Good day, ladies and gentlemen and thank you for standing by. Welcome to the Wingstop, Inc. Fiscal Third Quarter 2015 Earnings Conference Call. As a reminder all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note that this conference is being recorded today, November 5, 2015. On the call, we have Charlie Morrison, President and Chief Executive Officer; and Mike Mravle, Chief Financial Officer. I would now like to turn the conference over to Mike. Please go ahead.

Thank you, operator and good afternoon. By now, everyone should have access to our third quarter earnings release. If not, it can be found at www.wingstop.com under the Investor Relations section. Before we begin our formal remarks I need to remind everyone that our discussion today will include forward looking statements. These forward looking statements are not guarantees of future performance and therefore you should not put undue reliance on them. These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. We refer all of you to our recent SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial condition. Lastly, during today's call we will discuss non-GAAP financial measures which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP and reconciliations to comparable GAAP measures are available in our earnings release. With that, I would like to turn the call over to Charlie.

Thank you, Mike. Good afternoon, everyone and welcome to our earnings conference call. I'm going to begin with a brief overview of Q3 results and then provide an update on two key initiatives, our unit growth and our technology strategy. Afterwards, Mike will review our quarterly financial results and provide an update on our full year 2015 guidance. Finally, I'll conclude with our formal remarks with some closing comments before we open the line for your questions. We've had another solid quarter driven by a robust top line and bottom line growth attributed to the effective execution of our growth strategy. Compared to the year ago period, during the third quarter, we delivered 16.5% revenue growth, 14.1% adjusted EBITDA growth and 25.2% adjusted net income growth. Notably, these results were achieved while we continue to make infrastructure investments to support our brand over the long-term. The strong growth in both our top and bottom line was driven by maintaining our focus on our high growth asset light model through franchise development opportunities. We had 22 net new openings in Q3, which brings us to 95 net new openings so far this year. We ended the quarter with 807 system wide restaurants, representing 19% unit growth versus the prior year period. As you can see in our updated guidance, we are now expecting 125 to 130 net new openings in 2015. In the third quarter, we reached a significant milestone with the opening of our 800th restaurant as we continue our growth towards our long-term goal of 2,500 domestic locations. Domestic same store sales increased 6.3% in the third quarter on top of 12.4% last year. Given our strong performance year-to-date, we now expect our full year, domestic same store sales growth to be between 7.25% and 7.5%, an increase from…

Thanks, Charlie. Turning to the results of our third quarter 2015 ended September 26. Total revenues increased 16.5% to $19.1 million for the third quarter 2015, from $16.4 million in the comparable prior year period. As you know, the majority of our revenues are made up of royalties and franchise fees, which increased 22.3% to $11.6 million for the third quarter compared to $9.5 million in last year's third quarter. We opened 22 net new restaurants in the third quarter, bringing our year-to-date total net new openings to 95. We ended the third quarter with 807 total system wide restaurants, representing a unit growth rate of approximately 19% during the left 52-week period. All of our development so far this year has been franchise development. In addition to restaurant development, revenue growth was also driven by domestic same store sales growth of 6.3% in the third quarter. Our Company-owned restaurant revenue increased to $7.5 million from $6.9 million in the prior year, driven entirely by 8.7% growth in same-store sales. Our Company-owned restaurant average unit volumes are now approximately $1.6 million, for the trailing 52 weeks ended September 26, 2015. These domestic same store sales results put us on track to deliver our 12th consecutive year of positive domestic same store sales growth. Cost of sales increased 9.1% to $5.3 million from $4.9 million in the prior fiscal year's third quarter. As a percentage of Company-owned restaurant sales, cost of sales increased 40 basis points to 70.7% from 70.3%. The increase was primarily driven by a 17% increase in the commodity cost of bone and chicken wings, which was partially offset by sales leverage and operational efficiencies in both food and labor costs. Our new back office tools including actual versus theoretical food cost and labor management are having a…

Thank you, Mike. We are excited about the opportunities that lie ahead for Wingstop. I applaud the great work by our team and our franchisees that yielded our strong performance in the third quarter and feel confident in our ability to continue delivering consistent results into the future. Restaurant development is our driving force and while 2015 will be a strong year, we still have significant opportunity as we remain focused on our long-term goal of 2,500 domestic locations. We continue to see demand for unit growth, both with new and existing franchisees. We believe, they appreciate the simplicity of the operating model, the flexibility of our real estate, superiority of our unit economics and the significant whitespace available for them to grow. Wingstop's distinct brand attributes are what makes all of this possible. From our compelling value proposition to our ability to attract a broad audience, including successful engagement with the coveted millennial customer to our distinctive and craveable flavors to the ability to customize orders to share with family and friends or just eat it by themselves. We have positioned ourselves well across our three brand pillars, flavor, simplicity and value and we believe we have achieved best in class category performance as a result. Thank you again for joining us this afternoon. We appreciate your interest in Wingstop and would be happy to answer any questions that you may have. Operator, please open the line for questions.

[Operator Instructions] Our first question is from John Glass of Morgan Stanley. Please go ahead Mr. Glass.

Hi, thanks. Good evening. Maybe just first, if you could talk about the comp guidance for the year. You've raised it, but it was a fairly specific range so maybe if you could talk about what that -- what you're seeing in the fourth quarter, what you're sort of implying there and since you're based in Texas, majority of your stores or at least the largest market is there, we've heard differing accounts of what's happening in Texas, maybe comment a little bit about that market specifically if you would?

Yeah, hi John. Charlie here. Let me first start by commenting on Texas. We have not seen an impact in the state of Texas and I think, given just the impact perhaps that others have talked about with regard to the commodities business or otherwise, it has not impacted our business. In fact, the Texas market has in many cases outperformed for us. So, I think one indicator of that is, that our Company's store performance was also strong in the quarter and in fact stronger than the chain average and 14 out of 19 stores are in the Texas market. As it relates to the guidance, it's a fairly narrow range, I suppose, but I think it's indicative of the continued momentum we have in the Company associated with our same-store sales and I think at 7.25% to 7.5%, we've obviously increased our guidance and that reflects not only the performance in the quarter but the continued momentum of the brand. Mike do you want to -- no go ahead.

I'm sorry. So, just two other questions. One is, as you've gotten to this 15% level in digital orders, maybe what you are seeing in terms of order size, the benefit, if there's a way you can quantify maybe the savings available to -- I know it's largely a franchise system, but is there franchisees starting to benefit from some labor efficiencies from that? Any color on how those digital orders are differing from the base would be helpful.

Sure, as we noted before, and we see this consistently, the average check from an online order is about $4 higher than the typical check in the system. So, as we increase mix we certainly see the benefit of that and as we noted, we've exceeded 15% online orders as a percent of our domestic system revenue in the first four weeks of the quarter. In fact, we've also seen, during this timeframe that roughly 160 of our restaurants have exceeded 20% online sales. So we do -- we're very excited about the increased performance and the continued performance there. At the restaurant level, it does that create an inherent efficiency right off the bat simply by adjusting the method by which transaction hit the POS system. So they come in straight into the POS system, they drop on the ticket rail, ready to be made and then provide it back to the customer. Historically, online orders came in on a printer that the associate at the front counter had to in turn input into the POS system. So, depending on how fast you are at that it does create some labor benefit. We see that as much as a benefiting cost as an opportunity to deploy our team members of the front counter towards higher levels of service to the customer as well.

If I could just -- one last one just as we think about 2016, are there any high level sort of thoughts you have in terms of the development pipeline for example, any movement in the P&L, anything -- I know it's a relatively simple model, so maybe there aren't a lot of moving parts that you could predict here, but anything you could talk about '16 would be helpful.

Yeah, I think -- at this time, John, we're not providing any guidance in the 2016. We'll provide that perhaps at the next earnings call, but what I can say is we are confident in our pipeline. As we noted in our remarks, our existing franchisees are continuing to invest in the Wingstop brand. 74% of our pipeline is now made up of existing franchisees. So it shows the continued strengthening of that throughout the year and we expect it to carry into next year.

Our next question is from Andy Barish of Jefferies. Go ahead, Mr. Barish.

Hey guys, wondering if you can give us a little color on flavor rollout of Spicy Korean Q and in September, did you see a pickup around that, because I think that was a new LTO versus brand advertising last year and was the television advertising coverage greater and did you do anything different there or was it kind of focused in those co-op markets where you already have some TV presence?

Yeah Andy, the Spicy Korean Q product was well received by our customers. It is equally performing against a lot of the limited time only flavors that we've had in the past few years, most notably it mixed about the same as Mango Habanero did when we rolled out that product. The approach to media was very consistent with other flavor events, but also on a year-over-year basis was consistent with how we deployed media when we did brand advertising last year, but the TV spots were very specific to the product. They engage the customer via the concepts around social media in our millennial core base by leveraging a tweet and then incorporating that into the commercials. So overall, I think the media was consistent. It was deployed primarily on TV and radio through our 13 co-ops across the country and that's consistent with the year prior.

Just finally on the -- any movement with the football schedule changing as we've heard from some other folks who served wings?

Yeah, hey Andy, this is Mike. We did lose a week of football this year, as you've heard from others, that's a timing shift that will flip into Q1 of 2016, and we estimate that impacted our comp in the quarter by about 70 basis points.

Our next question is from David Tarantino of Robert W. Baird. Please go ahead, Mr. Tarantino.

Charlie on the unit development outlook, you mentioned that you have been able to not only increase the number of openings in each of the past several years but also the rate of growth and just wondering kind of big picture as you think about the next several years and in your commentary around the breadth of the franchisee base expanding, as you sign up more franchisees, do you think it's realistic to think that the number of openings will continue to increase as we look out over the next several years? I'm not asking specifically about 2016, but longer term.

Yeah, hey David. I think, certainly we are very confident in the pipeline and continued growth in the pipeline, as well as the number of restaurants that we've put in the ground. This year, between 125 and 130 is a big increase from where we were last year. The pipeline supports continued growth. I did note the pace of increase over the past few years, but obviously, as you know, we start from a lower base in the prior years and that base increases every year, so harder and harder of course to eclipse those rates of growth, but I do have a lot of confidence in the future growth of the brand and we are well on our way in strengthening as we go towards our goal of 2,500 restaurants, but I would still maintain our long-term guidance of, 10% plus manual unit growth would remain consistent into the long-term outlook of the brand.

Okay, great that's helpful and then a question on pricing. I think you -- [indiscernible] pricing last Q4 and I think you're rolling over that sooner, if you've already rolled over it, maybe that's the case, can you talk about that dynamic as you enter the fourth quarter, how much pricing you'll have versus what you had in the third quarter and then, maybe more broadly what's the philosophy on pricing as you move into next year or whether the franchisees' thinking given all the headwinds that they might have around labor costs.

Hey David, it's Mike. A couple of things on pricing, as you mentioned. We did have a price increase last Q4 of about 3%. We do roll over that this year, as we kind of move from the third quarter into the fourth quarter. So, as you're looking at the trend on comps for those two things that will kind of be a trend difference between those two quarters. We don't have -- we're not putting another 3% on top of that this year. The other piece to mention, just from a shift standpoint in the fourth quarter, we do have the Christmas shift which does cost us by about 50 basis points a comp on the quarter, just to reconcile the trend on the comp. So, that's the pricing for now. We don't have any specific pricing plans that we have in place for next year. We don't typically take menu pricing to drive comp. It's more to manage inflationary costs in the P&L. The franchisees obviously make their own decisions relative to pricing and I know they consider those things, particularly in states where we have the wage increases like California, those franchisees will be looking to possibly take some pricing to manage those inflationary costs, but a lot of that has to do with what's going on in wing environment as well and so we'll see how that plays out.

Great, and just to be clear, Mike, is that 3% pricing, is that for the system or is that for your corporate stores or both?

Yeah, it's a system number. It's for both of them, but it's a system number generally.

Our next question is from Jake Bartlett of SunTrust. Please go ahead, Mr. Bartlett.

Thanks for taking the question. Just to clarify that last point, are you saying that there's going to be no pricing, because you're rolling over the pricing from last year in the fourth quarter, so that your guidance has no pricing in the fourth quarter?

No Jake, so, we don't break our comp down between pricing and ticket and transactions, but we will when we have the calendar shift, we take these system wide organized price increases just as context and so that's the context of the rollover 3%. It wasn't a commentary that there's no other price or ticket in the comp in the quarter.

Okay and then when I do the math, I come up with 3% to 4% for the system in the fourth quarter for comp and that implies a deceleration on a two year basis, a one year basis and a three year basis, is there any -- are you rolling over anything in particular last fourth quarter that isn't difficult to compare against or maybe help us understand why we should -- where we're expecting a deceleration?

Yeah, I think it goes to the comment I just made, which is we're losing those 3 points of price when we have that calendar shift on Christmas, if you bridge those things from Q3 to Q4, I think you're going to see the momentum is relatively the same as we just posted in Q3.

Okay and then just on the calendar shift, just to clarify, we're losing 70 basis points in the fourth quarter because of football and 50 basis points because of Christmas?

No, the football shift was a third quarter.

Okay. So, it goes from the third quarter into the fourth quarter?

No, it goes from the third quarter. We lost a week of football in the third quarter. It cost us about 70 basis points. That comes into the first quarter of '16.

Okay. I think I got it. One question, just I guess, last question on international development. There was, I think four closings internationally, that was just one question about what those were or if there's any -- if you could give us an indication of what you expect for international growth just over the next several years. Should we expect the kind of pace we've seen this year and last year in terms of gross openings?

Yeah, I'll first say that we have definitely delivered against the pace that we would expect on international growth this year, and expect that to be the case even net of the closings that we had, I would expect that to be consistent as we move forward. The foreclosures were specific to the Philippines market. Our partner there had opened a few restaurants very quickly, early in their, I guess, lifecycle of development for this brand there in the Philippines. It's only a deal that's about a year and half, two years old. Those turned out to be real estate choices they weren't happy with, but I will say that the particular partner is well ahead of its development schedule and continuing to open restaurants and we've opened a couple of restaurants since then in the Philippines to replace these closures. So we're very confident in the brand internationally, but this was just a sort of a one-time event where these particular restaurants, they felt like could be better suited in different trade areas in the market.

Our next question is from Jeff Farmer of Wells Fargo. Please go ahead. Mr. Farmer.

Thank you. Just following up on one of David's earlier questions. You guys did touch on it, but as it relates to the California franchisees and that July, I think it was July 1, 2014 minimum wage increase, what did they do? Did they act as a group of franchisees? Did they act as a state? What happened when that minimum wage increase went through?

Yeah, I think a part of the price increases that Mike had talked about obviously, this wage inflation was anticipated. So, it wasn't a surprise and many franchisees collectively worked to get ahead of that trend and so a big piece of the price increase was taken last year was incorporating in anticipation of that event.

Then I apologize for being slow on this, but as it relates to California taking another increase in January 2016, as of right now, there's just nothing you guys are disclosing. There's nothing contemplated. What's the game plan there to address that second minimum wage increase in California?

Yeah, I think one of the things to keep in mind about Wingstop is the simplicity of our model. So our franchisees are definitely cognizant of that and want to make sure that as we take price, we take it very carefully and try not to erode the transaction trend of the business. So we've taken some price over the past couple of years. I think they feel comfortable at least at this point in the pricing action that we've taken. They certainly have the ability to adjust price as we go forward, but our labor model is quite simple in our restaurant, we can afford to run this restaurant with a very lean team and still deliver the high average unit volumes that we do and that's part of the reason why you see such great returns on our stores. So, we try to be careful and cautious as we go through those price increases not to do anything to otherwise affect the business.

Okay, understood and just the final one and unfortunately one more on pricing, so you mentioned the 3% menu pricing taken in Q4, so again to try to further the understanding here, is that a situation where maybe half the franchisees are at 3%, some 25% or above 3%, 25% below 3%, how should we think about that?

I mean, I think that's reasonable to assume that some are above and some are below, but I think there is certainly a reasonable peak to what that price increase could or should be and it's really market dependent and restaurant dependent, some trade areas are going to be more receptive to a higher price increase than others, but usually market to market and within a co-op or a DMA, our franchisees do try to align themselves so that their pricing doesn't conflict with each other. So you should see regional consistency as they make price changes.

Okay, now, I apologize again. Very last one, but theoretically if the pricing or the franchise group decided to move forward with the pricing sometime in the next two months, that wouldn't be communicated to the investor community until early '16 or when you report Q4 in '16. How would that happen?

Yeah, that would be consistent with how we would to discuss that, yes.

Our next question is from Jeffrey Bernstein of Barclays. Please go ahead, Mr. Bernstein.

This is [indiscernible] calling for Jeff. Just had a quick question regarding the wing outlook, obviously prices remain elevated in the third quarter, up 17%, and we've heard from one of your peers who is also heavily involved in wings, talk about how prices haven't really fallen as far and as quickly as maybe were expected any just, what are you guys thinking about going forward, your outlook for '16 and how we should think about wing prices?

Sure, one of the things, Mike commented on in his remarks earlier, was that wing prices were spot on to where we thought they would be in the third quarter. So, I think we had a pretty good feel for where the market was going to be and so they delivered right where we thought we'd be. As you look into the fourth quarter in the first four weeks of the quarter, we have seen the price of chicken wings ease a pretty decent amount and so you can find that on the Urner Barry which is how most companies acquire wings or that sets the price for how we buy wings. As we go into the fourth quarter and into the first quarter of next year, there is typically a seasonal uptick just because of the high demand for wings going into the Super Bowl timeframe and then they tend to taper off after that and that's how the seasonality here works. We do have a few things that may be opportunistic for us. We'll just have to wait and see how the market behaves, but the growers are expecting a larger flock. We do see that the pound estimates for broilers next year are going to be up and so that's a good sign for Wingstop. The other thing I would comment on is the feed costs seem to remain in line and consistent with what we experienced this year. So, all the right inputs are in place for the year to be pretty good for us, but as we know, it can be a volatile market. Lots of things can affect this market and change it. There are only two wings on a chicken. So, these things all factor in, but right now, we feel very confident in our ability to look at the market ahead and as I've said, in the third quarter it did not impact us because the team had pegged where we thought the market would be and we were spot on.

Our next question from Matthew DiFrisco of Guggenheim Securities. Please go ahead Mr. DiFrisco.

I just had a question with respect to the mobile and how that over time obviously you've been pretty detailed talking about the average check benefit there. I wonder though also, if you've seen any early indications of what that is doing as far as capacity to your stores. How has it helped maybe reallocate labor use more efficiently? Have you seen an ability to sustain higher volumes? You already to very big volumes off a small footprint, but I was wondering, does the mobile app skew even more to that take-out order and drive that business more or increase the repeat of the customer to a point where you think you could maybe even test the limits on some of the higher volume in the stores?

Yeah, a couple of things I would tell you on that. First, we've demonstrated that our very small, yet efficient footprint can deliver pretty high volumes. Our Company restaurants on average on a trailing 12 month are in the $1.5 million to $1.6 million a year performance or AUV, so we do know that there certainly is more capacity within the restaurant for growth, without expansion or retooling of the configuration of the kitchen. The app, the online ordering mechanism, we think it provides efficiencies as I mentioned before to the restaurants in just terms of the ease and consistency and accuracy of providing orders to our guests. It certainly makes it easier for our employees and our team to process those orders and we've also mentioned before that we are in the process of implementing one modification to the restaurant that we think can help the customer experience out and that is modifying our front counter to have a dedicated area where the customer can come in and grab their order without standing in line for others who are waiting to place an order. A lot of the online orders are going to replace people who are today calling into our restaurants and I would note that our concept already delivers 75% take-out for our guests and in terms of their preference and choice of how they dine with us. So, to increase that, I don't know that it would necessarily increase that number, but it certainly is a mix shift between the phone in orders and the online app.

Then I just had a question, a second one on delivery. A lot of the quick casual peers are getting into delivery now that do a significantly smaller amount of take-out business. I know you've always sort of said about the food quality of it is something to be concerned about, that it's just not great to deliver, but it does seem like the technologies there or at least the burden of delivery has been transferred to some third parties and some are trying to step up their games and delivering it. Would you test or have some of your franchisees discuss or consider testing delivery in the face of some competition coming in with it?

Yeah, it's a great question and I will go back to the comment you made that step one is to make sure that we maintain quality and put our high-quality food, our fresh ingredients and all of those elements into the hands of our customers in the best manner possible. We have to be cautious of making sure that any third-party company that we would do any business with is going to commit to delivering upon our expectations and not all food is made for delivery. We hand cut every potato in our restaurants to make our Fresh Cut Seasoned Fries every single day. Those fries wouldn't hold up well if a third party delivery driver took a long time to get it to the customer. So we are certainly aware of the trend and the growth in the trend, but at this point, we haven't made any firm commitments one way or the other as to how we would address that that emerging trend.

Then just the last question, how many stores are going to be in new markets over -- if we were to think like two to three years from now, every year, your percentage of stores that are going to be opening from franchisees, regardless if they're within that bucket of existing franchisees or not but considered more so, the new markets rather than new franchisees and that's my last question. Thanks.

Okay sure. Thank you. I don't have a specific number or metric, to provide you as to what percentage would be in new markets versus existing markets. I can tell you that the complexion of restaurants that are opening in new markets is going to grow relative to the existing. So, it will outpace that. I would also just point your attention to a statistically provided earlier on, which is of our growth goals to our 2,500 unit target domestically. There's almost an even split between the remaining restaurants that we can develop in both existing and new markets. So as I mentioned in my earlier comments, we can more than double the size of the chain just in existing markets alone without even entering new markets, but as we also noted, we have sold some deals recently in some of these new markets, Boston as an example, Philadelphia, et cetera. So, we would expect to see that mix shift over time.

Our next question is from Karen Holthouse of Goldman Sachs. Please go ahead Miss Holthouse.

This is [indiscernible] for Karen. We saw the gap between Company comps and franchisee comps widen by over 200 bps this quarter. Just wondering if you could give us some color on what drove this, was it differences in traffic or check? I know you don't break out comps, but any directional color would be helpful. Thank you.

Yeah I think, the thing Charlie mentioned before was part of the major drivers, the geography piece that they're in. So Texas, was a particularly strong market for us. Most of our Company stores are in Texas, particularly Dallas and Houston and that probably explains the majority of the variance there. The other thing to consider is, there's only 19 Company stores too, so the base is quite small, but I would say the geography is the major difference.

This concludes time allocated for questions on today's call. This also concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.