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WI

Wingstop Inc. (WING)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 revenue grew 12.0% to $174.3M, adjusted EPS was $1.00, and adjusted EBITDA rose 14.3% to $59.2M; domestic same-store sales (SSS) declined 1.9% as Wingstop lapped a 28.7% comp in Q2 2024 .
  • Wingstop opened a record 129 net new restaurants (19.8% unit growth), took digital sales to 72.2% of system-wide sales, and increased domestic AUV to $2.1M .
  • Management raised 2025 global unit growth guidance to 17–18% (from 16–17%) and lowered net interest expense guidance to ~$39M (from $40M); it reiterated ~1% domestic SSS, SG&A ~$140M (incl. ~$4.5M systems), stock-based comp ~$26M, and D&A $28–$29M .
  • Dividend increased to $0.30/share (from $0.27), reflecting strong cash flow; the Smart Kitchen rollout reached ~1,000 restaurants with faster service and outperformance in DFW, positioning comps to recover in late Q3 and into Q4 .

What Went Well and What Went Wrong

What Went Well

  • Record development: 129 net new openings in Q2; fourth consecutive quarter with 100+ net new units. “We continue to open new restaurants at a record pace…” (Michael Skipworth) .
  • Scale and earnings quality: Adjusted EBITDA +14.3% to $59.2M; adjusted EPS $1.00 amid higher interest expense from 2024 securitization .
  • Smart Kitchen execution and digital engagement: 40% lower average ticket times in initial markets, ~10-minute ticket times at company-owned stores, DFW comps outperformed; database approaching 60M, loyalty pilot slated for Q4 2025 (full launch 2026) .

What Went Wrong

  • Comp softness: Domestic SSS declined 1.9%, with pressure persisting among lower-income/Hispanic cohorts and a softer industry start in July; mgmt expects comps to turn positive late Q3/Q4 .
  • Higher interest burden: Net interest expense increased to $8.5M (vs. $5.2M) on $500M securitization, reducing EPS by ~$0.18 in Q2 (CFO remark) .
  • Company-owned cost structure still heavy: Cost of sales 75.2% of company-owned sales (down 70bps YoY but still high), with food and packaging costs ~mid-30% system average; sequential improvement requires Smart Kitchen leverage and delivery mix gains .

Financial Results

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Millions)$161.8 $171.1 $174.3
Diluted EPS ($USD)$0.92 $3.24 $0.96
Operating Income ($USD Millions)$41.84 $38.26 $45.23
EBIT Margin %25.8%*26.9%*26.8%*
EBITDA Margin %29.4%*30.6%*30.4%*
  • Values with asterisk (*) retrieved from S&P Global.

Segment revenue mix (company-reported):

Revenue Component ($USD Millions)Q4 2024Q1 2025Q2 2025
Royalty, Franchise Fees & Other$75.70 $78.78 $79.89
Advertising Fees$56.06 $62.27 $61.96
Company-Owned Restaurant Sales$30.06 $30.05 $32.48
Total Revenue$161.82 $171.09 $174.33

Key KPIs:

KPIQ4 2024Q1 2025Q2 2025
System-wide Sales ($USD Billions)$1.232 $1.300 $1.340
Net New Openings (Units)105 126 129
Domestic AUV ($USD Millions)$2.1 $2.1 $2.1
Domestic Same-Store Sales Growth (%)10.1% 0.5% (1.9%)
Digital Sales Mix (%)70.3% 72.0% 72.2%

Non-GAAP reconciliation items (Q2 2025):

  • Adjusted EBITDA: $59.205M (adds system implementation costs $1.534M and stock-based comp $6.217M) .
  • Adjusted EPS: $1.00 (adds system implementation costs $1.534M and tax effect $(0.368)M) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Global Unit Growth RateFY 202516–17% 17–18% Raised
Domestic SSS GrowthFY 2025~1% (updated from low-to-mid single digits) ~1% Maintained
SG&AFY 2025~$140M (incl. ~$4.5M systems) ~$140M (incl. ~$4.5M systems) Maintained
Stock-Based CompensationFY 2025~$26M ~$26M Maintained
Net Interest ExpenseFY 2025~$40M (updated from ~$46M) ~$39M Lowered
Depreciation & AmortizationFY 2025$28–$29M (updated from $29–$30M) $28–$29M Maintained
Quarterly DividendQ3 2025 payment$0.27/share $0.30/share Raised

Earnings Call Themes & Trends

TopicQ4 2024 (Prior-2)Q1 2025 (Prior-1)Q2 2025 (Current)Trend
Smart Kitchen / TechAnnounced AI-enabled kitchen platform to cut quote times; rollout planning ~200 restaurants live; 50%+ ticket time reduction in tests; DFW delivery conversion +5% vs control ~1,000 restaurants live; ~10-minute ticket times; DFW comps outperformance; faster lunch/late-night; mid-single-digit delivery growth differential vs non-SK stores Accelerating rollout; early sales lift; operational efficiency improving
Digital / CRM / LoyaltyMyWingstop launched; DB >50M; personalization drove frequency and ROIs DB enriched; record new guest retention; loyalty pilot planned Q4’25, full launch 2026 DB ~60M; loyalty design emphasizes emotional engagement, experiences; Q4’25 pilot affirmed Building toward loyalty; deeper personalization
Supply Chain / Food CostsVisibility to mid-30% food costs; company COGS 75–76% guidance Mid-30% food cost sustained; COGS 76.0% in Q1 System avg food cost ~34%; company COGS 75.2%, down 70bps YoY Stable/predictable; slight leverage YoY
Macro / ConsumerValue-focused QSR landscape; Wingstop winning quality/value Pockets of softness (low-income/Hispanic); comps pressured by tough laps July softer industry start; pockets remain soft; comps expected to recover late Q3 Near-term softness; sequential improvement expected
Product InnovationChicken sandwich success; flavor innovation roadmap Crispy tenders relaunch; “Bar Tender” activation; strong new guest acquisition Tenders mix > sandwich; bundles like 20-for-$20 deliver value, higher average check Innovation driving acquisition & value
InternationalStrong momentum; U.K. pipeline expanded; new markets planned Record Q1 openings; Australia opening in Q2 New markets (Sydney, Paris) exceeding AUV; Italy & Netherlands slated; summit in Toronto Accelerating expansion

Management Commentary

  • “Our momentum in development continued in the second quarter, opening 129 net new units, delivering 19.8% unit growth... furthering us towards our vision of becoming a Top 10 Global Restaurant Brand.” — Michael Skipworth .
  • “Markets with the Wingstop Smart Kitchen are delivering faster speed, a more consistent guest experience, and sales outperformance... ticket times ~10 minutes vs 18–22 minutes prior on our best days.” — Michael Skipworth .
  • “At today’s AUVs of $2.1 million and on a low $500,000 investment to build a Wingstop, brand partners are seeing unlevered cash-on-cash returns of over 70%.” — Alex Kaleida .
  • “We are increasing our global unit growth rate to 17%–18%... reiterating domestic same-store sales growth of approximately 1% for fiscal year 2025.” — Alex Kaleida .
  • “Our tenders are driving reactivation of lapsed users at a level we haven’t seen from any menu innovation in the past two years.” — Michael Skipworth .

Q&A Highlights

  • Comps cadence: Management reiterated ~1% FY 2025 SSS; expects comps to turn positive late Q3 as laps ease; no Smart Kitchen benefit included in guidance .
  • Smart Kitchen impact: ~4 weeks to acclimate; ~10-minute ticket times; DFW outperformance; mid-single-digit delivery sales growth differential vs non-SK stores .
  • Unit growth durability: Demand from existing brand partners remains strong; pipeline of sold commitments at record levels; international accelerating (Italy, Netherlands) .
  • Value bundles: 20-for-$20 delivered perceived value and a higher average check; promotions did not impair margins meaningfully .
  • Loyalty: Focus on emotional connection and experiences (e.g., swag, partner activations); Q4 2025 pilot, 2026 full rollout .

Estimates Context

Q2 2025 Actual vs Consensus (S&P Global):

MetricActualConsensusSurprise
Revenue ($USD Millions)$174.3 $173.5*+$0.8M — bold beat
Primary EPS ($USD)$1.00 $0.87*+$0.13 — bold beat
  • Values with asterisk (*) retrieved from S&P Global.
  • Note: Company reported adjusted EPS of $1.00 (non-GAAP); diluted GAAP EPS was $0.96 . Consensus series reflect S&P Global “Primary EPS.”

Implications for estimates:

  • Top-line and EPS beats on strong development and advertising fees; comp softness likely tempers near-term revenue modeling, but Smart Kitchen traction and loyalty pilot support H2 recovery assumptions. Guidance raises (unit growth, lower interest expense) may drive modest upward revisions to FY EBITDA/EPS, while SG&A and D&A are reiterated .

Key Takeaways for Investors

  • Development flywheel intact: Record Q2 net openings, raised unit growth to 17–18%, and robust sold-commitments pipeline underpin multi-year unit expansion .
  • Smart Kitchen is a real catalyst: Early data show faster service, higher satisfaction, and delivery wins; narrative supports late-Q3 comp inflection without explicit guidance benefit baked in .
  • Earnings quality resilient: Advertising fees and royalty growth offset comp softness; adjusted EBITDA +14.3% despite higher interest burden .
  • Capital returns continue: Dividend raised to $0.30 and buyback authorization remains in place; leverage is manageable given asset-light model and cash generation .
  • International optionality: New markets (Australia, Western Europe) opening above domestic AUVs, broadening growth vectors beyond U.S. .
  • Near-term trading setup: Expect volatility around monthly comp prints; mgmt commentary on late-Q3 comp recovery and visible unit growth could be key upside catalysts .
  • Medium-term thesis: Scale benefits (ad fund, digital database ~60M, loyalty launch, Smart Kitchen) support path to $3M AUV and sustained EBITDA growth; watch food cost stability (~mid-30%) and consumer pockets .

Values with asterisk (*) retrieved from S&P Global.