The Wendy's Company (NASDAQ:WEN) Q1 2018 Earnings Conference Call Transcript

May 09, 2018 • 09:00 am ET

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The Wendy's Company (NASDAQ:WEN) Q1 2018 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Ladies and gentlemen, thank you for standing by. Welcome to The Wendy's Company Earnings Results Conference Call. I will now turn the conference over to Greg Lemenchick, Director, IR. Please go ahead, sir.

Executive
Greg Lemenchick

Thank you and good morning, everyone. Today's conference call and webcast includes a PowerPoint presentation, which is available on the Investors section of our website, www.wendys.com. (Forward-Looking Cautionary Statements).

Also, some of today's comments will reference non-GAAP financial measures, such as adjusted revenue, adjusted EBITDA, adjusted EBITDA margin, adjusted earnings per share, adjusted tax rate, free cash flow and systemwide sales. Investors should refer to our reconciliations of non-GAAP financial measures to the most directly comparable GAAP measure.

Our conference call today will start with an update on key initiatives from our President and CEO, Todd Penegor, followed by a review of our first quarter results and full year outlook by our CFO, Gunther Plosch. After that, we will open up the line for questions.

With that, I will hand things over to Todd.

Executive
Todd Penegor

Thanks, Greg, and good morning, everyone. We are pleased with our continued sales momentum in the first quarter, where we delivered our 21st consecutive quarter of North America same-restaurant sales growth, a streak that continues to be unmatched in the QSR hamburger category. Same-restaurant sales increased 1.6% or 3.2% on a two-year basis, which included an approximately 50 basis point impact from the adverse weather we experienced in the first quarter. Our consistent results speak to the strength of our balanced marketing approach, along with continued awareness of our fresh never frozen beef.

We continue to execute our global expansion plans by opening 33 new restaurants in the quarter. Our global systemwide sales continue to grow at a faster pace than our same-restaurant sales on the backdrop of solid sales growth and contributions from new restaurant development. 44% of the global system is now image activated, which is up from the 43% at the end of 2017. We remain on track to reimage approximately 10% of our global system this year. In addition, we continue to expect Image Activation to contribute approximately 60 basis points of benefit to same-restaurant sales in 2018.

Our sales and profit growth, coupled with our core working capital initiative, led to strong free cash flow growth of 73% in the first quarter. The Company also remains on target to achieve our current year financial outlook, which GP will talk through shortly.

With that, I want to provide some context around our first quarter same-restaurant sales. We continue to stick to our playbook of utilizing a balanced marketing approach and remain laser-focused on driving profitable customer count growth. We kicked off the year strong by keeping our 4 for $4 platform fresh and ownable by expanding it to include eight different entree items.

We followed this up with an example of how our balanced marketing approach allows us to resonate with all types of consumers. We promoted our Spicy Chicken Sandwich and Dave's Double, which are two of our most