What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-10-30 compared with 2024-07-31 · 102 added, 88 removed, 261 unchanged (42% 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.

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;

Third Quarter of 2024 Highlights

• System-wide sales increased 39.4% over the prior fiscal third quarter to $1.2 billion;

• 106 net new openings in the fiscal third quarter 2024 for a total of 2,458 worldwide locations;

• Domestic same store sales increased 20.9% over the prior fiscal third quarter;

• Company-owned restaurant same store sales increased 7.3% over the prior fiscal third quarter;

• Digital sales increased to 69.0% of system-wide sales, as compared to 66.9% in the prior fiscal third quarter;

• Domestic AUV increased to $2.1 million;

• 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

• Total revenue increased 38.8% over the prior fiscal third quarter to $162.5 million;

• Net income increased 31.9% to $25.7 million, or $0.88 per diluted share, compared to net income of $19.5 million, or $0.65 per diluted share, in the prior fiscal third quarter;

• Adjusted EBITDA, a non-GAAP measure, increased 39.5% to $53.7 million, compared to adjusted EBITDA of $38.5 million in the prior fiscal third quarter.

Year-to-Date Third Quarter of 2024 Highlights

• System-wide sales increased 40.4% to $3.5 billion;

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

• 244 net new openings in the year-to-date third quarter of 2024;

• Domestic same store sales increased 23.6% over the prior fiscal year-to-date period;

6 unchanged sentences

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 Twenty-Six Weeks Ended

2023 June 29,

Thirteen Weeks Ended Thirty-Nine Weeks Ended

September 28,

2024 September 30,

2023 September 28,

2024 September 30,

Domestic Franchised Activity:

37 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.

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.

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

The following table sets forth our key performance indicators for the thirteen and thirty-nine weeks ended September 28, 2024 and September 30, 2023 (in thousands, except unit data):

Thirteen Weeks Ended Thirty-Nine Weeks Ended

September 28, 2024 September 30, 2023 September 28, 2024 September 30, 2023

Number of system-wide restaurants open at end of period 2,458 2,099 2,458 2,099

8 unchanged sentences

$ 53,672 $ 38,483 $ 155,713 $ 107,417

(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.

(1) The percentage of system-wide sales attributable to company-owned restaurants was 2.5% and 2.7% for the thirteen weeks ended September 28, 2024 and September 30, 2023, respectively, and was 2.5% and 2.8% for the thirty-nine weeks ended September 28, 2024 and September 30, 2023, respectively.

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

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

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,

The following table reconciles net income to EBITDA and Adjusted EBITDA for the thirteen and thirty-nine weeks ended September 28, 2024 and September 30, 2023 (in thousands):

Thirteen Weeks Ended Thirty-Nine Weeks Ended

September 28,

2024 September 30,

2023 September 28,

2024 September 30,

Net income $ 25,732 $ 19,511 $ 81,964 $ 51,361

6 unchanged sentences

— 1,300 — 5,150

Stock-based compensation expense (b)

System implementation costs (b)

Stock-based compensation expense (c)

7,273 3,128 16,011 10,019

1 unchanged sentence

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

The costs incurred in the thirteen and thirty-nine weeks ended September 30, 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 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) System implementation costs represent non-recurring expenses incurred related to the development and implementation of new enterprise resource planning and human capital management technology, which are included in Selling, general and administrative on the Consolidated Statements of Comprehensive Income.

Results of Operations

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 September 28, 2024 compared to Thirteen Weeks Ended September 30, 2023

The following table sets forth our results of operations for the thirteen weeks ended September 28, 2024 and September 30, 2023 (dollars in thousands):

Thirteen Weeks Ended Increase / (Decrease)

September 28,

2024 September 30,

Royalty revenue, franchise fees and other $ 74,395 $ 53,200 $ 21,195 39.8 %

8 unchanged sentences

Depreciation and amortization 5,054 3,384 1,670 49.3 %

Loss on disposal of assets — 18 (18) (100.0) %

Total costs and expenses 122,680 86,452 36,228 41.9 %

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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 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.

During the thirteen weeks ended September 28, 2024, total revenue was $162.5 million, an increase of $45.4 million, or 38.8%, compared to $117.1 million in the comparable period in 2023.

Royalty revenue, franchise fees and other increased $21.2 million, of which $9.6 million was due to domestic same store sales growth of 20.9%, and $9.3 million was due to net new franchise restaurant development.

Other revenue increased by $2.1 million primarily due to an increase in vendor rebates.

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

Advertising fees increased $16.8 million primarily due to a 39.4% increase in system-wide sales during the fiscal third quarter 2024.

$3.2 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.

Company-owned restaurant sales increased $7.4 million, due to an increase of $4.9 million related to the addition of ten net new company-owned restaurants since the prior fiscal third quarter.

The remainder of the increase was due to company-owned same store sales growth of 7.3%, which was driven primarily by an increase in transactions.

2 unchanged sentences

Thirteen Weeks Ended

June 29, 2024 July 1, 2023

September 28, 2024 September 30, 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 $ 24,367 77.8 % $ 17,622 73.6 %

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.

Food, beverage and packaging costs as a percentage of company-owned restaurant sales were 37.0% in the thirteen weeks ended September 28, 2024, compared to 33.0% in the comparable period in 2023.

This increase was primarily due to a 42.9% increase in the cost of bone-in chicken wings as compared to the prior year period.

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.

Our purchases in the prior fiscal third 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 23.5% for the thirteen weeks ended September 28, 2024, which was comparable to 23.6% for the thirteen weeks ended September 30, 2023.

Other restaurant operating expenses as a percentage of company-owned restaurant sales were 20.0% for the thirteen weeks ended September 28, 2024, compared to 19.4% for the thirteen weeks ended September 30, 2023.

The increase as a percentage of company-owned restaurant sales was primarily 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, as well as an increase in pre-opening expenses as compared to the prior year period.

Advertising expenses

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.

During the thirteen weeks ended September 28, 2024, advertising expenses were $61.0 million, an increase of $18.6 million compared to $42.4 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 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.

During the thirteen weeks ended September 28, 2024, SG&A expense was $32.3 million, an increase of $9.2 million compared to $23.0 million in the comparable period in 2023.

The increase in SG&A expense was driven by an increase in performance-based stock compensation and incentive compensation expense of $4.9 million primarily related to the Company’s performance, an increase in headcount related expenses of $2.8 million to support the growth in our business, and an increase in consulting and other professional fees of $1.3 million associated with our strategic initiatives, including system implementation costs.

Depreciation and amortization

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.

During the thirteen weeks ended September 28, 2024, depreciation and amortization was $5.1 million, an increase of $1.7 million compared to $3.4 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 during the second fiscal quarter 2024 related to our MyWingstop technology platform.

Interest expense, net

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.

During the thirteen weeks ended September 28, 2024, interest expense, net was $5.1 million, an increase of $0.6 million compared to $4.5 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 September 30, 2023.

Income tax expense

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)

During the thirteen weeks ended September 28, 2024, we recognized income tax expense of $9.8 million, yielding an effective tax rate of 27.5%, compared to an effective tax rate of 25.4% in the prior year period.

The increase in the effective tax rate is primarily related to the impact of nondeductible expenses for executive compensation during the thirteen weeks ended September 28, 2024.

Thirty-Nine Weeks Ended September 28, 2024 compared to Thirty-Nine Weeks Ended September 30, 2023

The following table sets forth our results of operations for the thirty-nine weeks ended September 28, 2024 and September 30, 2023 (dollars in thousands):

Thirty-Nine Weeks Ended Increase / (Decrease)

September 28,

2024 September 30,

Royalty revenue, franchise fees and other $ 212,652 $ 149,372 $ 63,280 42.4 %

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(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.

During the thirty-nine weeks ended September 28, 2024, total revenue was $464.0 million, an increase of $131.0 million, or 39.3%, compared to $333.0 million in the comparable period in 2023.

Royalty revenue, franchise fees and other increased $63.3 million, of which $31.1 million was due to domestic same store sales growth of 23.6%, and $20.2 million was due to net new franchise development.

Other revenue increased by $5.0 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.

Advertising fees increased $47.6 million due to a 40.4% increase in system-wide sales during the thirty-nine weeks ended September 28, 2024, and $6.3 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 $20.2 million, primarily due to an increase of $10.0 million related to the addition of ten 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 9.1%, which was driven primarily by an increase in transactions.

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

Twenty-Six Weeks Ended

June 29, 2024 July 1, 2023

Thirty-Nine Weeks Ended

September 28, 2024 September 30, 2023

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

4 unchanged sentences

Total cost of sales $ 68,311 76.1 % $ 50,959 73.2 %

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.

Food, beverage and packaging costs as a percentage of company-owned restaurant sales were 35.9% in the thirty-nine weeks ended September 28, 2024, compared to 32.6% 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.

Labor costs as a percentage of company-owned restaurant sales were 23.4% for the thirty-nine weeks ended September 28, 2024, compared to 24.0% 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 9.1%.

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.

Other restaurant operating expenses as a percentage of company-owned restaurant sales were 19.4% for the thirty-nine weeks ended September 28, 2024, comparable to 19.1% 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.

During the thirty-nine weeks ended September 28, 2024, advertising expenses were $172.7 million, an increase of $52.0 million compared to $120.8 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.

During the thirty-nine weeks ended September 28, 2024, SG&A expense was $85.6 million, an increase of $16.7 million compared to $68.8 million in the comparable period in 2023.

The increase in SG&A expense was driven by an increase in performance-based stock compensation and incentive compensation expense of $7.3 million primarily related to the Company’s performance, an increase in headcount related expenses of $6.8 million to support the growth in our business, and an increase in consulting and other professional fees of $1.6 million associated with our strategic initiatives, including system implementation costs.

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.

During the thirty-nine weeks ended September 28, 2024, depreciation and amortization was $13.6 million, an increase of $4.0 million compared to $9.6 million in the comparable period in 2023.

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.

During the thirty-nine weeks ended September 28, 2024, interest expense, net was $14.9 million, an increase of $1.5 million compared to $13.3 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 thirty-nine weeks ended September 30, 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.

During the thirty-nine weeks ended September 28, 2024, we recognized income tax expense of $28.5 million yielding an effective tax rate of 25.8%, which is comparable to an effective tax rate of 25.9% in the prior year 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 the repurchases of 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 repurchases of 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 repurchase 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 June 29, 2024, the Company had $96.7 million of cash and cash equivalents on its balance sheet.

As of September 28, 2024, the Company had $84.0 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 twenty-six weeks ended June 29, 2024 and July 1, 2023 (in thousands):

Twenty-Six Weeks Ended

The following table shows summary cash flows information for the thirty-nine weeks ended September 28, 2024 and September 30, 2023 (in thousands):

Thirty-Nine Weeks Ended

September 28,

2024 September 30,

Net cash provided by (used in):

7 unchanged sentences

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 $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.

Net cash provided by operating activities was $149.9 million in the thirty-nine weeks ended September 28, 2024, an increase of $66.1 million from net cash provided by operating activities of $83.7 million in the thirty-nine weeks ended September 30, 2023.

The increase is primarily due to an increase in operating income, coupled with the change in working capital due to timing of payments associated with our national advertising campaign and taxes.

Investing activities .

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.

Our net cash used in investing activities was $50.1 million in the thirty-nine weeks ended September 28, 2024, an increase of $16.6 million from net cash used in investing activities of $33.5 million in the thirty-nine weeks ended September 30, 2023.

The increase is primarily due to an increase in capital expenditures related to our technology investments, as well as the impact of additional restaurants acquired from franchisees as compared to the prior fiscal year period.

Financing activities .

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.

Our net cash used in financing activities was $88.3 million in the thirty-nine weeks ended September 28, 2024, a decrease of $60.7 million from net cash used in financing activities of $149.0 million in the thirty-nine weeks ended September 30, 2023.

The decrease is primarily due to a decrease in common stock repurchased under our Share Repurchase Program as compared to the prior fiscal year period, in which we initiated a $125.0 million accelerated share repurchase program, as well as principal payments made in the thirty-nine weeks ended September 30, 2023.

Securitized financing facility .

1 unchanged sentence

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.

No borrowings were outstanding under the 2022 Variable Funding Notes as of September 28, 2024.

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 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 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.

During the fiscal third 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 can be suspended at the borrower’s election until the repayment date, as long as the Company maintains a leverage ratio of less than 5.0x.

Accordingly, the Company elected to suspend payments following the principal payment made in the second quarter of 2023, and 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 in each of the first two quarters of 2024, and a quarterly dividend of $0.27 per share of common stock in the third quarter of 2024, resulting in aggregate declared dividends of $20.8 million, or $0.71 per share of common stock, during the thirty-nine weeks ended September 28, 2024.

On October 29, 2024 the Company’s Board of Directors declared a dividend of $0.27 per share, to be paid on December 6, 2024 to stockholders of record as of November 15, 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”).

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.

During the thirteen weeks ended September 28, 2024, the Company repurchased and retired 93,617 shares of its common stock at an average price of $373.68 per share.

As of September 28, 2024, $61.1 million remained available under the Share Repurchase Program.

Critical Accounting Policies and Estimates

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• the impact on our business from unexpected events such as international conflict or war and related sanctions, acts of terrorism, civil unrest, epidemics and pandemics and severe weather;

• our ability to comply with laws and government regulations, including those relating to food products, employment and franchising, or increased costs associated with new or changing regulations;

• our ability to comply with laws and government regulations, including those relating to food products, employment and franchising, advertising and consumer protection, or increased costs associated with new or changing regulations;

• our ability to maintain adequate insurance coverage for our business;

12 unchanged sentences

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