wen-20240331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒						QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024


☐						TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to _______________

Commission file number: 1-2207

THE WENDY’S COMPANY

(Exact name of registrant as specified in its charter)


Delaware		38-0471180
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

One Dave Thomas Blvd.
Dublin,	Ohio	43017
(Address of principal executive offices)		(Zip Code)

(614) 764-3100

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $.10 par value	WEN	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

There were 205,133,491 shares of The Wendy’s Company common stock outstanding as of April 25, 2024.

THE WENDY’S COMPANY AND SUBSIDIARIES

INDEX TO FORM 10-Q


			Page
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements			4
Unaudited Condensed Consolidated Balance Sheets as of March 3 1, 2024 and De cember 31 , 2023			4
Unaudited Condensed Consolidated Statements of Operations for the three months ended March 31, 2024 and April 2, 2023			5
Unaudited Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2024 and April 2, 2 0 23			6
Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2024 and April 2, 2023			7
Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and April 2, 2023			8
Notes to Condensed Consolidated Financial Statements			9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			23
Item 3. Quantitative and Qualitative Disclosures about Market Risk			37
Item 4. Controls and Procedures			37

PART II: OTHER INFORMATION			38
Item 1. Legal Proceedings			39
Item 1A. Risk Factors			40
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			40
Item 6. Exhibits			41
Signatures			42

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

THE WENDY’S COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands Except Par Value)


	March 31, 2024		December 31, 2023
ASSETS	(Unaudited)
Current assets:
Cash and cash equivalents	$	498,333	$	516,037
Restricted cash	36,058		35,848
Accounts and notes receivable, net	125,546		121,683
Inventories	6,110		6,690
Prepaid expenses and other current assets	39,075		39,640
Advertising funds restricted assets	162,406		117,755
Total current assets	867,528		837,653
Properties	890,667		891,080
Finance lease assets	227,547		228,936
Operating lease assets	696,944		705,615
Goodwill	773,077		773,727
Other intangible assets	1,210,124		1,219,129
Investments	33,230		34,445
Net investment in sales-type and direct financing leases	306,908		313,664
Other assets	183,745		178,577
Total assets	$	5,189,770	$	5,182,826

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	29,250	$	29,250
Current portion of finance lease liabilities	20,730		20,250
Current portion of operating lease liabilities	49,848		49,353
Accounts payable	26,175		27,370
Accrued expenses and other current liabilities	144,211		135,149
Advertising funds restricted liabilities	155,235		120,558
Total current liabilities	425,449		381,930
Long-term debt	2,727,371		2,732,814
Long-term finance lease liabilities	563,955		568,767
Long-term operating lease liabilities	729,086		739,340
Deferred income taxes	270,875		270,353
Deferred franchise fees	89,331		90,132
Other liabilities	90,049		89,711
Total liabilities	4,896,116		4,873,047
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.10 par value; 1,500,000 shares authorized; 470,424 shares issued; 205,325 and 205,397 shares outstanding, respectively	47,042		47,042
Additional paid-in capital	2,962,241		2,960,035
Retained earnings	400,465		409,863
Common stock held in treasury, at cost; 265,099 and 265,027 shares, respectively	(3,053,133)		(3,048,786)
Accumulated other comprehensive loss	(62,961)		(58,375)
Total stockholders’ equity	293,654		309,779
Total liabilities and stockholders’ equity	$	5,189,770	$	5,182,826

See accompanying notes to condensed consolidated financial statements.

Table of Contents

THE WENDY’S COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In Thousands Except Per Share Amounts)


	Three Months Ended
	March 31, 2024		April 2, 2023
	(Unaudited)
Revenues:
Sales	$	225,323	$	227,949
Franchise royalty revenue and fees	146,500		141,677
Franchise rental income	57,986		57,807
Advertising funds revenue	104,944		101,374
	534,753		528,807
Costs and expenses:
Cost of sales	192,113		196,536
Franchise support and other costs	14,742		13,260
Franchise rental expense	31,778		30,629
Advertising funds expense	107,374		101,661
General and administrative	63,757		62,276
Depreciation and amortization (exclusive of amortization of cloud computing arrangements shown separately below)	35,518		33,472
Amortization of cloud computing arrangements	3,542		1,582
System optimization losses (gains), net	127		(5)
Reorganization and realignment costs	5,673		6,808
Impairment of long-lived assets	2,006		376
Other operating income, net	(3,033)		(2,266)
	453,597		444,329
Operating profit	81,156		84,478
Interest expense, net	(30,535)		(31,705)
Loss on early extinguishment of debt	—		(1,266)
Investment loss, net	—		(3,562)
Other income, net	6,836		7,336
Income before income taxes	57,457		55,281
Provision for income taxes	(15,464)		(15,460)
Net income	$	41,993	$	39,821

Basic and diluted net income per share	$	.20	$	.19

See accompanying notes to condensed consolidated financial statements.

Table of Contents

THE WENDY’S COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In Thousands)


	Three Months Ended
	March 31, 2024		April 2, 2023
	(Unaudited)
Net income	$	41,993	$	39,821
Other comprehensive (loss) income:
Foreign currency translation adjustment	(4,586)		158
Other comprehensive (loss) income	(4,586)		158
Comprehensive income	$	37,407	$	39,979

See accompanying notes to condensed consolidated financial statements.

Table of Contents

THE WENDY’S COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In Thousands)


	Common Stock		Additional Paid-In Capital		Retained Earnings		Common Stock Held in Treasury		Accumulated Other Comprehensive Loss		Total

	(Unaudited)
Balance at December 31, 2023	$	47,042	$	2,960,035	$	409,863	$	(3,048,786)	$	(58,375)	$	309,779
Net income	—		—		41,993		—		—		41,993
Other comprehensive loss	—		—		—		—		(4,586)		(4,586)
Cash dividends	—		—		(51,374)		—		—		(51,374)
Repurchases of common stock	—		—		—		(7,216)		—		(7,216)
Share-based compensation	—		5,853		—		—		—		5,853
Common stock issued upon exercises of stock options	—		179		—		1,036		—		1,215
Common stock issued upon vesting of restricted shares	—		(3,855)		—		1,778		—		(2,077)
Other	—		29		(17)		55		—		67
Balance at March 31, 2024	$	47,042	$	2,962,241	$	400,465	$	(3,053,133)	$	(62,961)	$	293,654





Balance at January 1, 2023	$	47,042	$	2,937,885	$	414,749	$	(2,869,780)	$	(64,176)	$	465,720
Net income	—		—		39,821		—		—		39,821
Other comprehensive income	—		—		—		—		158		158
Cash dividends	—		—		(53,103)		—		—		(53,103)
Repurchases of common stock	—		—		—		(38,810)		—		(38,810)
Share-based compensation	—		4,609		—		—		—		4,609
Common stock issued upon exercises of stock options	—		808		—		1,808		—		2,616
Common stock issued upon vesting of restricted shares	—		(2,222)		—		678		—		(1,544)
Other	—		58		(22)		54		—		90
Balance at April 2, 2023	$	47,042	$	2,941,138	$	401,445	$	(2,906,050)	$	(64,018)	$	419,557

See accompanying notes to condensed consolidated financial statements.

Table of Contents

THE WENDY’S COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)


	Three Months Ended
	March 31, 2024		April 2, 2023
	(Unaudited)
Cash flows from operating activities:
Net income	$	41,993	$	39,821
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (exclusive of amortization of cloud computing arrangements shown separately below)	35,518		33,472
Amortization of cloud computing arrangements	3,542		1,582
Share-based compensation	5,853		4,609
Impairment of long-lived assets	2,006		376
Deferred income tax	603		2,302
Non-cash rental expense, net	10,974		9,012
Change in operating lease liabilities	(12,112)		(11,718)
Net receipt (recognition) of deferred vendor incentives	8,584		(1,197)
System optimization losses (gains), net	127		(5)
Distributions received from joint ventures, net of equity in earnings	430		394
Long-term debt-related activities, net	1,870		3,419
Cloud computing arrangements expenditures	(2,865)		(6,643)
Changes in operating assets and liabilities and other, net	3,464		(22,449)
Net cash provided by operating activities	99,987		52,975
Cash flows from investing activities:
Capital expenditures	(17,354)		(12,240)
Franchise development fund	(4,741)		(218)

Dispositions	26		287

Notes receivable, net	1,256		110
Net cash used in investing activities	(20,813)		(12,061)
Cash flows from financing activities:

Repayments of long-term debt	(7,313)		(39,122)
Repayments of finance lease liabilities	(5,465)		(4,398)

Repurchases of common stock	(7,295)		(36,727)
Dividends	(51,374)		(53,103)
Proceeds from stock option exercises	932		2,881
Payments related to tax withholding for share-based compensation	(2,115)		(1,809)
Net cash used in financing activities	(72,630)		(132,278)
Net cash provided by (used in) operations before effect of exchange rate changes on cash	6,544		(91,364)
Effect of exchange rate changes on cash	(2,274)		129
Net increase (decrease) in cash, cash equivalents and restricted cash	4,270		(91,235)
Cash, cash equivalents and restricted cash at beginning of period	588,816		831,801
Cash, cash equivalents and restricted cash at end of period	$	593,086	$	740,566

See accompanying notes to condensed consolidated financial statements.

Table of Contents

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

(1) Basis of Presentation

The accompanying unaudited condensed consolidated financial statements (the “Financial Statements”) of The Wendy’s Company (“The Wendy’s Company” and, together with its subsidiaries, the “Company,” “we,” “us” or “our”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and, therefore, do not include all information and footnotes required by GAAP for complete financial statements. In our opinion, the Financial Statements contain all adjustments of a normal recurring nature necessary to present fairly our financial position as of March 31, 2024, the results of our operations for the three months ended March 31, 2024 and April 2, 2023 and cash flows for the three months ended March 31, 2024 and April 2, 2023. The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results to be expected for the full 2024 fiscal year. The Financial Statements should be read in conjunction with the audited consolidated financial statements for The Wendy’s Company and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (the “Form 10-K”).

The principal 100% owned subsidiary of the Company is Wendy’s International, LLC and its subsidiaries (“Wendy’s”). The Company manages and internally reports its business in the following segments: (1) Wendy’s U.S., (2) Wendy’s International and (3) Global Real Estate & Development. See Note 16 for further information.

We report on a fiscal year consisting of 52 or 53 weeks ending on the Sunday closest to or on December 31. All three-month periods presented herein contain 13 weeks. All references to years, quarters and months relate to fiscal periods rather than calendar periods.

Our significant interim accounting policies include the recognition of advertising funds expense in proportion to advertising funds revenue.

(2) Revenue

Disaggregation of Revenue

The following tables disaggregate revenue by segment and source:


	Wendy’s U.S.		Wendy’s International		Global Real Estate & Development		Total
Three Months Ended March 31, 2024
Sales at Company-operated restaurants	$	219,468	$	5,855	$	—	$	225,323
Franchise royalty revenue	108,853		16,827		—		125,680
Franchise fees	17,826		1,889		1,105		20,820
Franchise rental income	—		—		57,986		57,986
Advertising funds revenue	96,700		8,244		—		104,944
Total revenues	$	442,847	$	32,815	$	59,091	$	534,753

Three Months Ended April 2, 2023
Sales at Company-operated restaurants	$	222,632	$	5,317	$	—	$	227,949
Franchise royalty revenue	106,339		15,811		—		122,150
Franchise fees	17,272		1,523		732		19,527
Franchise rental income	—		—		57,807		57,807
Advertising funds revenue	94,745		6,629		—		101,374
Total revenues	$	440,988	$	29,280	$	58,539	$	528,807

Table of Contents

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Contract Balances

The following table provides information about receivables and contract liabilities (deferred franchise fees) from contracts with customers:


	March 31, 2024 (a)		December 31, 2023 (a)
Receivables, which are included in “Accounts and notes receivable, net” (b)	$	62,000	$	55,293
Receivables, which are included in “Advertising funds restricted assets”	74,614		76,838
Deferred franchise fees (c)	100,264		100,805

_______________

(a)Excludes funds collected from the sale of gift cards, which are primarily reimbursed to franchisees upon redemption at franchised restaurants and do not ultimately result in the recognition of revenue in the Company’s condensed consolidated statements of operations.

(b)Includes receivables related to “Sales” and “Franchise royalty revenue and fees.”

(c)Deferred franchise fees are included in “Accrued expenses and other current liabilities” and “Deferred franchise fees” and totaled $10,933 and $89,331, respectively, as of March 31, 2024, and $10,673 and $90,132, respectively, as of December 31, 2023.

Significant changes in deferred franchise fees are as follows:


	Three Months Ended
	March 31, 2024		April 2, 2023
Deferred franchise fees at beginning of period	$	100,805	$	99,208
Revenue recognized during the period	(2,804)		(2,814)
New deferrals due to cash received and other	2,263		1,300
Deferred franchise fees at end of period	$	100,264	$	97,694

Anticipated Future Recognition of Deferred Franchise Fees

The following table reflects the estimated franchise fees to be recognized in the future related to performance obligations that are unsatisfied at the end of the period:


Estimate for fiscal year:
2024 (a)	$	9,345
2025	6,526
2026	6,390
2027	6,290
2028	6,169
Thereafter	65,544
	$	100,264

_______________

(a)Represents franchise fees expected to be recognized for the remainder of 2024, which includes development-related franchise fees expected to be recognized over a duration of one year or less.

Table of Contents

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

(3) System Optimization Losses (Gains), Net

The Company’s system optimization initiative included a shift from Company-operated restaurants to franchised restaurants over time, through acquisitions and dispositions, as well as facilitating franchisee-to-franchisee restaurant transfers (“Franchise Flips”). As of March 31, 2024, Company-operated restaurant ownership was approximately 5% of the total system. While the Company has no plans to move its ownership away from approximately 5% of the total system, the Company expects to continue to optimize the Wendy’s system through Franchise Flips, as well as evaluating strategic acquisitions of franchised restaurants and strategic dispositions of Company-operated restaurants to existing and new franchisees, to further strengthen the franchisee base, drive new restaurant development and accelerate reimages. During the three months ended March 31, 2024, the Company facilitated 11 Franchise Flips. During the three months ended April 2, 2023, the Company did not facilitate any Franchise Flips. No Company-operated restaurants were sold to or purchased from franchisees during the three months ended March 31, 2024 or April 2, 2023.

Gains and losses recognized on dispositions are recorded to “System optimization losses (gains), net” in our condensed consolidated statements of operations. Costs related to acquisitions and dispositions under our system optimization initiative are recorded to “Reorganization and realignment costs,” which are further described in Note 4. All other costs incurred related to facilitating Franchise Flips are recorded to “Franchise support and other costs.”

As part of our system optimization initiative, the Company recorded a (loss) gain on sales of surplus and other properties of $(127) and $5 during the three months ended March 31, 2024 and April 2, 2023, respectively. The Company received net cash proceeds from the sales of $26 and $287 during the three months ended March 31, 2024 and April 2, 2023, respectively.

Assets Held for Sale

As of March 31, 2024 and December 31, 2023, the Company had assets held for sale of $2,678 and $2,689, respectively, primarily consisting of surplus properties. Assets held for sale are included in “Prepaid expenses and other current assets.”

(4) Reorganization and Realignment Costs

The following is a summary of the initiatives included in “Reorganization and realignment costs:”


	Three Months Ended
	March 31, 2024		April 2, 2023
Organizational redesign	$	5,622	$	6,737

Other reorganization and realignment plans	51		71
Reorganization and realignment costs	$	5,673	$	6,808

Organizational Redesign

In February 2023, the Board of Directors approved a plan to redesign the Company’s organizational structure to better support the execution of the Company’s long-term growth strategy by maximizing organizational efficiency and streamlining decision making (the “Organizational Redesign Plan”). As a result of the Organizational Redesign Plan, the Company held its general and administrative expense in 2023 relatively flat compared with 2022. Additionally, in January 2024, the Board of Directors announced the appointment of Kirk Tanner as the Company’s new President and Chief Executive Officer, effective February 5, 2024. Mr. Tanner succeeded Todd A. Penegor, the Company’s previous President and Chief Executive Officer, who departed from the Company in February 2024. The Company expects to incur total costs of approximately $17,000 to $19,000 related to the Organizational Redesign Plan, including costs related to the succession of the President and Chief Executive Officer role. During the three months ended March 31, 2024 and April 2, 2023, the Company recognized costs totaling $5,622 and $6,737, respectively, which primarily included severance and related employee costs. The Company expects to incur additional costs aggregating approximately $2,500 to $4,500, comprised of (1) severance and related employee costs of approximately $2,000, (2) recruitment and relocation costs of approximately $200 and (3) share-based compensation of approximately $1,500. The Company expects costs related to the Organizational Redesign Plan to continue into 2026.

Table of Contents

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

The following is a summary of the costs recorded as a result of the Organizational Redesign Plan:


	Three Months Ended
	March 31, 2024		April 2, 2023		Total Incurred Since Inception
Severance and related employee costs	$	5,362	$	5,539	$	11,605
Recruitment and relocation costs	82		78		636
Third-party and other costs	50		345		1,046
	5,494		5,962		13,287
Share-based compensation (a)	128		775		1,399
Total organizational redesign	$	5,622	$	6,737	$	14,686

_______________

(a)Primarily represents the accelerated recognition of share-based compensation resulting from the termination of employees under the Organizational Redesign Plan.

As of March 31, 2024, the accruals for the Organizational Redesign Plan are included in “Accrued expenses and other current liabilities” and “Other liabilities” and totaled $3,816 and $2,261, respectively. The tables below present a rollforward of our accruals for the Organizational Redesign Plan.


	Balance December 31, 2023		Charges		Payments		Balance March 31, 2024
Severance and related employee costs	$	1,692	$	5,362	$	(977)	$	6,077
Recruitment and relocation costs	—		82		(82)		—
Third-party and other costs	—		50		(50)		—
	$	1,692	$	5,494	$	(1,109)	$	6,077


	Balance January 1, 2023		Charges		Payments		Balance April 2, 2023
Severance and related employee costs	$	—	$	5,539	$	(741)	$	4,798
Recruitment and relocation costs	—		78		(78)		—
Third-party and other costs	—		345		(62)		283
	$	—	$	5,962	$	(881)	$	5,081

Other Reorganization and Realignment Plans

Costs incurred under the Company’s other reorganization and realignment plans were not material during the three months ended March 31, 2024 and April 2, 2023. The Company does not expect to incur any material additional costs under these plans.

(5) Investments

The following is a summary of the carrying value of our investments:


	March 31, 2024		December 31, 2023
Equity method investments	$	31,512	$	32,727
Other investments in equity securities	1,718		1,718
	$	33,230	$	34,445

Table of Contents

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Equity Method Investments

Wendy’s has a 50% share in a partnership in a Canadian restaurant real estate joint venture (“TimWen”) with a subsidiary of Restaurant Brands International Inc., a quick-service restaurant company that owns the Tim Hortons® brand (Tim Hortons is a registered trademark of Tim Hortons USA Inc.). The Company has significant influence over this investee. Such investment is accounted for using the equity method, under which our results of operations include our share of the income of the investee in “Other operating income, net.”

Presented below is activity related to our investment in TimWen included in our condensed consolidated financial statements:


	Three Months Ended
	March 31, 2024		April 2, 2023
Balance at beginning of period	$	32,727	$	33,921

Equity in earnings for the period	3,151		2,783
Amortization of purchase price adjustments (a)	(629)		(684)
	2,522		2,099
Distributions received	(2,952)		(2,493)
Foreign currency translation adjustment included in “Other comprehensive (loss) income”	(785)		10
Balance at end of period	$	31,512	$	33,537

_______________

(a)Purchase price adjustments that impacted the carrying value of the Company’s investment in TimWen are being amortized over the average original aggregate life of 21 years.

Other Investments in Equity Securities

During the three months ended April 2, 2023, the Company recorded an impairment charge of $3,562 for the difference between the estimated fair value and the carrying value of an investment in equity securities.

(6) Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Valuation techniques under the accounting guidance related to fair value measurements are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions. These inputs are classified into the following hierarchy:

•Level 1 Inputs - Quoted prices for identical assets or liabilities in active markets.

•Level 2 Inputs - Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

•Level 3 Inputs - Pricing inputs are unobservable for the assets or liabilities and include situations where there is little, if any, market activity for the assets or liabilities. The inputs into the determination of fair value require significant management judgment or estimation.

Table of Contents

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Financial Instruments

The following table presents the carrying amounts and estimated fair values of the Company’s financial instruments:


	March 31, 2024				December 31, 2023
	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Fair Value Measurements
Financial assets
Cash equivalents	$	339,779	$	339,779	$	365,901	$	365,901	Level 1
Other investments in equity securities (a)	1,718		1,718		1,718		1,718		Level 2

Financial liabilities (b)
Series 2022-1 Class A-2-I Notes	98,250		93,449		98,500		92,289		Level 2
Series 2022-1 Class A-2-II Notes	389,134		354,571		390,134		370,577		Level 2
Series 2021-1 Class A-2-I Notes	422,144		367,544		423,269		362,572		Level 2
Series 2021-1 Class A-2-II Notes	631,905		530,592		633,530		530,581		Level 2
Series 2019-1 Class A-2-I Notes	356,673		341,960		357,673		341,606		Level 2
Series 2019-1 Class A-2-II Notes	401,998		376,793		403,123		374,058		Level 2
Series 2018-1 Class A-2-II Notes	439,912		415,457		441,099		412,754		Level 2
7% debentures, due in 2025	48,405		49,813		48,237		49,431		Level 2

_______________

(a)The fair value of our other investments in equity securities is based on our review of information provided by the investment manager, which is based on observable price changes in orderly transactions for a similar investment of the same issuer.

(b)The fair values were based on quoted market prices in markets that are not considered active markets.

The carrying amounts of cash, accounts payable and accrued expenses approximate fair value due to the short-term nature of those items. The carrying amounts of accounts and notes receivable, net (both current and non-current) approximate fair value due to the effect of the related allowance for doubtful accounts. Our cash equivalents are the only financial assets measured and recorded at fair value on a recurring basis.

Table of Contents

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Non-Recurring Fair Value Measurements

Assets and liabilities remeasured to fair value on a non-recurring basis resulted in impairment that we have recorded to “Impairment of long-lived assets” in our condensed consolidated statements of operations.

Total impairment losses may reflect the impact of remeasuring long-lived assets held and used (including land, buildings, leasehold improvements, favorable lease assets and right-of-use assets) to fair value as a result of (1) the deterioration in operating performance of certain Company-operated restaurants and (2) the Company’s decision to lease and/or sublease the land and/or buildings to franchisees in connection with the sale or anticipated sale of restaurants, including any subsequent lease modifications. The fair values of long-lived assets held and used presented in the tables below represent the remaining carrying value and were estimated based on either discounted cash flows of future anticipated lease and sublease income or discounted cash flows of future anticipated Company-operated restaurant performance. Total impairment losses may also include the impact of remeasuring long-lived assets held for sale. The fair values of long-lived assets held for sale presented in the tables below represent the remaining carrying value and were estimated based on current market values. See Note 7 for further information on impairment of our long-lived assets.


			Fair Value Measurements
	March 31, 2024		Level 1		Level 2		Level 3
Held and used	$	1,635	$	—	$	—	$	1,635
Held for sale	—		—		—		—
Total	$	1,635	$	—	$	—	$	1,635


			Fair Value Measurements
	December 31, 2023		Level 1		Level 2		Level 3
Held and used	$	1,212	$	—	$	—	$	1,212
Held for sale	1,044		—		—		1,044
Total	$	2,256	$	—	$	—	$	2,256

(7) Impairment of Long-Lived Assets

The Company records impairment charges as a result of (1) the deterioration in operating performance of certain Company-operated restaurants, (2) the Company’s decision to lease and/or sublease properties to franchisees in connection with the sale or anticipated sale of Company-operated restaurants, including any subsequent lease modifications and (3) classifying surplus properties as held for sale.

The following is a summary of impairment losses recorded, which represent the excess of the carrying amount over the fair value of the affected assets and are included in “Impairment of long-lived assets:”


	Three Months Ended
	March 31, 2024		April 2, 2023
Company-operated restaurants	$	1,775	$	350
Surplus properties	231		26
	$	2,006	$	376

(8) Income Taxes

The Company’s effective tax rate for the three months ended March 31, 2024 and April 2, 2023 was 26.9% and 28.0%, respectively. The Company’s effective tax rate varied from the U.S. federal statutory rate of 21% for the three months ended March 31, 2024 primarily due to state income taxes and the tax effects of our foreign operations.

Table of Contents

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

There were no significant changes to the unrecognized tax benefits or related interest and penalties for the three months ended March 31, 2024. During the next twelve months, we believe it is reasonably possible the Company will reduce unrecognized tax benefits by up to $220 due to lapses of statutes of limitations.

The current portion of refundable income taxes was $6,830 and $5,284 as of March 31, 2024 and December 31, 2023, respectively, and is included in “Accounts and notes receivable, net.” There were no long-term refundable income taxes as of March 31, 2024 or December 31, 2023.

(9) Net Income Per Share

The calculation of basic and diluted net income per share was as follows:


	Three Months Ended
	March 31, 2024		April 2, 2023
Net income	$	41,993	$	39,821

Common stock:
Weighted average basic shares outstanding	205,372		212,547
Dilutive effect of stock options and restricted shares	1,599		2,482
Weighted average diluted shares outstanding	206,971		215,029

Basic and diluted net income per share	$	.20	$	.19

Basic net income per share for the three months ended March 31, 2024 and April 2, 2023 was computed by dividing net income amounts by the weighted average number of shares of common stock outstanding. Diluted net income per share was computed by dividing net income by the weighted average number of basic shares outstanding plus the potential common share effect of dilutive stock options and restricted shares. We excluded potential common shares of 6,789 and 4,532 for the three months ended March 31, 2024 and April 2, 2023, respectively, from our diluted net income per share calculation as they would have had anti-dilutive effects.

(10) Stockholders’ Equity

Dividends

During both the first quarter of 2024 and the first quarter of 2023, the Company paid dividends per share of $.25.

Repurchases of Common Stock

In January 2023, our Board of Directors authorized a repurchase program for up to $500,000 of our common stock through February 28, 2027, when and if market conditions warrant and to the extent legally permissible (the “January 2023 Authorization”). During the three months ended March 31, 2024, the Company repurchased 392 shares under the January 2023 Authorization with an aggregate purchase price of $7,187, of which $470 was accrued as of March 31, 2024, and excluding excise tax of $24 and commissions of $5. As of March 31, 2024, the Company had $302,813 of availability remaining under the January 2023 Authorization. Subsequent to March 31, 2024 through April 25, 2024, the Company repurchased 229 shares under the January 2023 Authorization with an aggregate purchase price of $4,316, excluding applicable excise tax and commissions.

During the three months ended April 2, 2023, the Company repurchased 1,794 shares under the January 2023 Authorization with an aggregate purchase price of $38,785, of which $2,083 was accrued as of April 2, 2023, and excluding commissions of $25.

Table of Contents

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Accumulated Other Comprehensive Loss

The following table provides a rollforward of accumulated other comprehensive loss, which is entirely comprised of foreign currency translation:


	Three Months Ended
	March 31, 2024		April 2, 2023
Balance at beginning of period	$	(58,375)	$	(64,176)
Foreign currency translation	(4,586)		158
Balance at end of period	$	(62,961)	$	(64,018)

(11) Leases

Nature of Leases

The Company operates restaurants that are located on sites owned by us and sites leased by us from third parties. In addition, the Company owns sites and leases sites from third parties, which it leases and/or subleases to franchisees. The Company also leases restaurant, office and transportation equipment. As of March 31, 2024, the nature of restaurants operated by the Company and its franchisees was as follows:


			March 31, 2024
Company-operated restaurants:
Owned land and building			155
Owned building and held long-term land leases			144
Leased land and building			112
Total Company-operated restaurants			411

Franchisee-operated restaurants:
Company-owned properties leased to franchisees			493
Company-leased properties subleased to franchisees			1,176
Other franchisee-operated restaurants			5,168
Total franchisee-operated restaurants			6,837
Total Company-operated and franchisee-operated restaurants			7,248

Table of Contents

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Company as Lessee

The components of lease cost are as follows:


	Three Months Ended
	March 31, 2024		April 2, 2023
Finance lease cost:
Amortization of finance lease assets	$	4,297	$	4,063
Interest on finance lease liabilities	10,658		10,750
	14,955		14,813
Operating lease cost	21,701		21,449
Variable lease cost (a)	16,488		16,081
Short-term lease cost	1,394		1,506
Total operating lease cost (b)	39,583		39,036
Total lease cost	$	54,538	$	53,849

_______________

(a)Includes expenses for executory costs of $10,221 and $9,848 for the three months ended March 31, 2024 and April 2, 2023, respectively, for which the Company is reimbursed by sublessees.

(b)Includes $31,718 and $30,598 for the three months ended March 31, 2024 and April 2, 2023, respectively, recorded to “Franchise rental expense” for leased properties that are subsequently leased to franchisees. Also includes $7,388 and $7,865 for the three months ended March 31, 2024 and April 2, 2023, respectively, recorded to “Cost of sales” for leases for Company-operated restaurants.

Company as Lessor

The components of lease income are as follows:


	Three Months Ended
	March 31, 2024		April 2, 2023
Sales-type and direct-financing leases:
Selling (loss) profit	$	(16)	$	129
Interest income (a)	7,719		7,862

Operating lease income	41,497		42,156
Variable lease income	16,489		15,651
Franchise rental income (b)	$	57,986	$	57,807

_______________

(a)Included in “Interest expense, net.”

(b)Includes sublease income of $42,783 and $42,951 recognized during the three months ended March 31, 2024 and April 2, 2023, respectively. Sublease income includes lessees’ variable payments to the Company for executory costs of $10,089 and $9,778 for the three months ended March 31, 2024 and April 2, 2023, respectively.

Table of Contents

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

(12) Supplemental Cash Flow Information

The following table includes supplemental non-cash investing and financing activities:


	Three Months Ended
	March 31, 2024		April 2, 2023
Supplemental non-cash investing and financing activities:
Capital expenditures included in accounts payable	$	9,161	$	9,119
Finance leases	3,749		333

The following table includes a reconciliation of cash, cash equivalents and restricted cash:


	March 31, 2024		December 31, 2023
Reconciliation of cash, cash equivalents and restricted cash at end of period:
Cash and cash equivalents	$	498,333	$	516,037
Restricted cash	36,058		35,848
Restricted cash, included in Advertising funds restricted assets	58,695		36,931
Total cash, cash equivalents and restricted cash	$	593,086	$	588,816

(13) Transactions with Related Parties

Except as described below, the Company did not have any significant changes in or transactions with its related parties during the current fiscal period since those reported in the Form 10-K.

TimWen Lease and Management Fee Payments

A wholly-owned subsidiary of Wendy’s leases restaurant facilities from TimWen, which are then subleased to franchisees for the operation of Wendy’s/Tim Hortons combo units in Canada. Wendy’s paid TimWen $5,030 and $4,673 under these lease agreements during the three months ended March 31, 2024 and April 2, 2023, respectively, which is recorded to “Franchise rental expense.” In addition, TimWen paid Wendy’s a management fee under the TimWen joint venture agreement of $60 during both the three months ended March 31, 2024 and the three months ended April 2, 2023, which is included as a reduction to “General and administrative.”

Transactions with QSCC

Wendy’s has a purchasing co-op relationship structure with its franchisees that establishes Quality Supply Chain Co-op, Inc. (“QSCC”). QSCC manages, for the Wendy’s system in the U.S. and Canada, contracts for the purchase and distribution of food, proprietary paper, operating supplies and equipment under national agreements with pricing based upon total system volume. QSCC’s supply chain management facilitates continuity of supply and provides consolidated purchasing efficiencies while monitoring and seeking to minimize possible obsolete inventory throughout the Wendy’s supply chain in the U.S. and Canada.

Wendy’s and its franchisees pay sourcing fees to third-party vendors on certain products sourced by QSCC. Such sourcing fees are remitted by these vendors to QSCC and are the primary means of funding QSCC’s operations. In addition, QSCC collects certain rebates, price variance and other recoveries, technology fees, convention fees and other funding from third-party vendors as part of the administration and management of the Wendy’s supply chain in the U.S. and Canada. Should QSCC’s sourcing fees exceed its expected needs, QSCC’s board of directors may return some or all of the excess to its members in the form of a patronage dividend. Wendy’s recorded its share of patronage dividends of $3,096 during the three months ended March 31, 2024, of which $2,909 is included in “Other operating income, net” and $187 is included as a reduction of “Cost of sales.” There were no patronage dividends recorded during the three months ended April 2, 2023.

Table of Contents

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Transactions with Yellow Cab

Certain family members and/or affiliates of Mr. Nelson Peltz, our Chairman, Mr. Peter May, our Senior Vice Chairman, and Mr. Matthew Peltz, our Vice Chairman, hold minority ownership interests in Yellow Cab Holdings, LLC (“Yellow Cab”), a Wendy’s franchisee, that as of March 31, 2024 owns and operates 85 Wendy’s restaurants, and/or certain of the operating companies managed by Yellow Cab. During the three months ended March 31, 2024 and April 2, 2023, the Company recognized $3,612 and $3,610, respectively, in royalty, advertising fund, lease and other income from Yellow Cab and related entities. In all transactions involving Yellow Cab, the Company’s standard franchisee recruiting and approval processes were followed, no modifications were made to the Company’s standard franchise agreements or related documents, and all deal terms and transaction documents were negotiated and executed on an arm’s-length basis, consistent with the Company’s comparable franchise transactions and relationships. As of March 31, 2024 and December 31, 2023, $1,191 and $1,153, respectively, was due from Yellow Cab for such income, which is included in “Accounts and notes receivable, net” and “Advertising funds restricted assets.”

Transactions with AMC

In February 2023, Ms. Kristin Dolan, a director of the Company, was appointed as the Chief Executive Officer of AMC Networks Inc. (“AMC”). During the three months ended March 31, 2024 and April 2, 2023, the Company purchased approximately $500 and $419, respectively, of advertising time from a subsidiary of AMC. The Company’s advertising spend with AMC was made in the ordinary course of business and approved on an arm’s-length basis, consistent with the Company’s comparable advertising decisions. As of March 31, 2024 and December 31, 2023, approximately $50 and $584, respectively, was due to AMC for such advertising time, which is included in “Advertising funds restricted liabilities.”

(14) Guarantees and Other Commitments and Contingencies

Except as described below, the Company did not have any significant changes in guarantees and other commitments and contingencies during the current fiscal period since those reported in the Form 10-K. Refer to the Form 10-K for further information regarding the Company’s additional commitments and obligations.

Lease Guarantees

Wendy’s has guaranteed the performance of certain leases and other obligations, primarily from former Company-operated restaurant locations now operated by franchisees, amounting to $93,979 as of March 31, 2024. These leases extend through 2045. We have had no judgments against us as guarantor of these leases as of March 31, 2024. In the event of default by a franchise owner where Wendy’s is called upon to perform under its guarantee, Wendy’s has the ability to pursue repayment from the franchise owner. The liability recorded for our probable exposure associated with these lease guarantees was not material as of March 31, 2024.

Letters of Credit

As of March 31, 2024, the Company had outstanding letters of credit with various parties totaling $28,842. Substantially all of the outstanding letters of credit include amounts outstanding against the 2021-1 Variable Funding Senior Secured Notes, Class A-1. We do not expect any material loss to result from these letters of credit.

Table of Contents

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

(15) Legal and Environmental Matters

The Company is involved in litigation and claims incidental to our business. We provide accruals for such litigation and claims when we determine it is probable that a liability has been incurred and the loss is reasonably estimable. The Company believes it has adequate accruals for all of our legal and environmental matters. We cannot estimate the aggregate possible range of loss for our existing litigation and claims due to various reasons, including, but not limited to, many proceedings being in preliminary stages, with various motions either yet to be submitted or pending, discovery yet to occur and significant factual matters unresolved. In addition, most cases seek an indeterminate amount of damages and many involve multiple parties. Predicting the outcomes of settlement discussions or judicial or arbitral decisions is thus inherently difficult and future developments could cause these actions or claims, individually or in aggregate, to have a material adverse effect on the Company’s financial condition, results of operations, or cash flows of a particular reporting period.

(16) Segment Information

Revenues by segment are as follows:


	Three Months Ended
	March 31, 2024		April 2, 2023
Wendy’s U.S.	$	442,847	$	440,988
Wendy’s International	32,815		29,280
Global Real Estate & Development	59,091		58,539
Total revenues	$	534,753	$	528,807

The following table reconciles profit by segment to the Company’s consolidated income before income taxes:


	Three Months Ended
	March 31, 2024		April 2, 2023
Wendy’s U.S. (a)	$	125,824	$	125,230
Wendy’s International (b)	10,690		7,446
Global Real Estate & Development	24,061		25,068
Total segment profit	160,575		157,744
Unallocated franchise support and other costs	(26)		—
Advertising funds deficit	207		1,106
Unallocated general and administrative (c)	(33,390)		(32,161)
Depreciation and amortization (exclusive of amortization of cloud computing arrangements shown separately below)	(35,518)		(33,472)
Amortization of cloud computing arrangements	(3,542)		(1,582)
System optimization (losses) gains, net	(127)		5
Reorganization and realignment costs	(5,673)		(6,808)
Impairment of long-lived assets	(2,006)		(376)
Unallocated other operating income, net	656		22
Interest expense, net	(30,535)		(31,705)
Loss on early extinguishment of debt	—		(1,266)
Investment loss, net	—		(3,562)
Other income, net	6,836		7,336
Income before income taxes	$	57,457	$	55,281

_______________

Table of Contents

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

(a)Wendy’s U.S. includes advertising funds expense of $2,325 for the three months ended March 31, 2024 related to the Company’s funding of incremental advertising.

(b)Wendy’s International includes advertising funds expense of $162 and $548 for the three months ended March 31, 2024 and April 2, 2023, respectively, related to the Company’s funding of incremental advertising in Canada. In addition, Wendy’s International includes other international-related advertising deficit of $150 and $845 for the three months ended March 31, 2024 and April 2, 2023, respectively.

(c)Includes corporate overhead costs, such as employee compensation and related benefits.

(17) New Accounting Standards

New Accounting Standard Adopted

Common-Control Lease Arrangements

In March 2023, the Financial Accounting Standards Board (“FASB”) issued an update to amend certain lease accounting guidance that applies to arrangements between related parties under common control. The amendment requires a lessee in a common-control lease arrangement to amortize leasehold improvements that it owns over the useful life of the improvements to the common-control group, regardless of the lease term, if the lessee continues to control the use of the underlying asset through a lease. The Company adopted this amendment during the first quarter of 2024. The adoption of this amendment did not have a material impact on our condensed consolidated financial statements.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Introduction

This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of The Wendy’s Company (“The Wendy’s Company” and, together with its subsidiaries, the “Company,” “we,” “us,” or “our”) should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and the related notes included elsewhere within this report and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (the “Form 10-K”). There have been no material changes as of March 31, 2024 to the application of our critical accounting policies as described in Item 7 of the Form 10-K. Certain statements we make under this Item 2 constitute “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. See “Special Note Regarding Forward-Looking Statements and Projections” in “Part II. Other Information” of this report. You should consider our forward-looking statements in light of the risks discussed in “Item 1A. Risk Factors” in “Part II. Other Information” of this report and our unaudited condensed consolidated financial statements, related notes and other financial information appearing elsewhere in this report, the Form 10-K and our other filings with the Securities and Exchange Commission (the “SEC”).

The Wendy’s Company is the parent company of its 100% owned subsidiary holding company, Wendy’s Restaurants, LLC (“Wendy’s Restaurants”). Wendy’s Restaurants is the parent company of Wendy’s International, LLC (formerly known as Wendy’s International, Inc). Wendy’s International, LLC is the indirect parent company of (1) Quality Is Our Recipe, LLC (“Quality”), which is the owner and franchisor of the Wendy’s restaurant system in the United States (the “U.S.”) and all international jurisdictions except for Canada, and (2) Wendy’s Restaurants of Canada Inc., which is the owner and franchisor of the Wendy’s restaurant system in Canada. As used herein, unless the context requires otherwise, the term “Company” refers to The Wendy’s Company and its direct and indirect subsidiaries, and “Wendy’s” refers to Quality when the context relates to the ownership or franchising of the Wendy’s restaurant system and to Wendy’s International, LLC when the context refers to the Wendy’s brand.

Wendy’s is primarily engaged in the business of operating, developing and franchising a system of distinctive quick-service restaurants serving high quality food. Wendy’s opened its first restaurant in Columbus, Ohio in 1969. Today, Wendy’s is the second largest quick-service restaurant company in the hamburger sandwich segment in the U.S. based on traffic and dollar share, and the third largest globally with 7,248 restaurants in the U.S. and 32 foreign countries and U.S. territories as of March 31, 2024.

Each Wendy’s restaurant offers an extensive menu specializing in hamburger sandwiches and featuring filet of chicken breast sandwiches, which are prepared to order with the customer’s choice of toppings and condiments. Wendy’s menu also includes chicken nuggets, chili, french fries, baked potatoes, freshly prepared salads, soft drinks, Frosty® desserts and kids’ meals. In addition, Wendy’s restaurants sell a variety of promotional products on a limited time basis. Wendy’s also offers breakfast across the U.S. system and in Canada. Wendy’s breakfast menu features a variety of breakfast sandwiches such as the Breakfast Baconator® and sides such as seasoned potatoes.

The Company is comprised of the following segments: (1) Wendy’s U.S., (2) Wendy’s International and (3) Global Real Estate & Development. Wendy’s U.S. includes the operation and franchising of Wendy’s restaurants in the U.S. and derives its revenues from sales at Company-operated restaurants and royalties, fees and advertising fund collections from franchised restaurants. Wendy’s International includes the operation and franchising of Wendy’s restaurants in countries and territories other than the U.S. and derives its revenues from sales at Company-operated restaurants and royalties, fees and advertising fund collections from franchised restaurants. Global Real Estate & Development includes real estate activity for owned sites and sites leased from third parties, which are leased and/or subleased to franchisees, and also includes our share of the income of our TimWen real estate joint venture. In addition, Global Real Estate & Development earns fees from facilitating franchisee-to-franchisee restaurant transfers (“Franchise Flips”) and providing other development-related services to franchisees. In this “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the Company reports on the segment profit for each of the three segments described above. The Company measures segment profit using segment adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”). Segment adjusted EBITDA excludes certain unallocated general and administrative expenses and other items that vary from period to period without correlation to

the Company’s core operating performance. See “Results of Operations” below and Note 16 to the Condensed Consolidated Financial Statements contained in Item 1 herein for segment financial information.

The Company’s fiscal reporting periods consist of 52 or 53 weeks ending on the Sunday closest to December 31. All three-month periods presented herein contain 13 weeks. All references to years, quarters and months relate to fiscal periods rather than calendar periods.

Executive Overview

Our Business

As of March 31, 2024, the Wendy’s restaurant system was comprised of 7,248 restaurants, with 6,028 Wendy’s restaurants in operation in the U.S. Of the U.S. restaurants, 399 were operated by the Company and 5,629 were operated by a total of 208 franchisees. In addition, at March 31, 2024, there were 1,220 Wendy’s restaurants in operation in 32 foreign countries and U.S. territories. Of the international restaurants, 1,208 were operated by a total of 106 franchisees and 12 were operated by the Company in the United Kingdom (the “U.K.”).

The revenues from our restaurant business are derived from two principal sources: (1) sales at Company-operated restaurants and (2) franchise-related revenues, including royalties, national advertising funds contributions, rents and franchise fees received from Wendy’s franchised restaurants. Company-operated restaurants comprised approximately 5% of the total Wendy’s system as of March 31, 2024.

Wendy’s operating results are impacted by a number of external factors, including commodity costs, labor costs, intense price competition, unemployment and consumer spending levels, general economic and market trends and weather.

Wendy’s long-term growth opportunities include delivering accelerated global growth through (1) driving same-restaurant sales momentum across all dayparts, (2) accelerating our consumer-facing digital platforms and technologies and (3) expanding the Company’s footprint across the globe.

Key Business Measures

We track our results of operations and manage our business using the following key business measures, which includes a non-GAAP financial measure:

•Same-Restaurant Sales - We report same-restaurant sales commencing after new restaurants have been open for 15 continuous months and as soon as reimaged restaurants reopen. Restaurants temporarily closed for more than one week are excluded from same-restaurant sales. This methodology is consistent with the metric used by our management for internal reporting and analysis. The table summarizing same-restaurant sales below in “Results of Operations” provides the same-restaurant sales percent changes.

•Company-Operated Restaurant Margin - We define Company-operated restaurant margin as sales from Company-operated restaurants less cost of sales divided by sales from Company-operated restaurants. Cost of sales includes food and paper, restaurant labor and occupancy, advertising and other operating costs. Cost of sales excludes certain costs that support restaurant operations that are not allocated to individual restaurants, which are included in “General and administrative.” Cost of sales also excludes depreciation and amortization expense and impairment of long-lived assets. Therefore, as Company-operated restaurant margin as presented excludes certain costs as described above, its usefulness may be limited and may not be comparable to other similarly titled measures of other companies in our industry.

Company-operated restaurant margin is influenced by factors such as price increases, the effectiveness of our advertising and marketing initiatives, featured products, product mix, fluctuations in food and labor costs, restaurant openings, remodels and closures and the level of our fixed and semi-variable costs.

•Systemwide Sales - Systemwide sales is a non-GAAP financial measure, which includes sales by both Company-operated restaurants and franchised restaurants. Franchised restaurants’ sales are reported by our franchisees and represent their revenues from sales at franchised Wendy’s restaurants. The Company’s consolidated financial statements do not include sales by franchised restaurants to their customers. The Company’s royalty and advertising

funds revenues are computed as percentages of sales made by Wendy’s franchisees. As a result, sales by Wendy’s franchisees have a direct effect on the Company’s royalty and advertising funds revenues and profitability.

The Company calculates same-restaurant sales and systemwide sales growth on a constant currency basis. Constant currency results exclude the impact of foreign currency translation and are derived by translating current year results at prior year average exchange rates. The Company believes excluding the impact of foreign currency translation provides better year over year comparability.

Same-restaurant sales and systemwide sales exclude sales from Argentina due to that country’s highly inflationary economy. The Company considers economies that have had cumulative inflation in excess of 100% over a three-year period as highly inflationary.

The Company believes its presentation of same-restaurant sales, Company-operated restaurant margin and systemwide sales provide a meaningful perspective of the underlying operating performance of the Company’s current business and enables investors to better understand and evaluate the Company’s historical and prospective operating performance. The Company believes that these metrics are important supplemental measures of operating performance because they highlight trends in the Company’s business that may not otherwise be apparent when relying solely on GAAP financial measures. The Company believes investors, analysts and other interested parties use these metrics in evaluating issuers and that the presentation of these measures facilitates a comparative assessment of the Company’s operating performance. With respect to same-restaurant sales and systemwide sales, the Company also believes that the data is useful in assessing consumer demand for the Company’s products and the overall success of the Wendy’s brand.

The non-GAAP financial measure discussed above does not replace the presentation of the Company’s financial results in accordance with GAAP. Because all companies do not calculate non-GAAP financial measures in the same way, this measure as used by other companies may not be consistent with the way the Company calculates such measure.

First Quarter Financial Highlights

•Revenue increased 1.1% to $534.8 million in the first quarter of 2024 compared with $528.8 million in the first quarter of 2023;

•Global same-restaurant sales increased 0.9%, U.S. same-restaurant sales increased 0.6% and international same-restaurant sales increased 3.2% compared with the first quarter of 2023. On a two-year basis, global same-restaurant sales increased 8.9%;

•Global Company-operated restaurant margin was 14.7% in the first quarter of 2024, an increase of 90 basis points compared with the first quarter of 2023; and

•Net income increased 5.5% to $42.0 million in the first quarter of 2024 compared with $39.8 million in the first quarter of 2023.

Global Same-Restaurant Sales

Wendy’s long-term growth opportunities include driving same-restaurant sales across all dayparts through quality differentiation, exciting menu innovation and compelling value offerings. Global same-restaurant sales increased 0.9% in the first quarter of 2024 and increased 8.9% on a two-year basis. To drive same-restaurant sales across the breakfast daypart, the Company plans to fund approximately $27.0 million of incremental breakfast advertising in 2024.

Digital

Wendy’s long-term growth opportunities include accelerating consumer-facing digital platforms and technologies to drive global systemwide sales. Over the past several years, the Company has invested significant resources to focus on consumer-facing technology, including activating mobile ordering via Wendy’s mobile app, launching the Wendy’s Rewards loyalty program in the U.S. and Canada and establishing delivery agreements with third-party vendors. The Company is also continuing to make digital investments and is partnering with key technology providers to help execute our digital, restaurant technology and enterprise technology initiatives and support our technology innovation and growth. During the second quarter of 2023, the Company revised its definition of digital sales to reflect our full digital portfolio by including in-restaurant mobile scans, in addition to our previously included delivery, mobile order and kiosk digital channels. The Company’s digital business has continued to grow and, under the revised definition, digital sales as a percent of global systemwide sales increased from approximately 13.0% during the first quarter of 2023 to approximately 16.8% during the first quarter of 2024.

New Restaurant Development

Wendy’s long-term growth opportunities include expanding the Company’s footprint across the globe. To promote new restaurant development, the Company has provided franchisees with certain incentive programs for qualifying new restaurants, in addition to our build to suit development fund. In February 2023, the Company announced a new restaurant development incentive program in the U.S. and Canada that provides for waivers of royalty, national advertising and technical assistance fees for up to the first three years of operation for qualifying new restaurants. In addition, the Company has development agreements in place with a number of franchisees that contractually obligate such franchisees to open additional Wendy’s restaurants over a specified timeframe. During the three months ended March 31, 2024, the Company and its franchisees added eight net new restaurants across the Wendy’s system.

Organizational Redesign

In February 2023, the Board of Directors approved a plan to redesign the Company’s organizational structure to better support the execution of the Company’s long-term growth strategy by maximizing organizational efficiency and streamlining decision making (the “Organizational Redesign Plan”). As a result of the Organizational Redesign Plan, the Company held its general and administrative expense in 2023 relatively flat compared with 2022. Additionally, in January 2024, the Board of Directors announced the appointment of Kirk Tanner as the Company’s new President and Chief Executive Officer, effective February 5, 2024. Mr. Tanner succeeded Todd A. Penegor, the Company’s previous President and Chief Executive Officer, who departed from the Company in February 2024. The Company expects to incur total costs of approximately $17 million to $19 million related to the Organizational Redesign Plan, including costs related to the succession of the President and Chief Executive Officer role. Of the total costs, approximately $15 million to $17 million will be cash expenditures expected through 2026. Costs related to the Organizational Redesign Plan are recorded to “Reorganization and realignment costs.” During the three months ended March 31, 2024, the Company recognized costs totaling $5.6 million, which primarily included severance and related employee costs. The Company expects to incur additional costs aggregating approximately $2.5 million to $4.5 million, comprised of (1) severance and related employee costs of approximately $2.0 million, (2) recruitment and relocation costs of approximately $0.2 million and (3) share-based compensation of approximately $1.5 million. The Company expects costs related to the Organizational Redesign Plan to continue into 2026.

Results of Operations

The tables included throughout this Results of Operations set forth in millions the Company’s condensed consolidated results of operations for the first quarter of 2024 and 2023.


	First Quarter
	2024		2023		Change
Revenues:
Sales	$	225.3	$	227.9	$	(2.6)
Franchise royalty revenue and fees	146.6		141.7		4.9
Franchise rental income	58.0		57.8		0.2
Advertising funds revenue	104.9		101.4		3.5
	534.8		528.8		6.0
Costs and expenses:
Cost of sales	192.1		196.5		(4.4)
Franchise support and other costs	14.7		13.3		1.4
Franchise rental expense	31.8		30.6		1.2
Advertising funds expense	107.4		101.7		5.7
General and administrative	63.8		62.3		1.5
Depreciation and amortization (exclusive of amortization of cloud computing arrangements shown separately below)	35.5		33.5		2.0
Amortization of cloud computing arrangements	3.5		1.6		1.9
System optimization losses (gains), net	0.1		—		0.1
Reorganization and realignment costs	5.7		6.8		(1.1)
Impairment of long-lived assets	2.0		0.4		1.6
Other operating income, net	(3.0)		(2.4)		(0.6)
	453.6		444.3		9.3
Operating profit	81.2		84.5		(3.3)
Interest expense, net	(30.5)		(31.7)		1.2
Loss on early extinguishment of debt	—		(1.3)		1.3
Investment loss, net	—		(3.6)		3.6
Other income, net	6.8		7.4		(0.6)
Income before income taxes	57.5		55.3		2.2
Provision for income taxes	(15.5)		(15.5)		—
Net income	$	42.0	$	39.8	$	2.2


	First Quarter
	2024		% of Total Revenues		2023		% of Total Revenues
Revenues:
Sales	$	225.3	42.1	%	$	227.9	43.1	%
Franchise royalty revenue and fees:
Franchise royalty revenue	125.7		23.5	%	122.2		23.1	%
Franchise fees	20.9		3.9	%	19.5		3.7	%
Total franchise royalty revenue and fees	146.6		27.4	%	141.7		26.8	%
Franchise rental income	58.0		10.8	%	57.8		10.9	%
Advertising funds revenue	104.9		19.7	%	101.4		19.2	%
Total revenues	$	534.8	100.0	%	$	528.8	100.0	%

	First Quarter
	2024		% of Sales		2023		% of Sales
Cost of sales:
Food and paper	$	69.1	30.7	%	$	73.8	32.4	%
Restaurant labor	73.6		32.7	%	73.6		32.3	%
Occupancy, advertising and other operating costs	49.4		21.9	%	49.1		21.5	%
Total cost of sales	$	192.1	85.3	%	$	196.5	86.2	%


	First Quarter
	2024		% of Sales		2023		% of Sales
Company-operated restaurant margin:
U.S.	$	33.5	15.3	%	$	32.7	14.7	%
Global	33.2		14.7	%	31.4		13.8	%

The table below presents certain of the Company’s key business measures, which are defined and further discussed in the “Executive Overview” section included herein.


	First Quarter
	2024			2023
Key business measures:
U.S. same-restaurant sales:
Company-operated	(0.8)		%	7.4		%
Franchised	0.7		%	7.2		%
Systemwide	0.6		%	7.2		%

International same-restaurant sales (a)	3.2		%	13.9		%

Global same-restaurant sales:
Company-operated	(0.9)		%	7.4		%
Franchised (a)	1.1		%	8.0		%
Systemwide (a)	0.9		%	8.0		%

Systemwide sales (b):
U.S. Company-operated	$	219.5		$	222.6
U.S. franchised	2,774.5			2,722.2
U.S. systemwide	2,994.0			2,944.8
International Company-operated	5.9			5.3
International franchised (a)	448.1			413.2
International systemwide (a)	454.0			418.5
Global systemwide (a)	$	3,448.0		$	3,363.3

_______________

(a)Excludes Argentina due to the impact of that country’s highly inflationary economy.

(b)During the first quarter of 2024 and 2023, global systemwide sales increased 2.6% and 10.0%, respectively, U.S. systemwide sales increased 1.7% and 8.6%, respectively, and international systemwide sales increased 8.8% and 21.0%, respectively, on a constant currency basis.


	First Quarter
	U.S. Company-operated	U.S. Franchised	International Company-operated	International Franchised	Systemwide
Restaurant count:
Restaurant count at December 31, 2023	403	5,627	12	1,198	7,240
Opened	1	17	—	17	35
Closed	(5)	(15)	—	(7)	(27)

Restaurant count at March 31, 2024	399	5,629	12	1,208	7,248


Sales	First Quarter
	2024		2023		Change
Sales	$	225.3	$	227.9	$	(2.6)

The decrease in sales during the first quarter of 2024 was primarily due to (1) a 0.9% decrease in global Company-operated same-restaurant sales of $1.8 million and (2) net closures of Company-operated restaurants of $1.6 million. Company-operated same-restaurant sales decreased due to a decrease in customer count, partially offset by higher average check.


Franchise Royalty Revenue and Fees	First Quarter
	2024		2023		Change
Franchise royalty revenue	$	125.7	$	122.2	$	3.5
Franchise fees	20.9		19.5		1.4
	$	146.6	$	141.7	$	4.9

Franchise royalty revenue during the first quarter of 2024 increased $3.5 million, of which (1) $2.0 million was due to net new restaurant development and (2) $1.2 million was due to a 1.1% increase in global franchise same-restaurant sales. Franchise same-restaurant sales during the first quarter of 2024 increased due to higher average check, partially offset by a decrease in customer count.

The increase in franchise fees during the first quarter of 2024 was primarily due to (1) higher fees for providing information technology services to franchisees of $0.4 million and (2) an increase in other miscellaneous franchise fees of $1.0 million.


Franchise Rental Income	First Quarter
	2024		2023		Change
Franchise rental income	$	58.0	$	57.8	$	0.2

The increase in franchise rental income during the first quarter of 2024 was primarily due to increases in percent rent and executory costs, partially offset by the impact of assigning certain leases to franchisees. See Note 11 to the Condensed Consolidated Financial Statements contained in Item 1 herein for further information.


Advertising Funds Revenue	First Quarter
	2024		2023		Change
Advertising funds revenue	$	104.9	$	101.4	$	3.5

The increase in advertising funds revenue during the first quarter of 2024 was primarily due to (1) net new restaurant development of $1.3 million and (2) an increase in franchise same-restaurant sales in the U.S. and Canada of $0.9 million.


Cost of Sales, as a Percent of Sales	First Quarter
	2024		2023		Change
Food and paper	30.7	%	32.4	%	(1.7)	%
Restaurant labor	32.7	%	32.3	%	0.4	%
Occupancy, advertising and other operating costs	21.9	%	21.5	%	0.4	%
	85.3	%	86.2	%	(0.9)	%

The decrease in cost of sales, as a percent of sales, during the first quarter of 2024 was primarily due to (1) higher average check and (2) higher investments to support the entry into the U.K. market and additional inflationary pressures in the U.K. in the prior year. These impacts were partially offset by (1) a decrease in customer count and (2) an increase in restaurant labor costs.


Franchise Support and Other Costs	First Quarter
	2024		2023		Change
Franchise support and other costs	$	14.7	$	13.3	$	1.4

The increase in franchise support and other costs during the first quarter of 2024 was primarily due to an increase in costs incurred to provide information technology and other services to franchisees.


Franchise Rental Expense	First Quarter
	2024		2023		Change
Franchise rental expense	$	31.8	$	30.6	$	1.2

The increase in franchise rental expense during the first quarter of 2024 was primarily due to (1) the impact of assigning certain leases to franchisees and (2) increases in percent rent and executory costs. See Note 11 to the Condensed Consolidated Financial Statements contained in Item 1 herein for further information.


Advertising Funds Expense	First Quarter
	2024		2023		Change
Advertising funds expense	$	107.4	$	101.7	$	5.7

On an interim basis, advertising funds expense is recognized in proportion to advertising funds revenue. The Company expects advertising funds expense to be higher than advertising funds revenue by approximately $27.0 million for 2024, which represents the Company’s plan to fund incremental breakfast advertising. The increase in advertising funds expense during the first quarter of 2024 was due to (1) the recognition of $2.5 million of the expected Company breakfast advertising spend in excess of advertising funds revenue and (2) an increase in franchise same-restaurant sales in the U.S. and Canada.


General and Administrative	First Quarter
	2024		2023		Change
Share-based compensation	$	5.7	$	3.8	$	1.9
Employee compensation and benefits	34.6		33.8		0.8
Professional fees	13.9		15.0		(1.1)
Other, net	9.6		9.7		(0.1)
	$	63.8	$	62.3	$	1.5

The increase in general and administrative expenses during the first quarter of 2024 was primarily due to (1) an increase in share-based compensation and (2) higher employee compensation and benefits. These increases were partially offset by a decrease in professional fees, primarily as a result of costs associated with the Company’s human capital management (“HCM”) system implementation completed in the third quarter of 2023.


Depreciation and Amortization (exclusive of amortization of cloud computing arrangements shown separately below)	First Quarter
	2024		2023		Change
Restaurants	$	22.5	$	20.9	$	1.6
Technology support, corporate and other	13.1		12.6		0.5
	$	35.5	$	33.5	$	2.0

The increase in depreciation and amortization during the first quarter of 2024 was primarily due to (1) asset additions for new and remodeled restaurants and (2) depreciation and amortization for technology investments.


Amortization of Cloud Computing Arrangements	First Quarter
	2024		2023		Change
Amortization of cloud computing arrangements	$	3.5	$	1.6	$	1.9

The increase in amortization of cloud computing arrangements was primarily due to amortization of assets associated with the Company’s HCM system implementation completed in the third quarter of 2023.


System Optimization Losses (Gains), Net	First Quarter
	2024		2023		Change
System optimization losses (gains), net	$	0.1	$	—	$	0.1

System optimization losses (gains), net for the first quarter of 2024 were comprised of losses on the sale of surplus and other properties. See Note 3 to the Condensed Consolidated Financial Statements contained in Item 1 herein for further information.


Reorganization and Realignment Costs	First Quarter
	2024		2023		Change
Organizational redesign	$	5.6	$	6.7	$	(1.1)

Other reorganization and realignment plans	0.1		0.1		—
	$	5.7	$	6.8	$	(1.1)

The decrease in reorganization and realignment costs was primarily due to (1) lower share-based compensation and (2) a decrease in third-party and other costs under the Organizational Redesign Plan. See Note 4 to the Condensed Consolidated Financial Statements contained in Item 1 herein for further information.


Impairment of Long-Lived Assets	First Quarter
	2024		2023		Change
Impairment of long-lived assets	$	2.0	$	0.4	$	1.6

The increase in impairment of long-lived assets during the first quarter of 2024 was primarily due to higher impairment charges as a result of the deterioration in operating performance of certain Company-operated restaurants.


Other Operating Income, Net	First Quarter
	2024		2023		Change

Equity in earnings in joint venture, net	$	(2.5)	$	(2.1)	$	(0.4)
Other, net	(0.5)		(0.3)		(0.2)
	$	(3.0)	$	(2.4)	$	(0.6)

The increase in other operating income, net during the first quarter of 2024 was primarily due to an increase in the equity in earnings from our TimWen joint venture.


Interest Expense, Net	First Quarter
	2024		2023		Change
Interest expense, net	$	30.5	$	31.7	$	(1.2)

The decrease in interest expense, net during the first quarter of 2024 was primarily due to lower outstanding long-term debt.


Loss on Early Extinguishment of Debt	First Quarter
	2024		2023		Change
Loss on early extinguishment of debt	$	—	$	1.3	$	(1.3)

During the first quarter of 2023, the Company incurred a loss on early extinguishment of debt of $1.3 million related to the repurchase of $31.6 million in principal of the Company’s 7% debentures.


Investment Loss, Net	First Quarter
	2024		2023		Change
Investment loss, net	$	—	$	3.6	$	(3.6)

During the first quarter of 2023, the Company recorded a loss of $3.6 million due to impairment charges for the difference between the estimated fair value and the carrying value of an investment in equity securities.


Other Income, Net	First Quarter
	2024		2023		Change
Other income, net	$	6.8	$	7.4	$	(0.6)

The decrease in other income, net during the first quarter of 2024 was primarily due to a decrease in interest income, reflecting lower balances of cash equivalents.


Provision for Income Taxes	First Quarter
	2024			2023			Change
Income before income taxes	$	57.5		$	55.3		$	2.2
Provision for income taxes	(15.5)			(15.5)			—
Effective tax rate on income	26.9		%	28.0		%	(1.1)		%

Our effective tax rates for the first quarter of 2024 and 2023 were impacted by variations in income before income taxes, adjusted for recurring items such as non-deductible expenses and state income taxes, as well as non-recurring discrete items. The decrease in the effective tax rate for the first quarter of 2024 compared with the first quarter of 2023 was primarily due to a decrease in the tax effects of our foreign operations. This decrease was partially offset by (1) an increase in state income taxes, including discrete changes to state deferred income taxes, and (2) a decrease in the benefit of share-based compensation.

Numerous countries have enacted the Organization of Economic Corporation and Development’s framework on a global minimum tax (referred to as “Pillar 2”), with the earliest effective date for taxable years beginning after December 31, 2023. While the Company does not expect this enactment will have a material impact on the condensed consolidated financial statements, we will continue to evaluate and monitor as additional guidance and clarification becomes available.

Segment Information

See Note 16 to the Condensed Consolidated Financial Statements contained in Item 1 herein for further information regarding the Company’s segments.

Wendy’s U.S.


	First Quarter
	2024		2023		Change
Sales	$	219.5	$	222.6	$	(3.1)
Franchise royalty revenue	108.9		106.4		2.5
Franchise fees	17.8		17.3		0.5
Advertising fund revenue	96.7		94.7		2.0
Total revenues	$	442.9	$	441.0	$	1.9
Segment profit	$	125.8	$	125.2	$	0.6

The increase in Wendy’s U.S. revenues during the first quarter of 2024 was primarily due to (1) net new restaurant development and (2) an increase in franchise same-restaurant sales. Franchise same-restaurant sales increased during the first quarter of 2024 primarily due to higher average check, partially offset by a decrease in customer count. These increases were partially offset by a decrease in Company-operated sales driven by the same factors as described above for “Sales.”

The increase in Wendy’s U.S. segment profit during the first quarter of 2024 was primarily due to (1) an increase in franchise royalty revenue and fees and (2) lower cost of sales, as a percent of sales for Company-operated restaurants driven by the same factors as described above for “Cost of Sales, as a Percent of Sales” (excluding the impact of the U.K. market). These changes were partially offset by (1) an increase in the Company’s funding of incremental advertising and (2) higher franchise support and other costs.

Wendy’s International


	First Quarter
	2024		2023		Change
Sales	$	5.9	$	5.3	$	0.6
Franchise royalty revenue	16.8		15.8		1.0
Franchise fees	1.9		1.5		0.4
Advertising fund revenue	8.2		6.7		1.5
Total revenues	$	32.8	$	29.3	$	3.5
Segment profit	$	10.7	$	7.4	$	3.3

The increase in Wendy’s International revenues during the first quarter of 2024 was primarily due to (1) net new restaurant development and (2) an increase in franchise same-restaurant sales. Franchise same-restaurant sales increased during the first quarter of 2024 due to higher average check, partially offset by a decrease in customer count.

The increase in Wendy’s International segment profit during the first quarter of 2024 was primarily due to higher revenues. This increase was partially offset by higher franchise support and other costs.

Global Real Estate & Development


	First Quarter
	2024		2023		Change
Franchise fees	$	1.1	$	0.7	$	0.4
Franchise rental income	58.0		57.8		0.2
Total revenues	$	59.1	$	58.5	$	0.6
Segment profit	$	24.1	$	25.1	$	(1.0)

The increase in Global Real Estate & Development revenues during the first quarter of 2024 was primarily due to higher development-related fees.

The decrease in Global Real Estate & Development segment profit during the first quarter of 2024 was primarily due to an increase in franchise rental expense, reflecting the impact of assigning certain leases to franchisees.

Liquidity and Capital Resources

Cash Flows

Our primary sources of liquidity and capital resources are cash flows from operations and borrowings under our securitized financing facility. Our principal uses of cash are operating expenses, capital expenditures, repurchases of common stock, dividends to stockholders and repurchases of debt.

Our anticipated cash requirements for the remainder of 2024, exclusive of operating cash flow requirements, consist principally of:

•capital expenditures of approximately $73.0 million to $83.0 million, resulting in total anticipated cash capital expenditures for the year of approximately $90.0 million to $100.0 million;

•cash dividends aggregating approximately $153.9 million as discussed below in “Dividends;” and

•stock repurchases under the Company’s January 2023 Authorization as discussed below in “Stock Repurchases.”

Based on current levels of operations, the Company expects that available cash and cash flows from operations will provide sufficient liquidity to meet operating cash requirements for the next 12 months.

We currently believe we have the ability to pursue additional sources of liquidity if needed or desired to fund operating cash requirements or for other purposes. However, there can be no assurance that additional liquidity will be readily available or available on terms acceptable to us.

The table below summarizes our cash flows from operating, investing and financing activities for the first three months of 2024 and 2023:


	First Quarter
	2024		2023		Change
Net cash provided by (used in):
Operating activities	$	100.0	$	53.0	$	47.0
Investing activities	(20.8)		(12.1)		(8.7)
Financing activities	(72.6)		(132.3)		59.7
Effect of exchange rate changes on cash	(2.3)		0.2		(2.5)
Net increase (decrease) in cash, cash equivalents and restricted cash	$	4.3	$	(91.2)	$	95.5

Operating Activities

Cash provided by operating activities consists primarily of net income, adjusted for non-cash expenses such as depreciation and amortization, deferred income tax and share-based compensation, and the net change in operating assets and liabilities. Cash provided by operating activities was $100.0 million and $53.0 million in the first three months of 2024 and 2023, respectively. The change was primarily due to (1) the timing of payments for marketing expenses of our national advertising funds and (2) the timing of receipt of vendor incentives.

Investing Activities

Cash used in investing activities was $20.8 million and $12.1 million in the first three months of 2024 and 2023, respectively. The change was primarily due to (1) an increase in capital expenditures of $5.1 million and (2) an increase in expenditures associated with the Company’s franchise development fund of $4.5 million.

Financing Activities

Cash used in financing activities was $72.6 million and $132.3 million in the first three months of 2024 and 2023, respectively. The change was primarily due to (1) a decrease in repayments of long-term debt of $31.8 million, reflecting the impact of repurchases of the Company’s 7% debentures in the first quarter of 2023, and (2) a decrease in repurchases of the Company’s common stock of $29.4 million.

Long-Term Debt, Including Current Portion

We may from time to time seek to repurchase portions of our outstanding long-term debt, including our 7% debentures and/or our senior secured notes, through open market purchases, privately negotiated transactions or otherwise. No debt repurchases were made during the three months ended March 31, 2024. Future repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. Whether or not to repurchase any debt and the size and timing of any such repurchases will be determined at our discretion.

There were no material changes to the Company’s debt obligations since December 31, 2023. The Company was in compliance with its debt covenants as of March 31, 2024.

Dividends

On March 15, 2024, the Company paid a quarterly cash dividend per share of $.25, aggregating $51.4 million. On May 2, 2024, the Company announced a dividend of $.25 per share to be paid on June 17, 2024 to stockholders of record as of June 3, 2024. If the Company pays regular quarterly cash dividends for the remainder of 2024 at the same rate as declared in the second quarter of 2024, the Company’s total cash requirement for dividends for the remainder of 2024 would be approximately $153.9 million based on the number of shares of its common stock outstanding at April 25, 2024. The Company currently intends to continue to declare and pay quarterly cash dividends; however, there can be no assurance that any additional quarterly dividends will be declared or paid or of the amount or timing of such dividends, if any.

Stock Repurchases

In January 2023, our Board of Directors authorized a repurchase program for up to $500.0 million of our common stock through February 28, 2027, when and if market conditions warrant and to the extent legally permissible (the “January 2023 Authorization”). During the three months ended March 31, 2024, the Company repurchased 0.4 million shares under the January 2023 Authorization with an aggregate purchase price of $7.2 million, of which $0.5 million was accrued as of March 31, 2024, and excluding excise tax and commissions. As of March 31, 2024, the Company had $302.8 million of availability remaining under the January 2023 Authorization. Subsequent to March 31, 2024 through April 25, 2024, the Company repurchased 0.2 million shares under the January 2023 Authorization with an aggregate purchase price of $4.3 million, excluding applicable excise tax and commissions.

Cloud Computing Arrangements

In addition to the anticipated cash requirements for capital expenditures noted above in “Cash Flows,” the Company expects to spend approximately $25.0 million during 2024 on cloud computing arrangements (“CCA”), primarily related to data

platforms, enterprise resource planning projects and investments associated with the Company’s growth initiatives. The Company’s cash expenditures related to CCA amounted to $2.9 million during the three months ended March 31, 2024.

General Inflation, Commodities and Changing Prices

Inflationary pressures on labor directly impacted our consolidated results of operations during the three months ended March 31, 2024, and we expect this to continue throughout the remainder of 2024. We attempt to manage any inflationary costs and commodity price increases through selective menu price increases and product mix. Delays in implementing such menu price increases and competitive pressures may limit our ability to recover such cost increases in the future. Inherent volatility experienced in certain commodity markets, such as those for beef, chicken, pork, cheese and grains, could have a significant effect on our results of operations and may have an adverse effect on us in the future. The extent of any impact will depend on our ability to manage such volatility through product mix and selective menu price increases.

Seasonality

Wendy’s restaurant operations are moderately seasonal. Wendy’s average restaurant sales are normally higher during the summer months than during the winter months. Because our business is moderately seasonal, results for a particular quarter are not necessarily indicative of the results that may be achieved for any other quarter or for the full fiscal year.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

As of March 31, 2024 there were no material changes from the information contained in the Company’s Form 10-K for the fiscal year ended December 31, 2023.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

The management of the Company, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of March 31, 2024. Based on such evaluations, the Chief Executive Officer and Chief Financial Officer concluded that as of March 31, 2024, the disclosure controls and procedures of the Company were effective at a reasonable assurance level in (1) recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act and (2) ensuring that information required to be disclosed by the Company in such reports is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes in the internal control over financial reporting of the Company during the first quarter of 2024 that materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

There are inherent limitations in the effectiveness of any control system, including the potential for human error and the possible circumvention or overriding of controls and procedures. Additionally, judgments in decision-making can be faulty and breakdowns can occur because of a simple error or mistake. An effective control system can provide only reasonable, not absolute, assurance that the control objectives of the system are adequately met. Accordingly, the management of the Company, including its Chief Executive Officer and Chief Financial Officer, does not expect that the control system can prevent or detect all error or fraud. Finally, projections of any evaluation or assessment of effectiveness of a control system to future periods are subject to the risks that, over time, controls may become inadequate because of changes in an entity’s operating environment or deterioration in the degree of compliance with policies or procedures.

PART II. OTHER INFORMATION

Special Note Regarding Forward-Looking Statements and Projections

This Quarterly Report on Form 10-Q and oral statements made from time to time by representatives of the Company may contain or incorporate by reference certain statements that are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Reform Act”). Generally, forward-looking statements include the words “may,” “believes,” “plans,” “expects,” “anticipates,” “intends,” “estimate,” “goal,” “upcoming,” “outlook,” “guidance” or the negation thereof, or similar expressions. In addition, all statements that address future operating, financial or business performance, strategies or initiatives, future efficiencies or savings, anticipated costs or charges, future capitalization, anticipated impacts of recent or pending investments or transactions and statements expressing general views about future results or brand health are forward-looking statements within the meaning of the Reform Act. Forward-looking statements are based on our expectations at the time such statements are made, speak only as of the dates they are made and are susceptible to a number of risks, uncertainties and other factors. For all of our forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Reform Act. Our actual results, performance and achievements may differ materially from any future results, performance or achievements expressed or implied by our forward-looking statements. Many important factors could affect our future results and cause those results to differ materially from those expressed in or implied by our forward-looking statements. Such factors include, but are not limited to, the following:

•the impact of competition or poor customer experiences at Wendy’s restaurants;

•adverse economic conditions or disruptions, including in regions with a high concentration of Wendy’s restaurants;

•changes in discretionary consumer spending and consumer tastes and preferences;

•the disruption to our business from COVID-19 and its impact on our results of operations, financial condition and prospects;

•impacts to our corporate reputation or the value and perception of our brand;

•the effectiveness of our marketing and advertising programs and new product development;

•our ability to manage the impact of social media;

•our ability to protect our intellectual property;

•food safety events or health concerns involving our products;

•our ability to deliver accelerated global sales growth and achieve or maintain market share across our dayparts;

•our ability to achieve our growth strategy through new restaurant development and our Image Activation program;

•our ability to effectively manage the acquisition and disposition of restaurants or successfully implement other strategic initiatives;

•risks associated with leasing and owning significant amounts of real estate, including environmental matters;

•risks associated with our international operations, including our ability to execute our international growth strategy;

•changes in commodity and other operating costs;

•shortages or interruptions in the supply or distribution of our products and other risks associated with our independent supply chain purchasing co-op;

•the impact of increased labor costs or labor shortages;

•the continued succession and retention of key personnel and the effectiveness of our leadership and organizational structure;

•risks associated with our digital commerce strategy, platforms and technologies, including our ability to adapt to changes in industry trends and consumer preferences;

•our dependence on computer systems and information technology, including risks associated with the failure or interruption of our systems or technology or the occurrence of cyber incidents or deficiencies;

•risks associated with our securitized financing facility and other debt agreements, including compliance with operational and financial covenants, restrictions on our ability to raise additional capital, the impact of our overall debt levels and our ability to generate sufficient cash flow to meet our debt service obligations and operate our business;

•risks associated with our capital allocation policy, including the amount and timing of equity and debt repurchases and dividend payments;

•risks associated with complaints and litigation, compliance with legal and regulatory requirements and an increased focus on environmental, social and governance issues;

•risks associated with the availability and cost of insurance, changes in accounting standards, the recognition of impairment or other charges, changes in tax rates or tax laws and fluctuations in foreign currency exchange rates;

•conditions beyond our control, such as adverse weather conditions, natural disasters, hostilities, social unrest, health epidemics or pandemics or other catastrophic events; and

•other risks and uncertainties affecting us and our subsidiaries referred to in our Annual Report on Form 10-K filed with the SEC on February 26, 2024 (see especially “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations”) and in our other current and periodic filings with the SEC.

In addition to the factors described above, there are risks associated with our predominantly franchised business model that could impact our results, performance and achievements. Such risks include our ability to identify, attract and retain experienced and qualified franchisees, our ability to effectively manage the transfer of restaurants between and among franchisees, the business and financial health of franchisees, the ability of franchisees to meet their royalty, advertising, development, reimaging and other commitments, participation by franchisees in brand strategies and the fact that franchisees are independent third parties that own, operate and are responsible for overseeing the operations of their restaurants. Our predominantly franchised business model may also impact the ability of the Wendy’s system to effectively respond and adapt to market changes.

All future written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to above. New risks and uncertainties arise from time to time, and factors that we currently deem immaterial may become material, and it is impossible for us to predict these events or how they may affect us. We assume no obligation to update any forward-looking statements after the date of this Quarterly Report on Form 10-Q as a result of new information, future events or developments, except as required by federal securities laws, although we may do so from time to time. We do not endorse any projections regarding future performance that may be made by third parties.

Item 1. Legal Proceedings.

The Company is involved in litigation and claims incidental to our business. We provide accruals for such litigation and claims when we determine it is probable that a liability has been incurred and the loss is reasonably estimable. The Company believes it has adequate accruals for all of its legal and environmental matters. We cannot estimate the aggregate possible range of loss for our existing litigation and claims due to various reasons, including, but not limited to, many proceedings being in preliminary stages, with various motions either yet to be submitted or pending, discovery yet to occur, and significant factual matters unresolved. In addition, most cases seek an indeterminate amount of damages and many involve multiple parties. Predicting the outcomes of settlement discussions or judicial or arbitral decisions is thus inherently difficult and future developments could cause these actions or claims, individually or in aggregate, to have a material adverse effect on the Company’s financial condition, results of operations, or cash flows of a particular reporting period.

Item 1A. Risk Factors.

In addition to the information contained in this report, you should carefully consider the risk factors disclosed in our Form 10-K, which could materially affect our business, financial condition or future results. Except as described elsewhere in this report, there have been no material changes from the risk factors previously disclosed in our Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

The following table provides information with respect to repurchases of shares of our common stock by us and our “affiliated purchasers” (as defined in Rule 10b-18(a)(3) under the Exchange Act) during the first quarter of 2024:

Issuer Repurchases of Equity Securities


Period	Total Number of Shares Purchased (1)	Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans (2)
January 1, 2024 through February 4, 2024	729	$19.48	—	$310,000,010
February 5, 2024 through March 3, 2024	255,597	$18.21	145,450	$307,361,378
March 4, 2024 through March 31, 2024	255,410	$18.47	246,389	$302,813,243
Total	511,736	$18.34	391,839	$302,813,243

(1)Includes 119,897 shares of common stock reacquired by the Company from holders of share-based awards to satisfy certain requirements associated with the vesting or exercise of the respective award. The shares were valued at the fair market value of the Company’s common stock on the vesting or exercise date of such awards, as set forth in the applicable plan document.

(2)In January 2023, our Board of Directors authorized a repurchase program for up to $500.0 million of our common stock through February 28, 2027, when and if market conditions warrant and to the extent legally permissible.

Subsequent to March 31, 2024 through April 25, 2024, the Company repurchased 0.2 million shares under the January 2023 Authorization with an aggregate purchase price of $4.3 million, excluding applicable excise tax and commissions.

Item 6. Exhibits.


EXHIBIT NO.			DESCRIPTION

10.1			Form of Long-Term Performance Unit Award Agreement for 2024 under The Wendy’s Company 202 0 Omnibus Award Plan * **
31.1			Certification of the Chief Executive Officer of The Wendy’s Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2			Certification of the Chief Financial Officer of The Wendy’s Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1			Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
101			The following financial information from The Wendy’s Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2024 formatted in Inline eXtensible Business Reporting Language: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Comprehensive Income, (iv) the Condensed Consolidated Statements of Stockholders’ Equity, (v) the Condensed Consolidated Statements of Cash Flows, and (vi) Notes to Condensed Consolidated Financial Statements.
104			The cover page from The Wendy’s Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, formatted in Inline XBRL and contained in Exhibit 101.

_______________


*			Filed herewith.
**			Identifies a management contract or compensatory plan or arrangement.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			THE WENDY’S COMPANY (Registrant)
Date: May 2, 2024			By: /s/ Gunther Plosch
			Gunther Plosch
			Chief Financial Officer
			(On behalf of the registrant)

Date: May 2, 2024			By: /s/ Suzanne M. Thuerk
			Suzanne M. Thuerk
			Chief Accounting Officer
			(Principal Accounting Officer)