenue was $301.5 million, an increase of $85.6 million, or 39.6%, compared to $215.9 million in the comparable period in 2023.

Royalty revenue, franchise fees and other increased $42.1 million, of which $21.5 million was due to domestic same store sales growth of 25.1%, and $13.8 million was due to net new franchise development.

Other revenue increased by $3.0 million primarily due to an increase in vendor rebates.

Advertising fees increased $30.7 million due to a 41.0% increase in system-wide sales during the twenty-six weeks ended June 29, 2024, and $3.1 million was due to an increase in the national advertising fund contribution rate to 5.3% from 5.0% effective the first day of the fiscal second quarter 2024.

Company-owned restaurant sales increased $12.8 million, primarily due to an increase of $6.7 million related to the addition of seven net new company-owned restaurants since the prior year comparable period.

The remainder of the increase was due to company-owned same store sales growth of 10.1%, which was driven primarily by an increase in transactions.

Cost of sales

The table below presents the major components of cost of sales (dollars in thousands):

Twenty-Six Weeks Ended

June 29, 2024 July 1, 2023

In dollars As a % of company-owned restaurant sales In dollars As a % of company-owned restaurant sales

Food, beverage and packaging costs $ 20,596 35.3 % $ 14,751 32.3 %

Labor costs 13,663 23.4 % 11,037 24.2 %

Other restaurant operating expenses 11,167 19.1 % 8,633 18.9 %

Vendor rebates (1,482) (2.5) % (1,084) (2.4) %

Total cost of sales $ 43,944 75.2 % $ 33,337 73.0 %

Food, beverage and packaging costs as a percentage of company-owned restaurant sales were 35.3% in the twenty-six weeks ended June 29, 2024, compared to 32.3% in the comparable period in 2023.

The increase was primarily due to a 41.5% increase in the cost of bone-in chicken wings as compared to the prior year period.

Our purchases in the prior fiscal year period were tied primarily to the spot market, which benefited from significant deflation in the cost of bone-in chicken wings.

Labor costs as a percentage of company-owned restaurant sales were 23.4% for the twenty-six weeks ended June 29, 2024, compared to 24.2% in the comparable period in 2023.

The decrease in company-owned restaurant wages as a percentage of sales was primarily due to leverage as a result of company-owned domestic same store sales growth of 10.1%.

Other restaurant operating expenses as a percentage of company-owned restaurant sales were 19.1% for the twenty-six weeks ended June 29, 2024, comparable to 18.9% in the prior fiscal year period in 2023.

Advertising expenses

During the twenty-six weeks ended June 29, 2024, advertising expenses were $111.7 million, an increase of $33.4 million compared to $78.4 million in the comparable period in 2023.

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.

Selling, general and administrative (SG&A)

During the twenty-six weeks ended June 29, 2024, SG&A expense was $53.3 million, an increase of $7.5 million compared to $45.8 million in the comparable period in 2023.

The increase in SG&A expense was driven by an increase in headcount related expenses of $3.7 million to support the growth in our business and an increase in incentive compensation and performance-based stock compensation expense of $2.3 million primarily related to the Company’s performance.

Depreciation and amortization

During the twenty-six weeks ended June 29, 2024, depreciation and amortization was $8.6 million, an increase of $2.4 million compared to $6.2 million in the comparable period in 2023.

The increase in depreciation and amortization was primarily due to depreciation expense for software assets placed in service related to our MyWingstop technology platform during the twenty-six weeks ended June 29, 2024.

Interest expense, net

During the twenty-six weeks ended June 29, 2024, interest expense, net was $9.7 million, an increase of $0.9 million compared to $8.8 million of interest expense, net in the comparable period in 2023.

The increase was primarily driven by additional interest income earned on our cash balances during the twenty-six weeks ended July 1, 2023.

Income tax expense

During the twenty-six weeks ended June 29, 2024, we recognized income tax expense of $18.8 million yielding an effective tax rate of 25.0%, compared to an effective tax rate of 26.2% in the prior year period.

The decrease in the effective tax rate is primarily related to an increase in excess tax benefits recognized from stock-based compensation in income tax expense as compared to the prior fiscal period.

Liquidity and Capital Resources

Our primary sources of liquidity and capital resources are cash provided from operating activities, cash and cash equivalents on hand, and borrowings available under our securitized financing facility.

Our primary requirements for liquidity and capital are working capital, general corporate needs, capital expenditures, income tax payments, debt service requirements, dividend payments, and repurchasing shares of our common stock (if any).

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

We generally utilize available cash flows from operations to invest in our business, service our debt obligations, pay dividends, and repurchase shares of our common stock (if any).

We generally utilize available cash flows from operations to invest in our business, service our debt obligations, pay dividends, and repurchases of shares of our common stock (if any).

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 (as defined below).

As of March 30, 2024, the Company had $108.3 million of cash and cash equivalents on its balance sheet.

As of June 29, 2024, the Company had $96.7 million of cash and cash equivalents 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 thirteen weeks ended March 30, 2024 and April 1, 2023 (in thousands):

Thirteen Weeks Ended

2024 April 1,

The following table shows summary cash flows information for the twenty-six weeks ended June 29, 2024 and July 1, 2023 (in thousands):

Twenty-Six Weeks Ended

Net cash provided by (used in):

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

Net cash provided by operating activities was $44.7 million in the thirteen weeks ended March 30, 2024, an increase of $9.0 million from cash provided by operating activities of $35.7 million in the thirteen weeks ended April 1, 2023.

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

Net cash provided by operating activities was $80.8 million in the twenty-six weeks ended June 29, 2024, an increase of $32.9 million from net cash provided by operating activities of $48.0 million in the twenty-six weeks ended July 1, 2023.

The increase is primarily due to an increase in operating income.

Investing activities .

Our net cash used in investing activities was $11.7 million in the thirteen weeks ended March 30, 2024, an increase of $7.3 million from cash used in investing activities of $4.3 million in the thirteen weeks ended April 1, 2023.

The increase in cash used in investing activities was primarily due to an increase in capital expenditures related to our technology investments as compared to the prior fiscal year period.

Our net cash used in investing activities was $25.3 million in the twenty-six weeks ended June 29, 2024, an increase of $3.0 million from net cash used in investing activities of $22.2 million in the twenty-six weeks ended July 1, 2023.

The increase in net cash used in investing activities was primarily due to an increase in capital expenditures related to our technology investments as compared to the prior fiscal year period.

Financing activities .

Our net cash used in financing activities was $9.6 million in the thirteen weeks ended March 30, 2024, a decrease of $0.5 million from cash used in financing activities of $10.1 million in the thirteen weeks ended April 1, 2023.

The decrease in cash used in financing activities was primarily due to a principal payment made in the prior fiscal year period, partially offset by an increase in taxes paid on stock vesting during the period.

Our net cash used in financing activities was $45.2 million in the twenty-six weeks ended June 29, 2024, an increase of $27.8 million from net cash used in financing activities of $17.4 million in the twenty-six weeks ended July 1, 2023.

The increase in net cash used in financing activities was primarily due to the repurchase of approximately $29.2 million in common stock under our Share Repurchase Program in the twenty-six weeks ended June 29, 2024, partially offset by principal payments made in the twenty-six weeks ended July 1, 2023.

Securitized financing facility .

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.

On March 9, 2022, the Company completed a securitized financing transaction, pursuant to which Wingstop Funding LLC, 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"), and 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 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 Class A-2 Notes”).

No borrowings were outstanding under the 2022 Variable Funding Notes as of March 30, 2024.

During the fiscal first quarter of 2024, the Company continued to have a leverage ratio under the 2020 Class A-2 Notes and the 2022 Class A-2 Notes of less than 5.0x.

No borrowings were outstanding under the 2022 Variable Funding Notes as of June 29, 2024.

During the fiscal second quarter of 2024, the Company continued to have a leverage ratio under the 2020 Class A-2 Notes and the 2022 Class A-2 Notes of less than 5.0x.

Per the terms of the Company’s debt agreements, principal payments are not due until the repayment date as long as the Company maintains a leverage ratio of less than 5.0x.

Accordingly, the entire outstanding balance 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.

We paid a quarterly cash dividend of $0.22 per share of common stock, aggregating $6.5 million in the fiscal first quarter of 2024.

On April 30, 2024, the Company’s Board of Directors approved a dividend of $0.22 per share, to be paid on June 7, 2024 to stockholders of record as of May 17, 2024, totaling $6.5 million.

We paid a quarterly cash dividend of $0.22 per share of common stock in each of the first two quarters of 2024, aggregating $12.9 million in the twenty-six weeks ended June 29, 2024.

On July 30, 2024, our Board of Directors approved a dividend of $0.27 per share, to be paid on September 6, 2024 to stockholders of record as of August 16, 2024, totaling approximately $7.9 million.

We do not currently expect the restrictions in our debt instruments to impact our ability to make regular quarterly dividends pursuant to our quarterly dividend program.

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On August 17, 2023, the Company announced a share repurchase program with authorization to purchase up to $250.0 million of its outstanding shares of common stock (the “Share Repurchase Program”).

As of March 30, 2024, $125.0 million remained available for repurchase under the Share Repurchase Program.

During the thirteen weeks ended June 29, 2024, the Company repurchased and retired 75,862 shares of its common stock at an average price of $381.29 per share.

As of June 29, 2024, $96.1 million remained available under the Share Repurchase Program.

Critical Accounting Policies and Estimates

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• our ability to effectively implement our growth strategy;

• our relationships with, and the performance of, our franchisees, as well as actions by franchisees that could harm our business;

• our relationships with, and the performance of, our existing and new franchises and franchisees, as well as actions by franchisees that could harm our business;

• our ability to identify, recruit and contract with a sufficient number of qualified franchisees;

• risks associated with food safety, food-borne illness and other health concerns;

• our ability to successfully expand into new markets;

• our ability to successfully expand into new and existing markets;

• our ability to effectively compete within our industry;

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• our ability to attract and retain our executive officers and other key employees;

• our ability to protect our intellectual property, including trademarks and trade secrets;

• our ability to protect our intellectual property, including trademarks, trade secrets and other proprietary rights;

• the impact on our business from environmental, social and corporate governance matters;

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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-Q

Item 2. Management’s Discussion and Analysis