The Wendy's Co (WEN, Financial) released its 8-K filing on August 1, 2024, reporting unaudited results for the second quarter ended June 30, 2024. The company, known as the second-largest burger quick-service restaurant (QSR) chain in the United States, continues to navigate a challenging market environment.
Performance Summary
The Wendy's Co (WEN, Financial) reported total revenues of $570.7 million for Q2 2024, a 1.6% increase from $561.6 million in Q2 2023. However, this figure fell short of the analyst estimate of $577.37 million. The company's reported diluted earnings per share (EPS) stood at $0.27, aligning with the analyst estimate of $0.27.
Operational Highlights
| Metric | Q2 2023 | Q2 2024 | Change |
|---|---|---|---|
| Total Revenues ($M) | 561.6 | 570.7 | 1.6% |
| Net Income ($M) | 59.6 | 54.6 | -8.4% |
| Adjusted EBITDA ($M) | 144.5 | 143.1 | -1.0% |
| Reported Diluted EPS | 0.28 | 0.27 | -3.6% |
Key Financial Metrics
Despite the revenue increase, The Wendy's Co (WEN, Financial) faced several challenges. The U.S. company-operated restaurant margin decreased to 16.5% from 17.3% in Q2 2023, primarily due to higher labor costs and a decline in customer count. Operating profit also saw a decline of 9.0%, dropping to $99.5 million from $109.3 million in the same period last year.
Net income for the quarter was $54.6 million, an 8.4% decrease from $59.6 million in Q2 2023. The adjusted EBITDA also saw a slight decline of 1.0%, coming in at $143.1 million compared to $144.5 million in the previous year.
Company Commentary
"Our restaurants across the globe continued to deliver same-restaurant sales growth, holding steady with the QSR burger category in the second quarter," said President and Chief Executive Officer Kirk Tanner. "Our industry-leading quality, exciting innovation, and compelling value will remain in focus as we continue to execute our customer-first approach and drive the restaurant economic model throughout the rest of the year and beyond."
Financial Achievements and Challenges
The Wendy's Co (WEN, Financial) achieved a global systemwide sales growth of 2.6% for Q2 2024, with U.S. sales growing by 1.7% and international sales by 8.3%. However, same-restaurant sales growth was modest, with a global increase of just 0.8%, driven by a 0.6% increase in the U.S. and a 2.5% increase internationally.
The company also faced higher general and administrative expenses, which increased by 1.9% to $61.5 million, primarily due to lower incentive compensation accruals and reduced outside professional services costs. However, these were offset by increased employee compensation and benefits.
Income Statement Highlights
From the income statement, total revenues for the quarter were $570.7 million, with franchise royalty revenue contributing $136.3 million and franchise fees adding $21.4 million. Advertising funds revenue also increased to $115.1 million. On the expense side, cost of sales was $199.9 million, and general and administrative expenses were $61.5 million.
Balance Sheet and Cash Flow
As of June 30, 2024, The Wendy's Co (WEN, Financial) reported total assets of $5.09 billion, with cash and cash equivalents of $465.5 million. The company's total liabilities stood at $4.81 billion, with long-term debt amounting to $2.72 billion. The company generated $145.5 million in cash flows from operations during the first half of 2024, a 2.8% increase from $141.5 million in the same period last year.
Conclusion
The Wendy's Co (WEN, Financial) continues to navigate a challenging market environment with modest revenue growth and stable EPS. While the company faces higher labor costs and a decline in customer count, its focus on quality, innovation, and value remains strong. Investors will be keen to see how the company addresses these challenges in the coming quarters.
Explore the complete 8-K earnings release (here) from The Wendy's Co for further details.
