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Wendy's Co (WEN)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 was mixed: revenues fell 2.1% to $523.5M, reported EPS was $0.19 and adjusted EPS was $0.20; U.S. company-operated margins contracted 50 bps to 14.8%, while adjusted EBITDA declined 2.6% to $124.5M, broadly in line with internal expectations amid consumer softness and adverse weather .
  • Management cut full-year guidance: global systemwide sales growth now (2.0)% to flat, adjusted EPS $0.92–$0.98, adjusted EBITDA $530–$545M; net unit growth (2–3%) and capex ($100–$110M) reaffirmed; dividend declared at $0.14 per share for Q2 .
  • International remained a bright spot with system sales +8.9% and SRS +2.3%; digital sales mix hit a record 20.3% of sales, supported by Frosty innovations and Fresh AI rollout .
  • Versus S&P Global consensus, Q1 revenue was a slight miss (actual $523.5M vs $526.6M*), EPS essentially in line ($0.20 vs $0.2003*); consensus EBITDA comparison is less clean given company uses adjusted EBITDA ($124.5M vs consensus EBITDA $122.5M*) [GetEstimates Q1 2025]* .
  • Near-term stock narrative drivers: lowered FY outlook on consumer pressure; execution on “100 days of summer” value and collaborations (Takis) to reaccelerate traffic; continued AI/menu investments and disciplined capital returns (up to $325M in 2025 via dividends/repurchases) .

What Went Well and What Went Wrong

  • What Went Well

    • International outperformed: systemwide sales +8.9% and SRS +2.3% on constant currency; record openings in Canada and momentum in APMEA, supported by localized supply chains minimizing tariff impacts .
    • Digital mix reached 20.3%, with app engagement highs and Fresh AI/menu boards scaling toward >500 locations by year-end to lift check and accuracy .
    • Shareholder returns remained robust: $173.5M returned in Q1 (8.2M shares repurchased for $124.1M; $0.14 dividend declared), with plans to return up to $325M in 2025 .
    • Quote: “We held both traffic and dollar share in a challenging consumer environment… and grew systemwide sales by 8.9% Internationally” — CEO Kirk Tanner .

  • What Went Wrong

    • U.S. softness: SRS down 2.8% and systemwide sales down 2.6%; adverse weather (five of first eight weeks) and deteriorating March consumer confidence pressured demand and margin .
    • Margin compression: U.S. company-operated restaurant margin fell 50 bps to 14.8% on sales deleverage, commodity/wage inflation despite labor efficiencies .
    • Guidance reduction: full-year system sales, adjusted EPS and adjusted EBITDA trimmed to reflect persistent consumer pressure; SRS expected to trough in Q1, with a gradual improvement into 2H .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Total Revenues ($USD Millions)$566.7 $574.3 $523.5
Reported Diluted EPS ($USD)$0.25 $0.23 $0.19
Adjusted EPS ($USD)$0.25 $0.25 $0.20
U.S. Company-Operated Restaurant Margin (%)15.6% 16.5% 14.8%
Adjusted EBITDA ($USD Millions)$135.2 $137.5 $124.5

Q1 2025 vs Prior Year and vs Estimates

MetricQ1 2024Q1 2025 ActualQ1 2025 Consensus*
Total Revenues ($USD Millions)$534.8 $523.5 $526.6*
Reported Diluted EPS ($USD)$0.20 $0.19 $0.2003*
U.S. Company-Operated Restaurant Margin (%)15.3% 14.8% N/A
Adjusted EBITDA ($USD Millions)$127.8 $124.5 $122.5*
  • Notes: Values with asterisks are from S&P Global; “Consensus EBITDA” may not be directly comparable to company “Adjusted EBITDA.” Values retrieved from S&P Global.

Segment and KPI Highlights

MetricQ1 2024Q1 2025
Systemwide Sales – U.S. ($USD Millions)$2,994.0 $2,916.1
Systemwide Sales – International ($USD Millions)$454.0 $473.2
Systemwide Sales – Global ($USD Millions)$3,448.0 $3,389.3
SRS Growth – U.S. (%)0.6% (2.8)%
SRS Growth – International (%)3.2% 2.3%
Systemwide Sales Growth – Global (%)2.6% (1.1)%
Digital Sales Mix (%)N/A20.3%
Net Restaurants Opened (Total/Net)35 / 8 74 / 68
Free Cash Flow ($USD Millions)$56.0 $68.0

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Global Systemwide Sales GrowthFY 20252–3% (2.0)% to flat Lowered
Adjusted EPS ($)FY 2025$0.98–$1.02 $0.92–$0.98 Lowered
Adjusted EBITDA ($M)FY 2025$550–$560 $530–$545 Lowered
Free Cash Flow ($M)FY 2025$275–$285 $250–$270 (excl. franchise dev. fund) ; $185–$205 (new definition incl. dev. fund) Lowered; definition modified
Global Net Unit Growth (%)FY 20252–3% 2–3% reaffirmed Maintained
Capital Expenditures ($M)FY 2025$100–$110 $100–$110 reaffirmed Maintained
U.S. Co.-Op Restaurant Margin (%)FY 2025N/A~15% ±50 bps New detail
G&A Expense ($M)FY 2025$285–$290 $265–$275 Lowered
Interest Expense ($M)FY 2025~$127 ~$127; plan to issue $400M WBS notes late 2025 Maintained
Dividend per Share ($)FY 2025Updated payout ratio 50–60% adj. EPS; guided Q2 dividend $0.14 Q2 dividend $0.14 declared Implemented

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q1 2025)Trend
AI/Technology (Fresh AI, digital boards, app)Scaling to 100+ pilots; digital menu boards rollout; AI improves accuracy and efficiency On track to >500 AI locations in 2025; curated upsell and accuracy gains; app gamification and conversion highs Improving
Supply Chain/Tariffs/MacroBeef inflation ~1% for 2024; tariff impact minimal due to domestic sourcing 2025 commodity inflation ~1%; beef largest driver; tariff impact expected minimal; Canada domestic sourcing reduces exposure Stable to mild pressure
Product Performance/CollaborationsQ4 SpongeBob delivered double-sized checks; salted caramel Frosty, mushroom bacon; breakfast tailwind Thin Mints Frosty drove late-Feb/March lift; “100 days of summer” incl. Takis collab; Frosty Swirls/Fusions Active pipeline
Regional TrendsInternational system sales +11% in Q4; ~2/3 of 2025 openings international Intl system sales +8.9%; strong Canada/APMEA; Australia off to a strong start Strengthening
Regulatory/LegalN/A$4M claim settlement with credit card providers, planned from 2024 One-off
Value StrategyBiggie Bag supported share maintenance; $1 any size drink promo “100 days of summer” weekly value; balance of core/value/innovation; March Madness $1 JBC app offer Emphasized
Operations/HospitalityDoubling field visits; “model of excellence” for consistency New field structure; label printers and delivery scales to boost accuracy; franchise P&L benchmarking tool Improving

Management Commentary

  • Strategic focus on three pillars: “fresh famous food,” “exceptional customer experience,” and “accelerating global net unit growth,” with 74 openings in Q1, 60% international .
  • Consumer backdrop: “We anticipated same-restaurant sales would be negative… adverse weather in Jan/Feb and weaker-than-expected consumer in March,” but maintained U.S. traffic/dollar share .
  • Technology: “On track to expand Fresh AI to more than 500 restaurants by end of year… curated suggestions increase check, accuracy improves” .
  • Value/Innovation: “100 days of summer” to balance core innovation, collaborations (Takis) and weekly digital deals to drive traffic .
  • Capital returns: plan to return up to $325M to shareholders in 2025 via dividends and repurchases .

Key quotes:

  • “We held both traffic and dollar share in the U.S.… and in our International business we grew systemwide sales by 8.9%.” — Kirk Tanner .
  • “We… are on track to hit our target of more than 500 [Fresh AI] by the end of the year… driving improvements in accuracy and check.” — Management .
  • “We now anticipate full year global system-wide sales to be flat to down 2%… adjusted EBITDA $530–$545M and adjusted EPS $0.92–$0.98.” — Management .

Q&A Highlights

  • Consumer/value cadence: March demand weakened industry-wide; Q2 expected similar to Q1, then momentum building in 2H with value and collaborations; lower-income cohort pressured more (H/H < $75k) .
  • Unit development: reaffirmed 2–3% net unit growth in 2025, ~150–200 openings with ~2/3 international; build-to-suit investments to support franchisees .
  • Breakfast: remains a priority; beverage lineup revamp (cold brew) and value-focused morning offers; breakfast grew ~4% in Q4 YoY and ~6% in 2024 .
  • Fresh AI operational KPIs: higher check, improved accuracy, labor efficiency at drive-thru; scaling to >500 sites .
  • Financial detail: $4M claim settlement in “other operating income” tied to credit card providers; planned/expected .

Estimates Context

  • Revenue slightly missed consensus: $523.5M actual vs $526.6M* consensus; EPS in line: $0.20 vs $0.2003*; consensus EBITDA $122.5M* versus company adjusted EBITDA $124.5M (definitions differ). Expect estimate trims to reflect lowered FY guide and Q2 cadence similar to Q1 [GetEstimates Q1 2025]* .

  • Analyst focus likely shifts to 2H recovery drivers (Takis, Frosty Fusions/Swirls, breakfast beverages), International unit growth flows, AI rollout pace, and U.S. margin trajectory (~15% ±50 bps) .

  • Notes: Values with asterisks are from S&P Global. Values retrieved from S&P Global.

Key Takeaways for Investors

  • U.S. softness drove a modest top-line miss and margin compression; International strength and digital/AI execution helped buffer earnings; Q2 expected to resemble Q1 before 2H reacceleration — positioning shares for event-driven catalysts into summer/fall programming .
  • Boldly monitor “100 days of summer” value and Takis collaboration as near-term traffic catalysts; watch app engagement/offer conversion to sustain digital mix >20% .
  • Margin path: U.S. company-operated margin guided ~15% ±50 bps; key swing factors are beef inflation, wage rates, sales leverage and operational initiatives (accuracy tools, Fresh AI) .
  • Development mix: 2–3% net unit growth with ~2/3 international openings should support franchise royalty growth and diversify macro reliance; build-to-suit accelerates pipeline .
  • Capital allocation: lowered dividend to $0.14 and stepped-up buybacks (up to $325M total returns in 2025) signal confidence in long-term plan and valuation support .
  • Estimates likely migrate lower on FY cuts; upside exists if consumer improves and promotions/AI deliver sustained lifts; track Q3/Q4 cadence and U.S. value competitive response .
  • Risk watch: consumer demand, beef/bacon costs, execution of AI/menu initiatives; mitigating factors include domestic sourcing, franchisee support, and diversified international growth .