Wingstop, Inc. Stock

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Wingstop Inc.'s Fiscal Third Quarter 2026 Earnings Conference Call. [Operator Instructions]

Please note that this conference call is being recorded today, Wednesday, October 28, 2026. On the call today are Michael Skipworth, President and Chief Executive Officer; Alex Kaleida, Senior Vice President and Chief Financial Officer; and Sarah Niehaus, Senior Director of Investor Relations.

I would now like to turn the conference over to Sarah. Please go ahead.

Thank you, and welcome to the Fiscal Third Quarter 2026 Earnings Conference Call for Wingstop. Our 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 SED filings describe various risks that could affect our future operating results and financial condition.

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 each of you please 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.

Thank you, Sarah. Good morning, everyone, and thank you for joining us. I would like to start by taking a moment to recognize our brand partners, restaurant team members and global support center team members for their continued commitment to Wingstop.

We've asked a lot from our team this year as we've advanced several important strategic initiatives across our business, and I genuinely appreciate their focus, hard work and dedication. This year, we've made significant investments in our talent, our operations, launched our first loyalty program and continued building capabilities that we believe will support our next phase of growth.

Our top priority is improving sales performance and rebuilding transaction growth. We are moving with urgency on the actions we can control in this current operating environment. During the third quarter, domestic same-store sales declined 5.4%, below our expectations. While we're beginning to see positive signals from the changes we've made, the improvement in sales performance is taking longer than we initially anticipated and the macro trends we are seeing among customers have intensified over the last few months. With that in mind, we've updated our full year domestic same-store sales outlook to a decline of approximately 6.5% to 7%. This does not change our focus on returning to sustained same-store sales growth, and we are confident the actions we are taking will do just that.

We also are not waiting for the consumer environment to improve. We are taking deliberate action across our business to strengthen performance, drive greater guest frequency and acquire new guests.

Over the past several quarters, as the operating environment has continued to evolve, we've continued to deepen our understanding of our guest behaviors, key choice drivers for restaurant occasions and what Wingstop can do better to more consistently win those occasions.

Last quarter, we outlined actions to sharpen our creative messaging and media mix more clearly connecting the quality and bold flavor our guests expect with the compelling value Wingstop can deliver. As you will hear today, we are encouraged by the early response to those actions, while recognizing there is more work to do. In addition to marketing, we are also intensified our focus on operations, bringing in new talent and capabilities to strengthen our execution across the business.

One of the key things we've learned is that our marketing campaigns over indexed on building awareness. The opportunity in front of us is around driving consideration. We recognize that our marketing wasn't consistently connecting our differentiated food, flavor and value into a compelling reason to choose Wingstop, particularly around occasions where we have the greatest opportunity to win.

As we discussed in our second quarter earnings call, we needed to do a better job of clearly communicating the value we offer beyond price alone while giving guests more reasons to return. We have put those insights into action by sharpening our marketing approach to drive greater consideration and acquisition, leveraging Club Wingstop and personalization to test and learn how we can deepen guest relationships and drive greater frequency and strengthen restaurant execution through Wingstop Smart Kitchen.

Ultimately, our objective is to give consumers more compelling reasons to choose Wingstop more often. We are doing this by concentrating our media investment on occasions where guest interest and Wingstop's relevance are the highest. We are layering in menu, value and promotional levers that are being amplified by more compelling, creative and paid media.

Most of the changes in our marketing came to life in the second week of September with the kickoff of the NFL regular season, with limited impact on our third quarter results. The initial readout suggests we are on the right track and reinforce our conviction in this strategy.

I'm excited to lay out more detail on our messaging approach, which we believe is beginning to gain traction with our guests. Our marketing strategy is to build reach by front-loading our video investment with more premium placements in leveraging 32nd spots. And from there, we plan to sustain efficient reach and frequency through a weekly presence of 15-second spots and an always-on social strategy to keep Wingstop top of mind.

We are concentrating investments around high relevance occasions, pairing it with creative that more clearly communicates Wingstop's quality, bold flavor and compelling value and sustained engagement through paid and owned channels between those moments. We are leaning into our brand strengths, bone-in wings, flavor and quality while ensuring we are clearly communicating value.

The response to the Watch Party Bundle and our Thursday Night Football activation suggests we are on the right path. But the objective is not a short-term promotion. This is just the first step to establish with guests repeatable group occasions that build transactions frequency and long-term brand relevance.

We are supporting this strategy with incremental investment from our G&A dollars. As we continue to execute our plan, we will continuously measure results and sharpen our marketing investment based on the data. flavor innovation has always been core to Wingstop's identity and remains one of our greatest points of differentiation alongside our ranch, season fries and bone-in wings. And we know continued innovation and product news is key to driving consideration.

We're taking a more integrated approach to flavor innovation, including dedicated creative in support for flavor LTOs like our recent Lemon Pepper Trio. Part of this is doubling down on what we know our customers already love, our Lemon Pepper, and giving them reasons to reengage through LTOs, which are both new and familiar at the same time.

This brings me to Club Wingstop Wingstop's first-ever loyalty program. Club Wingstop is another way we can deliver additional value to our guests and keep them coming back for more. Our initial priority following the national launch in May was to build awareness and drive enrollment into the club, and we've made great progress.

Enrollment continues to pace ahead of our plan, giving us a solid foundation to where we are now focused on strategies and tactics that most effectively engage our members and drive frequency. We're seeing evidence of stronger retention among Club Wingstop members. New guests who enroll in the program are returning within 30 days at 13 points higher nonmembers, a trend that has remained consistent across enrollment cohorts.

There were also positive signs of behavioral changes with purchase frequency increasing almost 20% among members who have completed a full 90 days in the program. We are building on these early learnings with initiatives designed to give members more reasons to return.

Over the past several weeks, we've introduced exclusive offerings like Wing Pass which sold out in less than 1 minute. The Wingstop Watch Party bundle punch card merchandise drops, early access to new flavors and unique experiences that leverage our partnerships across sports and entertainment.

As we progress beyond the initial launch of Club Wingstop, our focus is now on testing and learning exactly which tactics increase purchase frequency and maximize the lifetime value of our members. And when we consider the typical maturity curve for loyalty programs, we're happy with the direction of this initiative, including the early response from our most loyal guests.

In September, we activated our AI-driven personalization engine, initially focusing on testing more relevant offers and messages with targeted guest segments. In those initial tests, guests receiving personalized odors generated higher total sales compared to those who did not receive offers. This demonstrates value of more relevant messages and the offers at the individual guest level and give us a foundation to scale this capability.

As our marketing strategy drives guests to our restaurants, it is paramount that every guest who chooses Wingstop has a great experience. The Wingstop Smart Kitchen is an enabler for our back-of-house operations, and now it's up to our restaurant team members to deliver that guest experience consistently.

Along with our brand partners and restaurant team members, we are laser-focused on delivering great tasting, cook-to-order wings, hot season fries and an accurate order every time. To deliver on that consistently, we've retrained the entire system in the last 3 months and established new operating standards.

We have just launched a new, more comprehensive restaurant scorecard and an operating toolkit that brings together guest feedback and restaurant performance data with a focus on food quality, order accuracy and speed of service. We also launched an AI system for field team to create quicker insights, greater clarity and focus on performance outliers for the restaurants they support.

This strengthens insights for our field teams providing a more consistent way to identify opportunities, coach restaurant teams and measure improvement. We recognize that consumers are making more deliberate decisions about where they spend their money, and when they choose to spend that money on Wingstop, we have to deliver.

They expect the quality, flavor and experience that makes Wingstop special, and it's our responsibility to deliver on that expectation every time. That's how we earn their trust and keep them coming back. And we are making good progress.

Throughout 2026, the rate of guest complaints related to food quality and preparation declined approximately 30% compared to the same period last year. However, we know there is more work to do, and this is something that is entirely within our control. Technology has always been at the forefront of our business, and we've invested significant time and resources in our proprietary platforms and data capabilities to build what we believe is a competitive advantage for Wingstop. Today, those investments are coming together through the Wingstop Smart Kitchen, Club Wingstop and personalization, giving us greater visibility into our business and more effective ways to serve and engage with our guests.

With a dedicated Chief AI officer helping lead the next phase of our AI and data strategy, we're excited about the foundation we've built and the opportunity to continue to strengthen our competitive advantage as we scale. Technology will continue to be a long-term compounder for our business as we improve our execution. Our growth engine remains strong, supported by compelling restaurant level economics and continued brand partner confidence in the Wingstop opportunity.

During the third quarter, we opened 76 net new restaurants globally, bringing our system to 3,331 restaurants, an increase of nearly 14% year-over-year. Importantly, 98% of the restaurant openings through the first 9 months of this year came from existing brand partners, reinforcing their continued confidence in the Wingstop model and commitment to reinvesting in the brand. As we scale domestically, our enhanced marketing -- market planning capabilities are allowing us to more effectively evaluate trade areas restaurant spacing and delivery overlap, we're seeing the benefits of that approach.

During the third quarter, we made restaurant level investments to support our strategies and protect our core consumer occasion. The underlying economics of our business remain compelling. With domestic average unit volumes of approximately $1.8 million, our current restaurant level model supports unlevered cash-on-cash returns of approximately 60%. These attractive returns continue to support brand partner investment in the brand, and our development pipeline remains robust with over 2,300 committed restaurants globally.

Outside of the U.S., we opened 21 restaurants during the quarter, bringing our international footprint to 544 restaurants, an increase of more than 27% year-over-year. We've opened 8 markets in the last 1.5 years.

I'm excited by the response and engagement we're seeing from guests, and how our brand partners are operating and importantly, the opportunity in front of us to scale these markets. We've launched flagship restaurants in Thailand, Spain and Italy. And in August, we celebrated our 100th restaurant opening in the U.K.

India, which is a 1,000 restaurant opportunity is our next market and is anticipated to open by early 2027. Our development opportunity is supported by attractive brand partner returns disciplined market planning and significant white space, both domestically and internationally. Those fundamentals give us the confidence in our ability to grow the global footprint and scale towards our long-term goal of 10,000-plus restaurants.

As I wrap up, I want to reiterate that returning to sustained sales growth remains a top priority for our team. We're taking deliberate actions across the business that we believe will deliver sustained sales growth. We have an incredibly differentiated brand, compelling unit economics, a strong development pipeline and significant white space ahead of us, both domestically and internationally.

Our optimism is grounded in the early evidence we are seeing and the work still in front of us. We will continue to execute with the discipline, speed and determination required to deliver sustaining same-store sales growth.

We are building something incredibly special at Wingstop. And I couldn't be more confident in our ability to capture the tremendous growth opportunity ahead of us as we scale Wingstop into a top 10 global restaurant brand.

Thank you. And with that, I'll turn the call over to Alex.

Thank you, Michael, and good morning, everyone. We are making good progress in the strategies we're executing to return same-store sales to growth, but we recognize we're not where we need to be. Our focus remains on sharpening our marketing execution, leveraging our new loyalty program to drive acquisition and frequency and delivering a great guest experience while continuing to invest in the capabilities that will support Wingstop's long-term value creation. This includes measuring results, optimizing returns and holding our restaurants accountable for executing our standards.

During the third quarter, domestic same-store sales declined 5.4%, and we opened 76 net new restaurants, contributing to 6% system-wide sales growth totaling approximately $1.4 billion. Royalty revenue franchise fees and other increased 6.3% to $86.3 million. The quarterly pacing of openings reflects the timing of restaurants moving through the construction pipeline. As we mentioned at the start of the year, we rolled out a new restaurant design, which has gradually worked its way into the construction plans and will lead to a more outsized open rate in quarter 4.

Company-owned restaurant sales increased 6.9% to $34.8 million during the third quarter driven by additional corporate restaurants opened or acquired since the prior year and partially offset by a 2.7% decline in company-owned same-store sales.

During the third quarter, we completed the acquisition of 13 restaurants in the Tampa market for approximately $32 million, as previously disclosed on our second quarter earnings call. This acquisition provides an opportunity to drive shareholder value and expand our company-owned restaurant footprint in a new market, one that has the potential to deliver approximately 25 additional restaurants over time.

Turning to Restaurant-Level Margins. Company-owned cost of sales increased 340 basis points to 78.2% of company-owned restaurant sales. The increase was primarily driven by sales deleverage on labor and other restaurant operating expenses, partially offset by [lower] bone and wing costs.

Coinciding with our 13 restaurant acquisition, we invested in additional labor, training and deferred maintenance expenses as we integrated the restaurants into our portfolio. We anticipate some of these incremental expenses to flow into the fourth quarter. SG&A expense decreased $200,000 to $30.5 million versus the prior year, primarily driven by a decrease of $2 million in stock-based compensation expense, which was associated with the forfeiture and offset by $1.5 million in headcount-related investments.

Third quarter net income was $29.1 million or $1.07 per diluted share compared to $28.5 million or $1.02 per diluted share in the prior year. There is an approximately $0.07 per diluted share impact associated with additional depreciation and amortization expense from new technology investments in the quarter, which included Club Wingstop and AI capabilities.

Adjusted EBITDA, a non-GAAP measure, increased 0.5% to $64 million. Our capital allocation priorities remain unchanged. Our first priority is investing behind our strategies, which we believe generate the highest long-term returns. An example of that is our recent acquisition of 13 franchise restaurants and the opportunity to expand our corporate restaurant footprint.

We also continued to return capital to shareholders through a balanced approach that includes both our quarterly dividend and share repurchase program. On October 27, our Board of Directors authorized and declared a quarterly dividend of $0.33 per share of common stock, totaling $9 million and to be paid on December 4, 2026, to stockholders of record as of November 13, 2026.

Additionally, during the quarter, we repurchased approximately 191,000 shares of common stock for $25 million, bringing our 2026 year-to-date repurchases to $102.9 million. As of quarter end, approximately $288.4 million remained available under our share repurchase authorization.

Turning to our outlook for 2026. We updated our domestic same-store sales guidance to a decline of between 6.5% and 7% for the full year, given trends in the current consumer environment and the pace with which our actions are flowing into the top line. We also updated our global unit growth outlook to a range of 440 to 450 net new restaurants for 2026 or 14.4% to 14.7% unit growth versus prior year.

The updated outlook reflects the timing change in restaurant openings, with the largest factor attributed to ground-up shopping center locations that are experiencing more extensive time lines to complete. We remain incredibly proud of the efforts from our support center team, regional teams and brand partners to open new restaurants at this scale.

Our development pipeline with more than 2,300 restaurant commitments remains healthy and continues to provide strong visibility into future restaurant growth. Additionally, we are updating our SG&A guidance to a range of $138 million to $140 million. This includes additional marketing investment to support the strategy Michael discussed that was not part of our prior outlook, along with lower full year stock-based compensation expense of approximately $21 million.

As you saw in our Q3 results, we've been disciplined in SG&A to manage profitability. However, in light of the marketing investment we anticipate making, the guidance applies a more elevated spend in SG&A during Q4, which would translate to adjusted EBITDA below our prior expectations.

As we look ahead, our focus is on executing the strategies we put in place, building on the progress we made throughout the year and translating those investments into stronger financial performance over time. Our highly franchised model, attractive unit-level economics and significant global restaurant opportunity provides a strong foundation for future growth.

And as we continue to strengthen the guest experience and give consumers more reasons to choose Wingstop, we believe we're positioning the brand to deliver sustainable growth and create long-term value for shareholders.

I'd like to close by thanking our restaurant team members, global support center team members, supplier partners and brand partners for their efforts and dedication to Wingstop.

With that, operator, please open the line for questions.

[Operator Instructions] Our first question today comes from Brian Harbour with Morgan Stanley.

Yes. I guess when you talk about response to some of the recent advertising changes, I mean is there any quantification you can give to that? You don't usually like to talk about quarter-to-date, but have you sort of seen a real-time response to some of that? How should we sort of interpret those comments about responses to the change in marketing?

Hi, Brian, good morning. Thank you for the question. As we said in our prepared remarks, our top priority right now is to improve our sales performance and return to same-store sales growth. And as we mentioned, we're taking some deliberate actions and executing on strategies we believe will help us return to growth, but they're taking time.

And so we did reference some proof points, if you will, or some kind of signals that we're seeing in the business that we're encouraged by. I think it can relate to what we're seeing around engagement with some of the promotions we're running like Watch Party bundle or even our Thursday Night activation for a Thursday Night Football with 30 for $30, and those types of signals that we're seeing are translating to improvements in first-party average weekly sales.

We're seeing improvement in reactivation of guests, a decline in lapsed guests, and we're seeing an uptick in organic search traffic. And so there's some positive signals that we're seeing that tell us we're on the right track. The strategy we're working is showing up the way we want it to. And so we're continuing to remain focused on executing against that.

Okay. What are your thoughts at this point on unit growth for 2027? And I guess some of the slippage this year, would you expect those to just kind of move into the first quarter of next year?

Yes, Brian. We're really encouraged by the pace of development and the position we're in to deliver such a strong number for 2026. And the sites we called out that are associated with ground-up leases, which were the biggest driver to the revision and what we expect this year.

Clearly, those will translate to openings in 2027. But we're not obviously here today to necessarily guide to '27. But what I would refer back to are some of the prior remarks we've made about kind of how we see development overall playing out for our brand over the long term. Obviously, we sit here today with a pipeline of sold commitments of over 2,300.

So a really robust and strong pipeline and really strong demand from our brand partners to grow. But as we've talked about before, we expect the pace of development in the U.S. to kind of -- we've been comfortable at the level we've seen over the last couple of years and might expect that to even moderate a little bit. But at the same time, we're seeing really strong momentum build in our international business as we continue to launch new markets, and in those markets that we've launched start to scale up their pace of development.

So you'll see our international business continue to contribute to the overall unit growth rate that we're able to deliver, which lines up really well with our long-term target, our long-term algorithm of 10% plus unit growth.

Our next question today comes from Chris O'Cull at Baird.

Alex, the comp guidance seems imply fourth quarter comps down between 4.5%, 6.5%. Is that the current trend -- is the current trend within that range and you believe you've built in maybe some conservatism? And then I have a follow-up.

Hey, Chris, yes, thanks. One of the things we did mention was just the backdrop we're operating in with this volatile consumer environment. And -- and so we did contemplate how we thought about current trends there as well as the confidence we have and the strategies we're executing that lead us down that path to return to growth. So I think we certainly want to deliver and have a high degree of confidence in our guidance for the quarter. We know how trends are progressing through the quarter and some of the proof points Michael mentioned that give us the confidence to hit that guidance.

Okay. And then I know you're not guiding to '27 today, but how should we think about next year's comp set up? I mean comparisons get easier, but the calendar turning doesn't necessarily change the underlying trend especially, as you mentioned, your core consumer is still under some pressure. So how should we balance those factors as we're thinking about building our models for next year?

Yes, Chris, this is Michael. I would just tie back to the comments we made around. We are taking deliberate actions to help position us to return to growth. And we acknowledge that those are going to take some time. But we're sharpening our creative and messaging. We're leaning into our brand strengths, bone-in wings, flavor, quality and the value that Wingstop can deliver. And we're supporting that by a stronger media mix. And we're focusing our investments around occasions where Wingstop is highly relevant.

And we're layering in menu, value and promotional levers amplified by creative and paid media. And so we think all of that is really supporting the signals that we're seeing and putting us on a path, we believe, to return to same-store sales growth. And it's not a promotion. It's not a quick fix, but this is something we think will set us up to deliver sustained same-store sales growth over time.

Our next question comes from Andy Barish at Jefferies.

Yes, quick one, Alex, just on the adjusted EBITDA comments at the end of your prepared remarks. Should we kind of think about that sort of like the third quarter, flattish on a year-over-year basis?

Yes. I think you can see how -- what it implies based on that step-up in G&A investment, which includes the digital marketing that we're going to infuse to the plan for the fourth quarter. So I think you'd be pretty close modeling it that way.

Okay. And then just on the delivery channel, I know you've been doing work all year in a variety of ways with [Riviti]. Could you just kind of give us a sense of how that channel is behaving and obviously moving into a more important seasonal period with football and weather and stuff like that?

Yes, Andy, this is Michael. I think the delivery channel is another great example of kind of where we talked about some of the things we've learned and we've analyzed earlier in the year and then the actions that we're taking.

One of the things that was pretty clear in the first half of the year was just a level of intensity around offers on these platforms, but we've taken a very intentional and approach we think is effective around while we're increasing the frequency of our offers, we're doing it in a very targeted way that's driving consideration. And really, what we're seeing is that strategy has proven to be effective for us.

Our next question today comes from Sara Senatore with Bank of America.

I guess maybe two quick questions. One is on the unit growth, if you could just talk a bit about the franchisee. It sounds like some of this is just timing, but returns while still very, very high, have come down a bit. Are you seeing any kind of change in sort of franchisee approach to development, anything that suggests that they're pushing things out or how they're -- how you're identifying sites maybe the sites that they're bringing to you, what you're approving? Just any thoughts on the change and if there is one in the development strategy?

And then you mentioned marketing, focusing on guest interest and Wingstop relevance where their highest I know in the past, you've talked about maybe bringing in new customers like with sandwiches. Is that something maybe you're evolving away from really going back to the core? Or is this something where you can kind of do both? Just it seems like the language is a bit different from what we've heard in the past?

Thank you for the question. Let me hit on the development one first. As I mentioned earlier, obviously, we're pretty proud to be on a pace of opening, call it, roughly 450 restaurants this year. I think there's a few things at play that have impacted kind of how the year has played out, the cadence of openings. We talked earlier this year about a new restaurant design that we launched that we're really excited about, and I think our brand partners share that excitement. And so that's influenced a little bit of the cadence throughout the year as anything that was in the pipeline or new sites, we're making sure we're we're incorporating that new restaurant design into those.

The other thing I would point to is our market level playbooks that you've heard us reference before that our trade area specific, in addition to that, identifying kind of the schedule or timing of when restaurants are opened in each market underneath that playbook. And that's proven to be working out really well.

We're obviously, as we said in our prepared remarks, we're measuring any levels around kind of demand in that area as well as any any associated impact and those are running at levels well below what we've seen historically. And so the playbooks are working out really well.

We just came off of our annual brand partner convention just a couple of weeks ago. And on your question about brand partner sentiment, I guess an example or maybe an example that I would share with you is the fact the sentiment was pretty positive from Brand Partners.

And obviously, as you mentioned, the returns are still really strong. And the demand for growth is still really strong. And I even had a handful of brand partners hand my presentations, if you will, that were pitches around asking for more development and more growth. And so I think you see that show up in the pipeline of sold commitments that we were able to reference in our prepared remarks of over 2,300 as we sit here today.

As it relates to our marketing strategy, obviously, we've talked about our core guests and how a priority of ours is to focus on and protect our core guests, and it's also, it's about making sure that we're leaning into our brand strengths and showing up in a big way because what we acknowledged earlier in the year was our marketing was, if you will, a little overly focused on brand awareness and not focused enough or the opportunity that we really saw was around driving consideration.

And so that ties back to not just those occasions that we're leaning into where Wingstop is highly relevant but it's also making sure that we're connecting our food, flavor and value into a compelling reason for consumers or for guests to choose Wingstop.

We're not -- we're obviously taking a balanced approach, and we still see a huge opportunity around new guest acquisition, and that's part of how we're deploying and investing in those media dollars that I referenced earlier in our prepared remarks. But I think the combination of those two things, and it's those early signals that we're seeing really tell us that we're on the right track here, and we're just going to continue to focus on measure the results and pivot where we need to continue to execute as we march towards returning to sales growth.

Our next question today comes from Jim Salera at Stephens Inc.

I wanted to talk a little bit about the franchisee margins. And you guys have mentioned you've started to step up a little bit in the marketing on the value side. On one hand, assuming the traffic declines or headwind, but then at the same time, we've seen chicken prices come down significantly. So could you just give us an update on kind of where the franchisee margins sit relative to maybe where we've been over the past couple of years and how that interplays with the step-up in the value messaging?

Hey, Jim, this is Alex. Good morning. I would say we're optimistic about where margins will lead us into in 2027. We're actually going through the mechanics now on projecting out and negotiating our pricing arrangements for our poultry purchases and are very encouraged by the market dynamics that we see in front of us.

And we kind of believe that we'll either be at or slightly below what our full year food cost could be for this year. I think margins are an opportunity for us. And one of the steps we took, and you can kind of see some of this in our corporate restaurant margins is some investments we made on value, whether it's a heightened focus on our classic wing our bundles with 30 for $30 or Watch Party bundle that we have out there. And then strengthening our value proposition through our Club Wingstop platform, which we see as -- we made great progress on driving enrollment, but you're going to see us start to shift into more frequency-centric drivers and strategies that we'll deploy through that platform to help again strengthen the value proposition for both our core guests and new guests alike.

Separately, I do want to address in our corporate restaurant margins during the quarter. We did have some acquisition-related impacts related to the kind of our largest acquisition to date of 13 franchised restaurants. So we made some investments in labor, training and maintenance expenses that we believe will carry in. But that's unique to our corporate footprint, not something that you see translate the same way in the franchise restaurants.

Great. I appreciate all the detail. One follow-up just on the gas composition as you have changed some of the marketing messaging. Have you noticed if you're able to identify new guests that are coming in based off the value-focused messaging that are either lapsed guests or perhaps new to the brand?

Yes, I think there's a couple of elements to answer that question. Obviously, I referenced we're seeing really encouraging results around reactivation of guests. And then I would say we're also seeing as Alex mentioned earlier, some really positive signals within club Wingstop. We're seeing new guests who sign up for Club Wingstop, returning and engaging with the brand in the next 30 days at a much higher rate. And so I would say we're seeing a balance of kind of both of those new guests as well as reactivation of guests that are really encouraging. And again, point to some of those signals that we referenced that that tell us we're on the right track here, and we're continuing to focus and execute against the right strategy.

Our next question today comes from Margaret Binshtok with Wolfe Research.

I just wanted to ask a little bit on the integrated approach to flavor that you guys talked about with some of the creative support for LTOs like Lemon Pepper Trio. Can you give us some more color on what that support looks like and how Lemon Pepper Trio performed with it? And then just how we should think about flavor cadence going forward and that integration with Club Wingstop?

Thank you for the question. Flavor is something that I think Wingstop has definitely earned the right to play in and to win in with consumers [end]. What we did with Lemon Pepper Trio, I think, is a great example of how we're evolving our approach and the actions that we're taking. And so what we've done differently with Lemon Pepper Trio is one thing as we leaned into and equity of the brand, our Lemon Pepper and made a play on that.

That was something that obviously, our consumers know and love but then we were able to introduce innovation around that in we supported that with dedicated creative around lemon pepper trio and included that in our media strategy. And so that's a bit of a different approach for us. And then obviously, integrating that through the right level of support through paid and social.

And so I do think you'll see us continue to lean into to that playbook, which again, those early results and signals are encouraging. And lemon pepper trio performed really well for us. And so we do have additional flavor innovation coming down the pipeline for the balance of this year and then obviously into 2027 as well.

And just this weekend, and this week, you have an opportunity to to try a really unique flavor that may sound a little odd at face value, sour patch kids, wing flavor, but it's actually incredibly delicious. And so I would encourage you all to go out and try it. But it's a way for us to innovate with flavor, create some new news for our guests. And as we mentioned in our remarks, newness, innovation, those are things that really drive a consideration and that's the opportunity we have in front of us.

And the next question today comes from Gregory Francfort at Guggenheim Securities.

My question is on the value marketing. And I just pulled up the app and you guys kind of have two buckets of what you're marketing, which is $8 to $10 kind of individual bundles and $22 to $28 group bundles. And I look at your competitors and a lot of what they're doing are either individual offerings where maybe the price points are lower or when they do groups, maybe there's more side options or more attached than kind of just fries. And I guess how much has kind of the $22 to $28 bundles where on of protein, but maybe just with fries resonated with consumers? And do you think you need to go after maybe more -- or shift the marketing towards more individual focus or add more side options? I'm just trying to figure out how this might evolve from here and what options you have.

Yes, Greg, it's a great question. And I think you're hitting on exactly some of those we called out from our last call that were some of the learnings that we gathered and the actions we said we were going to take, and those are the deliberate actions that we took. And so we saw messaging and clearly communicating value as an opportunity for us. And you're seeing that come to live -- come to life in the creative that we have out there today.

I referenced that watch party bundle and the strong performance we've seen with that. But we were very intentional while it is a group hack and serves 4 people -- up to 4 people we were intentional around the messaging on that value that we can deliver on a per person basis. And so the messaging includes that $7 per person.

But if you're logged into our app, you're probably seeing things that are very targeted. And that's a little bit of what we can do with the database that we have and how we've enriched that data. But then obviously, as we think about Club Wingstop and the opportunity we have there, where we can be very targeted with value messaging and deliver value, I think, in a very personalized way. And so in certain instances, it could be an individual occasion. And in others, it is a group pack, but I think it really depends on the guests and kind of their profile and how they typically engage with our brand. But we're going to measure all of these things and continue to sharpen our strategy as we continue to execute through the balance of the year.

And Greg, this is Alex. Just to add to. You're bringing up a great example of what we can accomplish with personalization because on my web page, have a different item featured and flavor feature because of what we know about our guests. And we can also enable that capability with our CRM campaigns, and it could be centered around flavor. It could be an individual occasion.

It could be targeting a dinner group occasion for that guest based on what we know and understand about this. And we've really deepened the knowledge of how to execute against this, and it's a component of an action we took alongside a Club Wingstop to really unlock this personalization engine we've been able to build.

Our next question -- our final question today, I apologize, comes from Danilo Gargiulo with Bernstein. Please go ahead.

Great. Michael, I wanted to ask you about the state of operations. fairly encouraging that you're saying that some complaints have gone down across the system. I was wondering the opportunities that you had ahead in the words -- where do you see the complaints from customers actually going up, and therefore, they represent an opportunity for you to be deploying some actions to address those?

Hey, Danilo, thank you for the question. And good morning.I'd maybe start answering your question with just calling out Wingstop markets and just how much of a game changer that spend for us. And this is really really elevated the level of visibility that we have into our operations, and it's identified, if you will, incremental opportunities for us to continue to sharpen our execution within the 4 walls of the restaurant. And that's what we've been focused on, and we did allude to the fact that we're seeing and measuring some really encouraging improvements, reduction in incidences around food quality and preparation over recent months.

And we also shared the fact that we've launched a new scorecard. In the scorecard that we've launched, it's really about measuring the right things. And those are the things that really tie directly to that guest experience, which we talked about how important that is, and in this environment, in particular, how every guest experience has to be delivered at a high level so that we can win over and retain those guests. And so I would say the other opportunities that we see, and this is really what we're focused on is just really around accuracy.

And that's something we spend a lot of time with our brand partners talking about it at our convention that we just had. This new scorecard is focused around ensuring we make progress there. But the results we see today and the opportunity that's in front of us, we're really encouraged by that and feel like we're on a really strong foot and headed in the right direction.

And then Mike, if you mind, I would love to hear your thoughts more strategically on how the landscape of the restaurant delivery business is changing with Walmart making an enter, and perhaps if you can share your thoughts under what circumstances you will be considering partnering with Walmart, whether this is going to be expanding your TAM on the delivery side, given that this continues to be a big opportunity for you.

Yes, Danilo, that's a great question. I think delivery continues to have a long runway for growth for Wingstop in particular. I think we've demonstrated this over the year. We're better positioned than most brands to win off-premise occasions. And so if there's an opportunity for us as it relates to winning more share and optimizing our economics on the delivery channel with something like what Walmart's launched.

I think it's clearly something that we'll evaluate. But we continue to see this channel as a strategic channel for us and an opportunity for us to continue to win share and drive growth. And so I think obviously, more competition should be better in the end for brands and I think for consumers as well.

Thank you. That does conclude our question-and-answer session and our conference for today. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Wing Top -- excuse me, Wingstop Inc.'s Fiscal Second Quarter 2026 earnings conference call. [Operator Instructions] Please note that this conference is being recorded today, Wednesday, July 29, 2026.

On the call today are Michael Skipworth, President and Chief Executive Officer; Alex Kaleida, Senior Vice President and Chief Financial Officer; and Sarah Niehaus, Senior Director of Investor Relations.

I would now like to turn the conference over to Sarah. Please go ahead.

Thank you, and welcome to the Fiscal Second Quarter 2026 Earnings Conference Call for Wingstop. Our 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 condition. 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 each of you please 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.

Thank you, Sarah. Good morning, everyone, and thank you for joining us. I would like to start the call by taking a moment to recognize our brand partners, restaurant teams and global support and our team members. I have previously described 2026 as a transformational year for Wingstop from operationalizing Wingstop Smart Kitchen, a new kitchen operating platform that completely changed our back of house operations to the national launch of Club Wingstop, our first loyalty program. The commitment from our brand partners and team members has been impressive. All of this while operating in this evolving consumer environment. That is a direct reflection of the resilience and incredible commitment of our team members across the system and demonstrates the shared excitement around the future for Wingstop.

While we've continued to strengthen the business for the long term, our financial performance this quarter fell short of our expectations with second quarter same-store sales declining 7.5%. The pressure on our core guests remained more pronounced than we anticipated. At the same time, the quarter gave us greater clarity about what's driving our results. It's increasingly clear that the challenge we're facing today is not structural and not a reflection of our brand relevance or product quality. That being said, we have an opportunity to showcase value more overtly to help preserve Wingstop occasions with our core guests as price pointed messaging broadly across the industry has continued to intensify.

Independent brand tracking continues to rank Wingstop among the strongest restaurant brands for quality. Brand awareness is growing. And over the past year, aided brand awareness has increased more than 5 percentage points, perhaps one of the strongest proof points of brand health and relevance came during the World Cup. On key match days, we saw same-store sales swing into double-digit growth as guests came together to celebrate with family and friends. We saw similar response during the NBA finals in markets with hometown teams competing. Those moments are a great reminder of what we have known as a brand for a long time. When our guests have special moments and occasions to celebrate together, Wingstop flavor and quality is one of their top choices. And many of those gets who engaged with Wingstop on those days are the very same consumers experiencing the greatest financial pressure today, whether it was key World Cup matches or the NBA finals, our core guests ordered for groups driving double-digit increases in average ticket and frequently choosing one of our bundled offerings.

To us, that's a really important insight. When our guests choose to treat themselves and come together for a group occasion the Wingstop brand was top of mind. Consumers are still willing to spend on meaningful occasions they simply want confidence they're receiving compelling value for the group. Our opportunity particularly in this current environment is to make that per person value even more obvious so that our guests consider Wingstop for more occasions while we continue to expand the brand to new consumers. We find our business more exposed than other restaurant concepts to consumers who have been disproportionately impacted by persistent inflation and ongoing economic uncertainty.

To better appreciate our results, let me share a little bit about the makeup of our restaurant footprint. Today, more than 55% of our domestic restaurants are located in urban trade areas where households are under more financial stress than higher-income households. Digital guest visits in those trade areas and correspondingly frequency declined by approximately 9%, while visits in higher-income trade areas actually grew in the second quarter. That divergence and trend reinforces our belief that the pressure we're seeing today in our core guests is macro-driven, not any change in the underlying strength of the Wingstop brand. While brand awareness remains an opportunity for us, we have made great progress over the last 5 years, and our footprint has played a key role. But as awareness has continued to grow, our focus is naturally evolving.

Over the past several years, we focused on introducing more consumers to the Wingstop brand. Today, our opportunity is increasingly about converting that awareness into consideration driving more occasions and increased frequency. That means giving guests more reasons to choose Wingstop through differentiated flutter innovation, compelling value and increasingly personalized engagement. What you will see from us in the second half of the year is our creative and message will evolve to this strategy. When we think about value, it's one simple question. Was the experience worth what I paid. Price is certainly an input into that equation, but it's not the only one.

Our quality, flavor, abundance and experience all contribute to the value guests received. That said, in this current environment, price is clearly playing a greater role in consumers' perception of value. Guests can still feed a group at Wingstop for approximately $8 per person, just as they could several years ago. What has changed is the environment our guests are operating in. And that means we have to communicate value in ways that resonate today. Our confidence in the strategies we've put in place has not changed. And as we move into the balance of 2026, we're executing against our strategies with a sharper focus on protecting our core guests while continuing to strengthen the business for the long term.

During the second quarter, we deployed a variety of offers to better understand how guests respond to different expressions of value. Our $1 wing promotion reinforced the demand compelling value can generate. The 30 for 30 bundle validated that the right offer can do more than drive transactions. It can grow the overall occasion increasing average first-party ticket by nearly 17%. Flavors under $10 demonstrated that we can better highlight the accessible price points already available on our menu creating more entry points into the Wingstop brand while maintaining the quality, flavor and experience our guests expect. That approach resonated with guests. The overall satisfaction scores improved in 89% of the markets where the promotion ran.

Importantly, we're executing our value strategy while preserving the strong unit economics that have always differentiated the Wingstop model. Competing more effectively for today's consumer requires us to win more occasions and strengthen the emotional connection with our guests over time. perhaps the most significant milestone in advancing that strategy this quarter and one we've been working towards for several years with the national launch of Club Wingstop, our first loyalty program. From the beginning, our vision wasn't simply to launch another loyalty program. It was to build a more personalized relationship with our guests that allow us to engage with them in more meaningful ways, such as through exclusive access to Wingstop or in special experiences and events. The early response has exceeded our expectations. In just a matter of weeks, Club Wingstop enrollments are tracking ahead of expectations by 22%, and loyalty sales represent nearly half of our first-party digital cells, significantly outperforming the pilot market results.

While our near-term focus is centered on enrollment, early engagement trends reinforce our confidence in the platform, Club Wingstop has given us something we've never had before, a scalable personalization platform with millions of active guests that allow us to introduce exclusive experiences tailor and hyper-personalized communications deliver relevant value through targeted offers and ultimately build greater guest frequency over time. As we've discussed, value, is it a one-size fits all and Club Wingstop gives us the ability to deliver the right message and the right offer to the right guest at the right time, ultimately strengthening the emotional connection with our guests. That's a much more effective way to communicate the compelling value already inherent in our menu than broad-based discounting and one that supports both guest engagement and healthy brand partner economics. It's still early, and we have a great deal to learn as the platform continues to mature, but the pace of adoption and early engagement reinforce our confidence in Club Wingstop and its potential to become an important long-term growth platform for the brand.

As awareness has grown, our focus is increasingly on converting that awareness into consideration. And one of the greatest reasons guests engaged with Wingstop continues to be our unmatched flavor. Our bold and distinctive flavors have always been one of our strongest competitive advantages. And we've recently become much more intentional about maintaining a consistent cadence of innovation, Citrus Mojo in sweet heat Chamoy generated great guest engagement during the quarter, and we're excited about our innovation pipeline in the second half of the year. Innovation remains one of the best ways we can drive consideration, create new occasions, encourage repeat visits and reinforce what makes Wingstop unique. Operations is equally as critical to ensure we consistently deliver on the promise we're creating for our guests. That's exactly why we've remained focused on executing our Wingstop Smart Kitchen strategy. While we have more work to do, operationally, we're seeing the improvements we expected in guest satisfaction, speed, consistency and restaurant execution. While the current environment is masking the near-term same-store sales lift, it does not change the long-term opportunity.

Smart Kitchen is designed to improve the guest experience over time and those benefits compound as guests repeatedly experience faster and more consistent service. Our field team is supporting through training and monitoring operating standards to ensure every restaurant consistently delivers the Wingstop experience our guests expect. Our historically lower-performing restaurants have improved digital guest satisfaction by more than 11 percentage points while reducing the performance gap across the system by more than 40%. To us, those are the right leading indicators. And they reinforce our confidence that Wingstop Smart Kitchen will continue strengthening the business over the long term. Perhaps the strongest validation of our confidence in the long-term opportunity is the confidence our brand partners continue to demonstrate through their investment in Wingstop.

New restaurant development remains healthy across both our domestic and international business, reinforcing our belief that our long-term unit economics and growth opportunity remain firmly intact. Our brand partners continue investing because they see the same long-term opportunity we do, a highly differentiated brand compelling restaurant economics and a significant white space remaining both in the U.S. and internationally. Our brand partners in the U.S. opened more than 300 restaurants across 46 states in the last 12 months, a more than 13% growth rate. Outside of the U.S., we're continuing to make meaningful progress as we surpassed 100 restaurants in the United Kingdom, opened our flagship restaurant in Singapore and remain on track to enter India later this year, which represents our largest international growth opportunity to date. 2026 is on pace for another record year of openings for our international markets. We are also excited to announce that we have signed a development agreement to expand into Poland a market with an opportunity of over 100 restaurants, reflecting continued confidence in the long-term international opportunity and adding another attractive growth market to our development pipeline.

Finally, we're continuing to invest in one of our most important competitive advantages, our people. We have recently strengthened our leadership team with the addition of our first Chief AI Officer. Further building the capabilities we believe are necessary to support Wingstop's next chapter of growth. Just as we've invested in our restaurants, technology and digital capabilities we're equally committed to investing in the talent that will help us execute our strategy and deliver on the long-term opportunity in front of us. With today's consumer backdrop, we're focused on what we can control. First, we're refining how we bring Wingstop to market. Our creative and messaging will increasingly connect our leadership in quality, bold flavor and compelling price per person value helping us win more occasions, more consistently throughout the year. Second, we're building deeper relationships with our guests through Club Wingstop. While still early in the launch and initial results are encouraging, Club Wingstop gives us the ability to communicate more effectively, deliver value and exclusive experiences and build greater guest frequency over time.

We're also focused on driving Smart Kitchen execution. As we continue improving operational consistency across the system, we're creating a more consistent and better guest experience that reinforces everything our marketing promises and strengthens the business for the long term. Taken together, these priorities position us to better serve our guests today while building an even stronger Wingstop for years ahead. We believe they are the right actions to strengthen the brand, create long-term shareholder value and continue advancing towards our goal of becoming a top 10 global restaurant brand.

With that, I'll turn the call over to Alex.

Thank you, Michael, and good morning, everyone. As Michael discussed, our second quarter results fell below our expectations and we are adapting our creative [indiscernible] in the second half to apply what we learned in Q2. But even in this environment, our confidence in our long-term strategy has not changed. During the second quarter, we delivered system-wide sales growth, double-digit adjusted EBITDA growth and strong free cash flow generation, giving us the flexibility to continue investing behind our strategic priorities. While we were disappointed in our same-store sales result, Q2 showcased the strength of our model, and we believe we are executing strategies that will return same-store sales to growth. .

One of the clearest financial proof points of our model continues to be our unit development and the opportunity to scale Wingstop to over 10,000 restaurants globally. Our development pipeline provides us with the visibility into future unit growth, and we continue to see broad-based demand across both domestic and international markets. Restaurant commitments under development agreement stands at record levels. The underlying economics of the business remain compelling, and we believe returns for our brand partners are industry-leading.

Domestic same-store sales declined 7.5% during the second quarter, reflecting the continued pressure on our core consumer that Michael discussed earlier. However, System-wide sales grew 5.3% to approximately $1.4 billion, supported by continued net new restaurant openings across the system. And as a result, royalty revenue, franchise fees and other increased 8.7% to $86.8 million. Company-owned restaurant sales increased 5.3% to $34.2 million which included a same-store sales decline of 2.5% during the second quarter and 3 additional corporate-owned restaurants added since the prior year. Company-owned restaurant same-store sales outperformed the system average and benefited from a portfolio concentrated in the Dallas-Fort Worth market, our most mature market and one that has the highest level of brand awareness. Compared to our broader system, the Dallas Fort Worth market also has a more diversified consumer base and less concentration in the lower income consumer, a great representation of how we see our long-term opportunity to widen our consumer base.

Turning to restaurant level margins. Company-owned cost of sales improved 190 basis points to 73.3% of company-owned restaurant sales. This improvement was primarily driven by lower bone and wing costs. Our supply chain strategy continues to provide great visibility and predictability into food costs for our brand partners, allowing us to benefit when market conditions become more favorable as demonstrated in Q2. SG&A expense declined $2.7 million to $30.2 million versus the prior year for the second quarter, primarily related to the onetime stock forfeiture and stock-based compensation expense. We continue to take a disciplined approach to invest in talent and capabilities that we believe will support sustainable long-term growth.

Q2 net income increased to $31.3 million or $1.15 per diluted share, an increase of 16.9% versus the prior year. Adjusted EBITDA, a non-GAAP measure, increased 12.5% to $66.6 million. Our capital allocation priorities remain unchanged. Our first priority is investing behind our organic growth strategies where we believe we can generate the highest long-term returns. That includes investments in technology and digital innovation. Corporate restaurant operations and the strategic initiatives Michael discussed earlier that we believe will strengthen Wingstop's long-term competitive position.

In the third quarter, we expect to close on the acquisition of 13 restaurants in a market outside of the Dallas-Fort Worth area, representing an investment of approximately $32 million. With this acquisition, it will unlock a significant development opportunity for our company-owned portfolio. It has the potential to support an additional 25 restaurants over time. When opportunities arise to deploy capital in ways that both strengthen the business and create attractive long-term returns, we'll continue to evaluate them through that disciplined framework. The acquired restaurants are anticipated to contribute approximately $7 million of revenue and $1 million of adjusted EBITDA for the balance of 2026, net of the royalty impact. These restaurants operate at volume more represented the broader system average than our existing company-owned portfolio, and we expect to invest behind operations as we integrate them.

We remain committed to returning excess capital to shareholders through a balanced approach that includes both our quarterly dividend and our share repurchase program. On July 28, our Board of Directors approved an increase to our quarterly cash dividend from $0.30 per share to $0.33 per share. In addition, through the first half of the year, we have repurchased 374,324 shares of common stock for $78.5 million. As of quarter end, approximately $313 million remained available under our share repurchase authorization.

Turning to our outlook. We've updated elements of our full year guidance to reflect both the current operating environment and the continued investments we're making across the business. First, we're updating our domestic same-store sales outlook to a decline of 4% to 6% for the year. We believe this change reflects the Q2 results in our business and the current macroeconomic environment, including recent inflation in fuel prices. Importantly, we're reiterating our global unit growth guidance of 15% to 16% for the year. We expect the pace of openings to celebrate through the balance of the year with the fourth quarter representing a largest quarter of net new restaurant openings.

The health of our development pipeline continues to provide us with the visibility into the balance of the year, reinforcing our confidence and one of the key drivers of our long-term algorithm. We're also updating our SG&A outlook to a range of $140 million to $143 million and stock compensation expense to approximately $24 million. While we've updated our same-store sales outlook to address the current environment and pressure on our core consumer, we're focusing on what we can control and the opportunities in front of us with our long-term strategies.

Our brand health metrics are strong. The Wingstop Smart Kitchen elevates our operating standards to the level unseen before for the brand. The Wingstop Smart Kitchen investment, along with the launch of our first loyalty program, position us for another phase of growth. And importantly, in a franchise system such as ours, we believe our unit economics remain best-in-class, fueling this opportunity to bring more Wingstops to guests around the world. I want to thank our team members, supplier partners, and our brand partners for their continued commitment and dedication to Wingstop.

With that, operator, please open the line for questions.

[Operator Instructions] The first question comes from David Tarantino with Baird.

My question is on the value strategy that you mentioned related to the new approach on the marketing. So I guess two parts to the question. One is, could you just elaborate on how you're planning to approach this? Is this a discount versus what you already offer? Are you just highlighting the value of what you offer today? And then secondly, I was hoping you could share maybe some anecdotes on whether you have some test results or proof points that might give us confidence that this the strategy will indeed work to stabilize the sales trend?

David, thank you for the question. I think it's important to understand and maybe take a little bit of a step back, and we'll talk about what we saw in the second quarter. And if you recall, we talked about the need to really protect our core consumer. And so what you saw us do in the second quarter was really bring forward value messaging, and we tested a handful of ways to present value. And we also tested ways to really deconstruct inherent value on our menu to both kind of create single entry price points or even a price per person for group occasions. And I think A great example I would point to and what we really learned in Q2 was when we put forward 30 wings for $30. And what we saw with that promotion, David, was guests were building their own bundles with attachments and ultimately driving a higher average check well above that $30 price point. And so that really told us that it's not just price point, they saw compelling value in building their own bundles and then knowing that the value they were getting on the wings.

And so it tells us, David, that quality, flavor, abundance and the value per person are key to winning more occasions for us. We also saw -- we also saw increased the frequency of flavor innovation and we see measurable increases in the rate of repeat visits within the first 90 days when we bring flavor innovation forward. So another key indicator of how we can protect our core consumer. And we have a strong pipeline of flavor innovation in the back half of the year that we're really excited about. So when we think about both flavor and value, we know that we can do a better job executing with our creative and messaging to include a call to action. That shows not only quality and flavor but also breaks through with that value per person that exists on our menu today.

And as we take a step back and look at the last 5 years and how we've scaled brand awareness, we see a real opportunity for us to evolve and really focus on consideration and value per person, messaging as well as flavor innovation are both things that's going to help us drive consideration, which we know will drive purchase. And so you'll see us evolve our margin in the second half to really more heavily focus on driving consideration and taking those learnings that we have from Q2.

Great. And maybe just a follow-up on the second part of my question. Is that -- I guess, were you seeing signs that this strategy is working under the surface? I only asked because the result for Q2 came in a bit below your expectations. So just trying to reconcile those 2 points where it seems like you've unlocked some concepts on value that could work. But I guess, did you see it working under the surface and giving your confidence for the second half?

Yes, David, we did see certain elements that we put forward show some really positive signs. I would say, taking a step back and just looking at it at a higher level, we did see an improvement in trend as it relates to transactions. We gave a little bit of that back on it, but did see some improvement in transactions. And we also saw that drive engagement with that core guests in some of those trade areas that we referenced in our prepared remarks that are under more pressure we saw improvement in trends within those trade areas as we -- and we leaned in and demonstrated some of these value offerings that are inherent in our menu today.

The next question comes from Sara Senatore with Bank of America.

There's a question and a follow-up. I guess maybe if you could talk to the marketing perhaps a little bit. You talked about call to action. I mean I think one of the things that we have seen is that like social, digital marketing has been really powerful for some brands around sort of relevance to the cultural conversation. Have you done anything stood up social listening or changed anything about your strategy? I know you've talked about shifting a little bit more perhaps to that from linear television, but the examples you cited of really strong performance were around live sports, which I think has historically been your strong suit. So any -- I guess any update on kind of a pivot that makes you a little bit more visible on social, digital media and then I have a quick follow-up.

I do think kind of reiterating back to some of our prepared remarks and then my response to David earlier, you will see us get much more tighter, I think, around the execution, both creative and messaging that does include that call to action. But it's balancing what we've historically been really heavy in quality and flavor but also balancing that value message, and it's really about that value per person that you can get in our menu today and really finding ways to present that, that includes, again, that call to action. And so one of the things we've acknowledged kind of in the first half of the year and second quarter is continuing to drive execution as it relates to the creative and the messaging. And so you'll see us continue to lean in and improve kind of the consistency and I would say, a little bit of the focus around that messaging in the back half of the year.

And Sara, this is Alex. Just to add to Michael's response. We also, alongside of our launch of Club Wingstop, we invested behind our personalization engine through CRM, through Club Wingstop that allows us to really hyper-personalize that message to the guests as some of our core consumers that are feeling more pressure could see a more value-centric message. Some could see something set around flavor to elevate -- that elevated quality that we can deliver. And alongside of that, we now have Club Wingstop as a platform to further strengthen our value proposition through various challenges and rewarding those members, with more points, more access to Wingstop. So I think the combination of that, plus what Michael mentioned, is something we're now able to unlock.

The next question comes from Jon Tower with Citi.

Maybe just a couple of ones real quick. Obviously, you spoke quite a bit on innovation around labor, and that's kind of been your valid look for a long while. I'm curious if there's any other innovation we should be thinking of on your menu taking into consideration your make line that's very basic and very low SKU count, but also the idea of new product news may be driving more customers to the stores.

The follow-up question is around the store acquisition that you made outside of Dallas, 13 stores, but I think you alluded to the idea of 25 more potentially in the pipeline. Is it your intention to build those out yourself from a company portfolio? Or is the idea that you will own this and then potentially refranchise that chunk at some point down line?

Jon, I'll take the first question, and then I'll let Alex take the second question you asked. But what I would say is I'll point to and we referenced this in our prepared remarks, but we saw these kind of key moments in the quarter and even after the quarter. And it's kind of the World Cup and in certain matchups, we saw like these moments that it just reminds us of how special this brand is. We saw our core guests engage with our brand in a big way on certain key match-up days, we saw double-digit growth. And it shows us that the brand is still relevant. The brand is still top of mind. We just have a core guest that's under pressure, but it was that guest who has pulled back and saw these moments around whether it was NBA finals or certain World Cup match ups, where when they did choose to dine out, Wingstop was top of mind and their top choice.

And so as we think about our core guests what they come to Wingstop for, it is obviously quality. It's the hand sauce-and-toss but it is our flavor. And so we know, and history has told us that when we continue to bring flavor innovation that only Wingstop can bring forward, it drives engagement with our core guests. It brings that guest back, gives them another reason. And it also presents us in a way of kind of that continued cadence of innovation to bring in new guests and drive new trial with the brand. And so you'll see us as it relates to innovation, continuing to lean into our proven playbook around flavor innovation. And then I'll let Alex answer your second question.

Jon, regarding the corporate acquisition, to be clear, this is not a departure from our strategy to maintain an asset-light, highly franchised model. But as we see deals throughout the years coming through the [indiscernible], we saw this market an opportunity for us to step into that was a way for us to further enhance shareholder returns. And we do anticipate retaining this market. So in addition to the 13 restaurants, we see another potential 25 restaurants for us to build over time.

The next question comes from Brian Harbour with Morgan Stanley.

When you spoke about the more challenged areas. I guess those are the lower income markets. Do you think -- I don't know if you can measure this. But I mean do you think that you're losing share there to some extent? And is messaging value kind of meant to regain some of that? Or do you think this is sort of a problem across these markets?

Brian, I would say, obviously, what we indicated on -- in our prepared remarks in those markets, where we do have a heavier presence with the lower income consumer, we did see a pullback in frequency. For us, when we look at the data, I don't know if there necessarily going somewhere else or just generally pulling back in this environment as we try to navigate the economic situation that they've put in. And I'd tie back to a comment we prepared earlier or we mentioned earlier, about what we saw with the World Cup, it really kind of is a strong signal that our core guests is still there. They still -- Wingstop is still top of mind.

And so, as we think about what we saw and learned in that situation, it supports how important our plan is for the second half of presenting value with our quality and flavor in a way that we believe will position us to win more occasions with that core guest.

Okay. And how did third-party delivery do in the second quarter? I guess, I might think that that's actually holding up better based on the customer base, but I was curious if you've seen that. And also, as you've kind of been working on the service time in that channel? Have you continued to see improvement there? Is that resonating at all?

Yes, Brian. As it relates to the third-party delivery platforms, one of the things we kind of learned as we would continue to progress through the second quarter is not necessarily seeing the lift we maybe initially would have expected just from the improvements in speed alone. And what we did in the second quarter is really tested our way through understanding better on kind of how those algorithms work and how important conversion is as it fuels those algorithms. And so based on what we learned at Q2 and the plan that we have in front of us for the back half of the year, we think we've got a strategy in place that will fuel those algorithms that will put Wingstop into the more of the consideration set and position us to take advantage of the improvements we've made in speed.

The next question comes from Jim Salera with Stephens.

I wanted to ask about the new unit opening splits. Michael, you highlighted this 55% that are in these markets that are experiencing a little bit more pressure. Can you give us a sense given the new unit opening is at such a strong cadence. The split of the new units? And if you have maybe a glide path of where you expect that to be longer term, that mix between these higher income areas that are doing better and then maybe more legacy units?

Jim, great question. What I would say is our kind of existing restaurants that we are opening and a little bit of what's in our pipeline today. I would say, generally speaking, is probably a decent representation of our footprint today as we execute those development playbooks. But one of the things we've talked about before is kind of that core demand space that we have and have a huge opportunity where we're only winning, call it, 2% to 3% of that demand space today. And benchmark suggests we should be winning close to 20% of that demand space. And as you deconstruct that demand space, the majority of the spend in that demand space is represented by households that have an income level of above $100,000. And so as you think about mapping out our continued growth in the U.S., you would expect our footprint to evolve a little bit that positions us to win more of those occasions in that demand space over time.

If we think about the demand drivers, again, you called out a lot of the engagement in the lower income is around specific events, primarily sporting events. Is that different at all with the higher income groups? Do you see any sort of call out or anything that's different on a kind of demand basis? Or is it just they have more disposable income and so the frequency around the events is higher?

Jim, I'd say that -- this is Alex. The distinction was just more of our core consumer coming back in an outsized way during some of those key events. I think that was the factor. And we saw certainly engagement during some of those more consistently in those other areas, higher income. I think we even mentioned in our prepared remarks about them higher income areas outperforming those trade areas that are more concentrated on low income.

But the other interesting element that I'd point to is within Club Wingstop, we're very focused on enrollment levels in this early phase of the launch. The characteristics of that of the typical guest that has enrolled in Wingstop is our core consumer, that lower income, younger consumer demographic and they're showing a propensity of returning at a pretty fast rate. About 70% of those loyalty members that signed up are back already another visit. So we're encouraged by that, and we talked about the element how Club Wingstop can strengthen that value proposition. We've got a lot more of opportunity to showcase that in the coming months.

The next question comes from Zach Fadem with Wells Fargo.

I know you don't typically talk about cadence, but considering all the moving parts around oil prices, sporting events and all the levers you've pulled around Club Wingstop and value. Maybe you can walk us through monthly comp performance in a little bit more detail. Any changes you saw as these factors evolve? And whether there's a specific message around early Q3 and your expectations around the shape of the back half of the year?

Zach, this is Michael. On our last call, I think you heard us signal a little bit to what we saw in the first month of the quarter. And then obviously, in May, we saw gas prices kind of hit their recent peak. And obviously, based on the results we posted for the quarter, that the impact of those elevated gas prices had a pretty pronounced impact on our core guests. And so I think that should give you an indication of kind of what we saw as we progressed through the quarter. As we think about our guide and the balance of the year, I think our approach is pretty consistent with what we've done historically, looking at trends in the business. And obviously, acknowledging the recent inflation, again, we've seen in gas prices.

But what I would really point you to is as we think about these strategies that we're executing against that we've -- that we've outlined here today, whether it's continuing to strengthen the execution around creative and messaging to really make sure we're driving through quality flavor and then that value per person that you can get with Wingstop whether it's Club Wingstop, which we're really excited about the early days and see that as a really encouraging and exciting long-term driver for our business.

And then we talked about Smart Kitchen. The progress we're making there is really encouraging, but continuing to execute from an operations perspective, to help deliver that overall guest experience where they can ultimately say when they come to Wingstop and that was really worth it. And so as we think about continuing to execute against these in the back half of the year, I would basically kind of point you to or encourage you to kind of think about a ratable improvement in the trend as we progress through the back half of the year.

Got it. And then we have a favorable environment for wing prices right now. And I'm curious to what extent you think value efforts can sustain considering the profit dynamics. And then a separate question around your EBITDA for the year and to what extent you think double-digit growth could still be on the table?

Zach, yes, regarding the favorable market dynamics, you kind of saw that play out in the second quarter with our food cost. But we do see that, and we've been transparent with our brand partners about an opportunity to invest behind our value strategies. And so I think we can take advantage of the market with the market backdrop on wings and allow that to help us invest behind our bundles and the flavor strategies, quality that we're going to deliver across the board. And I think with regards to our growth for the balance of the year, it still can imply a double-digit rate on adjusted EBITDA versus the prior year based on the shape of our guidance.

The next question comes from Danilo Gargiulo with Bernstein.

Michael, historically, when same-store sales decline in the industry, typically anthesis respond by reducing labor in their store. And I wonder whether you've seen that trend also across franchises and therefore, you're expecting that the 4-wall economics may be largely unaffected this year.

Danilo, thank you for the question. I think as it relates to labor, particularly in our restaurants, we've run a highly efficient labor model within our restaurants. And so there's not a lot of labor in there to begin with. And as you think about recent sales, I wouldn't necessarily point to margin benefit or anything like that. But what I would point you to is just the reality of the strength of our model, the AUV growth we've seen over the past 4 or 5 years as we sit here today and pair that with the supply chain strategy that we're executing against that Alex just referenced, the unit economics for our Wingstops today are still really strong.

And I think one of the biggest and most supportive statements to really back that up is if you look at our unit guide this year, which we reiterated to 15% to 16% unit growth. And then obviously, we referenced it in our prepared remarks, but to have a development pipeline that's sitting at a record level today as well, really shows the level of commitment and excitement our brand partners have to continue to invest in Wingstop.

And then exactly to this point, you pointed out as well that the franchisee economics really dictate their willingness to be opening stores. Today, you're sitting still at $1.9 million average unit volume, which is significant above your historical level. And I'm wondering at what point of same-store sales growth do you expect them to start to feel their conviction on the long term and potentially reduce the net unit growth from the 15% plus that we're seeing today?

Well I think, Danilo, as we indicated with our guide for the balance of the year and these strategies that we're executing against it clearly implies a pretty meaningful inflection in the trend that we have in our business today. And so we're more focused on executing against that and continuing to work our way towards growth and continuing to work towards expanding AUV, which we know will only continue to fuel one of the strongest development pipelines in the industry.

The next question comes from Gregory Francfort with Guggenheim Securities.

Michael, just to follow up on Danilo's question. I think you guys have had or suggested that the cannibalization is not that material to your system. I guess, we just look at the down high single-digit comps. And can you maybe help us understand what you're seeing or give us maybe some data points that would support that there's no reason necessary for franchisees are you guys to start pulling back unit growth?

Yes, Greg, as it relates to cannibalization, we referenced in Q1 that we actually saw that impact retract to kind of below historical levels. And we measure it obviously every quarter. And Q2 actually, it got a little bit lower than that even. So what I would really point to as it relates to the pipeline and unit growth is I'd really tie back to a lot of the conversations I've been having with our brand partners out in market and their level of excitement with the strategies that we're executing, what they're seeing from Smart Kitchen, what they're seeing in the early days of Club Wingstop. And then obviously, when they experience those moments that I referenced that we saw, whether it's around NBA finals or World Cup, it's a reminder of how special this brand is. And so, our brand partners are bought in, and that's really what I would point you to around the continued pace of growth in front of us.

Greg, did you have a follow-up, sir?

No.

The next question comes from Brian Vaccaro with Raymond James.

Back to the need just for more value. I'm curious what led you to conclude that beyond just sort of your softer comp trends and maybe some of the macro things you're seeing in the markets you highlighted. And one dynamic that I wanted to ask about specifically was around product mix. And I'm curious if sales for chicken sandwich or other boneless products have been softer than bone-in wings, which may reflect some of the more intense value competition from QSR competitors. Just curious on that or any other dynamics as you sort of look under the hood to learn more about kind of what this value opportunity might look like?

Brian, what I would really point to, and I think what you heard us say earlier was when we saw the conflict in the Middle East and what happened with gas prices and just that incremental pressure on our core guests. We saw that as clearly the need and the kind of catalyst for us to really lean in and protect our core guests and make sure that we're presenting them with value. And as we mentioned, we tried several different tactics on ways to deliver value and the messaging around it, and it really laddered back to our core occasion, that group occasion and making sure that we're messaging in a breakthrough way that value per person that we can deliver at Wingstop. It's been $8 per person for several years now. That's still -- that's a pretty compelling value when you match that against the quality, the flavor that our guests enjoy and get from Wingstop and pair that with the experience they now get in the restaurant supported by Wingstop Smart Kitchen and the team's execution there around speed and consistency. All of those are really what give us a lot of encouragement and give us a little bit of confidence in what we see in the back half of the year as we execute against a plan that's really centered around continuing to tighten the execution around creative around messaging and making sure it's breakthrough with that value per person. .

And I would say as it relates -- as it relates -- as it relates to menu mix, I think it has a little bit to do with our core guests and obviously, bone-in wings are kind of halo product and our hero product, if you will. And when we saw these core guests reengage, they came back to Wingstop for what they love about Wingstop and a lot of that is centered around our bone and wing product. And as we saw with some of the tests that we demonstrated in Q2, I referenced 30 for 30, where we saw it engaged with our core guests and then they built their own bundle in a way that ultimately drove ticket for us on those occasions. And so I think I look at that as really positive and something that we can continue to lean in as we protect that core guest of ours in the back half of the year and win more occasions with them.

Okay. That's helpful. And I guess the follow-up within that, you talked about the 30 for 30 bundle, and we've seen other bundles even last year, things like the game time promotion at $35, 20 for 20 in the middle part of last year, those types of things. But I guess I'm thinking, and you referenced sort of the single eater price points and the importance of being in that $10 or lower range. Can you -- and I know you've been testing some of these things in recent month. Can you talk about the performance of, say, dollar wings in that 10 for 10 band, the flavor combos for $10 or even some of the early learnings on the $5 and under tastings menu that I think you're testing in 3 or 4 different cities? Can you talk about the importance of that sort of $10 in under versus the bundle and just sort of recommunicating that, yes, $35 you can eat for $8 if you have a big group that single leader. Can you provide more color on that opportunity?

Brian, this is Alex. I think the simple way to think about it is we're deconstructing this inherent value in our menu to showcase a lower entry price point for consumers. There's still this opportunity for us to educate guests on how to navigate our menu. And that's some of the learnings we're extracting from Q2. I think that flavors under $5 is a good example that it's the same value as it would be with a larger group pack that's on our menu. We're just helping guests identify that easy entry point. And then the reality is they're building their ticket that's much higher than that $5 -- less than $5 price point that they see.

Thank you. This concludes our question-and-answer session and Wingstop Inc.'s Fiscal Second Quarter 2026 Earnings Conference Call. Thank you for attending today's presentation. You may now disconnect.

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Wingstop Inc.'s Fiscal First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded today, Wednesday, April 29, 2026.

On the call today are Michael Skipworth, President and Chief Executive Officer; Alex Kaleida, Senior Vice President and Chief Financial Officer; and Sarah Niehaus, Senior Director of Investor Relations. I would now like to turn the conference over to Sarah. Please go ahead.

Thank you, and welcome to the Fiscal First Quarter 2026 Earnings Conference Call for Wingstop.

Our 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 condition. 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 each of you please 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.

Thank you, Sarah, and good morning, everyone. We appreciate you joining the call.

We believe 2026 is going to be a transformational year for Wingstop and remain extremely confident in the long-term opportunity in front of us. Our focus is on execution. Execution against unique brand-specific strategies, which include strengthening our operations through the Wingstop Smart Kitchen, expanding our reach to new guests and launching our new and highly differentiated loyalty program each of which we believe are structural changes that will drive sustained growth towards our AUV target of $3 million.

As I step back and assess the current state of the business, we are making significant progress against our strategic priorities. We are seeing measurable improvements in speed, accuracy and consistency that are being enabled by the Wingstop Smart Kitchen along with early signals that our marketing is reaching new guests and driving deeper engagement. That said, our same-store sales result in Q1 was disappointing and fell below our expectations.

As we started the year, domestic same-store sales trends from Q4 carried into the first month of Q1, suggesting more consistency in the trend. However, as the quarter progressed, 2 factors came into play. The first was atypical winter weather resulting in temporary restaurant closures in over 700 restaurants. And secondly, elevated gas prices as a result of the conflict in the Middle East. Not too dissimilar to what we experienced in 2022, rapidly rising gas prices stress the balance sheet of the lower-income consumer that our business overindexes to. As a result, our same-store sales trend worsened during the quarter and resulted in a decline of 8.7%. If you exclude these unusual external factors, performance would have broadly been in line with our expectations.

We have updated our full year outlook to reflect our results for Q1 and now anticipate same-store sales to be down low single digits, but we believe our business can return to growth in the second half of the year as these strategies we are executing all come together. While the macro backdrop is masking some of the near-term impact, we can see measurable progress across our key initiatives.

Our asset-light, highly franchised model continues to demonstrate its resilience. In the quarter, we delivered double-digit adjusted EBITDA growth, and we opened 97 net new restaurants translating into 17% unit growth. This performance reinforces the strength of our model. Central to our strategies is our disciplined focus on protecting our brand partners' margins and maintaining strong unit economics, which we believe is foundational to sustaining long-term unit growth. And despite the challenging macro backdrop, we saw brand partner margins strengthen in Q1. And we believe this helps reinforce the strength of our development pipeline, a pipeline that remains one of the strongest in the industry, showcasing the durability of our model and confidence of our brand partners who continue to invest in the long-term growth of the brand.

We believe we have significant opportunity in front of us to scale Wingstop to over 10,000 restaurants globally. We remain focused on what we can control, and our strategy remains unchanged.

Let me start with the Wingstop Smart Kitchen. The West market is a meaningful operational transformation, requiring fundamental changes to how our restaurants execute day-to-day. We are making clear progress in strengthening our operations with improvements in speed, accuracy and consistency across the system. And while the full benefits from our new back-of-house technology have not scaled to the entire Wingstop system yet, we are seeing clear evidence it is working.

Last quarter, we discussed the need to focus on Friday and Saturday dinner dayparts, where we see the highest volume of new guests entering the brand, with approximately 50% of new guest trying us for the first time during those windows. Within these dayparts, we are now seeing an approximately 16-point improvement in the number of restaurants hitting our targeted speed of service in Q1 compared to Q4, along with a roughly 5 percentage point improvement in accuracy. Restaurants are driving greater consistency during these peak periods, ensuring we deliver on those moments that matter most for both new and existing guests.

In addition, customer satisfaction improved across both digital carryout and delivery in the quarter with delivery improving approximately 17 percentage points in customer satisfaction driven by gains in need and execution. We are also seeing in restaurants consistently achieving our 10-minute speed of service standard. Delivery times are now moving closer to our goal of less than 30 minutes, reinforcing that stronger execution translates into a better end-to-end guest experience.

The most pronounced impact is in our lowest performing restaurants, reinforcing that we are raising the floor of performance across the system. This is a significant operational transformation and scaling consistent execution across the system of our size is a deliberate ongoing focus. As we continue to build consistency across restaurants, dayparts and channels, we expect to more fully unlock the demand and conversion benefits of the platform.

To further highlight the progress we are making on speed of service, we're targeting a launch of our order ready tracker by the end of Q2 and that is designed to reinforce our speed of service through enhanced communication to our guests and drive measurable impacts in guest satisfaction. This feature directly connects into the Wingstop Smart Kitchen with real-time status updates, guiding the guests through the cook-to-order high-quality experience only Wingstop can deliver. In early testing, the order tracking feature created greater confidence into the guest quote time, better highlighted the craft associated with each Wingstop order and reduced status-related complaints and improved accuracy.

The takeaway is clear. When we deliver that high-quality cook-to-order Wingstop experience and execute with speed, accuracy and consistency, we drive stronger conversion, improved retention and incremental sales. As we closely analyze the data, it is what we see in the data and the results that gives us strong conviction in the Wingstop Smart Kitchen as a key unlock for our restaurants. We are building momentum. And as we execute at a high level, consistently across the system, we expect the Wingstop Smart Kitchen to be a meaningful contributor to scaling AUVs towards our target of $3 million.

Another key strategy in 2026 that we believe can position Wingstop for sustained growth is the launch of our loyalty program, which we are referring to as Club Wingstop. This is not a traditional discount-driven rewards program. Club Wingstop is built around a simple premise, members eat first. Given our most engaged guests, access, experiences and benefits that go beyond points and discounts. What differentiates the platform is how it enhances the guest interaction through capabilities like group ordering, point sharing and personalized offers that adapt based on behavior.

As part of the latent design of this platform, we built an AI-enabled tool that will allow us to achieve personalization at scale. This includes generating hundreds of pieces of content that drive relevant and adaptable messages to specific segments in our database. We have features embedded in our Club Wingstop technology that are designed to strengthen the emotional connection to our brand and drive sustained frequency over time. In our pilot market, we are seeing this translate into improved retention, higher reactivation of lapsed users and increased engagement from our most valuable guests. Engagement is strong, with roughly half of active guests enrolled and approximately 40% of new guests are signing up. Members are also demonstrating higher check and stronger retention relative to nonmembers. Results in our pilot market are being achieved with limited marketing support. And only a partial feature set, which to us reinforces the strength of the platform and the opportunity as we scale.

We are preparing for a national launch by the end of Q2, supported by a full 360-degree marketing strategy and a robust pipeline of features, including personalization, merchandise and experiential elements that extend well beyond traditional points-based programs. We believe loyalty will be a meaningful driver over time, particularly as we scale nationally and integrate more deeply into our digital ecosystem.

Widening the top of the funnel and capturing our fair share of our demand space is another key priority for us in 2026. We estimate we are capturing only about 2% share in a demand space, we believe we can win a 20% share, highlighting the significant runway ahead, but execution is foundational to this effort. It starts with driving acquisition through brand awareness and innovation, particularly flavor-led innovation, which we know is a key driver of consideration, especially among the consumers we are targeting in our demand space.

Our Wingstop is Here advertising campaign is designed to expand the top of the funnel, and we are beginning to see early signs that it is working. New guests are increasingly skewing towards higher income cohorts, particularly in the $50,000 to $100,000 range, one of the fastest-growing segments among new guests we're acquiring. This gives us confidence that our marketing is resonating with a broader audience and is reflective of the opportunity we're targeting in our demand space. Looking ahead, we have a strong pipeline of innovation and marketing initiatives, including continued flavor-led innovation in the next phase of Wingstop is Here, which we believe will showcase the quality and premium experience our guests have come to love.

Together with the Wingstop Smart Kitchen and Club Wingstop, these efforts are designed to strengthen acquisition, improve conversion and support sustained traffic growth over time.

Another significant factor for building brand awareness and acquiring new guests is what we've been able to accomplish in expansion of our footprint. Our unit growth is supported by the strength of our unit economics underpinning the strong demand from our brand partners. In the first quarter, we opened 97 restaurants globally at a more than 17% growth rate versus the year. As we grow our restaurant base, development itself becomes a demand driver, expanding brand awareness and amplifying the impact of our marketing, reinforcing the flywheel across the system.

We continue to scale Wingstop in a disciplined manner and believe our market level strategies will allow us to do so in the most sustainable way. Outside of the U.S., momentum remains strong, with newer markets such as Ireland and Thailand thriving and already delivering attractive unit economics as well as reinforcing the portability of the brand. Looking ahead, we remain on track to enter our largest new market to date, India, in 2026, representing a significant long-term opportunity.

What fuels our growth is our brand partners' returns, which we believe are industry leading. It's why we believe addressing near-term challenges for our core consumer should not compromise our long-term fundamentals. That mindset has translated into incredible growth. Since the beginning of 2023, we have opened over 1,000 restaurants and more than doubled system-wide sales to over $5.4 billion on a trailing 12-month basis, all while systematically growing our global pipeline to a record level.

While the level of uncertainty in the current operating environment remains high, our path forward and strategies are very clear. We are focused on strengthening our operations through the Wingstop Smart Kitchen, expanding our reach to new guests and launching Club Wingstop, each of which we believe will drive a return to same-store sales growth and further strengthen brand partner profitability and returns.

We are confident in the strength of our asset-light model, the resilience of our brand and the significant runway ahead. Together, we believe these position us to scale average unit volumes towards $3 million, expand our global footprint and continue advancing our ambition to become a top 10 global restaurant brand. And it is important to note that none of this would be possible without the dedication of our team members and the continued commitment of our brand partners who are executing every day to deliver a great guest experience and grow the Wingstop brand around the world.

With that, I'll turn the call over to Alex.

Thanks, Michael, and good morning. Our first quarter results reflect the resiliency of our highly franchised, asset-light model. In a more pressured consumer environment, we delivered system-wide sales growth, double-digit adjusted EBITDA growth and unit growth that well exceeded our long-term algorithm.

Development continues to be one of the most compelling proof points in our model and the long-term opportunity to scale Wingstop into a top 10 global restaurant brand. We opened 97 net new restaurants in the first quarter, a 17% growth rate. And with domestic AUVs at approximately $2 million on a roughly $580,000 upfront investment to build a Wingstop, our brand partners are seeing, on average, a payback of less than 2 years. Our unit economics are what drive the demand we see in our pipeline, which is evident in a pipeline that stands at more than 2,200 restaurant commitments under development agreements, and that demand remains broad-based across our brand partners.

System-wide sales increased 5.9% to $1.4 billion in the quarter, fueled by net new unit development and more than offset the 8.7% decline in same-store sales. As a result of our system-wide sales growth, total revenue increased 7.4% to $183.7 million versus the prior year. Royalty revenue, franchise fees and other increased $8.7 million to $87.5 million.

Company-owned restaurant sales increased by $2.9 million to $33 million, driven by 6 additional corporate stores opened or acquired since the prior year comparable period. Company-owned restaurant cost of sales decreased 110 basis points versus the prior year to 74.9% of company-owned restaurant sales, primarily driven by a 160 basis point decline in food, beverage and packaging costs.

Our supply chain strategy continues to provide great visibility and predictability into food costs for our brand partners throughout 2026. With this current operating environment, we are encouraged by how our strategies improved profitability for our brand partners this quarter. SG&A increased $3 million versus the prior year to $34.4 million, primarily driven by a $2.4 million nonrecurring restructuring charge related to the corporate realignment announced in January this year. This was partially offset by lower system implementation costs. We continue to take a disciplined approach with our SG&A investments, ensuring we are investing appropriately in people, capabilities and technology to support our long-term aspirations.

Adjusted EBITDA, a non-GAAP measure, was $65.4 million during the quarter, an increase of 9.9% versus the prior year. Q1 net income was $30 million or $1.08 per diluted share, a decline of $62.4 million in net income versus the prior year. This was driven by a nonrecurring gain of $92.5 million recognized in the prior year associated with the sale of our U.K. brand partner, Lemon Pepper Holdings.

As we disclosed in Q1 last year, we reinvested $75 million of the proceeds from the sale of LPH into the newly formed entity, which we believe will strengthen returns for shareholders. On an adjusted basis, excluding the impact from this nonrecurring gain in the prior year, earnings per diluted share was $1.18, a 19.2% increase versus Q1 2025.

In recognition of our strong free cash flow generation and our commitment to returning capital to shareholders on April 28, 2026 and our Board of Directors authorized and declared a quarterly dividend of $0.30 per share of common stock to be paid on June 5, 2026 to stockholders of record as of May 15, 2026, totaling approximately $8.2 million.

On March 11, 2026, the Board of Directors also authorized an additional $300 million available for share repurchases. During the first quarter, we repurchased and retired 374,324 shares of our common stock at an average price of $208.08 per share. As of March 28, 2026, $313.4 million remained available under our existing share repurchase program.

Since the inception of our share repurchase program in August of 2023, we have repurchased and retired more than 2.9 million shares of common stock. Our ability to consistently return capital to shareholders remains an important component of our strategy to maximize shareholder returns.

Turning to our outlook for 2026. We updated our domestic same-store sales guidance to a low single-digit decline, reflecting what we have seen year-to-date and the more significant pressure on our core consumer from elevated fuel prices. We estimate that higher fuel prices and the unusual winter weather in January which caused a high rate of weather-related restaurant closures contributed to an approximately 4 percentage point headwind to domestic same-store sales in the first quarter. We are also updating our full year SG&A outlook to a range of $146 million to $149 million, which includes $3 million of restructuring charges related to the corporate realignment and $28 million of stock-based compensation expense.

Additionally, we are reiterating the following guidance for 2026, global unit growth of 15% to 16% and which is based on the visibility we have into the pipeline today, net interest expense of approximately $43 million, depreciation and amortization of approximately $30 million.

As we look ahead, our focus remains on the strategy that will return Wingstop to same-store sales growth, improving operational execution through the Wingstop Smart Kitchen, scaling our new loyalty platform with the upcoming national launch of Club Wingstop, acquiring new guests into the brand and continuing to expand our global footprint.

I'd like to close by thanking our restaurant team members, supplier partners and brand partners for their efforts in driving Wingstop toward a top 10 global restaurant brand. With that, operator, please open the line for questions.

[Operator Instructions] The first question today comes from David Tarantino with Baird.

Michael, I was hoping you could help to clarify where you're seeing some of the traffic loss in your business. And it seems like you picked up a lot of traditional quick-service customers during that 2022 to 2024 time frame. And as we got to kind of the middle of 2024 and the environment got a bit tougher for that consumer and quick service restaurants got more promotional. It seems like your business has been decelerating since that point. So I guess the question is, is it that traditional consumer you gain that you're now losing? And I was wondering if there's any tactical response that you could have to stop the bleeding in the bottom of the funnel, so to speak?

David, I appreciate the question. I think maybe it's -- the way we're looking at it, it might be somewhat similar to how you phrased the question, but we've talked about over the past year, how much our business compared to other restaurants does over-index a little bit to the lower-income consumer. And so those could be one and the same. And I think what we saw in Q1 was the start of the quarter, we saw some stability within the trend and then obviously, we're hit by a couple of events that were outside of our control.

And when we looked at the data, particularly within March, we look back at kind of how our business responded and how our core consumer responded to when gas prices reached similar levels in 2022, we saw a pretty similar reaction this year in March in our business. And so we do think that that's attributed to a little bit of the near-term or more pronounced immediate reaction to gas prices when they reach these levels. But we do see that normalize pretty quickly. And I think we did see that in the trends as we exited the quarter and started Q2.

Great. And I guess the second part of my question, is there a tactical response, maybe a bit more focus on value to be more competitive with that consumer that you appear to be losing, I guess, is there anything you're considering there?

Yes, David, I would say we're obviously focused on executing against the strategies that we believe are going to position the brand for this next phase of growth and what's in front of us. But I would say a couple of things. Obviously, with the data that we have and what we know about our consumer we can be very targeted with the messaging that we present. And I think you saw us do that a little bit. And this is really us showcasing existing value that's on our menu and us not necessarily discounting or anything like that or being overly promotional. And we did that in ways of highlighting flavor under $10, where we have our chicken sandwich combo and a tender combo that is incredible value. And we are able to present value not only just through price point, but we think what's really important is to deliver it through quality, through abundance, through the experience. Ultimately, delivering an experience to the guest that's worth it.

And so we can do that in a very targeted way. But what we're seeing and what the opportunity for us is really around what we're doing to expand the top of the funnel and bring in new guests. These guests look a little bit different than our traditional guests. And while it might be masked a little bit by some of the macro events that impacted our business in the first quarter, we're really encouraged by what we're seeing. We're seeing some early signs that the strategy is working. We're seeing the highest income cohort growth within the highest income cohort for us is that $50,000 to $100,000. We're seeing improvement in awareness and conversion. And we're actually seeing some really encouraging signals around the reactivation of laps. And so we think the strategies we're executing are working, but where it is important and where it is relevant to showcase value, we're doing that in a very targeted way, but obviously focusing on these strategies that we're executing against that we're really excited about what that could translate to for the back half of the year.

The next question comes from Jeffrey Bernstein with Barclays.

Great. First, I just wanted to follow up on that topic regarding the comp trend. You lowered the full year guidance. I think you just mentioned that in April, maybe trends have improved or normalized. So wondering if you could just clarify for us what maybe you're seeing was the exit to the first quarter and maybe what you're seeing in April and whether or not a concern at all related to the return to positive in the second half. It does seem like not necessarily our compare is getting a lot easier. So presumably, you're talking about some initiatives within your control, maybe the loyalty program. maybe what kind of assumption you're assuming for that loyalty program. But April and then kind of your confidence in turning back to positive in the back half of the year, kind of the biggest drivers? And then I had one follow-up.

Jeff, yes, we did see an improvement in the trend to start Q2. And I'll tie back a little bit to my previous comment around a little bit of that more pronounced near-term reaction to fuel prices, and that does normalize pretty quickly. But we saw an improvement. And I think as we updated our full year we obviously took into consideration our actual results for Q1, but we did adjust down our expectations for Q2, which are somewhat related to our expectation of some near-term pressure on the consumer with elevated gas prices.

Obviously, it's extremely difficult for anyone to predict this macro environment that we're in. But what we're really focused on, Jeff, is we are seeing some really positive signals in our business, whether it's as it relates to Smart Kitchen, we talked about that Friday and Saturday night daypart that we're focused on, we saw a 16 percentage point improvement and the number of restaurants that are delivering on that 10-minute speed of service on Friday and Saturday night. Our bottom quartile of restaurants, we saw a 3-minute improvement in overall speed within those and we're measuring significant progress and improvements within guest satisfaction scores. All strong signals that give us a lot of excitement and confidence about the impact that Wingstop Smart Kitchen will have on our business over time.

I mentioned the marketing. We feel like our marketing is resonating. We're seeing reactivation of laps. We're seeing that fastest growing cohort at $50,000 to $100,000. We're seeing improvements in awareness and conversion, all really strong signals that it's resonating, and we have some exciting things coming within our pipeline as it relates to innovation that we're really excited about that we know based on the research that we've done, is one of the #1 drivers for this target that we're targeting within our demand space. So one of the number one is really around innovation. And so I think that's going to position us well.

And then Club Wingstop, it's a big one for us. We're excited about it. Our pilot results continue to strengthen. We're seeing improvements in retention in reactivation in frequency, all really strong signals and again, without the support of our national advertising and without really leveraging that platform at scale. And so the combination of those things do give us confidence in the early signals that we're seeing in the business, we expect over time to return to growth in the second half of the year.

Yes. And Jeff, this is Alex. I could help translate a little bit on what we anticipate on the shape of the year. With what we're seeing in the April trends and kind of knowing that this is a little bit of, hopefully, the peak on fuel prices that consumers seeing. We're anticipating somewhere in the mid-single-digit decline range for comps in the second quarter, followed by a gradual improvement into that low to mid-single-digit positive range for the second half as these strategies come together and what Michael mentioned.

And I think these are informed by just some ways that we've been able to see results in top-performing restaurants on Smart Kitchen, what they're seeing in their business comp performance also what we're seeing in our pilot market, again, with very limited features and marketing behind it and measure and seen a measurable comp impact. So that's how we got to -- the shape of the outlook, very similar to what we said last quarter, we anticipate a return to growth in the second half. Near term, we have brought forward a little bit of that inflation challenge that we're seeing from the war that took place at the start of March. But we have a high degree of confidence in this outlook and in fact, are working to exceed it.

Understood. And then my follow-up. Michael, franchisees, just based on your commentary seem very happy. Obviously, the comp growth isn't where they want it to be, but [ because ] a couple of years sales growth the 70% type returns they're generating, all that supports the outsize unit growth. But clearly, the current macro is challenged. I'm wondering if you could talk a little bit about the recent conversations with franchisees, what they're most focused on and whether it ever becomes a discussion internally about considering maybe tempering unit growth. Clearly, you're running well above the 10% long-term algo with your 15% to 16% growth this year. Maybe there's some risk that is cannibalizing, maybe makes sense to try and control or limit the outsized unit growth? Any thoughts there would be great.

Yes, Jeff, we mentioned this in our prepared remarks, but I think it's really important to say it again. And we actually saw our brand partner margins and profitability improved in the first quarter. And we talked about that's about -- that's us making really intentional and strategic decisions about what's right for the business long term. And obviously, continued progress with our supply chain strategy and continuing to protect and, in some cases, enhance those industry-leading returns in unit economics.

And they remain strong. The sentiment and the conversations with our brand partners, it's really a lot about acknowledgment that over the last few years, our AUVs have grown close to $500,000. And that, combined with just continued focus and execution against protecting profitability has been pretty positive. But then when you layer on top of that, us working with them and talking to them about these strategies that we're executing and what's in front of us.

There's a pretty high level of excitement around Wingstop and to continue to grow and to continue to expand. We feel like we're growing at the right pace. We're obviously executing against our market level playbooks, which are very intentional and very clearly defined around where we open restaurants and at what pace and when we open those restaurants. But -- we mentioned it as well in our prepared remarks, our pipeline sits at a record level, which I think showcases the demand and excitement for growth. And based on the visibility we have in the pipeline today, we're able to reiterate our outlook this year, which is another industry-leading year of unit growth at 15% to 16%.

The next question comes from Andy Barish with Jefferies.

Guys. Just wondering on kind of thoughts as you look out in terms of becoming a more mainstream brand, do you think kind of marketing has to evolve as we look out maybe to '27, particularly given the size and scale of your spend to more kind of traditional windows and promotions that are laid out. And then kind of also wondering, just on the move to $3 million AUVs. If you could kind of frame up how much of that is maybe related to incremental chicken sandwich and tenders occasions, just given how strong your share is in the traditional wings business.

Andy, I think that's a great question. And if you go back 4 or 5 years, we were able to be a little bit more of what I would characterize as a marketing strategy that was almost a one size fits all. And as we look at how our business has grown and scaled and diversified to some degree, we are 100% aligned with the question you asked, and that is we have to be very targeted. Messages need to be different based on audience based on channel. And I think that can go from linear TV all the way down to the social platforms, and that's exactly the playbook that we're executing is making sure our message is tailored specifically to the targeted audience that we're trying to reach.

And I think you'll see more of that come to life as we talked about some of the next phase or next chapter of Wingstop this year. You're going to see a little bit more variation in the messages that we're putting in front of consumers, a little bit more targeted messaging as it relates to calls to action. But that's exactly the playbook that we're executing. And as we think about our path to $3 million AUVs. We do think there are a ton of chicken sandwich occasions that we are positioned to win and we will win and tenders are the same. But we also think there's a lot of group occasions, our halo product, bone and chicken wings, that we're going to win as well as we educate more of these consumers who don't know about us or maybe don't consider Wingstop today. And that's what we're excited about as it relates to our Q1 results is we're seeing early signals in the business that we're making progress against all of those initiatives.

And Andy, I'd add, too, that we've historically anchored as an example, on social media and as area like TikTok, we now are diversifying more messaging in personalizing content to those channels across Meta, Instagram, X, other areas where we can really speak to that new guests we're looking to acquire. So we think the timing is right to start to move more into those various social channels alongside the level of content we're able to produce and the relevance we can drive at the messaging in those channels.

Congrats on #500 internationally.

Thank you.

Thank you.

The next question comes from Chris O'Cull with Stifel.

I had a couple of follow-up questions from earlier ones. And Michael, has the company -- the company has guided to, I think, 15%, 16% unit growth this year, which continues to pace well ahead of the 10% long-term algo. But to what extent is this growth being driven by brand partners voluntarily developing ahead of their contractual mandates? And franchisees reverted to the minimum requirements of the development agreements, what would that base unit growth rate look like?

Chris, I wouldn't say there's anything to call out as it relates to brand partners developing ahead of their schedule. In fact, I would say it's it goes back to these market-level playbooks. And that informs how we write these agreements. And we're writing these development agreements in a very targeted and intentional way that we believe is kind of really helping us have our hand on the dial and manage the pace of development. So I would almost go so far as to say we discourage brand partners from developing ahead of that contractual commitment because we've been very intentional with how we design these agreements. And we believe we've got a strategy that we're executing against.

Okay. That's helpful. And then we've noticed the sub-$10 combos, which you mentioned earlier, being pulse through social and CRM channels. But what is the reluctance to pivot linear TV towards these offers since it would seem to be a better medium to drive new and lapsed users than maybe targeting some of the existing users to increase frequency.

Yes, Chris. That's a little bit of what I hit on earlier. I think you're going to see that come to life as we progress through the year. And while linear is obviously continues to be an efficient platform, you're going to see us leaning a lot more into OTT and streaming, which allows us to be very targeted because some people -- the relevant message that we're targeting might be this new group pack bundle, where we preconfigured a bundle at a compelling value to serve 3 or 4 people, and we've preselected the flavors, highlighting convenience, highlighting ease, but obviously, the flavor and quality associated Wingstop, and they can order that with one click.

And so that could be the right message that we highlight in a targeted way, or it could be someone who's more value-sensitive. And in that case, we can target them with the message that profiles this lunchtime offer that we have that is pretty compelling value to get our cook-to-order, [ hand-tossed ] sandwich or tender combos for under $10. So that's exactly something we're leading into.

The next question comes from Sara Senatore with Bank of America.

Just, I guess, maybe one quick follow-up and then one quick question. Just you mentioned the lower-income consumer. I think in the past, you've said that's roughly 1/4 of your sales, but that maybe has been trending down. So if you if you could update on what that mix is? Because I do think that's obviously much higher than I think what we've seen from others. So that's just a data point.

But the question is on value. You mentioned value for the money, which I think is obviously clearly embedded in your menu. But some of what we're seeing that is very successful, especially for lower-income consumers is very low price point value. And I think in the past, in 2023, relative value is a big part of what you're able to offer because wing prices were down so much. Is there -- I know your emphasis on visibility in terms of wing prices as opposed to kind of maximizing the benefit from the recent decline. But is there an opportunity to do more price point value below that $10? Or is it the margin structure just really doesn't support that? We have seen some other higher ticket concepts, maybe do things on the app only to really kind of introduce people to the brand at very accessible price points, just as budgets are really constrained. So just trying to understand if there is that opportunity either through the app or through your loyalty because these sort of entry-level price points you seem to be working very well right now.

Sara, this is Alex. I can jump in first. The low income percent still has been about that mix of about 25% within our database. And we still are acquiring low-income guests. What we have seen in their behaviors is more they're actually trading up into larger bundles. We've seen the ticket increase, but the items that they're attaching per ticket has changed. That's come down a little bit. So they're almost kind of looking for that abundance, quality that we can deliver inherent value. And I think we've said this in prior calls, too, that that consumer is still telling us we're doing the right things in terms of messaging value, delivery and quality. And we really think about that overall value proposition that we deliver to guests beyond just the price point. So we're focused on some areas to showcase our menu differently flavor lists value as well. And then loyalty is a way for us, we believe we can strengthen the value proposition.

And one difference that we're seeing among low-income consumers is in our market where we're testing loyalty, their engagement, their frequency has been sustaining. We're not quite seeing what we're seeing in the rest of the U.S. And we think we've brought some areas and examples for it for them that's really showcasing that value proposition, how loyalty can come into play there.

Great. And just is it the 7% increase? Is that roughly the same that you've been seeing in these sort of loyalty frequency as in the past?

Yes. Actually, loyalty members are outperforming nonloyalty members in terms of -- across a number of metrics, including frequency, new guest retention. We're also seeing reactivation of lapsed users come back in at a rate of 2x nonloyalty members in there. So there's a variety of metrics were really -- which has given us that confidence in the path to growth in the second half based on this data we're seeing. But yes, it continues to be more elevated in the pilot market.

The next question comes from Brian Harbour with Morgan Stanley.

Could you comment on how your 2 biggest markets, California and Texas are doing relative to the rest of the country?

Brian. I would say, obviously, California, I wouldn't say the trend has really improved as inflation like kind of the consumer macro backdrop has remained pretty consistent there. I would say, as it relates to the Texas market, we have obviously a lot of corporate restaurants there. And so our corporate results give you a little bit of an indication. But as we look at DFW as an example, or even broader Texas, where we have had more tenure with the Smart Kitchen, those markets are performing a little bit better than the rest of the country. But I would say it's really something that we pointed to in our prepared remarks, which has to do with those restaurants that are consistently delivering on our 10-minute speed of service target. And I think that applies outside of Texas, where those restaurants that are doing that -- we continue to see higher new guest retention rates, better frequency, higher guest acquisition -- or guest satisfaction scores and ultimately better same-store sales.

Okay. and on Smart Kitchen, I mean, it is fully rolled out at this point, right? So I guess the question is like for the earliest adopters, are you still seeing a same-store sales gap consistent with what you've talked about before. I guess I might conclude at a high level that customers don't really care about this yet, like I think we understand the operational benefit in the theory, but is it necessarily showing up for customers in faster delivery times? Or are you seeing kind of more like walk-up business in response to this? I mean at what point do you think it actually is more of a mover for customers?

Yes. Brian, I would say -- and we mentioned this in our prepared remarks, but we can see it in the data. And we know what good looks like -- and when it is delivered, and we are delivering on that 10-minute speed of service, you can measure it in the results and in the data. One of the things we highlighted in our prepared remarks was the kind of bottom quartile restaurants where we've really been focused on execution there, and we've reduced speed by 3 minutes and seeing some pretty meaningful improvements in get satisfaction score, so the guests are noticing and giving us credit for that.

I would say one of the areas where the most noticeable improvement was in delivery times and guest satisfaction within the delivery channel, where we measured a 17 percentage point improvement in guest satisfaction scores in the delivery channel, and that channel outperformed versus the rest of the system. And so there are some really strong signals that we're seeing in the business and the progress we're making.

But I think it's important just to highlight that this is a really big operational change. It may be bigger than we even anticipated. And one of the things we've learned as we're continuing to focus and drive execution is we have to also guard against being too fast. We're updating -- we talked earlier this year about the new op scorecard that we rolled out. We're actually updating our scorecard, just to make sure we're measuring performance against our targeted speed of service of 10 minutes, but we're also not rewarding the wrong behavior. But progress is being made across the board. We are getting credit from the consumer and the opportunity in front of us, and I think the long-term impact here continues to be really big.

The next question comes from Danilo Gargiulo with Bernstein.

Michael, first of all, I'd like to expand on the comment you just made on this being an operational lift of high magnitude. I guess I'm trying to understand what is the impediment for all the stores to deliver within 10 minutes, even during peak times of Friday and Saturday, you're updating the scorecard. But I think for most operators, this market is translating into better operations. So what's the impairment on the ground for a better adherence to the high standards.

Yes. I mean I think, Danilo, if you take a step back and think about and just remember, particularly with these more tenured restaurants and tenured team members the change is pretty drastic to go from an operating model that relied on paper kitchen tickets and a lot of voice command to now leveraging a technology platform, interaction with the screens and ultimately relying on in leveraging an AI-enabled demand forecast bespoke to every single restaurant that's being delivered in 15-minute increments. It's a fundamental change.

And I agree with your statement that it is a better team member experience, and it does result in overall improvement in operations, but it is still a big change, particularly when you think about -- we often reference our standard quote time of 20 minutes on average, but when you think about Friday and Saturday night, when restaurants are experiencing high volume, those tickets -- the speed times could be on average 45 minutes.

And we've taken that down significantly. And in some cases, we're not at that 10-minute yet, but we're materially faster than we used to be. And so it's a balance of ensuring we're executing and delivering on the speed that consumers expect but also making sure we're not rewarding the wrong behavior or driving the wrong behavior. That could translate to some unintended consequences around being too fast. And so it is a balance, and it's something we're focused on and the team is executing against a plan, and we're confident based on the data that we see and the progress that we're making that we will get the entire system to deliver on a consistent tenement speed of service. But it is taking time. It is taking focus. It's taking some revisions to our scorecard that I mentioned, but the progress is clear in the data that we see.

And if I may, with increased uncertainty on macro geopolitical and even the demand environment, why is the best option to continue to do share repurchases versus maybe driving down the leverage to 3 to 4x over time in anticipation of high volatility rates?

I think, Danilo, great question. I think as we've shared in the past, we want to demonstrate our commitment to our buyback strategy because we believe in the long-term value creation it has for shareholders. And I think what you'll see as we manage through this is not accessing near-term outside capital to support the strategy, leverage this free cash flow generation that we have in our business and in combination of seeing some deleverage. But we do see ourselves in a place that's closer to that 4x leverage range as opposed to where we've been historically in 5 to 7x.

The next question comes from Sharon Zackfia with William Blair.

Yes, I want to [ delve into ] [indiscernible] early. I think you guys [ point and speed ] or execution, maybe I missed that on Saturday nights. But can you just give us kind of broadly speaking, what percent of the system is hitting the 10-minute speed? And then I think secondarily, you had talked last quarter about some challenges with the delivery providers getting under 30 minutes. Can you talk about kind of what percent are now consistently under progress is moving [indiscernible] kind of move that towards the goal line?

Sharon, you bet. You were breaking up a little bit, but I think I caught the gist of your question. As it relates to Friday, Saturday and dinner daypart, I think one of the things is, obviously, it's important to highlight those are 2 of our busiest or peak dayparts within the week. But it's also the dayparts where about 50% of our new guests visit the brand for the first time. And so obviously, extremely important as we think about the marketing strategies that we're executing and broadening the top of the funnel and bringing in new guests that we deliver on their expectations and retain them.

And so that's a big focus for us. And when we entered this year, about 30% of the restaurants were delivering on that targeted 10-minute speed of service within the Friday and Saturday dinner daypart. And we've made meaningful progress on execution within our restaurants. And it's due to the incredible work of our ops team, of our brand partners, of our teams and their teams and the restaurants. And so kudos to them, but we've seen a 16 percentage point improvement just in 1 quarter in the number of restaurants that are delivering. And so that's meaningful progress that's super encouraging and we're going to continue to chip away at it, and I'm confident that we'll get the entire system there over time.

And then I think the other part of your question, could you repeat that part again for me? I lost you at the very end of it.

Yes, sure. Sorry about the cell phone. On the delivery providers, I think there were some challenges getting them under 30 minutes even when you were at 10 minutes. Can you talk about kind of where you stand at the 30-minute threshold system-wide and how those discussions and how that progress is going?

Yes. We're really encouraged with how our partners on the third party have leaned in. We obviously have had some meetings with their leadership team, their teams leaned in with our teams. We've implemented a few things that are helping send the right signals to their drivers at the right time to make sure they're getting there to the restaurant when the order is ready and we mentioned it, but we're seeing a meaningful improvement in the performance there. And we actually highlighted this within that bottom quartile of restaurants, just the improvement within the delivery channel that we're seeing there is pretty meaningful.

And I think it speaks to the opportunity we have within that channel. But to see 1 percentage point improvement in guest satisfaction within the delivery channel is pretty pronounced. And so we're encouraged by the progress we're making.

The next question comes from Jon Tower with Citi.

I know you mentioned that protecting and growing franchisee profits and cash flows is frankly a priority for the company? And kind of following up to Sara's question earlier around value. In your conversations with them, are they reluctant to move down on price points on the menu over time? I'm just curious if that's been pushed back from that community specifically.

Jon, this is Alex. No, I think we're lockstep with our brand partners in terms of really even in this environment, protecting the unit economics. And we don't believe it's a little bit more of our perception that training a guest to come to you for a $3 menu item as an example, is not who Wingstop is. Our demand space target that group occasion. Again, our guest has given us feedback that we're doing all the right things on overall satisfaction. We've improved quality 6% versus last year. Consideration is up 4% versus last year. And even at lower income consumer isn't saying that we have a value issue with us. So we're focused on that and really building that top of the funnel, attracting those new guests and keeping our brand partners focus on that long-term opportunity for Wingstop to build towards 6,000-plus restaurants in the U.S.

Got it. And I know, Michael, you earlier in the conversation, you had mentioned that innovation is kind of top of mind for most guests in terms of what they want to see from the brand. It sounds like you're focused primarily on flavor. I mean any form factor changes that you're thinking about going forward?

Jon, yes, it's super clear to us when we studied our demand space, the consumer and who we're going after, who really doesn't engage with our brand today, but represents a huge opportunity for us. And our brand hits on the top emotional and functional needs of that guest and is best positioned to win. It's really about just driving awareness and then making Winstotop-of mind and relevant to them. But the #1 driver for these guests we are targeting to bring in to the brand is innovation and it's innovation through flavor. And this is a proven playbook for us. We go back to 2024, and when we launched Hot Honey. But we launched Hot Honey when everyone else was doing it as a wet sauce, we did the way that only Wingstop can do and did it as a driver of, and that is a great example of how we can lean into innovation, lean in to flavor and drive relevance and bring new guests into the brand.

In Q1, we launched a Hot Honey Trio, 3 ways to Hot Honey. That actually performed a lot better than we anticipated. In fact, we sold out of 2 of the flavors within about 2 weeks. Another example I will point to is our current LTO flavor, Citrus Mojo. A lot of guests have kind of said it's a play on our iconic lemon pepper where it's a fresh garlic herb, a bright splash of citrus. But what we're seeing with the performance of Citrus Mojo, over-indexing to the reactivation of lapsed guests. It's bringing in new guests. And so we have an innovation pipeline built out for the rest of the year that we're super excited about. This includes a lot of really unique flavors that only Wingstop can do, but it also includes some unique dips as well. And so we're excited about this innovation pipeline and how that's going to drive relevance and I think continue to really bring in these new guests that we're targeting.

This concludes our question-and-answer session and concludes our conference call today. Thank you for attending today's presentation. You may now disconnect.

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Wingstop Inc.'s Fiscal Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded today, Wednesday, February 18, 2026.

On the call today are Michael Skipworth, President and Chief Executive Officer; Alex Kaleida, Senior Vice President and Chief Financial Officer; and Sarah Niehaus, Senior Director of Investor Relations.

I would now like to turn the conference over to Sarah. Please go ahead.

Thank you, and welcome to the fiscal fourth quarter and full year 2025 earnings conference call for Wingstop. Our 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 condition. 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 each of you please 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.

Thank you, Sarah, and good morning. We appreciate everyone joining our call. As we enter 2026, I could not be more excited about what is in front of us here at Wingstop. Our 2025 results showcase the resiliency of our asset-light, highly franchised model and demonstrated the opportunity we have to scale Wingstop to over 10,000 restaurants globally. We surpassed a milestone of 3,000 restaurants and launched six new international markets outside of the U.S. This resulted in system-wide sales growth of 12% despite a decline in same-store sales of 3%. While this was our first same-store sales decline in 22 years, I continue to be reminded of how our business has scaled in the last three years, which on a stacked basis was an impressive 35% in same-store sales growth and has allowed us to reach average unit volumes of $2 million. And as we set our sights on $3 million AUVs central to our strategy is our unit economics and our brand partner profitability. Our corporate restaurants with AUVs now approaching $2.5 million provide a great example with margins in the mid-20% range. Our brand partners see the long-term potential in their returns and are signing up for a record number of commitments, evidenced by approximately 2,300 restaurant commitments as of the end of 2025. Lastly, with an adjusted EBITDA growth of 15% in 2025, we continue to demonstrate the durability and consistency of our asset-light, capital-efficient model.

I firmly believe we'll look back at 2025 as a transformational year for Wingstop with the national rollout of the Wingstop Smart Kitchen and the development of our first loyalty program. 2026 will leverage these strategies by expanding awareness and consideration to bring in new guests and increase frequency among our current guests. We have a clear view into our demand space our core consumer and the opportunity in front of us. Our core demand space is an off-premise occasion, typically involving two or more adults eating together where a high-quality indulgent experience matters most. Flavors, variety and cook to order are top of mind for our targeted consumer and are core to what Wingstop has delivered for decades. But we also know these consumers expect a fast and consistent experience. Today, we are only capturing roughly 2% of this demand space, underscoring the significant runway ahead to the 20% we consider to be our fair share. I'm confident we are executing the strategies that will close that gap. At the center is the Wingstop Smart Kitchen, a new kitchen operating platform that fundamentally raises our game and our ability to deliver on speed and provide a consistent, high-quality experience at scale.

In 2025, we set an ambitious goal to roll out Wingstop's market in more than 2,500 restaurants in less than 10 months, a scale and pace that represents the excitement our brand partners have. I'm pleased to share that as we closed out 2025, the Wingstop Smart Kitchen has been installed in all of our domestic restaurants. With the Wingstop Smart Kitchen fully deployed, the focus now shifts from rollout to execution. We have introduced new operating standards centered on our objectives with speed and accuracy supported by clear expectations and accountability. The Wingstop Smart Kitchen is a considerable culture shift for how we operate our restaurants. Our restaurants are evolving from a back-of-house operation that was based on paper kitchen tickets to an AI-enabled state-of-the-art custom-built technology that enhances the team member and guest experience. With the rollout complete, we are now measuring the new Wingstop standard, and our brand partners are including these elements in their team member incentive compensation program. These are two best practices we have demonstrated in our corporate restaurants that will drive results. While our focus in 2025 has been on the rollout and operationalizing the Wingstop Smart Kitchen, we are already seeing early proof points. Last quarter, we discussed the progress we've seen in the Southwest region, which continues to see a mid-single-digit delta in same-store sales versus the U.S. average.

Now with more restaurants operating in the Wingstop Smart Kitchen, we're seeing results across a broader set of restaurants, operating on the platform and delivering on the 10-minute speed of service. These restaurants are showing improved customer frequency compared to restaurants that have recently launched on the platform or that are not delivering our new speed standard consistently. We also see an increase in transactions at the lunch daypart, reflecting both speed of service improvement and an enhanced guest experience. The data is very encouraging. However, we can also see opportunities in specific dayparts or in key windows, such as a busy Friday or Saturday night during dinner. While we are seeing a significant improvement in speed of service in these key dayparts relative to our prior operations, consistency and a reliable experience is what our guests expect of us. And for restaurants that are delivering 10-minute times, guests are rewarding us for it, which really speaks to the long-term opportunity we have in front of us. The speed of service doing sub smart kitchen enables can meaningfully increase consideration among delivery consumers, where speed is a critical factor. We're making good progress here. On average, restaurants are consistently seen a delivery time reductions of approximately 15% year-over-year. This change in delivery times has increased menu to order conversions on our aggregators since launch. But that being said, we are not seeing the reduction in our overall delivery times match, the reduction we're seeing in the speed of service within our restaurant operations. This is something we are working on closely with our delivery partners to ensure we are realizing the full benefit of the improvements we are making in speed. It's about consistent execution at every moment we interact with guests. We have a level of visibility into our operations we haven't had before, providing us the ability to identify opportunities for retraining and execution improvements in almost a real-time basis. As our restaurants attract new guests into the brand, ensuring that first experience meets our standards is critical to driving repeat visits and long-term loyalty. That means paring speed and accuracy with the hospitality and quality that defines Wingstop.

This focus on operating discipline is a critical part of how we are setting the business up for 2026, shifting from strategic investments to activating this growth engine that will drive us towards our goal of $3 million AUVs. With the Wingstop Smart Kitchen as an enabler, we are now in a position to widen the top of the brand funnel to bring in new guests and showcase those everyday occasions that Wingstop can deliver. That's where our new brand campaign comes into play, which we're calling Wingstop is here. Wingstop as a center of the plate occasion for everyone, and our campaign is focused on showcasing these occasions to expand awareness and consideration a significant gap we've benchmarked to levels of larger or more mature national brands. Even in this current operating environment is pressure on lower income guests have persisted we continue to see resilience across key occasions and customer cohorts. Dinner remains our largest and best-performing daypart, overall guest satisfaction scores continue to improve and higher-income households, particularly those earning between $50,000 and $100,000 remain the fastest-growing cohort within our digital customer base. As we win more of our fair share of our demand space, we fully expect to diversify our customer base across income and age categories from a more concentrated base today. The early results from our new advertising campaign suggested is performing well, delivering record high brand recall, reinforcing our ability to broaden consideration and attract new guests and win our fair share.

Our brand health metrics continue to remain strong. In fact, a data point to support this was in early February during the Super Bowl, a day that set a record for our business. To us, this was a powerful signal of the health and relevance of the Wingstop brand. Even in a more dynamic consumer environment, guests are still choosing to treat themselves and bring Wingstop into those moments that matter. It was our highest sales day on record. We acquired over 100,000 new guests in just 1 day and set record ticket levels. As execution strengthens through Wingstop Smart Kitchen, we are well positioned to win even more of these occasions over time. Alongside our opportunity to acquire new guests, it's equally important, we strengthen retention and drive frequency. We're still a low-frequency occasion with guests averaging only 1 visit per month. We see our new loyalty program. What we're referring to is club Wingstop is a powerful way to deepen engagement and further enhance an already compelling value proposition for our guests. A loyalty program that we believe will be differentiated, a loyalty program designed to strengthen the emotional connection to our brand through rewards, personalization, access to experiences and a best-in-class digital ordering platform.

During the fourth quarter of 2025, we launched a successful pilot of Club Wingstop to test the technology early features, enrollment strategies and reward models. This pilot has allowed us to gather enough learnings to be ready for a national launch at the end of the second quarter of 2026. While the pilot was focused on validating the functionality of the technology and the program, there are plenty of compelling signals in the data that are an affirmation of our strategy. Nearly 50% of active guests in the pilot market have already enrolled, including a majority of our heavy users. Frequency increased 7% among guests in the program versus their trend prior to the launch of the pilot. New guest retention rates are higher than benchmarks outside of the pilot market with over 30% of new guests signing up for the program. With a digital database of more than 60 million users and the Wingstop Smart Kitchen fully rolled out across the system, we believe we have the foundation in place to activate loyalty effectively.

As with any program of this scale, we anticipate that the impact of loyalty will build over time as enrollment grows and engagement deepens, coinciding with feature releases and enhanced personalization strategies, we expect Club Wingstop to contribute meaningfully to our strategy of scaling AUVs to $3 million. While we continue to focus on AUV growth, a significant part of our growth story is unit development, which we believe represents a structural competitive advantage for Wingstop. For the full year, we opened 493 restaurants globally, a significant achievement against our long-term opportunity of 10,000 restaurants globally. System-wide sales grew to over $5 billion. This marks another record year in development, and in our view, is one of the strongest indicators of the health of our business.

What gives us confidence looking and add is not just the pace of openings, but the visibility we have into future commitments, development demand remains broad-based across our brand partners, and our committed pipeline provides line of sight into delivering mid-teens unit growth in 2026, well above our long-term algorithm of 10% plus. This growth continues to be executed through playbooks developed at the market level, allowing us to scale in a disciplined and sustainable way while protecting our industry-leading returns. As we continue to fill white space and grow our restaurant base, development itself becomes a demand driver, a larger, more visible footprint increases brand awareness, amplifying the impact of our marketing. This advantage extends beyond the U.S. as well. In 2025, we expanded into six new international markets and opened more than 100 restaurants outside of the U.S., both first for our brand. The response from consumers globally is incredibly exciting. An example of this is our recent house of flavor that we opened in Milan during the Winter Olympics. This concept first introduced in Paris is an experiential venue that allows us to show consumers from across the globe. What's special about the culture of Wingstop.

We're excited to share that we'll be launching House of Flavors in key markets during the World Cup this summer. We have a proven market entry playbook and our success opening restaurants globally is fueling a strong business development pipeline. We anticipate opening our first flagship in Milan following Olympics, and building off the momentum from the House of Flavor in that country. Another new marketing industry we're excited about is India, a market that represents a significant long-term opportunity of more than 1,000 restaurants, where we are targeting an entry in 2026. Our global development reflects the confidence our brand partners have in the model and the proven portability of the brand, the investments we're making in talent and the substantial runway we see for Wingstop globally. Our focus remains on the long term, expanding the top of the funnel to capture more of our demand space executing our new operating standards through Wingstop Smart Kitchen and launching our differentiated loyalty program, Club Wingstop. All of which positions Wingstop to return to same-store sales growth as we move through 2026 and continue to grow system-wide sales.

At the foundation of our strategies are our people and culture. We have taken deliberate steps to ensure our leadership structure is aligned with enabling this next phase of growth. In January, we reinstated the Chief Operating Officer role with the appointment of Raj Kapoor. Raj is a seasoned global leader who joined us nearly 3 years ago from a large prominent global business, we helped more than double the business at scale from 25,000 stores to 50,000 plus. Since Raj joined us, he's built and developed his team to execute our international playbook. A great example is the opening of six new markets this past year. He also has a lot of experience delivering on 10-minute speed of service, an operating standard that has been in place in our international markets for years. Raj will lead global operations in development and is an incredible talent who has experienced operating scale brands globally.

We've studied how other successful global growth companies have scaled and applied those learnings at Wingstop. In addition to the COO role, we've taken an opportunity to optimize our leadership team to streamline decision-making, unlock growth opportunities for the talent we've been investing in and create greater clarity across the organization. This structure enhances operational consistency and accountability across the system globally while importantly, positioning our talent and company for our next phase of growth.

One important element of the changes in our structure was informed by the investments in our technology innovations. As we are approaching our loyalty launch, we saw an opportunity to create two teams that I believe will keep technology innovation, data analytics and insights as a competitive advantage. The first is the formation of what we are calling a commercial team that will harness our rich database and insights to execute our personalization strategies, including the national launch of Club Wingstop. The second is the formation of an analytics center of excellence to build capabilities, unlock deeper insights and accelerate best practices at scale. 2025 was a transformational year for Wingstop with the rollout of Wingstop Smart Kitchen, building our loyalty program, accelerating our global footprint and setting up an organizational structure that is positioned for this next phase of growth. 2026 will be about executing these strategies, and I couldn't be more excited by the progress we are making.

Before I hand the call over to Alex, I want to thank our brand partners, team members and shareholders for their continued support and confidence in Wingstop. With strong fundamentals and a robust development pipeline, we are executing a clear plan to drive AUV expansion, protect industry-leading unit economics and scale towards our long-term opportunity of more than 10,000 restaurants worldwide and our ambition to become a top 10 global restaurant brand.

With that, I'll turn the call over to Alex.

Thanks, Michael. 2025 was marked with a high degree of uncertainty, but we see it as a year that drove further clarity and confidence with the strategies we are executing. We remain focused on protecting our best-in-class returns, expanding our global footprint and returning to same-store sales growth in 2026 and beyond. In Q4, we system-wide sales increased to $1.3 billion, approximately 9.3% versus 2024, driven primarily by 124 net new restaurants partially offset by a decline of 5.8% in domestic same-store sales, which is attributable to the macro pressures our core consumer continues to face. The acceleration in unit growth translated into an 8% increase versus the prior year in royalty revenue, franchise fees and other revenue for a total of $81.9 million.

At the restaurant level, company-owned margins remained healthy and company-owned restaurants continued to outperform the broader system. Our company-owned same-store sales increased 1.6% in Q4. A combination of factors, including operating our new standards consistently and enabled by having the Wingstop Smart Kitchen in place for over a year. The customer mix in our Dallas restaurants also is more diverse than some of the more concentrated demographics in our system overall. The performance in our corporate restaurants illustrate the opportunity ahead. The combination of improved speed and consistency from the Wingstop Smart Kitchen pair with our new brand campaign is begin to show how these initiatives can work together to positively impact performance over time.

Overall, company cost of sales in the fourth quarter were 75.6%, an improvement of 200 basis points versus 2024. Food costs were largely stable as a percentage of sales, benefiting from lower wing costs in our supply chain strategy, which continues to provide strong visibility and predictability into food costs. For modeling purposes, we anticipate company-owned cost of sales to be in the range of 75% for 2026. These results highlight the strength of our unit level economics, which remain among the best in the industry and continue to fuel brand partner demand for more Wingstops.

SG&A increased $2.1 million versus the prior year comparable period to $33.3 million in the fourth quarter of 2025, driven primarily by headcount-related investments to support the growth and scale of the business, along with continued investments in technology. These increases were partially offset by lower incentive-based compensation versus the prior year. Overall, we remain disciplined in how we invest while ensuring we are appropriately resourced to support our long-term strategies. Our profitability remains strong. Adjusted EBITDA in Q4 increased approximately 10% versus 2024 to $61.9 million, underscoring the durability of our model. The strength of our model allowed us to deliver adjusted earnings per diluted share of $1, an increase of 5% this quarter versus 2024. This includes an $0.18 per share impact from the additional interest expense associated with our $500 million securitization transaction completed at the end of 2024.

Development continues to be a major contributor to our financial model. We have scaled from 255 net new restaurants in 2023 to 349 in 2024, and now to 493 for the full year in 2025, providing meaningful growth in system sales, royalty revenue and adjusted EBITDA. Importantly, this growth is supported by attractive unit economics, with domestic AUVs at $2 million on a low upfront investment of roughly $580,000. And our asset-light model continues to generate strong free cash flow which allows us to invest in the business while also returning capital to shareholders in a disciplined and consistent manner. During 2025, we returned over $250 million of capital to shareholders through a combination of dividends and share repurchases.

On February 17, 2026, our Board of Directors authorized and declared a quarterly dividend of $0.30 per share of common stock to be paid on March 27, 2026, to stockholders of record as of March 6, 2026, totaling approximately $8.3 million. In the fourth quarter, we repurchased and retired 248,278 shares at an average share price of $241.65. At the end of 2025, $91.3 million remained available under our existing share repurchase authorization. Since inception of our share repurchase program in August of 2023, and we have repurchased and retired over 2.5 million shares of common stock at an average price of $258.64. Our ability to consistently return capital remains an important component of our strategy to maximize shareholder returns.

Let's now move to guidance for 2026. We are continuing to execute against the long-term strategies that we have reinforced throughout 2025, strategies designed to return Wingstop same-store sales to growth. Similar to what we shared on our last call and as we entered 2026, we expect that the consumer environment to remain choppy with continued pressure on our core consumer. That said, we believe the strategies we have in place position us to navigate this current operating environment. As the Wingstop smart kitchen execution continues to unfold, loyalty launches nationally and our marketing efforts continue to broaden the top of the funnel, we believe these strategies will lead us to a return to same-store sales growth.

With that, our 2026 outlook for domestic same-store sales is flat to low single-digit percent growth. Global unit development remains a key contributor in 2026 as embedded in our outlook. Based on the strength of our committed pipeline and the visibility we have today, we anticipate global unit growth to be between 15% and 16%, well above our long-term algorithm of 10%. This growth is driven by broad-based demand across our brand partner base and continued expansion internationally. As we look to the cadence of openings this year, we expect the first half to be a bit lighter relative to the balance of the year. This is largely related to the fact that we unveiled a new restaurant refresh design, a design that drive inspiration from our international restaurants. And while a change was not mandated, many of our brand partners have proactively elected to retool construction plans to incorporate this new design into restaurants scheduled for early 2026, which extends construction time lines modestly. Importantly, however, this does not change our full year expectations.

SG&A guidance is estimated to be between $151 million and $154 million, which includes approximately $32 million of stock-based compensation expense and $3 million of restructuring charges associated with the organization changes Michael discussed earlier. By utilizing these inputs and for modeling purposes, our adjusted EBITDA growth rate translates to approximately 15% in 2026. Our financial performance in 2025 underscores the strength of Wingstop's model. We delivered double-digit revenue growth, mid-teens adjusted EBITDA growth, record unit development and provided significant capital returns, while continuing to invest behind our long-term growth strategies. We are proud of the progress we have made against our strategies and confident in our position as we enter this next phase of growth. What impresses me most about Wingstop is the people and culture that transcend the brand. While 2025 is a year with a lot of uncertainty, our team remains focused on executing our strategies and have us on our path to scaling Wingstop into a top 10 global restaurant brand.

With that, operator, please open it up for questions.

[Operator Instructions] The first question today comes from David Tarantino with Baird.

Michael, I just wanted to ask about the guidance for comps to turn positive this year. So I guess two parts to my question. One, are you already seeing signs of improvement in the first quarter relative to what you did in the fourth quarter? And then secondly, I guess, you laid out all the initiatives to try to understand, but I was hoping you could just talk about your degree of confidence in the turn there in light of all the macro cross currents.

Good morning, David. I guess to start with the first part of your question, maybe I'll start a little bit with the fourth quarter. And I would say, generally speaking, the trends played out pretty much in line with our expectations. On our last earnings call, we talked about trends had stabilized, and we saw that continue into the start of 2026. I will tell you, we're not usually want to talk about weather, but we did have with -- associated with some of the winter storms a few weeks ago. We did have at its peak over 700 restaurants that were closed and then the second wave there, another 400 restaurants. And so that obviously impacted our trend as we look at it in 2026. But as we think about the year, we anticipate sequential improvement as we progress through the year and a return to growth as these strategies come together. And what I would really say, David, is 2025 was focused on the rollout and operationalizing Smart Kitchen in 2026. We're laser-focused on execution and delivering a consistent 10-minute speed of service, and what we're seeing in the data and the results is really encouraging.

The next question comes from Chris O'Cull with Stifel.

Michael, what percentage of the system is already achieving the 10-minute ticket time consistently? And then can you give us a sense of the initiatives or training you think is going to be necessary to get the remainder on track to achieve those times? Then I had a follow-up.

Yes, Chris, it's a great question, and thank you. What I would say is, and I think we mentioned it earlier, we would say, if you look at it, roughly 50% of the restaurants are hitting 10 minutes, but that's us looking really at kind of daily and weekly averages. And what's super important and one of the things we've really started to lean into is it's every order. It's every guest occasion where we deliver that 10 minutes. And so we're really starting to cut the data and look at it super closely. And the way we're attacking this, really, it's not anything I would say new for our brand, and these are some initiatives that we actually deployed in our company-owned restaurants over a year ago. One of them starts with just an operation scorecard, where we are measuring performance against this new Wingstop standard and continuing to track progress against that. And then the other thing is our brand partners as we started 2026, and they launched their new incentive comp programs for their teams. They have incorporated these metrics, which we know from history will drive the right behavior. And so that is already having an impact as we look at just total number of orders that are delivering on a 10-minute speed of service. Just from the beginning of this year to today, we've already seen a 10 percentage point improvement. And so we're encouraged by the progress we're making, and we're focused on the execution and delivering on that 10-minute speed of service because we can see the impact of when we do and the numbers and how guests engage with our brand.

That's helpful. And then you mentioned delivery times, we're not seeing the same level of progress as of service improvements in the back of the house. Why do you think that's happening?

Chris, this is Alex. Yes, it's an interesting question. I think we've got really good partners with us on our delivery marketplaces. And we talked about before just the algorithms taking some time to improve. But similar to how we're measuring success with our restaurant teams. We also have some operational things we're working through with driver performance on delivery times. So we're working through that. But we've had a step down of about 15% delivery times. And to Michael's point on the improvements we've seen this year, we're also seeing those improvements in delivery times. One other data point is on our dinner daypart on Friday-Saturday night, where a majority of new guests are coming in. We're delivering about 10 minutes about 30% -- and 30% of our restaurants are delivering 10-minute service times, but if you look at the delivery times of those getting under 30 minutes, you could probably cut that number in half in terms of percent of restaurants. So it speaks to the opportunity we're working on, that we're laser-focused and to Michael's point is all about execution this year.

The next question comes from Jeffrey Bernstein with Barclays.

My First question was just on the long-term guidance. I believe in the past, you've talked about mid-single digit for the next 3 to 5 years. I know that's a moving target. But what indicators would lead you to tweak that downward. I know your long-term guidance beyond that time frame is low single digit, and that is the 2026 guidance for flat to low. So I'm just wondering or maybe you're assuming a return to mid-single digit next year. Just wondering how you think about the the framework of that currently assume mid-single digit for the next few years? And then I had one follow-up.

Jeff, I think clearly, we've acknowledged and you've heard other brands acknowledge just the current environment we're in right now. But I would say what we're focused on this year is really things that we can control, and that's around execution delivering a consistent 10-minute speed of service. And then as we look to the back end of Q2, the national launch of our loyalty program, which we're really excited about. And doing that in a way that we think will be best-in-class. And we think the combination of those two things will will drive our business and allow us to return to growth, and that's what we're focused on and think that will allow us to deliver on the outlook that we shared in our prepared remarks this morning.

Understood. And my follow-up is just I was looking back for a second in terms of maybe some learnings from 2025. You called it a transformational year, but seemingly disappointing with the comp below your plan and maybe what you were initially targeting and obviously being the first negative in a long, long time. But if you were to look back, I mean, what do you believe were internal versus macro? Maybe what would you have done differently, things that maybe were in your control, or would you say you know what the entirety of the disappointment on comp was macro-driven?

Jeff, I would say when we look at 2025, we talked about it throughout the year, I think, quite a bit. But we looked at really the underlying health of the brand. And we saw really strong signals there. We saw frequency holding. We saw quality and satisfaction scores increasing. And we look at our dinner daypart as an example, a key daypart for us. It remains strong. And we did see some pockets of softness in certain dayparts like lunch and snack, but we really focused on 2025, and I think what we're really proud of is in over 2,500 restaurants, we implemented something like Wingstop Smart Kitchen, a new kitchen operating platform in 10 months, which is pretty remarkable. And so the effort by our brand partners, by their team, by our team is pretty remarkable. And so it could have been easy for us to really get caught up and solving for the short term, but our focus is making sure we're investing strategically and setting the business up for that next phase of growth. And as we look at 2026, that's what we're really excited about.

The next question comes from Christine Cho with Goldman Sachs.

Really great to hear the impact of Smart Kitchen on speed of service, and how guests are rewarding you for that consistency. But I'd love to learn more about how it's impacting the staff and the restaurant team specifically. I think you've previously mentioned, it helps to reduce the time to train the new staff and improve kind of staff retention. Are there any early signs or metrics you can share on how it's impacting the labor productivity in the stores?

Hi, Christine, good morning. I think we shared a few times throughout 2025, that in our corporate-owned restaurants, we were experiencing some of the lowest turnover we've had. And I think that is a strong indication of the team members' experience with this new kitchen operating platform. And quite simply put, it provides a high degree of focus, and generally speaking, it makes it easier for them to do the job we're asking them to do to take care of our guests. And so that's been super encouraging. But it can be taken lightly just the culture change this is for our restaurants. We were a brand that has shifted or evolved from operating our kitchens with paper kitchen tickets to now this new technology platform. And so change management and navigating that has been a big focus. But generally speaking, the -- as I've gone out into restaurants around the country and talk to teams the excitement and engagement with this new kitchen operating platform is really positive.

Great. My follow-up is related to the advertising could you discuss how you are assessing kind of the performance of the new Wingstop this year campaign? Any early indicators that you're seeing that is helping you capture kind of a larger share of everyday dining occasions and bringing kind of new guests into the brand.

Christine, yes, that's a great question. And we're really encouraged by what we're seeing in our Wingstop is Here campaign. We mentioned it in our prepared remarks, but that -- this new spot we're running right now is delivering the highest brand call we've ever had on record, which is super encouraging to see. But one of the things we look at is really our digital database, which gives us the most visibility and insight into our overall business and to the customers. And it's easy to kind of look past the fact, if you look at 2025 and the environment we're operating in, to look past the fact that our digital database grew by 20% in 2025, which is pretty remarkable. And as we look and study that data, we're seeing still Gen Z being one of the highest growth cohorts that we have. And what's been really interesting and kind of when we look at this new ad campaign, quarter-over-quarter, we're starting to see growth emerge in other demos such as Gen X, the highest growth being in that 50,000 to 100,000, but we're actually seeing growth in the 100,000 to 150,000. And what's interesting about that cohort is they're demonstrating the frequency that's very similar to our core. So I think as I look at all of this together, I think we're really encouraged by what we see in our ad campaign, and how it's working for us. But yes, it just highlights the opportunity we have in front of us to win our fair share of our core demand space, which also we believe will translate into an opportunity to diversify our customer base a little bit.

The next question comes from Brian Harbour with Morgan Stanley.

Michael, could you just elaborate on some of the leadership changes that you made, and why you thought now was sort of the right time to do those?

Hi, Brian, good morning. As I take a step back and look at our business and just look at it over the last few years, the reality is our business has doubled, whether you look at it restaurant count size, systems, sales, EBITDA, significant growth. And as we looked at this next phase of growth in front of the brand, I would really distill this all down to really, it's just us playing offense and making sure we're positioned for this next phase of growth. We have the clarity around decision-making. We're unlocking the opportunities and really investing in the talent that we've hired over the last few years and setting that bench up and continuing to grow that. This new design is really around driving greater clarity around operational consistency, increasing accountability. But again, it all comes down to really just positioning the brand for this next phase of growth and our ability to execute against that.

Okay. Got it. And then on the third-party delivery platforms, what do you think will sort of further optimize the times there? And I guess, secondarily, I think those guys are beta testing sort of a genetic AI ordering on their platforms. Have you discussed with them how you sort of present in that scenario, how to make sure that Wingstop sort of is prioritized and still is kind of ranked highly in that situation?

Yes, Brian, I would say I don't think anything has changed. If anything, maybe it strengthen as it relates to our partnerships with our third-party delivery providers. And we've talked about it over the years, but they value our business like our business. It's good for their business. And so this is an opportunity, I think, for us to continue to grow and strengthen our businesses together, whether it's through continued innovation, as you referenced. But one of the things that's really powerful about Wingstop Smart Kitchen is it's given us a level of visibility that we didn't have before. And so we know exactly when orders are prepared when they're ready, and it's allowing us to have a little bit elevated visibility, drive accountability and make sure that we're delivering on that guest's expectation around as it relates to third-party delivery. And so it's something we're going to continue to work at and our partners are committed to improving that experience and increasing those times that guest experience. We're pretty excited about continuing to partner with them.

The next question comes from Zack Fadem with Wells Fargo.

On the topic of value, there was a lot of success around your 20 for 20 deal over the summer. And considering the deceleration afterwards, just curious to hear the thought process around not bringing that deal back. And with wing costs still favorable, any thoughts on leaning more into value in 2026?

Yes. I think when we think about value, we actually look at the overall proposition, and it's not just price. It's the quality, it's the experience, it's the speed. It's delivering on the guest expectations. And obviously, price is a component there. And I think that's where we're going to focus as we continue to scale the brand. I think I mentioned earlier, we did see in our business in 2025, some pockets of softness in certain dayparts like lunch and snack. And there could be an opportunity targeted towards certain cohorts towards certain dayparts where we can showcase existing value on our menu today, whether that's an entry-level price point for chicken sandwich or tenders. And so I think there's some opportunity there. But I think for us, it's about winning our fair share, delivering on the total guest experience, which obviously we think quality, price and speed are going to be -- and a consistent experience are elements that allow us to win.

Got it. And then as you think through the dynamics of double-digit unit growth and comps more challenged in '25. Could you walk through some of the data and KPIs that you're looking at that give you comfort that cannibalization hadn't been worse in 2025?

Zach, this is Alex. One of this -- our approach is that really helps us guide the for development is these market-level playbooks that we develop that line up to our 6,000-plus restaurant target in the U.S. And we have visibility into sales predictions and data that surrounds the restaurants we make choices. And then we measure the result of those restaurant openings. And I think what gives us confidence to continue at the level of growth ever seeing is the results from the restaurant openings we've had in the last few years. And we haven't seen a material change versus historical trends in cannibalization to size up for you in 2025, it might have been 40 basis points more than what we had in prior years. And when we cut the data in 2025, 90% of the impact that we're seeing is from brand partners making strategic decisions to impact the restaurants as they fortress the market. And then when you look at the characteristics of the restaurants that were impacted, and we've talked about this before, is typically restaurants that have higher volume or tend to be an older vintage or have maxed out capacity in the restaurants from these small boxes that they operate in. So nothing that we see that concerns us, and we're continuing to stay focused on that unit growth opportunity for Wingstop.

The next question comes from Sara Senatore with Bank of America.

Just I guess, I'll start with the follow-up and then I'll ask the real question. The comp gap between franchisees and the company, I guess it narrowed a little bit. Should I interpret that as kind of half glass half full, which is the franchisees are kind of ramping up the learning curve. I just know last quarter, you saw a really wide gap and that seemed to signal kind of the building tailwind in your company stores from the Smart Kitchen. So anything to comment on there? And then I'll ask my question.

Hi, Sara, we appreciate the question. What I would say is there's -- obviously, our company-owned restaurant portfolio, it is a small number of restaurants. And so there can be nuances within that, whether it's little things like a fire in the back of house or some other electrical issue that could cause the restaurant to be down. We're encouraged by those results that we have in our corporate restaurants. But I think if you take a little bit of a step back and look at a broader sample like the entire DFW market, it actually outperformed our corporate restaurants, which to us continues to just be further proof points around the opportunity we have with Wingstop's market. We're super excited and encouraged by the progress that we're seeing throughout the system. I referenced it earlier, where over 50% of the restaurants, they're delivering an average time speed of service day in and day out. But as we start to fill it apart, and look at daypart specific, that's where we're focused, and it really comes down to execution. And we're already seeing progress against execution in 2026. And so we're going to continue to focus on that and deliver on the guest's expectation around speed.

Got it. That's very helpful. And then on the loyalty question, the lower program that you're launching, I know you mentioned it's kind of a lower frequency occasion once a month. I guess the 7% increase in frequency, you saw [indiscernible] in the program from other across the the sort of restaurant industry, we hear a wide range of what joining loyalty might mean for increased frequency. Sometimes it can be much higher than that, although I don't know how sustainable it is. Would you expect that to increase sort of further as you deploy more of this sort of targeted marketing that 7%. I just think about one time per month average frequency is maybe low for traditional QSR, but perhaps more typical fast casual. So I'm just trying to figure out how high that frequency could go, and what loyalty could do for it.

Yes, Sara, we think loyalty is going to be an incredible driver for us as we think about frequency long term. And we've talked about it before, but we're not trying to be overshoot here at all. Just one more visit a quarter from our average guest is a meaningful step towards that $3 million AUV target. And what we are seeing in our loyalty pilot gets us pretty excited. I mean this pilot, it was obviously centered around testing the technology, the features, the enrollment process, but the early signals we're getting out of it have us pretty excited about what this can mean for our business long term. We have over 50% of our active guests have enrolled. We're seeing the strongest level of adoption through our highest-value guest. And what's really exciting for us is, we're seeing over 30% of new guests signing up. This is already translating in the pilot to an improvement in retention, a slight improvement in frequency, and that's without really any national support. So as we think about additional features of supporting the launch nationally, we're excited about what loyalty can mean for our business, not just for 2026 for long term as we think about our path to $3 million AUV.

The next question comes from Jon Tower with Citi.

Maybe just a quick follow-up on the last point on loyalty. Are you guys embedding any sort of a headwind from an accounting standpoint related to implementing the program.

John, this is Alex. There's nothing material at this point to consider. And one aspect, maybe just to share a little bit differently from others is that we do anticipate, to Michael's plan, to build the $3 million that this will be margin accretive over time. And I think a lot of other loyalty benchmarks also include offer components that elevate maybe kind of discounting, ours is about rewards that can be redeemed for other things such as merge and experiences, other aspects that really drive that emotional connection for the brand.

Got it. And then I guess, one of the comments, Michael, you had made regarding the smart kitchens as you're starting to see more consumers kind of pivot to lunch relative to stores that don't have Smart Kitchen I'm just curious, have you seen any other -- or any impact on mix as a result of that?

No, I wouldn't say anything to call out as it relates to mix. We're just seeing when when we can deliver on that speed expectation, which it's pretty clear is associated with the lunch occasion and do that on a consistent basis, we're seeing strength in those restaurants in that daypart.

The next question comes from Gregory Frankfurt with Guggenheim Securities.

My question is on international. I mean, obviously, a lot of openings this quarter. And I guess I'm just curious as you think about the unit growth guidance for next year, do you think international could run up kind of close to 30% store growth again? And how has the business performed either from a comp or AUV perspective recently?

Appreciate the question about international. And it's an area of the business that we've been talking about for what feels like years talking -- referring to it as being supercharged for growth, and it's exciting to see that come alive in the business. And I think as it relates to your comments around unit growth for international business in 2026, I think that's a good way to think about it. Those businesses are opening really strong. We're continuing to expand and build out markets. The average unit volumes we're seeing in most of these new markets is well above what we experienced here in the U.S. business. And as you can see from the excitement from our partners and the pace of development, the returns they're seeing are really strong as well. So we're encouraged by the progress we're making there and continue to see that as a really exciting part -- long-term part of the growth story here. And I think we referenced it in our prepared remarks that we have additional new markets coming online this year, one of those being India that we're really excited about and the potential there.

The next question comes from Danilo Gargiulo with Bernstein.

Wondering if you can comment how the outside Hispanic consumer viewership at the Super Bowl may be thanks to [indiscernible] was impacting your customer acquisition that week? Maybe if you can give some composition of your 100,000 new users on that day alone. What learnings do you draw from that experience? And how do you think that's going to be informing your advertising strategy, especially during the World Cup this summer.

Danilo, thank you for the question, and good morning. Super Bowl, we were -- we're pretty excited about what we saw in Super Bowl. It was our first Super Bowl with Wingstop Smart Kitchen deployed across the system. It's pretty incredible to think we're actually able to deliver an average speed of service on that day of 20 minutes. Clearly, that's above our 10-minute target. But I can remember the days when most restaurants would turn off their digital ordering platform because demand and volume was so high. And so we believe we saw something pretty special. As we look at the business on that day, it was a record day of sales for our business, but we brought in over 100,000 new customers. Really encouraged by what we saw in the business on that day. And I don't think it will fundamentally shift our advertising strategy as we think about 2026 or even the summer around the World Cup. You're going to see us deploy, which we referenced in our prepared remarks, deployed this house of flavor concept in a few cities, which we think will be a great tool to continue to expand brand awareness, but we see the opportunity we have with our core demand space. It's about continuing to broaden, the top of the funnel versus maybe getting more narrowly focused on a specific cohort.

Great. And then I would like to follow up on the delivery opportunity because it sounds like you're working with this; market into control what's within your control, right? It's accelerating reducing the core time accelerating even just the speed of service, but there is another component of delivery, which does not depend on you, right? It depends on the third-party aggregators. And so the way that you show up on aggregator platform does not fully depend on you. You might be depending also on third parties. And I'm wondering, when you say we're still collaborating on third-party aggregators on how we show up on this platform. What kind of levers do you have at your disposal to make sure that the brand is a little more relevant for a consumer who actually just search for wings or more broadly in the [indiscernible]

Hi, Danilo, good question. And that's part of our strategy as we partner with the marketplace to talk about how we invest together on advertising their platforms. You can almost think about them as a different vehicle to drive awareness. And so when we're each month, each week, we're talking about different ways to elevate Wingstop visibility. And so Michael's earlier points on the call today, they're highly motivated to invest buying Wingstop and grow our business because of the characteristics of our transaction. And so we have a lot of those partnership conversations as we go through the year to ensure that we're getting the elevated visibility in the platform through banners or listings or areas like that.

The next question comes from Andy Barish with Jefferies.

I wanted to circle back and double-click on the international side of things. Just a quick kind of refresher on what's changed sort of in your strategy in entering new markets? And any information on the partner in India that you guys may have put out at this point?

Andy, I would say as it relates to international and our new market entry playbook, I would say it's something that we really started to hone in and dial in within the U.K. and our entry there, and it's been something we've continued to refine and build on, and we continue to see it strengthen as each new market comes online, and the demand and the acceptance and the relevance of the brand that we're seeing with consumers around the world is pretty remarkable. We referenced in our prepared remarks, the house of flavor that we are -- where we popped up in Milan to prepare for that new market entry here in a few months -- a couple of months. And the receptiveness of a market that is really known for being critical about food is the way I'll describe it. The receptiveness is remarkable. The demand, the number of people we've served there is super exciting to just showcase that the portability of the brand and the strategy that we're executing. And so you're going to see us continue to lean into that. It's working, and we're encouraged by what we see in each new market that we open. As it relates to India, we haven't really disclosed specifically who that partner is, and we'll get into that, but it's someone that we know very well and has proven and excited about about bringing Wingstop to the India market, which we mentioned on our prepared remarks is an opportunity that represents over 1,000 restaurants.

The next question comes from Peter Saleh with BTIG.

I guess my first question, operationally with the Smart Kitchen. Do you feel like you need to have consistent 10-minute ticket times to feel comfortable in the launch of the loyalty program at the end of 2Q. I just worry if you launched a loyalty program, you have all this demand coming through if you're not ready operationally, so just thoughts on that would be helpful.

Peter, I might answer your question a little differently. And that is I am highly confident based on the level of focus from our brand partners, the level of focus from Raj's team, the level of focus from our teams that we will be at a consistent 10-minute speed of service as we progress through the year. And so it really doesn't have anything to do with or doesn't influence how we're thinking about loyalty. That execution is something that's within our control, and I'm confident we will deliver on that. The launch of loyalty is really around the opportunity we see, a lever we've known for years that we've had to pull, and it does have to do with the fact that we know that consumers want this. They've told us that they want loyalty with Wingstop, but we're able to do it in a very differentiated way. And clearly, delivering on consumer expectations around speed and consistency is just going to be a further catalyst to what loyalty can do for our business long term.

Great. And then just lastly, can you talk a little bit about maybe how -- once you get to the 10-minute speed of service and you're comfortable, how do you communicate that faster speed of service to the consumer? Is there a way to do that, or do you just let this happen organically?

Peter, it's really a bit of both. And it's kind of what we're seeing in our restaurants that are consistently operating at 10-minute service times. We are seeing that organic change and how the guests engage with us, whether you look at new gas retention frequency, the delta and same-store sales performance, all those factors have come into play without us communicating differently. Michael also mentioned some opportunities just as we talk about the overall value proposition for the guests. And I think there's examples at a lunch or late-night daypart, where we can bring forward these compelling entry points into the brand with chicken sandwich or tenders, but they'll also -- in a daypart set, speed expectations are much different than dinner. And so we think the combination of those 2 and how we bring forward these menu items will be an opportunity to showcase our speed as well.

This concludes our question-and-answer session and concludes the conference call today. Thank you for attending today's presentation. You may now disconnect.

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Wingstop Inc.'s Fiscal Third Quarter 2025 Earnings Conference Call. [Operator Instructions]. Please note that this conference is being recorded today, Tuesday, November 4, 2025.

On the call today are Michael Skipworth, President and Chief Executive Officer; Alex Kaleida, Senior Vice President and Chief Financial Officer; and Sarah Niehaus, Senior Director of Investor Relations.

I would now like to turn the conference over to Sarah. Please go ahead.

Thank you, and welcome to the Fiscal Third Quarter 2025 Earnings Conference Call for Wingstop. Our 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 condition. 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 each of you please keep to 1 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.

Good morning, everyone. We appreciate you joining our call. Coming into 2025, our priorities were clear: accelerate our global footprint as we scale towards our goal of over 10,000 Wingstop restaurants execute the national rollout of our new kitchen operating platform across our 2,500 domestic restaurants and delivered average unit volume growth as we scale towards our target of $3 million. Following 2 industry-leading years of same-store sales growth, stacking comps of roughly 40%.

Through the first 3 quarters of 2025, we have opened 369 net new restaurants, representing a 19% unit growth rate while surpassing our expectations. And we are quickly approaching 3,000 restaurants globally, not even 1/3 of our potential. System-wide sales have grown by 13%. And on a trailing 12-month basis, system-wide sales exceeds well over $5 billion. The strength of our highly franchised asset-light model has delivered 17% adjusted EBITDA growth in the same time frame.

And as of this past week, we have implemented our new kitchen operating platform in over 2,000 restaurants. Keeping us on track to have the national rollout completed by prior to year-end. We shared earlier this year that certain regional pockets, which over-indexed to Hispanic and low-income consumers we're experiencing some softness in sales as we lap 2 consecutive years of industry-leading same-store sales growth.

During the third quarter, we saw this dynamic broaden across the industry and within our business to more geographies as well as to the middle income consumer in some areas, resulting in a 5.6% decline in same-store sales in Q3, that was below our expectations. We believe this is temporary, and the current consumer environment will prove to be cyclical.

While none of us can predict the duration where I am focused is on the strategies we are executing that position Wingstop to return to same-store sales growth and further strengthen our already best-in-class unit economics. What gives me confidence is the underlying fundamentals and health of the brand that remains strong and the early results we're seeing from our strategies being implemented in 2025.

Let me touch on each of these strategies we are investing in that we believe will scale AUVs towards our target of $3 million. First, our new kitchen operating platform, Wingstop Smart Kitchen is truly a game changer. As I mentioned earlier, we are live in over 2,000 restaurants. We are seeing more and more restaurants that have been on the new kitchen operating platform start to consistently deliver a 10-minute speed of service, truly incredible to think about. That's over a 50% reduction from our prior speed of service levels.

Our consumer research and early results in markets with the Wingstop Smart Kitchen show that speed and consistency are sizable opportunities for us to become more of the consumers' consideration set. Our brand partners are fully bought in, motivated to execute our new operating standards and maximize the investment they are making.

Our Southwest region which has the highest concentration and longest tenure with the new kitchen operating platform is consistently delivering these 10-minute speed of service levels with 100% of restaurants, seeing improvements in guest satisfaction scores, particularly in areas such as accuracy and consistency.

Additionally, during the last quarter, same-store sales growth in the Southwest region had a mid-single-digit delta versus the U.S. average. What we're learning is restaurants begin seeing measurable improvements in guest scores following 8 weeks of go-live and sustaining performance into a 3- to 6-month window from implementation where new guest retention rates and frequency strengthen, reinforcing that the benefits are consistent, repeatable and scalable across the system.

As we enter 2026 and begin supporting this game-changing improvement, in our speed of service levels with marketing. We anticipate this curve will start to accelerate and position us to win more share of occasions in our demand space. Second is our new marketing campaign.

Let me first help explain our core demand space where Wingstop is best positioned to win and who we need to target to fully appreciate the significance of this new campaign. It starts -- it's a party size of 2 or more adults who prioritize a high-quality restaurant experience and access brands through off-premise occasions. These guests aren't anchored to a specific demographic. They are equally representative across ethnicity, income level or age. The fact is today, we are only winning roughly 2% of this demand space. And we believe we have a runway to gain our fair share at 20% over the long term. It starts with filling the top of the funnel and attracting new guests into the brand. Our gap in awareness to larger, more mature national brands is more than 20%.

And as consumers become aware of your brand, consideration becomes an unlock where we have an even larger gap to these same brands. This is where our new ad campaign comes into play. The tagline is, Wingstop is here. Our new campaign will showcase how Wingstop fits into everyday life moments. A friend hosting dinner for game night, streaming a show with your plus 1, a quick lunch with coworkers or that late-night indulgent craving only Wingstop can fulfill.

Insights and moments informed by our more frequent guests. It is easily centered on reminding our core fans of that indulgent Wingstop occasion they know and love and educating new guests on how Wingstop fits into everyday life.

Our new campaign is centered around broadening the top of the funnel and bringing in guests and occasions, we are best positioned to win. I am extremely excited to see the interplay of this new marketing campaign and our kitchen operating platform, the Wingstop market, come to life, and I believe it will be a powerful unlock for our business.

The third strategic investment is loyalty. We have a best-in-class digital platform representing over 70% of sales, and we have amassed a database of over 60 million users, all without a loyalty program. Our technology platform, which we refer to as my Wingstop has positioned us for that next natural extension of our digital journey with the launch of a loyalty program that we are branding as club Wingstop. The addition of our loyalty program is just another tool in our digital flywheel that would allow us to drive behavior and win more of those occasions we are best positioned for.

It will connect our rich first-party data with personalized offers and experiences to increase frequency and lifetime value. Club Wingstop will bring a hyper-personalized digital experience to life in a way that only Wingstop can, not through discounting, but you curate one-of-a-kind access to content, flavors, merchandise and experiences. We are currently in the pilot phase. Sign-up rates and guest engagement are ahead of our expectations.

Based on early results, it's validating the extensive research and insights from our existing personalization strategies that informed the design of our program. It will truly be a differentiated loyalty program that we can bring to guests. We're on track for a national launch of our loyalty program by the end of the second quarter in 2026.

As we look to 2026 and consider our Wingstop Smart Kitchen, our new ad campaign and loyalty all coming together, there is a lot to be excited about, and I believe positions Wingstop well for this next phase of growth. Just last month, we hosted our brand partners at our annual franchisee conference. You could really fill the energy and enthusiasm in the brand. And it was clear they share my excitement around these investments we are making to support this next phase of growth for Wingstop.

The opportunity to scale Wingstop to over 10,000 restaurants globally remain significant. We are now opening more than 1 Wingstop per day. The demand from our brand partners is as strong as it's ever been. It holds true for a 5 restaurant brand partner or a 100-plus restaurant brand partner. We are executing our development strategy through our market-level playbooks that allow us to grow in the most sustainable way and maintain our industry-leading unit growth.

In our most recent quarter, over 70 unique brand partners opened a Wingstop in over 100 different markets across the U.S., which really showcases the breadth and depth of demand for unit growth across our brand partners. Based on the strength of our pipeline, we now have line of sight into delivering a unit growth rate in the mid-teens range for 2026 and well above our long-term algorithm of 10% plus unit growth.

Outside of the U.S., we are making tremendous progress with new market openings, and our growth rate continues to accelerate. We've opened in several countries throughout the GCC, launched a brand building site in the Netherlands, expanded in France with multiple flagships and are preparing to launch in Ireland, Thailand and Italy. We're proving the world needs our flavor and brand partners need our best-in-class unit economics. And we're just getting started in bringing Wingstop to guests around the world.

Most recently, we finalized a landmark agreement for Wingstop in India, a market with an opportunity of over 1,000 restaurants. Our international success shows the strength of the brand and the significant global runway still ahead. As of the end of Q3, our development pipeline yet again, sits at a record level and just continues to build. A powerful signal that our bent partners see what we see, a runway for sustained profitable growth supported by industry-leading returns. As our business continues to scale, we believe our obligation to give back grows as well.

About a year ago, we announced our partnership with St. Jude's Children's Research Hospital. The work that is happening at St. Jude is remarkable. And our brand partners, team members and fans have embraced the opportunity to contribute to St. Jude's lifesaving mission, finding a cure for childhood cancer. Since this partnership started a year ago, I'm thrilled to share that we have raised nearly $3.5 million as a system, and we're not going to stop there. We believe in St. Jude's cause and see this as a lasting partnership opportunity for our brand.

There's a lot to be excited about at Wingstop. We are focused on executing against strategies that we believe will position Wingstop well for the next phase of growth, providing line of sight for continued AUV expansion and maintaining industry-leading unit economics as we continue to expand our global restaurant count towards our goal of over 10,000 restaurants.

The progress we've made in rolling out the new Wingstop Smart Kitchen platform, building our loyalty program and opening over 350 net new restaurants globally in just 9 months is a testament to the people who are relentlessly focused on scaling Wingstop into a top 10 global restaurant brand. Our strategy is only as good as those executing and I want to take a moment and thank our brand partners, supplier partners and team members across the globe for their efforts.

With that, I'd like to turn the call over to Alex.

Thank you, Michael. Our third quarter performance is a testament to the continued strength and resiliency of our highly franchised asset-light model, delivering 10% system-wide sales growth, 19% unit growth and nearly 19% adjusted EBITDA growth. This performance reflects our disciplined focus on the long term, not reacting impulsively to the short term but rather executing against our proven playbook. Our success in the last 3 years has been fueled by this playbook. And while we're navigating an evolving consumer backdrop, our unit economics continue to hold strong, driving an industry-leading unit growth outlook.

By seeing committed to our strategies, investing behind initiatives such as the Wingstop Smart Kitchen and our loyalty program, we believe this is positioning us to be able to win our fair share of our core demand space and continue driving sustainable best-in-class returns for our brand partners and shareholders alike.

Our highly franchised model continues to generate durable capital-efficient growth. System-wide sales grew in the third quarter to $1.4 billion, fueled by 114 net new restaurant openings, marking our fifth consecutive quarter of adding more than 100 net new restaurants.

Through the first 9 months of the year, we've opened 369 net new restaurants at a unit growth rate of 19%. The appetite for expansion across our brand partner base has never been stronger. We're experiencing record demand for new development with brand partners reinvesting behind the strength of our unit economics and returns. We expect to maintain this elevated pace of development into 2026 in the range of the mid-teens unit growth, well above our long-term algorithm of 10% plus unit growth.

Total revenue increased 8.1% to $175.7 million versus the prior year. Royalty revenue, franchise fees and other increased $6.8 million, of which $10.6 million was due to net new franchise development, partially offset by domestic same-store sales decline of 5.6%. When stacking 30.6% same-store sales growth over the last 3 years, this has translated to more than $500,000 in AUV growth.

Domestic AUVs are now at $2.1 million, with industry-leading unlevered cash-on-cash returns of 70% plus on an average upfront investment of $500,000. That's why our brand partners continue to lean in, which showcases the attractiveness of our unit economic model.

Our company-owned restaurants continued to perform very well, delivered same-store sales growth of 3.8% in the quarter, outpacing the broader system. These restaurants serve as an early indicator of the impact we're seeing from the Wingstop Smart Kitchen that's translated into a meaningful operational and financial impact.

Wingstop Smart Kitchen continues to validate the long-term opportunity to drive both transaction growth and margin expansion. Our company-owned margins also continue to expand, with company-owned restaurant cost of sales declining by 300 basis points versus prior year in Q3 to 74.8% of sales, primarily due to lower bone-in wing costs and sales leverage on labor and operating expenses. Our supply chain strategy continues to serve us well, providing stability in food cost and visibility that allows our brand partners to plan with confidence, a key advantage in this environment.

We have line of sight into food and packaging costs throughout 2026 at our targeted range in the mid-30%, which was shared recently at our brand partner conference, further generating their excitement in our unit economics. SG&A decreased $1.6 million to $30.7 million, driven by lower headcount-related expenses, primarily associated with lower short-term and stock-based incentive compensation, partially offset by system implementation costs associated with our new ERP, human capital and global development platform.

Adjusted EBITDA, a non-GAAP measure, was $63.6 million in the third quarter, an increase of about 19% year-over-year. Adjusted EBITDA for Q3 was our highest single quarter on record. Adjusted earnings per diluted share was $1.09, a 15.6% increase compared to the prior year. This includes a $0.24 impact from the additional interest expense associated with our $500 million securitization transaction completed at the end of 2024.

Both metrics reflect the strength and profitability of our asset-light operating model. It's this operating model that fuels our return of capital strategies centered upon enhancing shareholder returns. In recognition of our strong free cash flow generation and our commitment to returning capital to shareholders on November 3, 2025 our Board of Directors authorized and declared a quarterly dividend of $0.30 per share of common stock, resulting in a total dividend of approximately $8.3 million. This dividend will be paid on December 12, 2025, to stockholders of record as of November 21, 2025.

In addition, during the third quarter, we repurchased and retired 140,103 shares of common stock at an average price of $285.26. At the end of the quarter, 151.3 million remained available under our existing share repurchase authorization. Since the inception of our share repurchase program in August of 2023, we have repurchased and retired over 2.3 million shares of common stock at an average price of $260.45 per share.

Turning to guidance for 2025. We are updating our full year outlook for domestic same-store sales to a decline of 3% to 4%. We believe our updated outlook is reflective of new data points on the consumer over the last couple of months and the broader softening of the macro environment. Importantly, however, the fundamentals of our brand remains strong. The combination of expansion at the top of the funnel to capture more of our demand space execution of our new operating sandwich with the Wingstop Smart Kitchen and the late Q2 launch of Club Wingstop positions us for a return to same-store sales growth during 2026. And we believe our industry-leading momentum in unit growth will continue.

As a result of the visibility we have into our development pipeline, we are increasing our global unit growth guidance to a range of 475 to 485 net new restaurants for 2025. A testament to the ongoing confidence our brand partners have in the model and the compelling returns they are realizing.

Additionally, we are updating our SG&A guidance to a range of $131 million to $132 million, which includes approximately $26 million of stock-based compensation expense and $4.5 million for nonrecurring system implementation costs, both of which will be an add-back to adjusted EBITDA.

As we look ahead, our focus remains on executing the long-term strategies that have driven Wingstop's success since becoming a public company 10 years ago. In this time frame, our AUVs have scaled from $1 million to $2 million. We have opened more than 2,100 restaurants globally. System-wide sales have grown from $800 million to north of $5 billion. We've enhanced unit economics and unlevered cash on cash returns increase from an industry-leading 50% to 70% plus. And we've returned over $1 billion of capital to shareholders alongside a TSR of over 1,200%.

Yet when we reflect on our strategies and the opportunity in front of Wingstop, it feels like we're just getting started. We're continuing to execute with discipline, and we believe we're entering the next phase of growth that is centered on scaling AUVs to our $3 million target maintaining best-in-class returns and expanding our footprint globally to more than 10,000 restaurants.

Coming off of our annual brand partner conference last month conviction in our long-term growth has never been stronger. Our brand partners believe deeply in this brand and are signing up to open more wing stops. The energy and optimism across the system are powerful proof points of the health of the business. I, too, share that excitement and couldn't be more energized by this next phase of growth for Wingstop.

With that, I'd like to now turn to Q&A. Operator, please open the line for questions.

[Operator Instructions]. Our first question comes from David Tarantino from Baird.

My question is on the comp outlook. I think looking at your full year guidance, it would imply a pretty low number for Q4, maybe worse than what you reported for Q3. So I guess First question is, is that how you're running quarter-to-date? Or are you trying to leave yourself a little bit of room given the uncertainty in the environment? Any way to frame up how you're thinking about Q4? And then I have a follow-up on that.

David, thank you for the question. I think we obviously acknowledge that there's some near-term choppiness in the business and in the overall industry. I think as we take a step back and look at how the business trended during the third quarter, which we did, in fact, expect the third quarter to be negative.

But the industry saw a consumer -- a change in the consumer trend, and we're not immune to that. And the reality is we over-indexed to this consumer that's under the most pressure. But I think similar to the trend that we saw as we exited Q3, we expect that trend to somewhat continue into Q4 just based on the current data that we have.

I will tell you, we have seen that trend stabilize within the fourth quarter. But then I think most importantly, David, we take a look at kind of the data that we have and the visibility that we have into the business, and we're actually pretty encouraged by what we see despite the overall comp number for Q3. And we see growth in our largest daypart as dinner as an example, the fastest-growing cohort within our database is that $75,000 household income and above. And so there's some really encouraging data points that we think, put us in a unique position to really not feel like we have to solve for the near term, but really stay focused on the investments we're making to position the brand for this next phase of growth.

Great. And my follow-up is, Alex, I think you mentioned that you're confident or you expect comps to be positive in 2026. I guess maybe we what would be helpful is just to kind of lay out the path you think the comps take as you move into next year? And what some of the key drivers of returning to positive might be, whether it's easier comparisons or whether the Smart Kitchen rollout or the loyalty program, I guess, what is the catalyst that's going to get it positive? And then how are you thinking about the timing of that? Is it later in the year? Is it earlier in the year? Anything you could offer would be helpful.

Yes, David, thanks for the question. Obviously, there's, as Michael mentioned, some near-term choppiness, the industry is navigating right now. But I think for Wingstop specifically, there's unique drivers in our business. And as we commented on our outlook for what we're seeing in early signs from the Wingstop Smart Kitchen, one of our largest regions is seeing the -- saw positive comp last quarter. very large mid-single-digit delta versus the system average and performance. That region has the highest concentration, longest tenure on the Wingstop Smart Kitchen.

Then we think about loyalty, which we're targeting to launch by the end of Q2, that coming together to complement our hyper personalization strategies really unlock this database of 60 million users that we have access to. We'll be rolling that out. And then this new advertising campaign that we're seeing that's really going to open up the top of the funnel.

So we as we open the top of the funnel, we're bringing new guests into the brand. And we're now delivering on those opportunity areas that we've talked about over the last year plus on delivering against speed and consistency. And so as that comes together into 2026, we're confident in our ability to deliver that same-store sales growth that we've guided to over the long term.

Our next question comes from Danilo Gargiulo from Bernstein.

Great. Michael, I have a question on the Smart Kitchen incrementality. You're mentioning that you're still seeing a mid-single-digit incrementality in the year have the highest concentration of markets. And I was wondering if you can give an estimate of how long you think the change management will take to see the benefits across the franchise stores. And perhaps also if you can comment on the biggest delta or what are some of the challenges that franchise stores might be seen in delaying the implementation and following the change management that you're suggesting?

Thanks, Danilo, for the question. I think one of the things that I'm most excited about as it relates to the Wingstop's Smart Kitchen is the fact that we're introducing a new operating standard for Wingstop. This is a transformational change for our business, and we unveiled that new operating standard to our brand partners at our business meeting we had with them last month, and they're bought in. And we think this new operating standard is going to position us to win more occasions that Alex talked about earlier, position us to deliver on quality that indulgent Wingstop occasion on a consistent basis. And as more and more restaurants are executing Wingstop Smart Kitchen and delivering our new operating standard, we are actually seeing that show up in guest satisfaction scores. And as we mentioned in our prepared remarks, take a region like the Southwest region beyond the DFW market, where we're seeing a consistent delivery of that 10 -- speed of service. And we're seeing that market or that whole region actually deliver a mid-single-digit spring comps to the overall country. And that's because that is a region that has the longest tenure and are demonstrating that consistent delivery of speed and consistency for our guests. And so as more and more restaurants deliver on these new standards, I think we're going to see that gap close over time.

Great. And then I wanted to ask a question on the net unit growth because you have a very strong pipeline. You've been accelerating for 2025. I was wondering if you can provide any context on the amount of cannibalization that you're seeing today and how that is related to the past. Obviously, the cash on cash returns have been very strong. I just want to understand also what it means may seem to be a drag potentially forward.

This is Alex. I can jump in here. The cannibalization we've seen, as we've talked about over the years, has really been concentrated on restaurants. It's higher volume restaurants really kind of max out capacity in the box itself from a storage standpoint. We operate out of this very small footprint, 1,400 to 1,700 square foot location typically.

So that hasn't changed too much. It's typically about 1 point in the comp that we've seen. What's been a little different, I think, as it relates to development in the last -- in the most recent quarter, specifically has been around lapping some openings that we had in a single market -- a brand new market where there's 1 restaurant.

And last year, we saw some openings that the restaurants touch 6 figures in the first week of sales and are in the first several weeks of sales. As we open more restaurants this year as part of our market playbooks to surround that restaurant, we're lapsing a little bit of that honeymoon side. So I'd say that part has come in to play a little more recently. It is more of a near-term dynamic. The restaurants are settling in very well above, in fact, our system average on AUVs, but that's probably the most recent dynamic associated with development.

Our next question comes from Andrew Charles from TD Cowen.

I was hoping you can unpack the mid-single-digit outperformance from smart kitchens in the Southwest, with the gap between company-operated same-store sales and franchise or I should say system -- excuse me, that widened to 940 basis -- outperformance in the Southwest is perhaps underrepresented, just given the outsized Hispanic consumer penetration in this market? Or is it perhaps that we're seeing some other benefit to company-operated same-store sales in the third quarter?

Andrew, our comment as it relates to the overall Southwest region, I think it's important to appreciate that, that includes over 600 restaurants. And I think really demonstrates the progress we're making around operationalizing this new kitchen operating platform. This new operating standard for Wingstop as a brand that just talked about. But I think if you look at DFW market specifically where the majority of our company-owned restaurants do operate. It's a really interesting business case, if you will. Obviously, that market is benefiting from the longest tenure on the Wingstop Smart Kitchen.

But in addition to that, when you take a look at the DFW market, it is our most mature market, our first market, brand awareness for Wingstop is a lot closer to that national brand awareness level of more mature national brands.

If we look at the demographics within DFW, it actually looks a little bit different than we do nationally. We over-index a little bit higher income. We're a little bit less ethnically diverse. And quite frankly, it's a really good representation of that demand space, we've been talking about and the opportunity we have.

And so what you're seeing is the interplay of Wingstop Smart Kitchen, Wingstop's new operating standard, delivering on those guest expectations and then obviously leaning into that demand space that we're best positioned to win. So I think it's a really nice indication of the strategy we're executing and the opportunity that's in front of us.

That's helpful. And then my follow-up question is just, obviously, the industry is trying to figure out ways to better emphasize value. And obviously, Wingstop has been very reticent in pricing, only taking about 1% to 2% per year in recent years. But I guess as you think about how to better use value to help our traffic in this more challenging time for the industry, what place does the 20 for 20 promotion that you successfully ran in the May and June time frame have as we look forward?

Andrew, I think Wingstop is in a pretty unique position. Unlike most other brands in the industry, we've experienced pretty incredible industry-leading years of growth over the past 2 years, putting us in a spot where we don't really feel like we have to get overly promotional or glean into discounting or solve for the near term. We're really focused on what's central to our strategy, which is protecting those unit economics which today remain as strong as they have ever been. And you're seeing that show up in the pace of development that we're delivering, which 2025 is shaping up to be a record year of opening what we estimate to be between 475 and 485 units, a pretty remarkable number for the brand and for any brand out there, quite frankly. And so we're focused on that and then investing in these strategies that are going to position the brand for the long term and for this next phase of growth.

Our next question comes from Christine Cho from Golden Sachs.

So Michael, I think you mentioned earlier the importance of unlocking that under 30 minutes or fastest -- new mechanism into 3D getting into kind of the guest consideration set. So I was wondering if you were tracking kind of the changes in the percentage of the stores that are now falling into this bucket. Along with the progress of this market -- and whether you're seeing any shift in sales on in this channel. Additionally, are you contemplating on any ways to better communicate that faster speed of service to your guests.

Christine, great question. We are relentlessly focused on most importantly and first, delivering on that 10-minute speed of service, but then a fast follow is ensuring that our restaurants are showing up in those categories on the DSP platforms. And what we're really learning is not only does it put Wingstop into the consideration set where we weren't previously considered or there before, but we're actually seeing and learning as we watch these consumers, and we talk to our partners, the delivery providers, that it actually drives repeat and drives behavior.

And so as we look to 2026 and operationalize and complete the national rollout of Wingstop Smart Kitchen. This is going to be an area where we're definitely going to lean in and an area that we see an opportunity to drive growth.

And also excited about the new Wingstop this year, Ten. But you also have several very important messages to deliver to customers, including your value proposition, improved speed of service, all of that. So what are kind of the key messages that you will prioritize and how do you plan to kind of allocate media spending to achieve these holes while kind of maximizing leverage on your NFL and NBA partnership.

Yes, Christine, that's what I love about Wingstop is here. This is actually a campaign that can accomplish all of that. It's allowing us to showcase moments, moments that each and every person can find and relate with and showcase how Wingstop can play a role in their life, in their dining occasions.

In addition to that, we can showcase moments around speed. We can showcase occasions that hit on when the consumer is in a hurry, when they are in a rush and we can do it under this broad umbrella and at the same time, showcasing quality, showcasing abundant. Some of those tenants that really separate Wingstop from other brands that are out there. And we're excited to have a 30-second spot really for the first time, that story tells to that new consumer about Wingstop, who we are, how they can engage with our brand and how we deliver on quality and abundance.

And so while there is definitely an opportunity to impact the occasions that our current guests consider us for the bigger opportunity and the huge prize out there, and it really shows up in that demand space where we're only winning 2% today when benchmarking suggests we should be winning 20% to be at our fair share. The huge opportunity is really around all those guests who don't know of Wingstop or maybe Wingstop is just not in their consideration set. And so that's what we're going to be going after with this campaign as we operationalize Wingstop Smart Kitchen. And then just to think about in 2026 layering on something like loyalty, in the second quarter to be able to add that to our digital flywheel. It gives us a ton of confidence in our ability to continue to scale AUVs towards our target of $3 million over time.

The next question comes from Jeffrey Bernstein from Barclays.

Great. Just looking at the near-term comps. It looks like you're assuming down 5% or more in the fourth quarter that would be similar to or actually a little bit easing from the third quarter. But as we've talked about all your loan, the compares are easing. I know in the fourth quarter, they're using 1,100 basis points from the third quarter. Therefore, I guess that 2-year stack still seems to be slowing materially.

I'm just wondering whether you're surprised the compares are not driving the inflection or said another way, it does seem like the business is slowing further from here. So just wondering whether or not the compares in and of itself are not enough or how you go about directly bringing back, like you said, you over-indexed to perhaps a little bit lower income or more minority consumers, how you go about more aggressively bringing them back to slow that decline. And then I had 1 follow-up.

Jeff, I appreciate the question. I think as we said earlier, we acknowledge that there's definitely some near-term choppiness. And while we have seen trends stabilize as we've entered the fourth quarter. Obviously, we're not one, and I'm not sure who is to predict kind of the duration of this current environment and when it evolves. But what we're focused on, again, is not solving for the near term, but really focused on leaning into and ensuring that we operationalize this game-changing kitchen operating platform of Wingstop Smart Kitchen and ensure we're ready to really lean in and win our fair share as we look out into 2026 of that demand space and then doing loyalty right and launching it in a big way in 2026.

And then obviously supporting all that with this ad campaign, while we open a lot of restaurants at the same time and continue to expand on that opportunity. And we're going to remain focused on protecting the unit economics because that's really what it's about, here at Wingstop to what's central to our strategy. When you think about it, yes, we've opened a lot of restaurants this year. We're almost at 3,000 restaurants as a brand. but yet it's not even 1/3 of our potential. So the white space we have in front of us, the growth in front of us is what we're really focused on.

Understood. And just following up on that. as you look back over the past few months, how much do you think of the deceleration with industry or consumer versus maybe anything that will be self-inflicted. I mean, obviously, this is hindsight, but what could have been done better to mitigate the choppiness that you could perhaps use as you think about potential risk of this type of choppiness in the future.

Yes, Jeff, I think that's a great question. And I think more than anything it really just has to do about how we over index to this consumer and that's under the most pressure right now more than anything else.

But the second part of your question, it really feeds into the strategy, we're executing around winning our fair share of our core demand space. And as we look at who comprises this occasion that we're gone after and we look at the DFW as I mentioned earlier, is a great example of that. it is a little bit of an equal distribution as you cut the data, whether it's income level, ethnicity, ages.

And so it's about continuing to win our fair share of that demand base. And we think this new creative is going to be an unlock to position our brand to start to win that. And so as you fast forward and think about any other future cycles similar to this one, we'd expect our business to be in a different position than it is today.

Next question comes from Andrew Barish from Jefferies.

Just following up on that. It kind of reminds me of '22 when you had a negative comp. And obviously, the ad budget was going up -- Sandwich and Uber were rolled out. Are you kind of thinking about this in a similar way. It's just maybe going to take a little bit longer until all 3 of the current sort of drivers you laid out layer on top of one another?

Yes, Andy, I think that's a great point. And I think it's a good analogy to kind of compare to. I would say maybe what's different is -- and we'll acknowledge that a lot of our success during that time was focused on our core, and we won a lot of share with that core. And as we look forward, it's really about broadening the top of the funnel. Bringing in more new guests, new guests that maybe look a little bit different than our core and diversifying the business a bit.

The next question comes from Sara Senatore from Bank of America.

I wanted to go back to the comment, I think Alex made about a honeymoon period for restaurants. I don't think we've heard you talk about that in the past. And I was just curious, I guess, a couple of things. One is, do you see that across different types of markets. And do you think it signals anything about where brand awareness is, I guess, when I think of a big awareness gap, which has been a long-term opportunity, typically, I would not associate that with the honeymoon.

Yes, Sara, I can jump in here. I think it really is a little more unique to the last 12 months dynamic or 2024 because, we've attacked these white space opportunities. We're executing market-level playbooks. And we couldn't have predicted the strength of some of these openings in these, what we call kind of flavor desserts in a small town and Kentucky or Georgia or other parts of the country where we had no wing stops available. So I think it was a little bit unique to something in the last year. I don't think it's playing out the exact same way. It's not playing out the exact same way this year on how the pace of restaurant openings are and what we're seeing. I think they're kind of competing well among each other as we execute these playbooks.

And then the awareness piece, I guess, that was the second part. Do you think that awareness kind of has reached a critical mass or you still see a lot of opportunity there?

Yes. We still have a more than 20% gap in awareness to the larger, more mature QSR brands. And Michael talked about the opportunity in consideration is even larger. So as we're delivering against these opportunity areas on speed and consistency. I think we think the combination is going to further strengthen our AUVs on our path to that $3 million target.

Our next question comes from Chris O'Cull from Stifel.

Michael, my question is about the new ad campaign. Have you conducted any testing to confirm how the message resonates with consumers, particularly new consumers. I would just like to understand what gives you confidence that it's going to be successful.

Yes, Chris, we are super encouraged by early feedback and results on the new campaign. We think it works hard for us and accomplishes really what we set out to accomplish, which is to showcase moments that really speak to a wide range of different consumers, different cohorts, but yet still showcase quality and abundance. And tell a story. This is one of our first ads with the voiceover. And so it's actually informing that new guest that doesn't know about Wingstop, a little bit about who we are. The fact that we are the #1 wing company in the U.S. and taking that bold claim and sharing that on national TV. And so early feedback, early testing, very positive, and we think it's working hard for us.

Okay. And then my follow-up is you mentioned finalizing an agreement in India. Can you talk about the partner you selected, maybe the structure of the agreement for that market? And why do you believe this operator, you've chosen is the right one for the market?

Yes, Chris. We're pretty excited about the opportunity in India, a market that we see over 1,000 Wingstop restaurants over time. And so obviously, a really big deal for our global growth story. And this partner is a proven operator a multinational operator of brands that has a lot of experience in India.

And so we'll have a lot more details to share as this comes together and as our plans finalize on exactly what our market entry will look like, but we're really excited to share that with you as we continue to progress towards that long-term opportunity of over 1,000 restaurants in India.

Our next question comes from Jeff Farmer from Gordon Haskett.

Just wanted to drill down further on the lower income and Hispanic consumer cohorts. I know you guys don't share a lot, but -- anything that you can share as it relates to exposure to these cohorts even if it's just broad strokes?

Yes, Jeff, I would say broad strokes would maybe just be the overall comp trend you saw play out as you saw that dynamic broaden a little bit across the industry. But we're not overly focused or really overly thinking about that overall trend. And as I said earlier in our comments, as we look at the data we have and we look at the underlying health of our business, we're continuing to measure improvements in brand health metrics, which is really encouraging for us to see and showcases that the overall underlying strength and health of the brand are strong. And again, this is a little bit of near-term choppiness. And again, our business clearly over-indexes to that consumer that's under the most pressure right now.

Okay. And then unrelated follow-up. the development guidance has been pretty crazy. It's jumped 100 units, I think, almost 30% over the last 9 months. I can't remember ever seeing anything of this magnitude for as many restaurants as you guys have. So really, the question is, how did that happen? And I know you talked about 2026 development, but in terms of just really sort of overperforming on your initial development guidance, what drove that? And why theoretically wouldn't that outperformance continue in coming years?

Jeff, it's a great question. It's really exciting to see how our unit growth played out for this year. And I think there's a couple of things that we've talked about in the past. One is you've been executing these market-level playbooks. And alongside of that, we're having conversations with our brand partners about scaling the infrastructure, building their teams, organizations to execute an even greater number of openings than what they've had in the past.

International is playing a bigger role. We've started -- we've talked about how we see that opportunity in front of us as we've opened as many as 5 new markets this year. And we have line of sight to 3 more in the horizon, there are 4 more on the horizon going into 2026. So it's -- international is starting to play a big role and their pace of openings is moving a little faster than what we saw at the front end of the year.

And then the last part is we thought about the guidance at the start of the year was related to our Smart Kitchen rollout. We have not undertaken that size of a technology rollout in our footprint for this year, and we knew that was something brand partners we're going to need to allocate -- and frankly, they've done a tremendous job with executing both the Smart Kitchen rollout and building their infrastructure and organization. And so we felt the need to kind of allow that just continued growth and pace that we're heading into for 2026.

But it's a great point. It's incredibly exciting about what we have in front of us. And that's why it's so central to us is maintaining those best-in-class returns for our brand partners, so we continue to see this growth opportunity from a development standpoint.

Our next question comes from Jim Salera from Stephens Inc.

I was hoping that you might help us deconstruct some of the frequency trends that you've talked about. You guys have highlighted between rewards and the Smart Kitchen uplift and some of the new marketing those are all opportunities to drive better frequency. But maybe in kind of here and now, are you seeing any particular daypart or kind of specific consumer cohort that's seen a step down in frequency, and particularly, maybe around some of your restaurants that are closer in the border, maybe there's just less cross-border trade. And so it's not even so much that a guest is choosing not to come to Wingstop, but just there is not that restaurant occasion available anymore because fewer people trading in that area. Just any color on that dynamic would be helpful.

Yes, Jim. It's a great question. And what I would say is we talked about a little bit of a change in the consumer trend as we progress through the third quarter. And I think where we really saw from a daypart perspective, maybe that show up a little bit in snack daypart. And with that could come a little bit of ticket management.

But generally speaking, and I mentioned it earlier, our biggest daypart dinner, we actually saw growth during the third quarter, which I think really speaks to when you combine that with the strength in our brand health metrics, just speaks to the overall health -- underlying health of the brand.

Kind of keep that in mind, are you able to disaggregate what we would think about as group occasion, which I would assume leans heavily dinner versus somebody going by themselves. Is that really where the frequency pressure is concentrated is in those occasions where the guest is buying food just for themselves versus kind of copication?

Jim, this is Alex. What I'd point to in the last quarter was really around where we saw a little bit more of a difference from our targeted group occasion was on tenders. We did continue to see more individual occasions come through on tenders as they're trying -- that's that nice entry point for the brand coming in for the first time at high-quality tender experience. And specifically from a cohort standpoint one of our highest acquisitions last quarter was in that 18 to 25 age demographic, which also associates with a higher propensity for tender purchases.

Our next question comes from Dennis Geiger from UBS.

You touched on some, but I wanted to ask a little bit more on Smart Kitchen, the franchisee feedback. And as it relates to sort of the rollout and if you say that the rollout so far across similar stores at various stages of the rollout process, if that's been largely consistent or if there's some variability there, if anything more, they're obviously -- the Southwest data is super helpful. But anything more just kind of on how that rollout has gone and sort of performance along the various stages a couple of months in, 2 months and 3 months in, et cetera, if you could get that granular.

Yes, Dennis, it's a great question. And I would say, just generally speaking, we're really encouraged by where we are today in over 2,000 restaurants with the Wingstop Smart Kitchen operating platform. It was a big step in our brand partner conference last month for us to unveil and be super clear around these new Wingstop operating standards.

And obviously, as we transition into 2026 and get the entire platform launched across the system nationally, it will be really about driving those standards and holding our brand partners accountable because of the upside and opportunity we see associated with Wingstop Smart Kitchen.

So we mentioned it in our prepared remarks. We are seeing times, speed of service times experienced a pretty significant reduction, call it in that 6- to 8-week time period in. And then as you think about our frequency you're starting to see a little bit of traction as it relates to the consumer and how they engage with our brand, showing up in that 3- to 6-month window. And this is all without any sort of marketing support, all happening organically.

And so as you sit here and look at these early results we're seeing, the opportunity that's in front of us. And then again, when we look out into 2026 and think about this new ad campaign opening the top of the funnel, and then our new Wingstop operating standards, delivering on those guest expectations in a consistent way, we get pretty excited about what's in front of us.

Due to time constraints, this concludes our question-and-answer session. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.