Edited Transcript of WEN earnings conference call or presentation 6-Nov-19 1:30pm GMT

 

Thomson Reuters StreetEvents

November 23, 2019

 

Q3 2019 Wendys Co Earnings Call

 

Atlanta Nov 23, 2019 (Thomson StreetEvents) -- Edited Transcript of Wendys Co earnings conference call or presentation Wednesday, November 6, 2019 at 1:30:00pm GMT

 

TEXT version of Transcript

 

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Corporate Participants

 

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* Greg Lemenchick

 

The Wendy's Company - Director of IR

 

* Gunther Plosch

 

The Wendy's Company - CFO

 

* Todd Allan Penegor

 

The Wendy's Company - President, CEO & Director

 

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Conference Call Participants

 

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* Andrew Strelzik

 

BMO Capital Markets Equity Research - Restaurants Analyst

 

* Andrew Michael Charles

 

Cowen and Company, LLC, Research Division - Director

 

* Brian John Bittner

 

Oppenheimer & Co. Inc., Research Division - MD and Senior Analyst

 

* Christopher Thomas O'Cull

 

Stifel, Nicolaus & Company, Incorporated, Research Division - MD & Senior Analyst

 

* David Sterling Palmer

 

Evercore ISI Institutional Equities, Research Division - Senior MD & Fundamental Research Analyst

 

* Dennis Geiger

 

UBS Investment Bank, Research Division - Director and Equity Research Analyst of Restaurants

 

* Gregory Ryan Francfort

 

BofA Merrill Lynch, Research Division - Associate

 

* Jake Rowland Bartlett

 

SunTrust Robinson Humphrey, Inc., Research Division - Analyst

 

* Katherine Irene Fogertey

 

Goldman Sachs Group Inc., Research Division - VP & Derivatives Research Strategist

 

* Matthew James DiFrisco

 

Guggenheim Securities, LLC, Research Division - Director and Senior Equity Analyst

 

* Nicole Miller Regan

 

Piper Jaffray Companies, Research Division - MD & Senior Research Analyst

 

* Patrice Chen

 

JP Morgan Chase & Co, Research Division - Analyst

 

* William Everett Slabaugh

 

Stephens Inc., Research Division - MD

 

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Presentation

 

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Operator [1]

 

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Good morning. Welcome to The Wendy's Company earnings results conference call. (Operator Instructions)

 

Greg Lemenchick, Senior Director, Investor Relations and Corporate FP&A, you may begin your conference.

 

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Greg Lemenchick, The Wendy's Company - Director of IR [2]

 

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Thank you and good morning, everyone. Today's conference call and webcast includes a PowerPoint presentation, which is available on our Investor Relations website, irwendys.com.

 

Before we begin, please take note of the safe harbor statement that appears at the end of our earnings release. This disclosure reminds investors that certain information we may discuss today is forward-looking. Various factors could affect our results and cause those results to differ materially from the projections set forth in our forward-looking statements.

 

Also some of today's comments will reference non-GAAP financial measures. Investors should refer to our reconciliations of non-GAAP financial measures to the most directly comparable GAAP measure at the end of this presentation or in our earnings release.

 

On our conference call today, our President and Chief Executive Officer, Todd Penegor, will provide an update on key initiatives; and our Chief Financial Officer; Dr. Plosch, will review our third quarter results and full year outlook. After that, we will open up the line for questions.

 

With that, I'll hand things over to Todd.

 

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Todd Allan Penegor, The Wendy's Company - President, CEO & Director [3]

 

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Thanks, Greg, and good morning, everyone. Before I get into our third quarter results, I want to take a moment to thank all of you who attended or tuned in to the Investor Day a few weeks ago. As we shared, we are striving to become an accelerated, efficient growth company by playing a different game to unlock growth.

 

Let's dive into our third quarter results, which highlights the strong momentum we have in our business. As previously announced, we showcased our ability to be an accelerated, efficient growth company through our robust system-wide sales increase of 5.7%, on the backdrop of strong North America same-restaurant sales of 4.4% and continued global restaurant expansion, which translated into strong earnings growth. We opened 40 new restaurants across the globe in the third quarter and have opened 111 year-to-date. This is pacing slightly ahead of the openings we had this time last year, and we remain on track to deliver our goal of 1.5% net new unit growth in 2019.

 

We also continue to reimage our restaurants and now have 56% of the global system on the new image. Company restaurant margin came in at 16.2% for the quarter, growing 50 basis points from the prior year as we leverage our same-restaurant sales growth. Our Q3 results exceeded our expectations as we achieved approximately 3% adjusted EBITDA growth, 12% adjusted EPS growth and a 6% increase in our year-to-date free cash flow. This strong result will flow through to our updated outlook for the year, which GP will talk about in a moment.

 

Our balanced marketing strategy contributed to accelerated North America same-restaurant sales growth of 4.4% in Q3. We began the quarter with our Baconfest promotion, highlighting the newest addition to our Made to Crave Hamburger lineup, the Bacon Jalapeņo Cheeseburger. We then turned up the heat with the relaunch of Spicy Nuggets, and the customer response exceeded our expectations, thanks to our powerful social media voice that had customers craving for this product. This promotion increased our average check and significantly changed our incoming customer count trends when we began this promotion.

 

Supporting the launch of Spicy Nuggets for promotions through our mobile app, this led to an increased awareness of our digital platforms as we doubled our number of mobile ordering transactions during the promotion. The addition of the Bacon Jalapeņo Chicken Sandwich to our Made to Crave Chicken lineup as well as the Buffalo Chicken Salad, added to the excitement around spicy during the quarter. We continue to build on the equity we established in the first half of the year around driving flavor and innovation with our menu.

 

We have momentum. We shared at our Investor Day, our formula is simple, yet powerful: accelerate same-restaurant sales and drive global restaurant expansion, with a strong restaurant economic model to fuel this growth. With organic same-restaurant sales at the forefront to drive a healthy restaurant economic model, which is at #1, we continue to focus on our one more visit, one more dollar strategy to drive mix. This is working as evidenced by our strong third quarter results. As Kurt discussed at our Investor Day, we continue to make progress on improving our operations and have a comprehensive plan in place to ensure we succeed.

 

We are also enhancing our digital capabilities...

 

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