Wendy's Company (the) · NASDAQ:WEN
Wendy's Company (the) — The Wendy's Company — Investor Presentation (February 2018)
25 slides from Wendy's Company (the)'s investor presentation, Feb 21, 2018
Slide 1: Revenue Recognition Implementation & Other Income Statement Reclassifications
Revenue Recognition Implementation & Other Income Statement Reclassifications February 21, 2018 © Quality Is Our Recipe, LLC
Slide 2: Forward-Looking Statements
Forward-Looking Statements • Certain information contained in this presentation, particularly information regarding future economic performance, finances, and expectations and objectives of management constitutes forward-looking statements. Forward-looking statements can be identified by the fact th
Slide 3: Table of Contents
Table of Contents Page Number • Executive summary 4-5 • New revenue recognition standard (ASC 606) impacts and transition 6 • Other income statement reclassifications 15 • Recast financial information 18 THE WENDY’S COMPANY 3
Slide 4: Executive Summary
Executive Summary • The purpose of the presentation is to provide details of financial statement changes that will occur beginning in 2018, to help financial statement users understand the comparability of actual 2017 results to 2018 guidance. • The Company has elected the modified retrospective app
Slide 5: Executive Summary - Continued
Executive Summary - Continued • Financial statement changes include: • Revenue recognition (ASC 606) • Franchise fees, which were historically recognized upfront, will now be deferred and amortized over the life of the related franchise agreement. This will result in lower revenues each year, but a
Slide 6: New Revenue Recognition Standard (ASC 606) Impacts and Transition
New Revenue Recognition Standard (ASC 606) Impacts and Transition THE WENDY’S COMPANY 6
Slide 7: New Revenue Recognition Standard (ASC 606) Impacts and Transition
New Revenue Recognition Standard (ASC 606) Impacts and Transition • Impacted: • Certain franchise fees, including technical assistance fees and renewal fees (Note: these fees are recorded in the “Franchise royalty revenue and fees” caption on the Income Statement) • National advertising funds’ incom
Slide 8: Franchise Fees: Current State vs Future State
Franchise Fees: Current State vs Future State Fee type Current (2017) Future (2018) Comments New Build Technical $40,000 $50,000 Fee is used to defray some of the costs related to Assistance Fee (“TAF”) training, start-up and transitional services related to the development and opening of new restau
Slide 9: Franchise Fees – Illustrative Example
Franchise Fees – Illustrative Example Legend Current standard New Build TAF $40K initial fee recognized at restaurant opening Franchise Flip $40K initial fee recognized at time of franchise flip Advisory Fee $10K renewal fee recognized at execution Franchise Flip TAF 1 2 3 4 5 6 7 8 9 10 11 12 13 14
Slide 10: New standard results in more consistent revenue stream over time
New standard results in more consistent revenue stream over time Future franchise fee revenue growth will be driven by new restaurant development and Franchise Flip transactions Current standard – recognize upfront The current standard allows for upfront recognition of certain franchise fees, which
Slide 11: National Advertising Funds – Current
National Advertising Funds – Current Financial Statement Presentation • Current guidance: • Revenue and expenses of national advertising funds excluded from our income statement as Company acts as an agent based on franchisor specific guidance. • Currently presented as “Advertising funds restricted
Slide 12: National Advertising Funds – New
National Advertising Funds – New Financial Statement Presentation Income statement impacts • New guidance (ASC 606): • As we can no longer be considered an agent (or pass-through entity) for the advertising funds, we must follow New caption existing rules of consolidation. • When certain criteria ar
Slide 13: National Advertising Funds – P&L Impact
National Advertising Funds – P&L Impact • The objective of the advertising funds is to spend the contributions collected each year, so generally there should be little to no impact to our P&L. • To the extent timing of collections versus spend creates a surplus or deficit, there could be an impact r
Slide 14: New Revenue Recognition Standard (ASC 606) Transition
New Revenue Recognition Standard (ASC 606) Transition • Transition: • Allows for full retrospective presentation or modified retrospective. • Full retrospective presentation would recast all prior years presented for the related impacts of the new standard. • Modified retrospective presentation allo
Slide 15: Other Income Statement Reclassifications
Other Income Statement Reclassifications THE WENDY’S COMPANY 15
Slide 16: Other Income Statement Reclassifications
Other Income Statement Reclassifications • As the company completed its transition to 95% franchise ownership at the end of 2016, we wanted to increase transparency into the components of “Franchise revenues” as reported on the income statement. In order to do this, we separated “Franchise royalty r
Slide 17: Other Income Statement Reclassifications
Other Income Statement Reclassifications Income statement impacts • Beginning in Q1 2018, the company will have a separate line item, “Franchise support and other costs”, in the income statement. • The related reclassifications will be made New caption from “Other operating expense (income), net” an
Slide 18: Appendix A
Appendix A Page Number • Recast unaudited income statements 19 - 21 • Recast unaudited non-GAAP adjusted EBITDA and EPS reconciliations 22 – 23 THE WENDY’S COMPANY 18
Slide 19: Recast Statement of Operations, Fiscal Year 2017
The Wendy’s Company and Subsidiaries Condensed Consolidated Statement of Operations Fiscal Year Ended December 31, 2017 (a) (In Thousands Except Per Share Amounts) (Unaudited) Recast Other income statement As reported Franchise fees Advertising funds reclassifications Recast Revenues: Sales $ 622,80
Slide 20: Recast Statement of Operations, Fiscal Year 2016
The Wendy’s Company and Subsidiaries Condensed Consolidated Statement of Operations Fiscal Year Ended January 1, 2017 (a) (In Thousands Except Per Share Amounts) (Unaudited) Recast Other income statement As reported Franchise fees Advertising funds reclassifications Recast Revenues: Sales $ 920,758
Slide 21: Recast Statements of Operations, Fiscal 2017 by Quarter
The Wendy’s Company and Subsidiaries Condensed Consolidated Statements of Operations Fiscal Year 2017 by Quarter (a) (In Thousands Except Per Share Amounts) (Unaudited) Recast Three Months Ended April 2, July 2, October 1, December 31, 2017 2017 2017 2017 Revenues: Sales $ 148,212 $ 160,859 $ 158,84
Slide 22: Reconciliation of Net Income (Loss) to Adjusted EBITDA
The Wendy’s Company and Subsidiaries Reconciliation of Net Income (Loss) to Adjusted EBITDA Fiscal Year 2017 by Quarter (a) and Fiscal Year 2016 (In Thousands) (Unaudited) Recast Three Months Ended Twelve Months Ended April 2, July 2, October 1, December 31, December 31, January 1, 2017 2017 2017 20
Slide 23: Reconciliation to Adjusted Income and Adjusted Earnings Per Share
The Wendy’s Company and Subsidiaries Reconciliation of Net Income (Loss) and Diluted Earnings (Loss) Per Share to Adjusted Income and Adjusted Earnings Per Share Fiscal Year 2017 by Quarter (a) and Fiscal Year 2016 (In Thousands Except Per Share Amounts) (Unaudited) Recast Three Months Ended Twelve
Slide 24: Questions
Questions • Contact Peter Koumas, Director of Investor Relations • [email protected] THE WENDY’S COMPANY 24
Slide 25: The Wendy's Company
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