Wingstop Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended December 30, 2023 (52 weeks). The comparable fiscal 2022 had 53 weeks; the company notes that its same-store-sales comparisons exclude that extra week. This is an annual filing, and the supplied filing text does not provide a complete standalone fourth-quarter income statement.
Business context and results
Wingstop is a predominantly franchised restaurant business: at year-end it had 2,214 restaurants, including 2,165 franchised and 49 company-owned. It earns royalties, advertising contributions and franchise fees, as well as sales from company-owned locations.
| Metric | FY2023 | FY2022 | Change |
|---|---|---|---|
| System-wide sales | $3.482 billion | $2.739 billion | +27.1% |
| Consolidated revenue | $460.1 million | $357.5 million | +28.7% |
| Operating income | $112.6 million | $91.9 million | +22.5% |
| Net income | $70.2 million | $52.9 million | +32.5% |
| Diluted EPS | $2.35 | $1.77 | +32.8% |
| Adjusted EBITDA (non-GAAP) | $146.5 million | $107.6 million | +36.1% |
| Adjusted net income (non-GAAP) | $74.1 million | $54.5 million | +36.0% |
Domestic same-store sales rose 18.3% (company-owned domestic same-store sales: +8.2%); domestic average unit volume was approximately $1.827 million. The system added 255 net restaurants, bringing the year-end count up 13.0%. Digital sales were 67.0% of domestic sales in the fourth quarter and 67.0% of system-wide sales for the year, as reported in the filing.
Margins, cash flow, debt and liquidity
- Operating margin was approximately 24.5%, versus 25.7% in FY2022; net margin was approximately 15.3%, versus 14.8%. These are calculated from reported revenue and income.
- Operating cash flow was $121.6 million, compared with $76.2 million. Investing cash outflow was $52.2 million, including $40.8 million of property and equipment purchases and $10.8 million to acquire restaurants from franchisees.
- Financing cash outflow was $155.5 million, primarily reflecting $125.0 million of share repurchases and dividends. Cash, cash equivalents and restricted cash totaled $119.7 million at year-end; unrestricted cash and cash equivalents were $90.2 million.
- Debt principal outstanding was $720.9 million ($712.3 million net carrying value). The debt comprises securitized fixed-rate notes; no borrowings were outstanding under the $200 million variable funding facility. The company reported compliance with financial covenants and a leverage ratio below 5.0x, allowing it to suspend scheduled principal payments under the debt terms.
- Management expects operating cash flows and available securitized-facility borrowings to cover capital expenditure, working capital and debt service needs for at least the next 12 months. This is management’s expectation, not a guarantee.
Material changes and notable items
- Revenue growth reflected strong domestic same-store sales and new franchised restaurant development. Royalty revenue, franchise fees and other revenue increased 30.6%; advertising-fee revenue increased 32.0%.
- Company-owned restaurant food, beverage and packaging costs fell to 33.1% of sales from 38.3%, primarily as bone-in wing costs decreased 27.1% year over year. The filing identifies chicken as approximately 53.3% of system purchases, underscoring commodity exposure.
- SG&A rose 44.5% to $96.9 million, including higher incentive and performance-based stock compensation, strategic-initiative consulting fees and headcount costs. Stock compensation expense was $15.6 million versus $4.2 million.
- Adjusted EBITDA and adjusted net income are non-GAAP measures. FY2023 adjustments included $5.15 million of consulting fees; FY2022 also included $1.12 million of debt-extinguishment and financing costs. The company changed the presentation of gains and losses on asset disposals in these measures and recast prior periods to conform.
- The company repurchased $125 million of shares under an accelerated repurchase agreement, leaving $125 million of its $250 million authorization available at year-end. Regular dividends declared for FY2023 totaled $24.4 million; the board later declared a $0.22-per-share quarterly dividend for March 2024.
Outlook, risks and contingencies
The company emphasizes long-term same-store-sales growth, unit economics and international expansion. It believes the opportunity exceeds 4,000 U.S. restaurants and 3,000 international restaurants; these are strategic estimates, not near-term guidance. It opened 50 net new international restaurants in FY2023 and ended the year with 288 international locations in 10 countries and U.S. territories. The filing does not provide specific FY2024 financial guidance.
- Key exposures include volatile chicken prices and supply, reliance on a single U.S. distributor, franchisee funding and execution, labor costs, competition, consumer preferences, and the ability to sustain sales growth while adding locations.
- Digital dependence is significant: outages, cyber incidents, privacy regulation or third-party technology failures could disrupt ordering, payments, royalty reporting or customer relationships. Management reported no known cybersecurity incident that had materially affected, or was reasonably likely to materially affect, the company as of the filing date.
- Debt covenants and refinancing are important risks. Failure to meet specified conditions could trigger rapid amortization or default; the notes have anticipated repayment dates in 2027 and 2029, with additional interest potentially accruing if the 2022 notes are not repaid or refinanced by their anticipated repayment date.
- Ordinary-course employment- and franchise-related claims are pending. Management did not believe any pending proceeding would have a material adverse effect, while noting that a significant increase in claims or awards could be harmful. The company reported no material environmental compliance capital expenditures in FY2023.
Investor facts to verify
- Separate underlying sales growth from the effects of 255 net openings, pricing and the prior year’s extra fiscal week; note the strong FY2023 domestic same-store-sales comparison.
- Review the sustainability of lower chicken costs and company-owned restaurant margins, alongside potential food-cost, labor and other inflation.
- Assess debt maturities, covenant headroom, refinancing options and the practical availability of the variable funding facility.
- Reconcile GAAP results with adjusted metrics, especially the treatment of consulting fees and the sharp increase in stock-based compensation.
- Track whether development commitments convert to openings, and whether domestic and international growth maintains franchisee economics and brand consistency.
- Monitor digital platform resilience, cybersecurity and the concentration risk from the U.S. distribution arrangement.