Christopher O'Cull • Stifel Financial Corp.

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CEO Lori Flees described Breeze as a well-run, complementary business and stated that the primary focus is currently on gaining FTC approval to close the transaction. She noted that recent investments in Valvoline's core technology platforms (ERP, HRIS, cloud marketing) are expected to make the future integration more efficient.

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CEO Lori Flees detailed the process of value-engineering the store prototype and equipment, targeting a 10-20% cost reduction. She mentioned moving to a modular design (e.g., 2-bay vs. 3-bay) to lower average build costs. Flees also explained that while store maturity has shortened over time, it still varies by market presence, and they use targeted marketing to accelerate the ramp-up period.

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CEO Christine Barone described a two-pronged approach to throughput: providing teams with speed dashboards for visibility on peak hour performance and deploying a flexible system for staff to identify and address shop-specific bottlenecks. For new markets, she explained that trial is driven by a combination of paid advertising, rapid rewards program adoption, engaging merchandise drops, and innovative LTOs.

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CFO Josh Guenser confirmed that the lower CapEx outlook is driven by a strategic shift toward a greater proportion of build-to-suit lease arrangements. He noted that while these leases carry higher rent, the impact is already factored into the company's 2025 EBITDA guidance. He also suggested 2024 would represent the peak for per-unit CapEx.

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CEO Michael Osanloo described a successful social media-driven ad campaign in Dallas that will be pulsed in other new markets, now integrated with the Perks program. He clarified that opening early in Katy, TX was a reaction to developer delays, not a strategy. CFO Michelle Hook directed investors to the earnings supplement, noting the 2024 class was tracking at an annualized AUV of ~$4.8 million, below the long-term target, but expressed confidence they would reach it over time.

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CEO Michael Osanloo revealed the loyalty program is in a soft launch and will fully launch in early March. He anticipates seeing a positive impact starting in Q2 as the company begins using it to drive traffic and frequency, but he stated it was premature to share details on specific offers being planned.

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EVP and COO Danny Rivera explained that Q1 is typically a lighter quarter for franchise openings and that the long-term growth outlook remains intact. EVP and CFO Michael Diamond added that while tariffs are being monitored, they have not yet impacted unit construction costs, and franchisee growth sentiment remains strong.

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EVP & CFO Michael Diamond stated the guidance is prudent, with the vast majority of the 175-200 new units coming from Take 5, which has a strong pipeline of over 1,000 sites. On leverage, he explained the initial impact from the sale will be largely neutral due to the seller note structure. He reiterated the commitment to a 'drumbeat of deleverage' through free cash flow and asset sales to reach the 3x target by the end of 2026.

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CEO Jonathan Fitzpatrick declined to quantify potential proceeds, instead using the PH Vitres sale as an example of simplifying operations, with debt paydown as a byproduct. COO Danny Rivera and CEO Jonathan Fitzpatrick jointly explained the car wash success was due to a combination of a new price point, effective team training, operational improvements, strong leadership, and a robust CRM engine.

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Kirk Tanner, President and CEO, outlined two primary benefits observed from FreshAI. First, it drives an increased check size through automated, curated upselling suggestions. Second, it improves order accuracy, which is a key driver of customer satisfaction. He also noted efficiency gains for the restaurant crew, which improves speed of service. He concluded that the economics are encouraging and the rollout to over 500 restaurants this year remains on track.

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CEO Kirk Tanner identified the investment in the field organization as the most impactful short-term initiative, aiming to increase the frequency of restaurant visits and enforce operational standards. CFO Ken Cook added that technology is also a key component, with plans to accelerate the rollout of Fresh AI voice ordering and digital menu boards to enhance the customer experience and improve labor efficiency.

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CEO Kirk Tanner explained the promotion resonated broadly due to the 25-year legacy of SpongeBob, creating a powerful partnership with Paramount. He noted the success proves Wendy's can be a strong collaborator and confirmed the company is open to future partnerships that drive traffic and leverage its core menu.

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CFO Mika Ware clarified that April's sales trends are similar to Q3 on a one-year basis, and on a two-year basis, traffic has actually stepped up. She explained the higher CapEx guidance is due to accelerated investments in kitchen equipment, primarily new TurboChef ovens which include a one-time write-off of old equipment, and other maintenance capital to improve restaurant atmosphere.

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CEO Kevin Hochman explained that after a year, it's time to bring fresh news to the "3 for Me" campaign. He clarified the launches would be supported differently: the "3 for Me" innovation will be the focus of "air war" advertising, while the fajita upgrade will be a "ground war" driven by in-restaurant merchandising and operational execution. CFO Mika Ware addressed margins, noting Q2's 19.1% was a peak due to sales leverage and timing of labor spend. She guided to mid-to-upper teens for the full year and sees further upside as AUVs, which have grown from $2.9M to $4.2M, continue to climb.

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CEO Kevin Hochman explained that tokenized data helps measure the effectiveness of marketing campaigns and has revealed an increase in guest frequency, with return visits shortening from every 37 weeks to 31 weeks. He also noted that despite the success of value offerings, the '3 For Me' mix only increased by 1%, with nearly half of those sales in higher-priced tiers, indicating that the company's barbell strategy is effectively managing check averages.

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CEO Robert Lynch explained the platform is now live and allows them to track customer behavior across all channels in response to promotions and LTOs. The immediate goal is to drive frequency from existing guests with targeted incentives. Strategically, the data will also help them understand what attracts new or lapsed customers, informing marketing programs and improving new Shack openings in new markets.

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CEO Michael Skipworth explained that their 50 million-user database allows for targeted, market-specific tactics rather than a one-size-fits-all approach, using tailored messaging and value propositions to drive consideration. For the kitchen system, he stated they won't directly advertise speed. Instead, for new guests, the faster service will be their only experience. For existing guests, tools like the upcoming loyalty program will drive occasions, and the improved kitchen performance will then deliver on that promise.

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CEO Michael Skipworth explained that their large first-party database allows for targeted marketing tactics in affected areas, focusing on reinforcing the 'indulgent Wingstop occasion' with the right message and value propositions. Regarding the kitchen system, he stated that for new guests, faster service will be their only known experience. For existing guests, the company will use tools like the upcoming loyalty program to drive consideration for occasions where they can then impress customers with the improved speed and consistency, rather than advertising it directly.

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CEO John Lai explained they target a 3:1 revenue-to-spend lift but also factor in the long-term value (LTV) of a member, which enhances the return profile. CFO Jedidiah Gold noted the strategic debate on deploying media in dense versus smaller markets. Regarding innovation, Lai stated a target cadence of 18-24 months for new products and confirmed they have transformative ideas in the pipeline that are not yet public.

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CFO Jed Gold acknowledged the pattern of a strong weather month followed by a softer one but stated there wasn't enough analysis to confirm a pull-forward effect. CEO John Lai emphasized that with 75% of sales from subscriptions, the business is less weather-dependent. For retail growth, Lai said the focus is on brand-building and communicating value rather than discounting, and while tests are ongoing, nothing has materially moved the needle yet.

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Brian Niccol, Chairman and Chief Executive Officer, credited the China team for executing on relevant marketing and product innovation, including new flavor profiles, sugar-free options, and new price points. He stated these initiatives led to a 'very nice impact,' resulting in flat comparable sales with a 4% transaction growth for the quarter, and noted that the team is 'just getting started.'

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CEO Brian Niccol affirmed the two experiences are highly intertwined. He explained that the new algorithm pilot helps by sequencing mobile orders, reducing stress on partners and allowing them to provide better service and connection. He stated that while there is no definitive rollout timeline yet, the company will learn from expanding the pilot over the next couple of months.

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CEO Brett Schulman explained that while specific frequency data was not disclosed, revenue from loyalty members increased by 230 basis points since the program's relaunch. He highlighted a successful test where a point discount on a new menu item drove significant trial, demonstrating their ability to influence behavior.

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CEO Brett Schulman stated that the strategy remains consistent, focusing on one or two major "tentpole" menu events and a few seasonal offerings. He identified key future drivers as the new multi-phased loyalty program, the full-year impact of the steak offering (launched mid-Q2), and further flavor innovations for their popular pita chips, following the success of the Garlic Ranch flavor.

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President and CEO Todd Penegor confirmed a $3.5 million incremental marketing investment for the year, funded within existing guidance. He stated the commissary price increases are appropriate and the focus is on driving sales to trigger franchisee rebates and finding system-wide efficiencies, rather than reversing the changes. He also noted the need to address the lack of local advertising co-ops.

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Interim CEO Scott Boatwright stated that he believes it's possible for in-restaurant throughput to return to the 'heyday' levels of the low 30s entrees per peak 15 minutes, up from the mid-20s today. CFO Adam Rymer described the smoked brisket as performing very well, driving transactions and spend with a mid-teens incidence rate. He noted it attracts new customers and increases frequency, with strong repeat usage and crossover to other menu items on subsequent visits.

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CFO Raj Vennam attributed the margin pressure primarily to sales deleverage resulting from the unexpected and significant sales softness in July, which made it difficult to adjust costs in real-time. Despite the decline, he emphasized that a 20.6% segment profit margin remains industry-leading. For the rest of the fiscal year, Vennam projected earnings growth to be in the mid- to high-single-digit range for each of the next three quarters, with some minor fluctuations between them.

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