Wendy's Co Q3 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: David Palmer - Evercore ISI Institutional Equities - Analyst : Thanks. I'll try to squeeze in a two-parter. Really unrelated, but the unit growth outlook, I wonder how you're thinking about that now. I know you had some closures that might prove temporary as a drag to net unit growth in the US. And at the same time, it looks pretty bright what's going on in terms of international development. I'm wondering if you're thinking about more of an international skew to your development going forward, how you're thinking about that. And as far as the marketing goes, Krabby Patty has clearly been a big win. I'm wondering how you're thinking about more platform-ish type renovations, innovations, things that seem to have more of a longer curve to them. I mean, these types of activations are great, but I'm wondering if you're also working on some bigger stuff that we should be thinking about around the corner. Thanks.

Question: Dennis Geiger - UBS Equities - Analyst : Great. Thanks, guys. I wanted to come back to breakfast, and it seems like you're continuing to see good performance at that day part given the initiative that you've got in place across advertising, some of the offers, innovation, et cetera. Just curious, Kirk, if you could kind of touch a bit more on that, on how plans are progressing and how progress is progressing against your plans, and how we think about 2025 perhaps from a breakfast perspective, if anything to highlight there. Thank you.

Question: Danilo Gargiulo - Bernstein - Analyst : Great. Thank you. You mentioned that the macro was a bit more challenging than you were expecting coming into Q3. So can you help us understand the health of the consumer, both domestically as well as internationally, and whether you've seen any softening of this macro pressure getting into the fourth quarter? So any inter-quarter commentary might be helpful. Thank you.

Question: John Ivankoe - JPMorgan - Analyst : Hi. Thank you very much. The question is on prime costs, food and paper plus labor, which in the most recent quarter ran around 63%. I probably don't have to tell you, that screen's actually very high relative to most public restaurant companies. In fact, I can only think of one that's higher, and that brand is not in quick service and doesn't have advertising. So I guess, have you, Kirk, as you came into the Wendy's system, kind of benchmarked that number relative to the peers? And if there are kind of a couple of quote-unquote easy, and I really do mean to say that, easy ways to kind of fix that number, what are the types of opportunities that we should be thinking for you to significantly improve that ratio and get it closer to a more typical 60% type of number where I know the industry typically long term tries to target? Thank you.

Question: Jeffrey Bernstein - Barclays Capital Inc. - Analyst : Great. Thank you. I had one question and then one follow-up. The follow-up, actually, just, GP, you reiterated the adjusted EBITDA guidance despite the comp and the system fail shortfall. I was wondering if you could maybe just talk high-level as to what you think of the offsets to allow you to maintain that EBITDA. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 31, 2024 / 12:30PM, WEN.OQ - Q3 2024 Wendy's Co Earnings Call And then my question is more just following up on the unit growth side of things. Wondering in terms of international and, I guess, US franchisees' receptivity, you guys seem confident in, I guess, 2025 accelerating to that 3% to 4% net. Presumably, it is on a base reduced by the closures. So I'm wondering if you'd share how many closures there were or maybe how many absolute number of openings you're expecting in '25. Just because I know you mentioned 100% of the new build goal is tied to development commitments, so it was a question of whether or not those are executed on. So any color there would be great. Thank you.

Question: Brian Mullan - Piper Sandler Companies - Analyst : Thank you. Just back to the breakfast day part, Kirk, can you talk about the beverage component of the offering? Do you feel good about the beverage platform? Is that an area where you'll be spending more time or you think perhaps could be innovated from here? Just any thoughts on that component of the offering would be great.

Question: Chris O'Cull - Stifel Nicolaus and Company, Incorporated - Analyst : Good morning, guys, and thanks for taking the question. Kirk, it's good to hear the Krabby Patty promotions performed really well. Can you discuss what customer segments it's appealed to and if there are plans to collaborate with any other brands in the future?

Question: Lauren Silberman - Deutsche Bank - Analyst : Thank you very much. One more, just a follow-up on the recent trends, clearly the acceleration that you've seen. As the launch comes to an end, would you expect trends to normalize at a sustainably higher level than what we've seen in recent quarters? And then, can you just talk about the performance that you're seeing across the low, middle, and high-income cohorts? Thank you.

Question: Brian Harbour - Morgan Stanley - Analyst : Thanks. Good morning, guys. Sort of a random one, the voice AI in drive-through, are you in fact seeing kind of like labor hour savings? I guess if you could quantify that or sort of tell us more about what you're seeing and what's like the accuracy rate on that or what do you usually look for? You've obviously sort of expanded it, so you must be seeing things you like. But could you tell us more about that?

Question: Jon Tower - Citi - Analyst : Great. Thanks for taking the question. Maybe specifically in the quarter, I'm just curious, starting, how did your Biggie Bag platform perform during the third quarter, knowing that one of your larger competitors decided to do a value meal deal throughout the period? And then, more broadly speaking, similar competitors talking about relaunching a new everyday value platform, likely in early 2025. So can you speak to how your brand has performed in the past when large competitors kind of revamped their value message and, frankly, how you might plan to respond to this go-around?

Question: Jim Salera - Stephens Inc. - Analyst : Hey, guys. Good morning. Thanks for taking our questions. In your prepared remarks, you mentioned the October accelerating and obviously the implied acceleration in 4Q in the guidance. Can you just maybe offer some more color around what components of the menu are driving that acceleration? I know I've seen a lot of Saucy Nugg advertisements during football games this season. Maybe some color on how that's contributing, and then just any thoughts on bridging kind of the back half of the quarter, assuming that you see the Krabby Patty benefits start to roll off.

Question: Sara Senatore - BofA Global Research (US) - Analyst : Thank you very much. I wanted to go back to the store closures just in the sense of are there any kind of themes around the types of markets that they're in geographically? The reason I ask is it feels like a lot of restaurants that are accelerating unit growth are kind of shying away from the Rust Belt or the Northeast and really targeting the Sunbelt and faster-growing cities and MSAs. And I'm trying to figure out if there's room for everybody and also what this means in terms of net growth. Is this just sort of population shifts? And as you follow them, we should think about it from that perspective, or is there really kind of room to densify further or to grow beyond just the sort of moves in the economy or the population that we've seen over time in the US?

Question: Andrew Charles - TD Cowen - Analyst : Great. Thank you. I wanted to reconcile the breakfast performance of mid-single digit with the comps overall around flat. So can you talk about the incrementality of breakfast sales and what you're seeing there versus incrementality in recent years?

Question: Gregory Francfort - Guggenheim Securities LLC - Analyst : Hey. Thanks for the question. I just had a cost question, GP. Can you maybe just frame up what you're seeing from the commodity side and the labor side on inflation basis and how you expect that to play out kind of in the near to medium term? Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 31, 2024 / 12:30PM, WEN.OQ - Q3 2024 Wendy's Co Earnings Call

Question: Jake Bartlett - Truist Securities - Analyst : Great. Thank you very much. Kirk, my question was about your comments on operational improvements. You talked about doubling down. And I'm wondering how large an opportunity improving operations is, whether you'd rank that as one of your kind of largest sales-driving potentials in the near -- in the longer term into 2025. How would you frame that opportunity as a sales driver?

Question: Peter Saleh - BTIG - Analyst : Yeah, thanks for taking the question. I wanted to ask about the $1 any size soft drink promotion that you guys are running. That's been a proven strategy. I think we've seen many of your competitors run this in the past and it's definitely worked. So could you just talk about the early success that you're seeing there? And is this a promotion that's limited to the fourth quarter, or will this carry into 2025? Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 31, 2024 / 12:30PM, WEN.OQ - Q3 2024 Wendy's Co Earnings Call

Question: Christine Cho - Goldman Sachs - Analyst : Great. Thank you for taking the question. So we saw some announcements on executive leadership changes and major hires, including the Chief Legal Officer and Senior VP of US Operations, and I'm perhaps looking forward to meeting some of them at your Analyst Day in March. But Kirk, do you feel you have all the right people in place now to kind of drive accountability and accelerate growth globally? And what are some of your key priorities in an organization perspective? Thank you.

Question: Alex Slagle - Jefferies LLC - Analyst : Thanks. Going back to the success you're seeing with the SpongeBob collaboration and what seems like a really big jump in recent weeks, I just wanted to kind of see if you could elaborate on what you're doing differently just to drive engagement, whether there's something on the digital or social or any specific changes on that front that are working and you can carry on future promotions and innovations.

Question: Jim Sanderson - Northcoast Research - Analyst : Hey. Thanks for the question. Just following up on the discussion of promotional support given the success of the Krabby Patty promotion, do you plan to add more partnerships or potentially celebrity endorsements, something that would actually promote the product innovation you've described that you're launching later this quarter?

Question: Logan Reich - RBC Capital Markets (Canada) - Analyst : Hey. Good morning. Thanks for taking the question. I just wanted to ask a follow-up just about the improving trends through the quarter and into October relative to income cohorts. Are you guys seeing improvement in the lower-income cohort, as well as the middle and higher income cohorts? Or is there any sort of divergence between those brackets within the quarter and through October?