Good morning. Welcome to The Wendy's Company Earnings Results Conference Call [Operator Instructions] Thank you. You may begin your conference.

Good morning, and thank you for joining our fiscal 2025 fourth quarter earnings conference call. After this brief introduction, Ken Cook, Interim Chief Executive Officer and Chief Financial Officer, will provide a business update; and then Suzie Thuerk, Chief Accounting Officer and Global Head of FP&A, will review our fourth quarter results, share capital allocation priorities and our 2026 outlook. From there, we will open up the line for questions. Today's conference call and webcast includes a presentation, which is available on our Investor Relations website, ir.wendys.com. Before we begin, please take note of the safe harbor statement that appears at the end of today's earnings release. This disclosure reminds investors that certain information we discuss today is forward-looking and reflects our current expectations about future plans and performance. Various factors could affect our results and cause those results to differ materially from the projections set forth in our forward-looking statements. Also, some of today's comments will reference non-GAAP financial measures. Investors should refer to our reconciliations of non-GAAP financial measures to the most directly comparable GAAP measure at the end of this presentation or in today's earnings release. If you have questions following today's conference call, please contact me. I will now hand the call over to Ken.

Thank you, Aaron, and good morning, everyone. I want to begin by recognizing our franchisees, restaurant teams and company employees for their ongoing commitment to the Wendy's brand. Together as One Wendy's, we are strengthening the foundation to deliver long-term profitable growth for the company and our franchisees. This morning, I'll start by discussing our fourth quarter results and full year highlights, then provide an update on Project Fresh. And lastly, I'll share our 2026 outlook before passing it over to Suzie to talk through the financials in more detail. Starting with the fourth quarter. While results were in line with our expectations, we know that we have a lot of work to do to improve performance. With Project Fresh underway, we have the right plan in place to strengthen our U.S. business. As we shared on our last earnings call, we expected fourth quarter system-wide sales to be down significantly, and they were. Global system-wide sales declined 8.3%, driven by our U.S. business, where marketing spend was down significantly as a result of front-end loaded ad spending in 2025 and sales trends throughout the year, in addition to a tough comp with our SpongeBob collaboration in the prior year and our decision to shift the launch of our new chicken sandwiches into 2026 to ensure excellent execution. A bright spot for the U.S. was the rollout of our chicken tenders and new sauce lineup, which delivered strong customer satisfaction scores, demonstrating the power of focused execution. Turning to our international business. Performance remained strong with system-wide sales up 6.2% in the fourth quarter, its 21st consecutive quarter of growth. International expansion remains a key priority, and we continued our momentum, opening 59 new locations in the fourth quarter. New restaurant openings came from key stronghold markets such as Canada…

Thank you, Ken, and good morning, everyone. I'll begin with our fourth quarter results, then provide more details on our outlook for 2026 before closing with our capital allocation priorities. In the fourth quarter, global system-wide sales declined 8.3% on a constant currency basis, and U.S. same-restaurant sales declined 11.3%, driven by marketing spend, which was down significantly in addition to a tough comp with our SpongeBob collaboration in the prior year. This was partially offset by continued strength in our international business with system-wide sales growth of 6.2%. The decline in U.S. same-restaurant sales was driven by a decrease in traffic, partially offset by a higher average check. Same-restaurant sales at our U.S. company-operated restaurants outperformed the U.S. system by 410 basis points, driven by improvements in customer experience. Many of our franchisees have already begun implementing operational improvements, and we're making progress scaling these initiatives across the broader system as we execute on our Project Fresh turnaround plan. The outperformance at company-operated restaurants was also supported by strong delivery growth and benefits from the continued rollout of digital menu boards and Fresh AI automated ordering technology. Our U.S. digital sales grew 2% compared to the prior year, driven by continued growth in our loyalty program, bringing U.S. digital mix to an all-time high of 20.6% in the fourth quarter. Shifting to our International segment. The Wendy's brand continued to demonstrate strong momentum globally, delivering system-wide sales growth of 6.2% in the fourth quarter, driven by new restaurant openings across key growth markets. Growth was led by Asia Pacific and Latin America with strong performance in key markets such as the Philippines and Puerto Rico. We continue to see healthy underlying brand strength in Canada, gaining share in the QSR burger category throughout the year despite broader QSR traffic…

Thank you, Suzie. 2026 will be a rebuilding year, and I am confident that we will execute on our Project Fresh initiatives to strengthen our foundation and position Wendy's for long-term success while delivering strong growth in our international business. We are focused on controlling what we can control and leaning into what Wendy's can do better than anybody else, delivering the highest quality food in QSR. We have all the ingredients needed to be successful, an iconic brand, a great team, passionate franchisees, improved capabilities and a strategic action plan to deliver results. I'll now hand it over to Aaron to share our upcoming Investor Relations calendar.

Thank you, Ken. On March 10, we will participate in the Citibank Global Consumer and Retail Conference in Miami. And on March 11, we will be in New York City for the UBS Global Consumer and Retail Conference. If you are interested in joining us at one of these events, please contact the respective sell-side analyst or equity sales contact at the host firm. We will now transition to the Q&A part of the call. Due to the high number of covering analysts, please limit yourself to one question only. Operator, please queue up the first question.

[Operator Instructions] The first question comes from David Palmer of Evercore ISI.

Lots of great detail on this call. I guess when it comes to operations at digital, you have a lot of initiatives there. But I feel like when it comes to turnarounds in this space, it really comes down to that initial jolt around marketing and menu. And you had a pretty good idea towards the end of this last year with the tenders and it felt like a pretty good product. And so I'm just wondering how you're thinking about this year, the approach, the ideas, the execution on the marketing side. Help us imagine how things are going to evolve there in ways that you think might be more effective?

Yes. Great question, David. So I'll start by talking a little bit about what gives us confidence that the turnaround plan will work. The results that we delivered are well below our potential for sure. But we have all the ingredients needed to be successful. We have an iconic brand, determined employees, passionate franchisees, better data visibility and capabilities than we've ever had. We have great food, and we're approaching that all with a One Wendy's mindset. Secondly, we understand the problem. We got away from what made us great. We allowed ops to drift, and we focus too much on sales overnight and discounting versus brand over time. We made some decisions that optimize the short term, but we're changing all that. We now have a clear North Star, which is our brand essence, and that will help us reestablish Wendy's as the highest quality hamburger in QSR. Also, we're executing the right plan, Project Fresh. In terms of revitalizing the brand, we know who drives our business, and we know how to bring them in. We do have a new approach to both menu and messaging that you've already seen take hold in 2026. And we're focused on ops, deploying the playbook that we use to improve operational excellence in our company restaurants to the system. Additionally, we're making the right long-term decisions in terms of system optimization, optimizing our restaurant footprint, which will help improve franchisee economics. So turnarounds take time. We'll see the ops metrics change first, followed by brand metrics and then traffic and sales. In terms of the calendar approach, which you mentioned, what's going to be different, there's going to be a lot of things that are going to be different. We have a new menu calendar framework. We've divided the year into…

The next question comes from Jake Bartlett of Truist.

Yes. I'm hoping you can expand on that a little bit and some of the learnings, your work with Creed UnCo, the segmentation study that you did. What did you learn maybe a little more specifically that you didn't know before in terms of who your target customer is and who you thought it was before and who it actually is and how that's informing the approach going forward? Ken, you mentioned that we've already seen some of the changes to the approach. I just -- maybe just remind us what we've seen so far on that front? Or are you kind of referring to what's going to -- what we're going to see next week with the launch of the new burgers and the wrap?

Yes. Thanks for the question, Jake. In terms of the customer segmentation study, that was the first phase of the Creed UnCo engagement. So first phase and foundational in terms of a proven playbook. We completed that study in December. And the good news is Wendy's does have a very strong brand perception, very strong. But from a customer perspective, this -- the needs-based approach helps us move beyond the what to the why. So segmenting customers based on need, why they are coming to Wendy's. Is it the quality of our food? Is it the price? Is it the abundance, convenience, snacking, what occasion are they coming in for? Is it for a dinner with family? Is it for a frosty to celebrate a kids game, all of those things, better understanding the why. Then that allows us to value the segments and divide them up into who is our primary target, who is our secondary and who should we not focus on at all because they represent very small pieces of our overall customer base. This validated some things we already knew and did provide some new insights. But it helped us put the spotlight on so what? What are we going to do about these things? A couple of learnings and validations from the study where a big segment of our customers come to Wendy's for an everyday quality upgrade, especially hamburgers and our fresh never frozen beef. When we look back at 2025, we had 0 hamburger innovation. We didn't talk about our hamburgers and we didn't innovate on those. So that's changing this year. We're going to have several hamburger -- premium hamburger LTOs starting next week with the launch of our Cheesy Bacon Cheeseburger. So -- that's a learning. That's a big difference. We…

The next question comes from Margaret-May Binshtok of Wolfe Research.

I just wanted to ask, I remember you guys talked about expecting October to be the trough for the year. Could you give some color on the cadence of comps through November and December? And what do you see exiting the quarter into January?

Yes. Great question, Margaret. So yes, October was the trough for us. November and December were better than October, which is great. In terms of -- as we exited 2025 and entered 2026, we did see some improvements in early January. And then in the middle of January, we launched our new Biggie Deal platform, which we are really excited about and pleased with so far. But then we were met with some significant weather disruption. We ended January down about 8% in terms of U.S. SRS. We do expect the full first quarter to be a little bit better than that. So we're excited about the established value platform and the fact that we're talking about it in terms of Biggie, this distinctively Wendy's asset. Next week, we have the Girl Scout Thin Mint Frosty, which now has both a swirl and a fusion option, which we think is really going to resonate with our customers. We have leveraging the Chicken Tenders launch in the fourth quarter. We're innovating off that. We have a new Chicken Tenders Ranch Wrap that launches next week. And then back to hamburger and premium high-quality hamburgers, we have Cheesy Bacon Cheeseburger that launches. So -- all of these things are what makes us excited about 2026. We will build throughout the year. We've talked about 2026 being a rebuilding year. 4Q of 2025 is the trough, and we expect to improve throughout the year as we execute on our Project Fresh initiatives.

The next question comes from Brian Mullan of Piper Sandler.

Just a question on the system optimization efforts. With 5% to 6% of the U.S. system closing in the first half of the year, I guess, can you just talk about how exhaustive this process is, how flexible of an approach you're taking with franchisees? Meaning will this really be all the units that the franchisees have any desire to close and you'll be done after this? And then kind of just related to that, could you just comment on how this would impact the rental income line in '26, if you could put some parameters around that in the context of the guidance.

Yes, happy to. So system optimization is really about improving franchisee economics and improving the customer experience. We established a disciplined process with our franchisees to approach this restaurant by restaurant, working with them to make the best decisions that strengthen the system in the long term. Under this program, we closed 28 stores in the fourth quarter. The AUVs were -- had significantly lower than our overall average, which is to be expected. And we do expect to close around 5% to 6% of our U.S. restaurants under this program with the majority happening in the first half of 2026. We started with our list of restaurants. We also went out and had a process where franchisees could submit the restaurants they want. We've done a very robust process evaluating trade area, operational metrics, the profitability, leveraging the new data we have on restaurant level economics. And we expect 5% to 6% of the U.S. system to be impacted by this. In terms of the impact on total sales, in total, system optimization, we expect to have about a 4% impact on global system-wide sales, and we expect this to have about a $15 million to $20 million drag on adjusted EBITDA for the full year, which is inclusive of everything under that program, including the rental income.

Yes. The rental income for 2026 will be relatively flat. Obviously, it takes time to work with landlords and achieve what will be a win-win for both the franchisees and the Wendy's Company for those sites that we're in. So that will take a little bit longer to see the rental income impact versus the closures.

The next question comes from Jeffrey Bernstein of Barclays.

Great. Ken, for a turnaround to work in a franchise model, it's obviously very delicate. It seems like it's kind of a house of cards here, and it's all about the franchisee buy-in. So my guess is over the past 90 days, you've had a fair amount of discussions with those franchisees. I know it's a question that's come up before. But with the challenging fourth quarter and a rebuilding year in '26, I'm just wondering if you can share kind of current sentiment. I'm sure there are positives and negatives, but whether franchisees are aligned in terms of your approach to improving the comp, whether they're keen to push more value, whether there's any change in sentiment on unit growth, just an overarching discussion or perhaps color on just how franchisees are embracing the turnaround strategy.

Yes. Thanks for the question, Jeff. Under the One Wendy's approach, franchisees are appreciative of the flexibility that we've been providing and our willingness to make these decisions to help improve overall franchisee economics. Under the One Wendy's mindset, we know that the success of our company depends on the success of franchisees and vice versa, which is why we elevated franchisee economics as a key priority for us. Sales deleverage puts pressure on franchisee economics, and that is what we're seeing now. There's a wide range of situations in the U.S. We're working with franchisees on a case-by-case basis, partnering and leaning in where we can and then executing on the Project Fresh pillar around system optimization, optimizing the footprint. In terms of one thing I've learned over the last couple of months as we've executed these and begun down that path is the importance of communication. So we have -- obviously, we're making a lot of changes to the system around menu, around marketing, around operations, around system optimization. Communication is critically important in that. So we have significantly increased how frequently we're communicating with the franchisees. I was actually on a call with franchisees yesterday as part of the One Wendy's approach, giving them a preview of the things that they were going to hear on the earnings call today. Pete and I were with franchisees 2 weeks ago, walking through all the details of system optimization, allowing them to ask questions in a very open environment. Lindsay was on a call with franchisees a couple of weeks ago, walking them through the new approach to menu, messaging and how that was going to impact operations at the restaurant level. So that's critically important. Franchisees are appreciating the flexibility that we're giving and us working hand-in-hand with them to help improve overall franchisee economics.

The next question comes from Danilo Gargiulo from Bernstein.

Can I want to go back on to the segmentation study. And frankly, I'm a little bit surprised to hear that the learnings of the customer segmentations where the relevance of the beef platform, the fresh never frozen. I think you mentioned also snacking, which I think are a core part of the DNA of the brand for a long time. So I'm wondering if you can maybe talk about the -- if there was some institutional knowledge that has been lost within the organization over time. And if you can maybe expand on the internal turnover, employee engagement scores. Conversely, if you think that the real opportunity here is translating the inside or already inside the organization into actionable initiatives, is your current organizational structure and G&A investment sufficient to support that?

Yes. Great question, Danilo. So I think you're right. We had a combination of things that we knew that were validated through the Creed UnCo study and the customer segmentation study. And we did have some new insights, a combination of those things. But the focus is really on what are we doing about it. And I think it highlighted over the past, we had lost our focus a little bit on who the target segments were and how we're approaching menu and messaging. So now with this refocused emphasis on everyday quality upgrades and making the menu better and highlighting the quality of our food relative to the competition, that will inform the menu strategy. It will inform the marketing strategy and how we tell our story to consumers. We have stood up a new -- as a result of this, we have instituted a new marketing framework, a process that provides discipline and consistency. We've divided the year into 8 periods to provide sufficient new news from a product perspective and new news that's relevant to our target segments. Regular cadence for the restaurant teams that enable them to train appropriately and operate and execute these with excellence. And it helps us maintain balance in terms of core innovation and value. Window 1, we launched Biggie Deals. So very -- taking a very distinctive Wendy's asset, expanding that for the customer into this permanent value architecture, so we have everyday value that the customers can depend on and then talking about that. It does inform our decisions in terms of product quality enhancements. Chicken sandwiches, significant improvement in quality on a core menu item that we've had for 30 years. We'll provide our customers an everyday upgrade versus what's on the market today. We're also having a bun upgrade coming soon, which we'll use on all our premium sandwiches. And another learning was making sure that we have this common thread of quality throughout everything that we do. And so you'll see that come to life in the product innovations that we have on the menu as well as how we talk about those throughout. It does take some time to build the foundation properly. The team is making a lot of progress, and we expect the benefit of these to increase throughout the year.

And Danilo, I might add from an investment standpoint in G&A, we have strong free cash flow and our #1 capital allocation priority is investing in the business and our outlook for 2026 reflects those investments. Ken mentioned on the call, investments in field teams to better support our operational excellence in our restaurants. We saw that work with investments we made in 2025, and we're offering more investments in field resources in 2026 as well as international investments to support net unit development internationally.

The next question comes from Dennis Geiger of UBS.

Wondering if you could talk a little bit more about the Project Fresh rollout and maybe thinking about the timing for the franchisees to have a lot of the capabilities that the company stores have currently. I want to make sure maybe that that's the right way to think about it, Ken. And just curious how we think about that, how we think about that timing and ultimately, thinking about that gap in comp performance and kind of narrowing that gap as the franchisees improve their performance as this rolls out.

Yes, Dennis, it's a great question. Let me start by saying I'm very proud of the U.S. operations team. When you look at company restaurant performance versus the system, outperforming by 310 basis points in SRS for full year 2025 is really impressive. When you dive a level below that and see overall satisfaction was up 370 basis points year-over-year for company restaurants in the fourth quarter. When you look at accuracy, friendliness and taste, all of those elements were up over 300 basis points. So a great, great results from them. And how we did that, great operations start with having great teams. People activation is about having the right capabilities and experience in our restaurants. And so it starts there and then enhancing the training, making sure that we're training all our employees on hospitality and how to how to serve the guests with excellence. We mandated that for restaurant teams to make sure we were delivering quality and brand standards across the system. And then we implemented a very methodical approach to performance management and continuous improvement, making sure that each restaurant was focused on the 1 or 3 things that they had the opportunity to make the biggest improvement in, making sure we had disciplined action plans in place, making sure we had an accountability process behind that, where the district manager would come visit and review the progress that they were making. And then that combined with daily operating plans to make sure the entire restaurant team was focused on executing the action plan. So -- we activated that in company restaurants in early 2025 and then started seeing big results in the second half of 2025. If you look at the first quarter, there was about a 20 basis point difference between company restaurant SRS in the system. That grew to a little under 2% next quarter and then 400 basis points plus in the back half of the year. In terms of deploying that to the system, franchisees have been receptive to this. We have 20% of franchisees who have fully adopted the program that we rolled out, and we're working on deploying it with the rest of them right now. So I would expect to see the improvement to really start to take hold in the second half of 2026. But also remember, we keep pushing on our company-operated restaurants to continue to get better, right? There's no finish line here. We want to get a little bit better every single day. So we want to have some healthy competition in the system and see where we end up.

The next question comes from Gregory Francfort of Guggenheim Securities.

I just wanted to ask about breakfast. Can you remind us how many stores have it today? And the flexible changes, how would you expect that, I guess, to impact that number over time? And then you talked about redeploying those hours into late night. Just any framing for the expectations for franchisees? Is this -- they're open up to midnight now and they still open until 2:00 a.m. going forward? Just any thoughts on strategy-wise, how that helps.

Yes. So breakfast remains an important daypart for the system. The large majority of the system is going to stay in breakfast. We're not pulling out. We're working with franchisees right now to finalize those exact numbers, and we'll share updates as we go along. This is really a common sense decision, taking learnings from the past 6 years that we've been in breakfast plus taking into consideration the current environment. And ultimately, it was the right thing to do. It helps improve franchisee economics. And when they do make changes on the breakfast side, it enables them to start serving lunch earlier and focus their labor on dayparts with the highest potential, lunch, dinner and late night. Late night was actually our best-performing daypart in 2025, and we think we have an opportunity to build on that. Even if you think about it just from a general manager perspective, if that general manager is getting spread throughout the day, if you take some hours off of that morning daypart, it allows them to focus more on dinner and late night. So that's how that will work. We have a right to win in breakfast. If you look at the food that we serve, the Breakfast Baconator, the Burrito, which is my personal favorite, we upgraded our beverage lineup in 2025, hot brew, cold brew and sparkling energy and continue to focus on executing the local playbooks to help those restaurants succeed. In terms of the system-wide sales impact, the -- our estimated impact for breakfast is included in that 4% system optimization number that we provided. And again, we'll provide updates as we continue to work with franchisees and finalize the plans.

The next question comes from Jim Salera of Stephens Inc.

Ken, I was hoping you could offer some thoughts maybe at a higher level on how your expectations for QSR as a whole is going to progress this year. We've seen the industry pressured, obviously, around traffic and consumer being still very kind of value conscious kind of continuing the trend from last year. Is the LTO framework that you set up this year more of kind of sharpening your elbows to take more of a piece of a smaller pie? Or is it aimed at really driving consumers that may have lapsed from traditional QSR occasions and pulling them back into the category?

Yes. Thanks for the question, Jim. We expect the consumer to remain challenged throughout 2026. So we don't expect any big changes there, which means it does end up being a share gain primarily. So we're really pleased with the way that we've set up the year. So launching this new Biggie Deals platform was important for us. It provides customers value that they can rely on every single day. The way we're talking about it, giving customers more choice, this $4, $6 and $8 price point, $4 Biggie bites attracts customers who are looking for that lower price point and the customers that we've identified who come to Wendy's for more snacking occasions. And then we've intentionally designed the tiers of this to provide more value as you move up that chain. So $4, $6 and then $8, the $8, you get 2 sandwiches, fries and a drink. So full meal, 2 sandwiches, highest quality beef, highest quality food, fresh never frozen beef. So excited about that and a lot of abundance. And we're talking about it. So this is the first time we've advertised our Biggie platform since 2024. We do expect this to improve our worthwhile pay metrics and don't think we need to go deeper to kind of chase the price point below where we've set it now. The other thing that I would say is really refocusing our efforts on the Wendy's quality difference. We'll see that from the operations perspective. If you look at what we're doing, rolling out the action plans from company restaurants to the system. When you look at system optimization and potentially closing 5% to 6% of the worst-performing restaurants in the U.S. that -- all those things are going to improve the customer experience, combined with a new marketing approach that highlights the value or the quality that Wendy's brings to the table, we think that will help us continue to improve comps as we move throughout 2026.

The next question comes from Andrew Charles of TD Cowen.

The dividend payout ratio is approaching 100% in 2026, at the high end of your target leverage ratio. So I'm curious what levers do you have in plan to sustain the dividend should the sequential U.S. sales improvement not to materialize the slope you expect or more investments required in the turnaround?

Yes, it's a great question. We're committed to the dividend. We have a very balanced capital allocation policy. Priority #1 is investing in the business. We invested $140 million in CapEx in 2025. We'll invest another $120 million to $130 million of CapEx in 2026. We still have a lot of cash on the balance sheet, $340 million, which provides us the flexibility to potentially acquire restaurants under the system optimization pillar if we decide to. And then we have the $100 million -- approximately $100 million of dividend funds to pay out. Still deliver very strong cash flow, $200 million in 2025, $200 million in 2026, and we still have a $300 million revolving credit facility. So feel good about overall liquidity, feel good about the flexibility that we have, and we are focused on executing the Project Fresh turnaround.

The final question today comes from Lauren Silberman of Deutsche Bank.

I wanted to go back to the comp side. I know that January is challenging with weather. I'm just trying to understand like underlying trends and what you're assuming as we move through Q1. And then it seems like the guide implies comps of 1% to 2%. So can you just help us understand like the magnitude of the sequential improvement that you expect as we move through the year?

Yes. Thanks, Laura. So yes, it's -- January was a bumpy month. We did see improvements to start the year. So we saw some incremental improvement from where we exited 2025 into 2026. And then we were faced with significant weather disruption. January was down 8%. We do expect Q1 to come in a little bit better than that as we continue to see the benefits from the new Biggie platform as we continue to see the benefits from the new products that we're launching next week. And as we continue to sharpen our messaging that really appeals to our core consumer. In a couple of months, we'll launch a new chicken sandwich lineup that's significant upgrade from where we are today and gives customers an everyday upgrade relative to what's available in the market. We think that will be another boost. And then as all these things work together, all the levers of Project Fresh, system optimization as operational excellence initiatives take hold and our new and improved approach to menu and messaging, we expect sales to continue to improve as we move throughout 2026.

That was our last question of the call. Thank you, Ken and Suzie, and thank you, everyone, for joining us this morning. Have a great day.