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2022-05-12 17:20

Wendy’s Co. stock closed 10% down after the company reported its first quarter 2022 financial results that were worse than Wall Street had expected.

Wendy Q1 financial results

The company has generated $488.6 million total revenues compared to $460.2 million in the first quarter of 2021 which is an increase of 6.2%. Greater sales at Company-operated restaurants drove the rise in revenue, which was further aided by a rise in franchise royalty revenue and advertising funds revenue, both of which climbed substantially owing to higher same-restaurant sales.

The company’s general and administrative expense for the first quarter of 2022 was $62.3 million relative to $52.6 million in Q1 of 2021, a surge of 18.5%. The operating profit decreased by 9.9% to $74.9 million in the first quarter of 2022 compared to $83.1 million in the first quarter of 2021. Higher general and administrative expenses, as well as lower margins in Company-operated restaurants, contributed to the drop in operating profit. Lower restructuring and realignment expenditures, as well as higher franchise royalty revenue, somewhat offset these decreases.

The net income in the first quarter of 2022 was $37.4 million, a decrease of 9.6% from $41.4 million in the first quarter of 2021. The drop in net income was mostly due to a drop in operational profit. Lower interest expense as a result of the Company's debt refinancing completed in the second quarter of 2021 somewhat offset this.

For Q1 2022, the company’s adjusted EBTIDA was $106.9 million compared to $121.0 million. Figure shows a decline 11.6%. Higher general and administrative expenses, as well as a decline in Company-operated restaurant margin, contributed to the drop in adjusted EBITDA. Higher franchise royalty revenue largely compensated these declines.

What else was noteworthy?

Moreover the Adjusted EPS for the first quarter of 2022 was $0.17, a decline of 15% from $0.20 in the first quarter of 2021. A fall in adjusted EBITDA drove the drop in adjusted earnings per share. This was largely offset by decreased interest expenditure and fewer shares outstanding as a result of the Company's share repurchase programme. And Lastly the Free cash flow for the first quarter of 2022 was $44.4 compared to $97.5 in previous year’s same time period. Here again the value has relatively declined by 54.5%.

President and Chief Executive Officer Todd Penegor said:

"We continue to make meaningful progress against our three strategic growth pillars, reinforcing the strength and resiliency of the Wendy's® brand and driving robust AUV and sales increases. We had one of our best quarters in our history for unit growth, with over 90 new restaurant openings, and are on track to reach our planned net unit growth goal of 5 to 6 percent for the year.”

The $3.46 billion company that trades at a PE multiple of 18 is now down 35% for the year.