Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Wingstop Inc. Fiscal Third Quarter 2022 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. Please note that this conference is being recorded today, Wednesday, October 26th, 2022. I would now like to turn the conference over to Ms. Susana Arevalo, Vice President of FP&A and Investor Relations. Please go ahead, ma'am. Thank you, and welcome to the Fiscal Third Quarter 2022 Earnings Conference Call for Wingstop. On the call today are Michael Skipworth, President and Chief Executive Officer, and Alex Kaleida, Senior Vice President and Chief Financial Officer. Our fiscal third quarter 2022 results were published earlier this morning and are available on our investor relations website at ir.wingstop.com. Our discussion today includes forward-looking statements. These statements are not guarantees of future performance and are subject to numerous risks and uncertainties that could cause our actual results to differ materially from what we currently expect. Our SEC filings describe various risks that could affect our future operating results and financial conditions. We use certain non-GAAP financial measures that we believe can be useful in evaluating our performance. Presentation of such information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. Reconciliations to comparable GAAP measures are contained in our earnings release. Lastly, for the Q&A session, we ask that you please each keep to one question and a follow-up to allow as many participants as possible to ask a question. With that, I would like to turn the call over to Michael. Thanks Susana, and good morning, everyone. Thank you for joining our call. At Wingstop, we have carefully constructed our strategies with a technology-forward and growth-oriented mindset, and that is precisely what has enabled the success of the model and our industry-leading growth. That is what has fueled our culture, how we behave, and the core values that are at the forefront of every decision at Wingstop. Our strategy is built upon a foundation rooted in both living the Wingstop way and investing in people as our competitive advantage. This enables our core growth pillars, so preserving our culture is key. In our last earnings call, we signaled to our second half of the year story. We are pleased with our third quarter results. Results that demonstrate the resiliency of the Wingstop brand and the impact of our strategies as we reverse the trend we saw in the second quarter and delivered strong results across the board. This has us well on our way to delivering our 19th consecutive year of same-store sales growth. In the third quarter, domestic same-store sales growth was 6.9%, with the majority of this driven by transaction growth. That translates to 36% growth on a three-year same-store sales basis. System sales increased 17.7% to approximately $700 million. We opened 40 net new restaurants in the quarter and saw unit growth of 13.5%. Company-owned restaurant margins sequentially improved over the prior quarter as we continued to benefit from meaningful deflation in our core commodity, bone-in chicken wings. Adjusted EBITDA increased 33% - $28.4 million. I would like to spend a couple minutes to provide insights on our quarter trends and detail on the sales-driving strategies we executed against in the third quarter. At our Investor Day earlier this year, we outlined the strategies we are working towards to continue to sustain same-store sales growth and provide a clear line of sight into increasing AUVs above $2 million. During the third quarter, we made exciting progress against several of these sales-driving levers. We expanded our delivery channel, advanced menu innovation with the launch of our Chicken Sandwich, and we continue to drive brand awareness with an elevated level of national advertising spend. These are not just current quarter drivers for our business, but strategies that we believe have staying power. Let me briefly touch on each of these strategies, starting with Chicken Sandwich. We launched our Chicken Sandwich on August 29th. Our mission at Wingstop is to serve the world flavor. We didn't offer only a plain and spicy version, but we gave our guests a variety of 12 chicken sandwiches, soft and tossed in any one of our bold, distinctive flavors. Our sandwiches are offered at a compelling value, $5.49 for the à la carte sandwich and a dip, and $7.99 for the combo, which includes a drink, fries, and a dip. We anticipated that our Chicken Sandwich strategy would bring new guests into the brand and capture additional occasions, but we did not expect to see the incredible demand that we saw in our initial launch. Our initial launch sold out of four weeks of supply in six days, demonstrating the long-term opportunity we believe we have with Chicken Sandwich. After rebuilding supply, we relaunched Chicken Sandwich in early October with a more measured approach to ensure we win over all these new guests we're bringing into the brand by providing a great guest experience. We started the relaunch without advertising support and have gradually phased in media through the month of October. Only a few weeks into the relaunch, and we are pleased with the results, seeing the Chicken Sandwich mix in the high single digits range. That is over 2 x what we saw in our market test. At these mix levels, Chicken Sandwich is proving it can drive more Wingstop occasions and play a role in building brand awareness. We also see Chicken Sandwich as a way for us to further drive boneless mix in our restaurants, and can see a path to boneless mix exceeding 50% of our total mix, which will play a key role in advancing our supply chain strategy. With a higher boneless mix, we can see a future with food costs in the low 30% range, and will only further strengthen our industry-leading unit economics. Another sales-driving lever that we executed against was the addition of Uber Eats as a delivery provider. In July, we launched Wingstop nationally on the Uber Eats platform, and with little advertising efforts, sales proved to be highly incremental and were in line with our expectations. We are excited about the partnership with both leading delivery service providers, Uber Eats and DoorDash, to capture incremental occasions. We believe we are in the early stages of building our delivery channel. As we benchmark the more established off-premise businesses, where their delivery channel is upwards of 50% of sales mix, we see a path with significant growth in front of us in this channel. The third strategy I want to touch on is expanding brand awareness. We have made great progress in increasing our brand awareness the last few years, yet our gap to national peers still remains a significant opportunity for us. At the start of the second quarter, we converted the local 1% advertising fund to our national ad fund, bringing our national ad fund contribution rate to 5%. This 1% increase, combined with our growth in system sales, has provided a meaningful increase in the amount of ad fund dollars we can invest. Historically, we had concentrated the majority of our local dollars in the July and August timeframe. Q3 represented our first quarter lapping our historical local media investment window with the increased national spend. Not only does this give us the opportunity to drive these dollars more efficiently, we are also able to invest in more premium placements such as live sports, like the NFL, where you've likely seen us show up. This elevated level of investment will continue into Q4. With our continued growth in system sales, we are on track for an additional step-up in 2023 in our advertising investment that provides the firepower to drive brand awareness. We are excited about the strategic levers we are pulling to sustain same-store sales growth. As we exited Q3, the impact of any 2021 pricing has tailed off, and our sales growth was driven entirely by transactions, which is a true signal of the underlying momentum in our business. We also believe it highlights the unique long-term sales-driving levers we have as a brand. We continue to strengthen our competitive advantage with a best-in-class digital platform. While you're starting to see consumers resort back to their pre-pandemic behaviors, our digital business has sustained above 60%, demonstrating the stickiness of our new guests. We're committed to our aspirational goal of 100% digital transactions, where we enjoy a $5 higher average check. This continued expansion of our digital business allows us to continue to build upon our first-party database that's over 30 million strong. Sales-driving levers such as menu innovation through the Chicken Sandwich is another opportunity to capture new guests and further expand our digital database. Another important aspect of our growth story is global development, where we have a long-term target of over 7,000 restaurants. We opened 40 net new restaurants during the third quarter, which brings our total to 167 net new restaurants through the first nine months of this year. That's a 13.5% growth rate, with both our domestic and international business on track to have record restaurant development for 2022. Our global pipeline has further strengthened, which, as we look ahead into 2023, positions us for another strong year. With average unit volumes of $1.6 million and an initial investment of approximately $400,000, our brand partners are seeing cash-on-cash returns averaging 70%. These cash-on-cash returns have continued to strengthen this year, as we are one of the few brands experiencing significant deflation in 2022. This is driving quite a bit of excitement among our brand partners. As we sit here today, the Urner Barry price for jumbo bone-in wings is $1.05 per pound and represents a year-over-year COGS improvement of over 1,000 basis points. We are also seeing breast meat prices come down from their highs earlier this year and continue to see leading indicators that suggest a favorable commodity backdrop for the balance of this year and into early 2023. Despite the challenging macroeconomic backdrop, Wingstop remains well-positioned to deliver another industry-leading year, driven by our simple operating model, best-in-class unit economics, levers to sustain same-store sales growth, and record unit development. As the industry is navigating 40-year high inflation, forcing other brands to take price to manage margins while consumer sentiment is shifting, Wingstop is different. We are in a position where we do not necessarily have to take price. We have a proven playbook where we lean into that indulgent Wingstop occasion, presenting our guests with value that has allowed us to successfully navigate prior economic cycles. Additionally, we have a lot of runway in front of us to bring new guests and capture new occasions with strategic growth levers such as expanding our delivery provider base and menu innovation like our Chicken Sandwich. We believe this highlights the opportunity we have in front of us here at Wingstop and the long-term growth story. We are reiterating our guidance of low single-digit same-store sales growth for 2022, which would mark our 19th consecutive year of same-store sales growth. With the visibility into our pipeline at this point in the year, we are raising the low end of our estimate and now expect net new restaurant openings to be between 225 and 235, putting us in a position to exceed our 10%+ development target. I couldn't be more excited about how the back half of 2022 is playing out for Wingstop. Just a few weeks ago, we held our brand partner convention. At our convention, we outlined the strategies we are executing against to deliver this next phase of growth for Wingstop, and I couldn't be more excited with the shared vision and confidence our brand partners have in Wingstop. Our unit economics continue to strengthen against a backdrop of meaningful deflation in our core commodity. We have clear line of sight to $2+ million AUVs and strategies that will help us navigate uncertain times ahead. We remain confident in our strategies that will reward our shareholders, franchisees, and team members as we continue on our path to become a top ten global restaurant brand. Before I hand it over to Alex, I want to thank our brand partners, our team members in the restaurant, and the team members at the Global Support Center for all their incredible work and commitment that has put us in a strong position to deliver another industry-leading year for Wingstop. With that, I'd like to turn the call over to Alex. Thanks, Michael, and good morning. As you just heard from Michael, the third quarter demonstrated the strength of our long-term strategies. We delivered a 17.7% growth in system-wide sales in the third quarter, which now total $2.6 billion on a trailing 12-month basis. We grew royalty revenues, franchise fees, and other revenue by $7.5 million in the third quarter, driven primarily by 215 net franchise openings since the prior year comparable period and a 6.9% increase in domestic same-store sales. As we signaled in our last call, we reversed the trend we saw in the second quarter, delivering a third quarter comp that's largely driven by transaction growth. Company-owned restaurant sales totaled $20.2 million in Q3, an increase of $2.3 million, primarily due to a 4.3% increase in same-store sales in 9 net new restaurants versus the prior year comparable period as we continued to execute our Manhattan expansion strategy. Our unique position with meaningful deflation is illustrated in our corporate restaurant margins. Cost of sales excluding pre-opening expenses and as a percentage of company-owned restaurant sales decreased by more than 900 basis points compared to the prior year, mainly driven by a nearly 1,100 basis point decrease in food, beverage, and packaging costs, a 150 basis point decrease in labor, which were partially offset by higher rent and other operating expenses in our New York City restaurants. We are pleased to see the sequential improvement in restaurant margins this year, which for the third quarter benefited from a 43% decrease in the cost of bone-in chicken wings. Based on everything we know today, we have a favorable commodity outlook, not only for bone-in wings, but also for breast meat, which we believe will continue into early 2023. The significant deflation in wing prices, the recent declines in breast meat prices, along with our sales drivers, will further strengthen unit economics. For modeling purposes in company restaurants, we estimate food costs to be 35.5% in the fourth quarter. As a result, we now anticipate company and restaurant cost of sales in the fourth quarter to be approximately 75%, which is an improvement of 1,000 basis points versus the fourth quarter in 2021. In the third quarter, SG&A increased by $1.7 million versus the comparable period prior year to a total of $16.7 million, driven by investments in talent and strategic projects to support the long-term growth of the business. This was partially offset by a year-over-year decrease in stock compensation expense. Adjusted EBITDA, a non-GAAP measure, was $28.4 million during the quarter, an increase of 33% versus the prior year. Adjusting for non-recurring items, we delivered adjusted earnings per diluted share, a non-GAAP measure of $0.45, a 55% increase versus the prior year. Our highly franchised asset light model continues to deliver strong free cash flows. As of the end of the third quarter, we had $539.7 million in net debt. Our net debt to trailing 12 months Adjusted EBITDA was at 5.7x, which is almost half a turn lower than at the end of the second quarter, which underscores our ability to quickly delever through a combination of Adjusted EBITDA growth and strong free cash flow generation. We also are maintaining a strong cash balance that stands at over $170 million. This cash positions us to be opportunistic to support our supply chain strategy as we continue to explore options to take greater control of our supply chain. We remain committed to driving shareholder value and returning capital to shareholders through our regular quarterly dividend. Our board of directors has declared a dividend of $0.19 per share of common stock, a demonstration of the strong cash flow generation and strength of our business. This dividend, totaling approximately $5.7 million, will be paid on December 2, 2022 to stockholders of record as of November 11, 2022. Shifting to our outlook for 2022. We are reiterating our guidance for same-store sales of low single digits%, and we are updating our guidance for net new units to a range of 225-235 from prior guidance of 220-235 for the full year. This translates to unit growth of 13%-13.5% versus the prior year. We are also lowering SG&A guidance to a range of $68.5 million-$70.5 million from our prior guidance of $70 million-$72 million, including stock-based compensation expense of approximately $6 million. We are increasing our diluted earnings per share guidance of between $1.61 - $1.63 from prior guidance of $1.55 - $1.57. Our updated outlook for 2022 reflects our confidence in the second half of the year story for Wingstop, supported by the same strategies we are pursuing to achieve our vision of becoming a top ten global restaurant brand. With that, I'd like to now turn to Q&A. Operator, please open the line for questions. Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touch tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. Please limit yourself to one question and one follow-up, and if you have further questions, you may reenter the question queue. At this time, we will pause momentarily to assemble our roster. The first question will come from John Glass with Morgan Stanley. Please go ahead. Thanks good morning. I'm wondering on the Chicken Sandwich a few things first. Michael, if you can just talk about what the contribution actually was to the third quarter, recognizing it was there briefly, but it also sold out. Maybe are we over-indexing to that right now or as we look at the third quarter? Can you talk about the dynamics and how it impacts check? Is it the kind of thing where it drives traffic but it's dilutive to check? Or how is it purchased, I guess? How does it influence not just traffic, but check as well, please? Hey John good morning. Thanks for the question. You know what I would say about Chicken Sandwich is the reality within the third quarter itself, we had the Chicken Sandwich available for only six days. Clearly we saw the potential for Chicken Sandwich for our brand and really the long-term opportunity that we have there and really a permission for guests for us to play in that space. It's something we're really excited about, but there's not really anything I would call out materially as it related to the overall quarter for Chicken Sandwich. What I would point out is it was another demonstration of the opportunity that we have to drive brand awareness and the gap we have to other national brands, which is still significant. As we launched Chicken Sandwich, we really leaned in with our full advertising muscle, and we launched it all the way from, you know, inclusive of national TV to influencers, to social, to even PR campaigns around giving away 100,000 free sandwiches. Really hit it hard. What we saw was almost a halo effect to our overall business, where we saw the entire business, all channels really see growth while we were out driving awareness around the brand. Something we're really, really encouraged about. We see that, you know, not only as a long-term sales driving lever for us, but we also see it playing a meaningful role for us in our supply chain strategy. You heard in our prepared remarks the mix levels that we're seeing today. We see a path where total boneless mix can exceed 50%. At those levels, we see a path to food costs in the low 30%, which I know you're familiar with our story and the unit economics, John. That's really compelling when you think about what that can do for our brand partners' returns. We did see, similar to our test market, the Chicken Sandwich bring in a lot of new guests, and with that, we saw it mix nicely on the launch day part. There were some individual occasions with these new guests that we brought in that we were able to capture that did have a little bit lower average check. Again, it wasn't a significant number that I would call out on the quarter itself. Thank you for all that Michael just to follow up on what you just mentioned. On this path to getting food costs down to the low 30s%, which I think is pretty remarkable, just given how profound that would impact unit economics. One, is the key driver to that the Chicken Sandwich? Is that part of the boneless strategy? Is there something else like you're just talking about boneless wings? And is there a timeframe you think about when that can occur? Is it in the next couple of years? Is it a very long-term strategy? How do you think about how that can materialize? Yeah, absolutely. I think it's all of that, John. It includes the sandwich, our boneless wings, our tenders. We have regions, we have restaurants today that have boneless mix in excess of 50% and do enjoy food costs today in the low 30s%. It is happening. For the broader system, we do see this as an opportunity and again, a long-term driver for our brand, not just a current quarter hit, but a long-term driver to continue to drive chicken sandwich mix. From there, a lot of these new guests that we're bringing in are also users of tenders, so we see opportunity there. We can see, over time, as we continue to bring in these new guests, convert them to Wingstop users, the opportunity for that mix to continue to drive. Oh, great. Thank you. Thank you very much. You bet. The next question will come from David Tarantino with Baird. Please go ahead. Hi. Good morning. A couple questions. First, on the Q4 comps outlook. You know, your full year range of low single digits kind of leaves a pretty wide range of outcomes possible in the fourth quarter. I was hoping that you could comment maybe more specifically on what your expectation is for the quarter in broad terms, you know, especially now that it doesn't seem like you're running much pricing across the system. Yeah David good morning. Thanks for the question. You know, we're pretty excited about, you know, the work the team has executed against both here at the GSC and our brand partners around, you know, reversing the trend that we saw in Q2. As we progressed through Q3, we saw the comps sequentially improve throughout the quarter. It was really as we began to execute against these sales drivers that we called out in our prepared remarks, and also leverage the benefit of this elevated ad spend that we had year-over-year. Not to mention a balanced message around value, which we think is really important in this environment. We did talk about as we exited Q3, we saw the impact of 2021 pricing trail off and basically our entire comp being fueled by transaction growth, which is something we're really excited about and what we believe is really a true demonstration of the underlying strength and momentum in our brand. What we did comment about was Chicken Sandwich mix through the first few weeks of October, seeing that in the high single digit range. Really what we've seen in the comp, David, through, I guess, the first few weeks of October, is continued strength in that transaction growth. Where we're sitting and where we kind of expect October to finish up is around a 6% comp. That said, you know, we're confident in our ability to deliver on our target of low single digits same-store sales growth, particularly something we're proud about, particularly when you think about the challenging macro environment that we're in, and doing that in a way that's really fueled by transaction growth. Great. That's very helpful. One quick clarification. On the high single-digit mix for the Chicken Sandwich, how much of an increment to sales is that for your business? I assume maybe some of that's not incremental, but how would you characterize, you know, the lift that you're seeing at that level of sales mix? Yeah. We hit on it a little bit earlier in that we've kind of seen it be the Chicken Sandwich sales that we're seeing be highly incremental. We're really seeing a combination of two things here, David. One is bringing in a lot of new guests, which we're really excited about, but then we have a lot of existing Wingstop users who are adding Chicken Sandwiches on to their existing wing occasion. We've seen it be highly incremental and something we're really excited about, particularly when we think about the long-term potential for the brand. We've talked about this in the past, David, where we've often with our wing-focused offering have had to navigate that veto vote. We really believe offering a Chicken Sandwich, which is a pretty universal occasion for just about anyone, this really gives us an opportunity to address some of those issues we've seen in the past. Provides us a lot of confidence, not just for this quarter, but that this is something we're gonna be able to build on as we progress through the balance of 2022 and into 2023. Yep. Makes sense. Thank you very much. Thank you. The next question will come from Jeffrey Bernstein with Barclays. Please go ahead. Great. Thank you. Two questions. The first one, just following up on the comp trends. Sounds like, I think you mentioned trends improved sequentially through the third quarter, and you've given us some insight into October. Just wondering whether you see any signs of a slowing macro. I know you guys talk about 30%+ of your sales or maybe a lower income, and recognizing that's clearly down from where it was 5+ years ago, which is a net positive. Just trying to get a sense for what you would be looking for in your comp in the traffic or in the mix or anything like that. I know you said you hav e 30+ million database users, so whether that's your toolbox to kind of assess trends by customer. Just trying to get a sense if you're seeing any sign of a macro slowdown at all within that very strong comp. I had one follow-up. Yeah, Jeff. I think we're in a pretty unique spot at Wingstop where, you know, if we look at certain geographies, certain income levels, we can see less growth. We really have two elements at play in our brand that I think really strengthen our positioning. One is that proven value playbook. If you think about how consumers engage with our brand, it's really our frequency is about 3x a quarter. It's an indulgent occasion. Usually, when consumers are starting to feel pressure, or they want to pull back, they most immediately look at more high-frequency occasions, such as QSR, four to 5x a week visits, and will pull back there. As long as we're presenting them with value, we've been able to retain those indulgent occasions. In addition to that, and I think what we demonstrated in the third quarter is the opportunity we have around just bringing in new guests, whether that's closing the gap on brand awareness, whether it's capturing these Chicken Sandwich occasions or even the addition of an additional delivery service provider such as Uber Eats, that's allowing us to access a consumer base that we weren't previously offering Wingstop to. We have these two elements working in concert, if you will, and all supported by a significant increase in our ad fund dollars that we're able to invest this year that really helps us have confidence in our outlook for 2022, despite any pullback from the broader consumer or any recession concerns that are out there. Understood. My follow-up, kind of a follow-up from last quarter. I feel like I asked the same question, but I think it's just as relevant now. In terms of the conversations with franchisees, and I think you mentioned you just had a franchise convention, so I'm sure it was pretty upbeat. Any sign that the difficult broader operating environment or perhaps rising rates may temper at all the appetite for new unit growth into 2023? I know this year you were raising the range, and now you just tightened to the upper end. We're talking about 13%-14% type growth. I would think some franchisees might just be intimidated by the macro we're heading into and perhaps be a little bit more cautious. Just wondering whether you're seeing anything like that or whether we should expect another year next year of solid double-digit unit growth. Again, no formal guidance, but just any conversations you've had that would give you any kind of early intel. Yeah. Jeff, I appreciate the question. You know, we're really excited about having delivered for the first three quarters record unit development for the brand, not just in our domestic business, but also in our international business. Record pace of development for both areas there, which we're really excited about. We did comment in our prepared remarks that on the tails of that record pace of development, we actually sit here today with a stronger pipeline than we did this time a year ago, which I think really speaks to brand partner sentiment, their excitement around reinvesting and continuing to grow with Wingstop. I really think that is, if you will, the exclamation point on the fact that we've not only been able to benefit from, call it, you know, low- to mid-30% increase in sales over the last three years, but we sit here today with meaningful deflation in our business. Right now, our unit economics are about as strong as they've ever been. As we indicated, these leading indicators we watch around poultry seem to suggest through the balance of this year and into early 2023, we should have a favorable commodity backdrop, which is really encouraging. The last element I would add to the Wingstop development, and we've talked about this before, Jeff, is there's not a lot of leverage on the businesses for our brand partners. A lot of them use existing cash flow to reinvest and drive their growth. Leverage rates is not a common conversation that we have with our brand partners. I think knowing that, the rising rate environment that we're in right now doesn't give us a lot of concern around our ability to continue to deliver on our long-term algorithm of double-digit development growth. That's great. Thank you. Thank you. The next question will come from Jared Garber with Goldman Sachs. Please go ahead. Great. Thanks for the question. Sort of wanted to follow up on the development conversation and the unit growth conversation that you just touched on a bit. Wanted to get a sense of maybe how the third quarter unit growth numbers sort of tracked versus your internal estimates as they came in a little bit below where we had been expecting. But at the same time, you maintained and even, you know, to a degree, raised your full year outlook on unit growth. Just wanna get a sense of maybe how the third quarter played out and what gives you the confidence for the level of opens that you'll need to see in the fourth quarter. Then I guess beyond that, you know, with the returns, I mean, the new returns sort of speak for themselves with the phenomenal returns and the top line continues to grow. The question really is, what's the path towards accelerating unit growth from here? What are the conversations you're having, like, with franchise partners, maybe larger, more sophisticated partners, to take this brand on a more accelerated unit growth path? Thank you. Yeah. Thanks for the question, Jared. I would say, as far as the development, you know, I would say everything really, from our perspective is right on track. We provided an updated, raised our outlook, last earnings call, and as we've progressed through the year, we've tightened that estimate only by raising the low end as we have good visibility in what development looks like for the balance of the year. From our perspective, everything's on track, and we're really excited about, you know, our outlook and the reality that we're gonna deliver a record development year for the brand. I think that's a really strong statement when you particularly think about the broader macro and the operating environment that we're delivering that in. I think that really speaks to the strength of the brand. We're pretty proud of, you know, that range translating to a 13%-13.5% unit growth. I think that's pretty strong. As it relates to accelerating growth, I think it's happening. You are seeing brand partners reinvest. We are seeing international start to play a bigger part of our development story. I mentioned earlier, international is on pace for a record development year. There's a lot of excitement around the globe for expanding with Wingstop, and I think as we progress, that international story is gonna be a bigger part of our development and something we're really excited about. We're constantly having conversations with large-scale operators who are interested in Wingstop. The reality is we've got a lot of existing brand partners that are excited to grow. It's a really efficient way for us to grow. They know the brand, we know them. And we're really excited about continuing to grow with our existing brand partners. Again, a strong testament to the returns that they're seeing and their desire to continue to reinvest. Great. Thanks. I guess just following up quickly. Is there any outlook you can provide on what that development pipeline looks into 2023? Yeah, I think we commented earlier how it's strengthened from this time a year ago, and so the pipeline's strong. You know, we're excited about finishing this year out strong, and there's nothing in front of us that would lead us to believe we're not going to deliver another strong year in 2023. Great. Thanks so much. The next question will come from Jon Tower with Citi. Please go ahead. Great. Just two quick ones from me. The first, I was wondering, you know, just following up again on the unit development piece of it. We've heard from a handful of other operators some issues around opening new stores, whether it's securing the proper equipment or getting permitting, and you guys don't seem to be hitting any of that, any of those roadblocks. I'm curious, how have you and your franchisees been able to navigate around these issues? Hey, Jon. No, I appreciate the question. I think a lot of other brands, if you think about their asset, it could involve, you know, a scrape and build out on the pad. It could involve a much more involved build. Whereas if you think about our asset, it is in line. It's a shell that we're building out, and it's extremely efficient. I think that's what allows us to enjoy really low initial investment, on average $400,000, and deliver those great returns on that efficient box. We have been extremely proactive in engaging with equipment suppliers, just ensuring that the equipment is there to support our pipeline, whether that's us, you know, leaning in and securing banks of fryers as an example. We've taken a really proactive approach in trying to help mitigate any issues related to supply chain. I think it's those two things are probably what are helping us shape up to have another record development year despite the challenging macro backdrop. Okay. Even thinking about next year, there doesn't seem to be anything cropping up that you're saying would be a reason to believe growth would slow on an absolute basis. That's right. Okay. Then just following up on the COGS commentary about potentially moving down to 30% over time, which is great to hear. I'm curious, I mean, you've already got best in class unit growth and you know, the question from there is, can it step much higher from here given potential, say, human capital constraints for franchisees who've been opening new stores? I guess it then begs the question of, is there other aspects of the business that franchisees can be investing in, that maybe hits directly within their own P&Ls? Perhaps, you know, do you think that better line of sight in getting to 30% food costs over time potentially accelerates the willingness of franchisees to buy into doing the supply chain co-op? Yeah. I think there's a couple of things here, Jon, I would point out. One is, we know continuing to protect and enhance our unit economics is, if you will, a central pillar to our long-term strategy of delivering on the opportunity we have here at, you know, roughly 1,900 restaurants today, expanding this brand to over 7,000. The more we enhance and protect those unit economics, the increased confidence we have in that opportunity in front of us. There obviously will be areas where our brand partners will need to invest over time. You know, one of them that we're seeing right now is as our existing brand partners scale, they're making investments in their above restaurant support, their infrastructure, and so continuing to enhance these unit economics don't allow or don't require or permit any of those investments to impact how they're going to deploy capital. There are investments that are happening. As we scale the brand from here, as we continue to advance our supply chain strategy, we'll work closely with our brand partners to ensure that if investments are needed, they're clearly communicated with a business case behind them and in a way that won't impact our long-term target on unit growth. Great. Thanks for the time. The next question will come from Andrew Charles with Cowen. Please go ahead. Hey thank you. You know, Michael, obviously very strong performance following the increase in the national ad fund contribution back in May. That's obviously being concentrated in the back half of this year. Can you remind us just contractually when the next 50 or 100 basis points raise the national ad fund contribution is up for grabs to go to 5.5%-6% of sales? And your level of confidence following the convention a few weeks ago that franchisees will look to increase that contribution to continue to fuel the advertising strength you're seeing. Hey Andrew appreciate the question. We, when we went to increase the ad fund and convert that local 1% to national, we worked through a franchise agreement amendment process with all of our franchisees. We presented the business case, and we were extremely excited, and I think this is somewhat unheard of in the franchising space, that we obtained 100% of signatures needed to enact that amendment and get the rate moved to a 5% national contribution rate. As we sit here right now, Andrew, we feel pretty confident that that's given us a lot of firepower to continue to drive the brand and continue to close the gap on the opportunity we have in front of us around brand awareness when we compare ourselves to other more mature national brands. The thing that's going to continue to fuel that fund and fuel growth is really gonna come in the form of system sales growth, which is growing not only from same-store sales growth, but through our unit expansion as well. We believe that gives us a lot of firepower just to continue to drive the business and deliver on our algorithm of same-store sales growth. Okay great thanks for that. Then, Alex, just a question on the 2022 guidance. You know, you beat 3Q by more than you raised the full year EPS. I'm trying to better understand the implication for lower than expected 4Q. You provide the restaurant margin guidance. It's encouraging and kind of curious, does the 4Q guidance embed some hefty deterioration in underlying three-year same-store sales trends from 3Q to 4Q, you know, recognizing that you're rolling over that 5% price increase from a year ago, or perhaps a slightly higher tax rate in 4Q than 3Q. Just would love some help kind of as we think through the mechanics. Good morning Andrew. Thanks for the question. Yeah, I wouldn't necessarily point to the same-store sales estimate. You know, we're still delivering a three-year comp in that low 30%, low-to-mid 30% range from a same-store sales standpoint. I think it really points to what you've seen historically from us with the cadence of our SG&A spend and how that steps up from Q2 to Q3 to Q4, pointing to just the investments we're making in headcount and strategic project investments. Okay. Thank you. The next question will come from Jeff Farmer with Gordon Haskett. Please go ahead. You and a lot of your peers have seen some reduced frequency from that lower income consumer. But have you seen check management or any other indication of changing behavior from the balance of your consumer segments? Hey Jeff appreciate the question. We clearly indicated in our comments that we've seen the contribution of 2021 pricing trail off, particularly as we exited the third quarter. Really what's driving that is two things. One is, and I guess overall it's really just our business is remixing a little bit. We're seeing some nice organic growth in our dine-in business, which if you recall, did carry a lower average check associated with it. Then earlier I called out some of these new Chicken Sandwich occasions that we're bringing in do have a slightly lower average check associated with them as well. We're seeing a little bit of a remixing of the business as some of those elements come into play. The deterioration of the ticket contribution, or check contribution in our comp isn't anything as it relates to the consumer trading down. We're not seeing that in our business really in any way. Okay, that's helpful. Unrelated, staffing shortfalls, I know that varies from sort of market to market and restaurant to restaurant. Have staffing shortfalls prevented any of the company or franchise restaurants from fully meeting demand? I guess, in other words, do you feel are any of these restaurants or regions, markets leaving sales on the table because staffing levels aren't quite back to where you would like them? No Jeff we're actually pretty encouraged with what we see out there from a staffing perspective. It's gotten much, much easier than it was, say, a year ago. We're not seeing that constrained, you know, restaurant volume. I think as you look at opening 167 net new restaurants through the first nine months, it's not restricting our ability to expand our footprint either. I really just think that highlights the efficient labor model that we deploy. You can run a Wingstop at our average unit volume of $1.6 million with as few as three to four team members in there. The overall roster is clearly much smaller than what a lot of other brands have to operate within their assets. I think that helps us, you know, navigate and feel less of an impact from any sort of staffing issues out there, if there are any that continue to persist. Okay. Helpful and thank you. You bet. The next question will come from Andy Barish with Jefferies. Please go ahead. Pardon me, Mr. Barish, you may be muted. Oh, sorry about that. Yeah. Actually just wondering on, you know, as you talked about sort of the amount of sequential improvement, I guess, as you went through the three Qs and obviously September, you know, higher than what October is running. Just trying to kind of match all of that up with, you know, what happened with only the week of Chicken Sandwich and everything, you know, kind of surrounding that, I guess. Sorry, Andy. I think we had a couple levers we were pulling prior to Chicken Sandwich launch, you know, in those six days. We did obviously see a really strong surge in demand in those six days, which resulted in us selling out four weeks of inventory. What we saw was a pretty consistent trend as we progressed where the contribution of check trailed off sequentially and the transaction contribution built. Again, we were running at a really strong number when you include six days of Chicken Sandwich in September. You know, obviously we point to the fact that it's fueled by transaction growth. You know, as we continue to navigate this environment, as we continue to execute against these growth lever strategies, we feel pretty confident and excited about our ability to deliver that 19th consecutive year of same-store sales growth. As we thought about the relaunch of Chicken Sandwich, I mentioned earlier how we fired just about every bullet we had with the initial launch and we saw the opportunity and we saw how many new guests we were bringing in. With the relaunch, we took a much more measured approach. I referenced in our prepared remarks where we turned the Chicken Sandwich on, and for the first week we didn't even support it with advertising. Then from there we have advanced the ad support, ensuring that this opportunity we have of bringing these new guests into Wingstop, that we win them over and convert them to loyal Wingstop users and see that as a really nice long-term sales driving opportunity for us. I think that's consistent with how we've approached things historically, where we take a very measured approach. We're very intentional and we like the position that it puts us in to continue to deliver strong growth regardless of a challenging macro environment. Gotcha. Just looking out to 2023, I mean, anchoring around that kind of, you know, mid-single digit number that you talked about, you know, in the algorithm. I mean, should we be thinking of that as primarily traffic driven growth, you know, as we try to look at our model for next year? Yeah. I know we'll come out obviously early next year with more definitive comments around 2023. I think as we sit here today, you know, we've referenced this meaningful deflation that we've benefited from as a brand this year, which has really put us in a unique spot where we haven't had to take price this year. You know, a lot of other brands have, and they've had to take a lot of price to navigate this record inflation. You're seeing that drive a lot of their comp and you're seeing it start to impact transaction growth. We're obviously not in that position, but all things equal, I would expect in 2023 for us to revert back to maybe our more historical trend around pricing, and that is, a very disciplined approach of 1-2 points of price a year. But obviously we'll need to watch and see how things play out as we progress through the balance of 2022 and enter 2023. Thanks. Very insightful. You bet. The next question will come from Nick Setyan with Wedbush Securities. Please go ahead. Thank you. You know, the pleasant surprise in the comp in Q3 seems to be that it was more broad-based than just the Chicken Sandwich. Is there any way to maybe just parse out what the comp without the Chicken Sandwich may have been? That would be very helpful. Yeah Nick I completely appreciate the question. It's a little bit of a difficult one to solve. You know, we're really bullish and excited about the quarter, the growth levers we pulled. A great example to give you context on how to try to pull those apart is with our elevated ad spend. We were able to promote Chicken Sandwich on a new delivery platform. It's really hard to tease apart what drove the comp most. What we can say is we saw a meaningful benefit in all channels. We saw transaction growth across the board and something that we're really excited about and we think is pretty unique in this environment and gives us confidence to come out and reiterate our low single-digit target for this year and deliver our 19th consecutive year of same-store sales growth. Speaking of the Uber partnership, I think we went to like 62% in terms of digital sales in Q3. I think the trough last quarter was 60.5%. How should we think about the digital mix from here? You know, could we exit 2023 in the mid-60% range? What are some strategies that you're working on to drive that higher? Yeah Nick I think our digital sales mix, seeing it continue to build and sustain from these elevated levels is another element or aspect that really differentiates Wingstop, where we can see and demonstrate that these new guests, these new digital guests that we brought in are sticky, and we're retaining those guests. Whereas you're seeing a bit of a normalization to consumer dining behaviors, maybe back to more gravitating back towards pre-pandemic behaviors. A lot of brands are maybe not seeing that stickiness with their digital business, and we are, which I think is a really strong statement. We continue to see opportunity to drive and scale our digital business. We mentioned the addition of Uber Eats as a national delivery provider in the third quarter. That's something that we really haven't done a lot of ad support behind. We see a lot of opportunity not only there with DoorDash as well. When you benchmark our delivery business against other, more established, mature delivery businesses, there's a ton of runway for us. That is just one example of the opportunity we have to continue to scale and advance our digital business. Thank you. The next question will come from Dennis Geiger with UBS. Please go ahead. Great. Thank you. I just wanted to ask about wing costs, bone-in wing costs. You know, given the deflation there, how we should think about sort of continued use of strategic discounting to drive, you know, further traffic going forward for the core bone-in. I guess we could frame it up relative to boneless as well. Just anything on discounting promotional levers, which I think you've used pretty effectively in recent quarters, what that might look like in the next year, if you have any high-level comments on that. Yeah no absolutely. I think we wanna be really careful with the terminology we use here, because as a brand, and I mentioned this earlier, we know Wingstop is used as an indulgent occasion. If we lean into value, we don't really discount as a brand. When we lean into value, we're retaining those indulgent occasions, but then presenting the consumer with value, which can be a price point, it can be the cook to order element, it can be the craft and the attention to detail that goes into our ranch that's made from scratch in the restaurant every day. All of those elements contribute to the consumer's perception of value. We lean into that and can promote things like the Boneless Meal Deal, which we did earlier this year, that really reversed the trend that we saw in the second quarter. That Boneless Meal Deal was at a decent food cost for our P&L. It wasn't really at a discount. We, as a brand, don't discount, but we are intentional about how we think about and present the consumer with value, particularly in an environment where the consumer's being more discerning with their dining out decisions. We know that we need to be thoughtful. I think Chicken Sandwich is a great example of that. Our à la carte chicken sandwich that can come in 12 different flavors, presenting the consumer with a lot of variety, but yet presenting that at a $5.49 price point or even the combo with fries and a drink at $7.99 is compelling value. It also not only addresses value and that value message that's important to retain our core, it's also bringing in a lot of new guests. These are long-term sustaining sales drivers that we're activating against that give us a lot of confidence in what's in front of us and in navigating any sort of macro challenges that play out. Appreciate that color very much. Just one other quick one. Just on China, any update to share there on the work you've been doing on the development opportunity there, if there's been any changes or any kind of new commentary to share on that opportunity? Thank you. Yeah. No, sure. I mean, China continues to be an opportunity for us that we're really excited about. We continue to have active dialogue with potential prospects to partner with in that region. That said, I wouldn't say anything's materially changed on our position there in the timing around it. Obviously, just having the Party Congress meeting conclude last week or earlier this week, we have to evaluate the implications and how that plays out. We'll work through that, but I wouldn't say there's any meaningful update to provide at this time other than it remains an exciting opportunity for us. That's just one of the many opportunities we have around the globe, and we announced earlier where we sold the rights to South Korea. We expect our first restaurant to open there in early 2023. Really excited about that opportunity. We continue to expand around that Southeast Asia region, in addition to the success we're seeing, in Europe, particularly in the U.K., where we're 25 restaurants strong on pace for a record development year. Even with some of the challenging macro environment that the U.K. consumer is having to navigate, our business there continues to demonstrate strong sales. In fact, over the past couple of months, they've actually seen margin strengthen. I think another really strong case behind our international growth story. Not only is our brand transportable around the globe, but the resiliency of our brand is showcasing itself in a challenging environment in the U.K., just to provide that example. Great. Thank you, Michael. The next question will come from Michael Tamas with Oppenheimer & Co. Please go ahead. Hi, thanks. You know, you sort of touched on this a couple of questions ago, but your comments on delivery today have been pretty bullish, and you don't seem to be seeing a slowdown that others are experiencing or have talked about that they might see in the near future. You know, is that because you added the second delivery provider that added incremental customers? Or can you help us better understand why you think this differential exists, recognizing that, you know, some of those food delivery, you know, cuisines are also a pretty good value for the consumer? Thanks. Yeah. No, absolutely. I think there's a few things here and they kinda tie back to earlier comments. Clearly, one is expanding the delivery base and gaining access to a completely different delivery consumer has helped. You're also seeing just, I mentioned the halo effect of some of the work we've done around national advertising, leaning into that additional 1% where we commented last quarter, we're expecting an over 35% increase in the amount of ad dollars we can deploy in the second half of the year. As the business is trending, I think it's gonna be even higher than that, which we're excited about. That's allowing us to bring in a lot of new guests. We're starting to lean in and activate on these delivery platforms. I think we are seeing new guest acquisition in these channels. That's helping us continue to grow and see growth in the delivery channel. Perfect. Thanks. You know, your average customer transacts with you about 3x a quarter, and you mentioned that traditional QSR typically sees, you know, several times per week, in terms of frequency. So can you tell about any research you've done or what you've seen so far with the launch of the Chicken Sandwich and how maybe that platform could elevate your customer frequency going forward? No, I think it's a great point. You know, a few weeks in, it's probably hard to get much of a read, particularly when you think about the frequency we just referenced with 3x a quarter being the average. We do see it as an opportunity to capture more occasions. Inherently, in capturing more occasions, you're gonna impact frequency. We talked about this being a long-term sales driver for the brand and something that, you know, works in concert with a lot of the other growth drivers that we're pulling. It's all these growth drivers in aggregate that give us confidence in our ability to scale our AUV from what are $1.6 million today to what we believe we have a clear line of sight to, and that is to exceed $2 million. Driving frequency through capturing more occasions is 100% part of that strategy that we're executing against. Awesome. Thanks so much. You bet. The next question will come from Chris Carril with RBC Capital Markets. Please go ahead. Hi. Thanks, and good morning. I wanted to ask about longer term strategy. As you're looking at the changes across the menu, potential day part expansion, opportunities to drive transactions and grow awareness, could that lead you to revisit your real estate and restaurant format strategy? Is there potential to focus more on real estate in higher traffic locations or different formats like drive-through, just given how the business is evolving from here? I think it's an interesting question, but one that we really haven't seen the need to push very hard on, in that we're $1.6 million AUV today in a box that's anywhere from 1,300 sq ft - 1,700 sq ft, in line with the majority of our business off premise. As you start to introduce complexities around an asset out on the pad, drive-throughs, it starts to change the operating model. You start to add labor, you start to increase occupancy costs. As we talked about in some of our comments earlier, really making sure we protect and enhance these unit economics is something that's paramount for this brand and what we believe will continue to fuel industry-leading development. We're gonna stay true to that. We see an ability again to drive AUV to levels above $2 million with the existing box we have today. Great. Thanks for that. Just on the rebate of the advertising funds, was that driven by just better than expected system sales, and maybe more restrained advertising of the Chicken Sandwich relaunch? Or going forward, do you expect to kind of fully leverage that larger pool of advertising funds? Any clarification on that would be great. Hi, Chris. Yeah, this is Alex. Yeah, that was a function of last year. The better than expected sales growth, we built up a surplus and just were being opportunistic to return a component of that ad fund surplus last year in the midst of record inflation. To your point, that gives us strong, you know, even greater fuel going into next year with the growth in our system sales that we have to continue to work against our awareness gap to those top QSR peers out there. Great. Thanks very much. The next question will come from Joshua Long with Stephens Inc. Please go ahead. Great. Thank you for taking the question. I was just curious, as we think about the opportunity for that boneless mix to go north of 50% over time, pretty exciting. When we think about, you know, what kind of investments would be needed in that poultry complex to support that, assuming that you could get to that level across the overall system? Yeah. I don't think it involves a fundamental change in our supply chain strategy. Really what it's doing is allowing us to lean in a little bit more, a little bit further on that whole bird strategy. As you use more of the breast meat, which is what is in our boneless products, it really allows you to have a lot more leverage and control more of the costs that go into the whole bird. This is actually something that's accretive to our supply chain strategy and not really anything that would require incremental or additional investment or different ways to think about how we execute against our supply chain strategy. It's actually something that just bolsters it and gives us more confidence in the plan we're executing against. Very helpful. Appreciate that, color. When we think about some of the, you know, ghost kitchen units that you have, given that you've had some more time to work within that, could you provide an update on the strategy, any learnings, things that maybe might lead you to either accelerate, revisit or, just kind of update how those fit into the overall unit growth strategy now that you expand your digital, awareness and digital channel? Yeah. No, I would say there hasn't been a significant change in our perspective on ghost kitchens. We still have quite a few, I would say call it roughly 30 around the globe. The majority of those are actually outside of the U.S., where we've seen great success in deploying that efficient asset type and help drive the brand outside of the U.S. In the U.S., results, as we've said before, have been mixed. There's some spots and some partners where it works really well, others where it hasn't worked that well. When we think about, you know, the long-term potential for the brand, that over 7,000+ units, we do see a role for ghost kitchens, pretty consistent with what we've said in the past. We don't see that being a huge component of our growth, but yet something we'll continue to monitor and evaluate as we progress from here, and continue to drive and deliver that, on our long-term growth algorithm for unit development. Great. Thank you. The next question will come from Jim Sanderson with Northcoast Research. Please go ahead. Hey, thanks for the question and congratulations on a great quarter. Just wanted to drill down a little bit more on the digital component of your business. I think you mentioned an acceleration in digital sales mix. Was that delivery component, did that ramp up as well, especially given the addition of Uber Eats? Hey Jim I think that the point we were calling out around digital is that we did see it grow quarter-over-quarter. If you think about that in light of two things. One, that remixing we saw of our business where we're seeing a little bit of dine-in come back, where we're seeing growth in all channels, carry out, call in, still growing there as well. It was encouraging to see that channel grow. In addition to that, as you're starting to see, consumers drift back towards maybe pre-pandemic dining behaviors, you're seeing a lot of other you know digital channels retract. To see ours grow is something that we're really excited about, and I think, as I mentioned earlier, really speaks to the stickiness of the digital growth that we've seen in our business over the last couple of years. It's something that we're excited to continue to build on and advance from here. I think last year you were mixing about 27% delivery. Is that still a good run rate or is that a little too aggressive? Hi Jim yeah as we indicated in our investor day this past year, we see a path the benchmark suggests upwards of 50% mix. That's what we're working towards, you know, and Michael touched on the opportunity to partner with both delivery service providers. Another vehicle for us to build awareness in their marketplaces, attract the new guests. You know, we see a large runway ahead of us for the delivery business. Okay. Just one last question on the digital business. You mentioned about a $5 higher average check. Is that related primarily to higher menu prices for those delivery orders or a little bit of pricing and higher items? Just a little bit more texture on what's driving. No, that check lift, Jim, is something we have enjoyed in our digital business even before we had delivery as a channel. Pricing on those channels isn't something that impacts that check lift. Understood. All right, guys. Thank you very much. This concludes our question and answer session, as well as our conference call for today. Thank you for attending today's presentation. You may now disconnect.