Wingstop Inc (WING) 2016 Q1 法說會逐字稿

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Wingstop Inc. fiscal first quarter 2016 earnings conference call. At this time all participants are in a listen-only mode. (Operator Instructions). Please note that this conference is being recorded today May 5, 2016. On the call we have Charlie Morrison, President and Chief Executive Officer and Mike Mravle, Chief Financial Officer. I would now like to turn the conference over to Mike. Please go ahead.

Thank you, Operator, and good afternoon. By now everyone should have access to our fiscal first quarter 2016 earnings release. If not, it can be found at www.wingstop.com under the Investor Relations section. Before we begin our formal remarks, I need to remind everyone that our discussion today will include forward-looking statements. These forward-looking statements are not guarantees of future performance and, therefore, you should not put undue reliance on them.

These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. We refer all of you to our recent SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial condition. Lastly, during today's call, we will discuss certain non-GAAP financial measures, which we believe can be useful in evaluating our performance.

The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP and reconciliations to comparable GAAP measures are available in our earnings release. With that I'd like to turn the call over to Charlie.

Thank you, Mike. Hello, everyone, and thank you for joining join us. I'd like to begin with a few highlights from the quarter and transition into a discussion about how we are executing on three strategic priorities that will continue to drive our performance. Solid development, investments in technology to grow online ordering and migrating to a national advertising platform. Mike will then review our first quarter financial results and update our annual guidance for fiscal 2016. Afterwards, I will conclude our remarks with some closing thoughts before we open the line for questions.

We had a solid start to the year with an impressive first quarter which has enabled us to raise our fiscal 2016 annual guidance for revenue and profitability. Even as we continue to lap strong numbers from the prior year. Revenue grew 16% while adjusted EBIDTA and adjusted net income grew even at higher rates of 24% and 33% respectively.

We added 28 net new restaurants during the first quarter and ended with 873 restaurants across 39 states in six countries, representing a unit growth rate of 17% over the prior year period. We're currently on track with our targeted range of 125-235 net openings in 2016. And by year end we anticipate that we will be just short of 1,000 restaurants worldwide.

We still have a long runway ahead of us to reach our long-term target of 2,500 domestic restaurants. During the first quarter domestic same store sales increased 4.6% with our Company operating units boasting 9.0% growth. Our primary long term growth strategy is new restaurant development. This is fueled by the strong unit economic model we offer to franchisees. At the end of our first quarter our average unit volumes exceeded $1.1 million. With a target investment cost of $370,000 our model yields a Best In Class sales to investment ratio of three times.

For new units, our target model delivers unleverred cash on cash returns between 35% and 40% in year two of operation. These targets are based on results of our 2013 class of restaurants and sales performance of new units has been in line with the targets that we set. The combination of low entry costs and high returns provide a compelling investment opportunity for our franchisees that has helped drive the continued growth of our system. And with only about half of our potential footprint sold, we still have a significant amount of growth ahead of us.

Our second core long-term strategy is to increase our business through our online channels. As we have spoken about in the past, advances in technology will drive our business forward, both from a sales and operations standpoint. And we have invested heavily over the past few years to improve the guest experience and realize greater (inaudible) efficiencies. At the end of the first quarter we reached 60% implementation with our new point of sales system and expect this new system to be about 90% implemented by year end.

The new POS system is also integrated with our online ordering capabilities. During the first quarter, online sales comprised 15.8% of total sales, which compares favorably to approximately 11% mix reached in the first quarter last year. You may recall that online orders generate a $4 higher average check than all other orders and 60% of our total orders still come in over the phone today. For the first quarter of 2016, 20% of our domestic restaurants have online sales mix in excess of 20% of total sales.

That and our 75% mix of takeout orders gives us confidence that we can continue to grow our online ordering mix much higher over time. In the first quarter we continued to increase our digital advertising spend which yields a much higher return on investment by driving current and new guests to our website to place their orders. Our third strategic growth priority is to migrate to a national advertising platform. We held our worldwide franchise convention last month in Las Vegas, bringing together over 600 franchisees, key suppliers, and Wingstop corporate employees from all over the world to celebrate our success, learn from each other and plan for an even brighter future.

One of the primary topics we discussed at convention was a migration to a national advertising platform. We have previously communicated to you that our franchise agreement calls for the transition to national advertising at the earliest of 1,000 domestic restaurants, or 2018. We are excited to inform that you we have received an almost unanimous vote from our franchisees at the convention to accelerate this transition to a national ad fund beginning in the first part of 2017. This pivotal decision now allows us to buy media more efficiently and increase brand awareness in all markets, including significant benefits in smaller and newer markets where we don't currently leverage TV and radio.

We are working on the details of this transition and will provide updates on future earnings calls as we develop our plan for national advertising in 2017. In summary, our results in the first quarter continue to be strong and are ahead of our expectations and we are therefore comfortable raising our guidance for the full year. Our key strategic comparatives are in place and we're executing on our plan very well. We're excited about the future growth opportunities discussed today and look forward to continuing the strong momentum in our business. With that, let me turn it over to Mike for further comments on our performance.

Thanks, Charlie. Let's now review our quarterly results for the 13 week period ended March 26, 2016. Total revenues increased 16% to $22.1 million for the first quarter 2016 from $19 million in the first quarter of last year. Given that the Wingstop system is overwhelmingly franchised most of our revenues are made up of royalties and franchise fees, and they increased 21% to $13.5 million for the first quarter. Compared to $11.2 million in last year's first quarter.

As Charlie stated there were 28 net new restaurant openings during the first quarter, all franchise locations, bringing our quarter end total to 873 total system wide restaurants. This represented a unit growth rate of approximately 17%. In addition to restaurant development, revenue growth was also driven by domestic same store sales growth of 4.6% in the first quarter. Our Company owned restaurant revenue increased to $8.6 million from $7.9 million in the prior year, driven entirely by 9% growth in same-store sales.

Cost of sales increased 5.9% to $6.1 million, from $5.7 million in the prior fiscal year's first quarter. As a percentage of Company-owned restaurant sales cost of sales decreased 210 basis points to 70.8% from 72.9%. The decrease was primarily due to the leveraging of fixed costs as the Company owned same store sales increased 9%, and a 1.5% decrease in commodities rates for bone in chicken wings as compared to the prior year period.

Selling, general and administrative expenses remained flat at $7.7 million as compared to the prior year comparable period. This year's first quarter include $450,000 of transaction costs related to the March 2016 secondary offering whereas last years SG&A included $1.3 million of expenses associated with our preparation to be a public company. A decrease in nonrecurring costs was offset primarily by increases related to head count additions and other recurring costs associated with being a public company.

Adjusted EBIDTA, a non-GAAP measure, increased 24% to $8.9 million from $7.2 million last year. Please review the reconciliation table provided in our earnings release between adjusted EBIDTA and net income, its most directly comparable GAAP measure. For the quarter income tax expense was $2.5 million.

Our effective tax rate was 37.3% compared to 38.2% in the comparable period in the prior year. This is consistent with our expectation of an effective tax rate between 37% and 38% in 2016. Net income increased to $4.3 million, or $0.15 per diluted share compared to net income of $2.6 million, or $0.10 per diluted share in the same quarter last year.

Weighted average diluted shares outstanding were approximately $29 million for the first quarter 2016 and approximately $26.6 million for the prior year period. Adjusted net income, a non-GAAP measure, increased 33.2% to $4.6 million or $0.16 per pro forma diluted share, compared to $3.4 million, or $0.12 per pro forma diluted share last year.

Please review the reconciliation table provided in our earnings release between adjusted net income and net income and pro forma diluted shares to diluted shares, their most directly comparable GAAP measures. In terms of our liquidity and balance sheet, as of March 26, 2016, we had cash and cash equivalents of approximately $8.3 million, an outstanding debt of $85.5 million.

During the first quarter we made a voluntary prepayment on our term loan of $10 million. Note that we do not have a required principal payment on our current term loan until 2020. On a trailing 12 month basis our net debt to adjusted EBITDA ratio was approximately 2.5 times. In our traction to date we are pleased to be raising several key metrics as it relates to the annual guidance for 2016. Specifically, we are raising our range for total revenues to be between $89 million and $90 million. This represents 14.1% to 15.4% growth over 2015.

We are maintaining our forecast of 125 to 135 net new system wide restaurant openings, representing approximately 15% annual unit growth. Included in this range is one additional corporate restaurant that should open in the second or third fiscal quarter. Consistent with our long-term guidance domestic same store sales growth of low single digits. SG&A expenses are projected between $33 million and $34 million inclusive of approximately $1.3 million of stock based compensation expense, $0.9 million of expenses associated with our franchise convention, $0.8 million of expenses associated with the 53rd week, $0.8 million of incremental ongoing public company costs, and $.5 million of transaction costs related to the March 2016 secondary stock offering.

Adjusted EBIDTA is now anticipated to be approximately $33.5 million, up from $33 million, representing 16% growth over 2015. Pro forma adjusted fully diluted EPS has been raised to approximately $0.57 per share from $0.55 per share. And finally, fully diluted share count should be approximately 29 million shares, which is unchanged from prior guidance. Before I turn the call back to Charlie, I would like to provide a few additional comments for modeling purposes.

Fiscal year 2016 includes a 53rd week and all of the guidance just provided includes the 53rd week impact. For context, the impact of the 53rd week is estimated to contribute approximately $1.4 million of revenue and $0.3 million of adjusted EBIDTA. Secondly, we hosted our franchisee convention in April, which is held every 18 months. There is a net zero impact to profit dollars from this event but we will have expenses associated with the convention of approximately $0.9 million in SG&A in the second quarter with offsetting revenue from support we received to fund the convention.

Lastly, I want to provide some incremental color on same store sales. As we look at the cadence of quarterly count for the balance of the year, we are reviewed both two and three year stat comps. In the second quarter of 2016 we will be lapping two year comps that were significantly higher than any other quarter in 2015. The strong performance in the prior year was partially due to the boxing match between Floyd Mayweather and Manny Pacquiao. As we overlap those strong results we would anticipate our same store sales in the second quarter to be somewhat impacted against our incoming trend. And now, I will turn the call back over to Charlie for closing remarks before we begin Q&A.

Thank you, Mike. Our mission is to serve the world flavor and we execute our business by trying to deliver on our commitments to our guests, our franchisees, our team members, and our stockholders. I am energized by the opportunities in the business and the engagement of our franchisees. The resounding feedback from our franchisees at our convention was that it was the best one yet, and this is in large part due to the performance of the business and the success our franchisees are enjoying through their investment and hard work.

Although we'll be closing in on nearly 1,000 restaurants worldwide by the end of 2016, we're still far away from our 2,500 unit domestic potential. Thanks again for joining us this afternoon. We appreciate your interest in Wingstop and would be happy to answer any questions that you may have. Operator, please open the line for questions.

Thank you. (Operator Instructions). Our first question comes from the line of John Glass, with Morgan Stanley. Please, proceed with your question.

Thanks, good afternoon. Charlie, if you could comment on same store sales. Couple things, one is how did the first quarter progress sort of sequentially, weakness or strength and if you can talk about whether the Easter shift had a negative or any impact on your business and commensurately does it change your view in April. When you talk about where you are in April in your two or three year stacks if I were to look at a 3-year trend and hold that first quarter trend constant in the second quarter it would be a very low single digital, like a 1% comp, is that what you're sort of signaling when you look at your business right now?

Hey, John. It's Mike. So, you know, as we've looked at guidance, first of all, we're guiding the annual terms, you know, our long-term guidance is for low single digits and we like to just reiterated that coupled with the strong unit development that we have, where there's great growth for the shareholders. From a first quarter standpoint, we don't break down the comps by period. I would tell you that we were very proud of the results in the first quarter and it does signify the underlying momentum that does continue to exist in the brand and that same underlying momentum we believe continues to exist in the second quarter.

We don't provide quarterly guidance so we're not going to talk about April results to date but we did point out obviously the tough overlap that we have. We do have the Mayweather/Pacquiao fight that we have to overlap from last year, the NBA playoffs we're monitoring strong performance from the prior year based on the teams that were in and the match ups, and also some of the Houston floods that came in the second quarter as well. So we're monitoring all those things. We're not implying call it flat to even plus one comps in the guidance. We believe the underlying momentum still to be strong in the business but as we said we would anticipate a moderation from Q1 levels going into Q2.

I don't remember when that fight was last year. Have you already rolled over that and that's something you're anticipating and that's why you're more cautious?

It was on Saturday, this past Saturday we rolled over it.

Got it, okay. So you do have a good sense then of your run rate.

Yes.

Charlie, maybe just thinking about the transition to this national advertising that you're contemplating, remind us what incremental spend will be in terms of percent? And is there a material impact on your P&L? Is it really just modest, but kind of maybe talk through what the numbers are. And importantly, how do you defend markets like the Dallas or some of the important Texas markets? Because if you move to national do you still support those markets? There's been many examples in markets where they move to national and ended up hurting themselves because they had such concentration in some local markets that they lost dollars in.

Sure. And, excellent question. We're very excited about the opportunity to move to national advertising. The total spend that a franchisee will spend on marketing will not change in terms of their allocation of spend. And it's a 4% spend that we have in our contractual obligation through the franchise agreement. Historically that's been 2% that's paid to the national and 2% that's spent locally. In certain of our markets, franchisees have joined co-ops, some certain of the larger markets, Dallas being one of those as an example.

But in every case as we analyzed the approach to national advertising, we've found that even against what those markets are buying today in terms of media, on a national basis by pooling the dollars together and spending 3% nationally instead of 2% we would be able to actually deliver more TRPs, meaning more media weight across every market across the country instead of the 13 markets that had co-ops in place today. It does not have an impact to our P&L specifically. This is purely our national ad fund and it's just a reallocation of the dollars, again, out of those co-op markets and out of the field at a local market spend and consolidating that nationally.

Thank you very much.

You're welcome.

Our next question comes from the line of Sam Beres, with Robert W. Baird & Company. Please proceed with your question.

Hi, good afternoon. Thanks for taking the question. First, Mike, wanted to ask about the revenue growth guidance. So obviously modest rates, which is encouraging, however held the full year targets for both unit growth and comps. So wonder if you could kind of talk about the puts and takes there within raising that revenue guidance?

Sure. It just comes down to the favorability that we saw relative to our own expectations for Q1. Obviously there's a range of possibilities with low single digits and with the unit count and also it reflects the strength that we're seeing in the Company store performance, which we don't provide guidance on.

That's helpful. Thanks. I know you guys switched to kind of a national digital advertising strategy at the start of the year, so, Charlie, can you maybe provide some perspective on how that's going so far and maybe any meaningful benefits you've seen in the early days or learnings that you've found that can advise you on that strategy going forward or maybe help advise you as you look toward national traditional advertising approach?

Yes. I think the national digital transition was effectively a precursor so what we wanted to do on a national TV and radio media budget overall. We've been very pleased with the results simply because we've been able to consolidate our buying power by digital media much more effectively from a national perspective and deploy more dollars. Typically, what those dollars yield is a very high return on investment as it relates to customers that come in and utilize our online ordering platform. Simply clicking through in some of these ads. But we also migrated to a digital video platform to help increase brand awareness in markets where we may not have had a presence previously.

And I think the same principles apply when we go to a national advertising platform, where, as I mentioned in the prior question, all markets benefit because we'll be able to spend at a higher rate than any other market could otherwise spend, which means that we'll be able to generate awareness across the brand in all the markets we're in, 39 states across the country already in the US, and most if not all the major metro areas. We think it's going to be beneficial to the brand for the long-term by being able to continue to raise awareness through these platforms.

Great, thank you.

You're welcome.

Our next question comes from the line of Matthew DiFrisco, with Guggenheim Securities. Please, proceed with your question.

Thank you. I had follow-up on that comp question. I didn't hear a response, though, I think to the Easter. Did that have any effect or is that going to have a benefit as far as falling out of April and helping you in 2Q? And then I also just had a couple of questions about the sports calendar.

Yeah, sure. Thanks for reminding me. I did miss that one, Matt. The Easter shift for us is not that material in either quarter. It does move a little bit, but particularly as we're looking at the end results it's not something I would point out that's material for us.

Okay.

And so what were the questions on the sports calendar?

And then then I guess you made a point to call out the playoff schedule is not as favorable. I'm assuming what's the big team that you're missing there this year? Houston going a little father than they did last year? Or going less. Getting cutting out in the first rather then going two rounds?

Yes. So, you know, if you look at the competitions of the teams it was very comparable to last year, but the match ups last year on the first round you had Houston playing Dallas that went seven games and then you had Clippers playing Spurs, that's right, Charlie, they went seven games as well in the first round. So those were two really strong series last year in favorable markets for us. Like I said, the teams that are in this year are comparable but the series weren't as compelling, they went shorter games and also the time slots on TV then weren't as favorable when the match ups weren't as compelling. Obviously San Antonio made it through where they didn't last year and that's a pretty big market for us so we're hopeful they do well the balance of the quarter, which can help us out.

Okay. And then just curious, do you get any sort of lift from hockey ever, being that Dallas is in it this year and they weren't in it last year?

No, nothing that we can measure or see.

Historically, last question on the sports calendar, I guess the Olympics. Should that be a modest positive for you when we have that this year versus not having it this year in the summer?

We haven't seen historically a benefit when the Olympics were on so I can't say that we're anticipating that right now.

Okay. Thank you very much.

You're welcome.

You're welcome.

Our next question comes from the line of Jeffrey Bernstein with Barclays. Please proceed with your question. Mr. Bernstein, please proceed with your question.

Yes. Thank you very much. Couple of questions. First just in terms of the industry. We're seeing maybe more competitive nature across the wing category, whether it's like a Buffalo Wild Wings pushing more into takeout or it seems like we're (inaudible) push as part of the bar business with wings. I'm just wondering if you think of that as a competitive threat or do you think maybe your customer experience is totally differentiated relative to what those guys are offering?

Jeffrey, it's Charlie. You cut out on the second brand you mentioned. I'm just curious what that other brand was? I heard Buffalo Wild Wings.

Oh. Just things like bar and grill players in general, bar business, Chile's and others.

Okay. I don't think it has an effect necessarily on Wingstop. Most of those, as you just noted are bar and grill concepts. We participate in the fast casual space and that's the area of strength for us, 90% of our revenue, and then some comes from wings, fries and sides, 75% is takeout. And although there are some movements I guess by some of the folks to have more of an off-premise occasion, I think the general tendency for those occasions is the bar first and the product second and so that really doesn't play into how we operate our business. So we haven't seen anything or identified anything that would specifically call out that Wingstop would be affected by those promotions.

Okay. Then just in any update on the wing cost side of things? Mike, I think I missed what you said earlier in terms of the basket, I think you said something about down 1.5%. I'm just wondering from a wing cost perspective as we move through 2016. Would you still think it to be favorable and perhaps see prices easing as we move through the year?

So what we've mentioned on the script was the first quarter wing prices were down 1.5% over the prior year. I think on our earnings call, our last earnings call, we mentioned our expectation that wing prices would generally be flat to 2015 on an annual basis. And so we were about there in Q1. You know, wing prices have been elevated a bit as we've gotten past March Madness but we still feel like based on what we're hearing from economists and the supply dynamic in the industry that on an annual basis roughly flat to prior years to where we would expect it to be. From a basket standpoint, there's nothing of significance. Outside of the wing category, it's a pretty flat year from a standpoint.

Got it. And then just lastly, on the remodels, front counter, dedicated areas? I'm wondering what the franchisee commitments to those upgrades are?

One of the big things we talked about at the convention was the remodel, new look and feel of our concept and we shared that with our franchisees in the form of a fully mocked-up walk through prototype of that at the convention. Very well received by our franchisees and we're already in the process of starting to incorporate that into all new restaurants that go into the system, and then we are soliciting and we've already received a lot of interest in this new concept of remodeling the restaurants and we'll have firmer ideas of exactly how many franchisees will be impacted by this over this year, but it takes like anything else some time to get them into the pipeline. But I think it's reasonable to expect we can start to really affect restaurants in the coming months with this new look and feel.

Got it. Thank you very much.

You're welcome.

Our next question comes from the line of Andrew Charles, with Cowan and Company. Please proceed with your question.

Great. Thank you. If I remember correctly some of your digital capabilities in marketing are under national spend like social media and search engine. As you transition to a national ad will digital continue to be a priority, away from social, search engine, app interface or functionality or are the franchisees more adament around adding TV advertising?

Well, I think first and foremost we've been a TV advertiser for quite sometime in our 13 co-op markets primarily, those that are media efficient, which most of these are. What we weren't able to do was really be able to buy as many TRPs consistently across the markets on TV so this migration to national advertising gives us the opportunity to get to as many as 22 weeks of TV a year in our calendar across the entire country. So we'll still maintain a TV presence. Social digital will still be a big piece of the puzzle, and I would say that as it relates to other brands that may not have as high a spend as we do. We would probably disproportionately spend to digital social against other types of brands. But that doesn't mean that digital social would be more than more traditional advertising, TV especially.

Okay. And Charlie, given the high amount of orders that are currently phoned in, I was curious what tactics you have in place to convert these customers to in the future online orders?

A number of them in the restaurant, we have merchandising that guides the guest to order online. We also can incorporate a bag stuffer to our products to help encourage the guest. We're in the process of putting on some new on hold platforms that allows us to basically communicate to the guest if they're on hold or a prerecorded message of some of sort in the restaurant to do that. And then, some of our best franchisees talked about this when we were all together last month, about incentive programs at the restaurant level that encourage people over the phone when they do call in, hey, next time go to wingstop.com or use the app as a means to order online.

Great. Thank you.

You're welcome.

Our next question comes from the line of Jeff Farmer with Wells Fargo. Please proceed with your question.

Thanks. Just staying with online for a minute. So you guys alluded to this but it was almost 16% of sales in Q1. I'm just curious what you're seeing as it relates to potential throughput benefits and inventory management, labor benefits. Anything like that that you guys see as the online ordering mix continues to move higher?

We haven't specifically quantified anything in terms of the absolute benefit on the P&L, per se, but what I can tell you is that an online order is much easier to execute for our operators simply because that order comes straight into the restaurant, passes through the point of sales system and delivers a ticket to the make table. Which allows, one step of the process, which is taking the phone order or the counter order and putting that into the POS. So that time is saved for either redeployment or to add capacity for growing restaurants, which we know we have.

As it relates to any of the back-office features, that's really a part of our point of sales system platform that we're putting into the system right now. As I think Mike mentioned or we've talked about before, that's in 60% of the restaurants today. We expect to be over 90% deployed by the end of the year, and that functionality gives our franchisees and all of our restaurant operators the ability to have a theoretical food cost system as well as a very robust labor management system to monitor and operate their business. So I think the tie-in between the POS and online platform, that full integration creates a lot of technological efficiency that's help our operators.

That's helpful. Just sticking with that for one more second, so with the online ordering, I know it's only been, whatever, since the fall of 2014, but in terms of some of those early adopters, do you see evidence of increased frequency? Are they using the restaurant more if they've gone ahead and converted to online ordering pretty early?

I don't have anything that specifically would tell me that they're a more frequent guest than perhaps a phone or walk-in guest. I think it's their preference to use it and once they use it becomes very sticky and they stay with it. But an online order allows us to deliver much higher quality occasion. The product is delivered consistently. The accuracy of the order is dictated by the customer themselves. So they're in control of the process, which everybody wins on. But as it relates to a specific frequency, I don't have a metric that I would otherwise share.

Okay. Final question on development. I'm curious what new markets you are targeting for 2016 and how you go about targeting those markets, what becomes attractive as you guys look through the country and figure out where your best opportunities are, how are you going about doing that?

Sure. Well, as I mentioned earlier, we're in 39 states already across the country, which incorporates almost every major market in the US. The one market that comes to mind right off the bat that we really haven't started to penetrate, haven't built our first restaurant, although we're close, it should open here before too long, is in Boston. But we've already established partnerships with two folks in that market to grow that market. In most of the markets across the country, we've already established a presence either through agreements we've signed and in some cases it's just a matter of getting the real estate secured and actually getting the first restaurants open. But, you know, that's an example of a market where we don't have one that's a major market. Otherwise, most of the major markets up and down the eastern sea board also into the deep south are areas that were less penetrated perhaps than the upper Midwest or southwest but are really moving along very rapidly and growing.

Okay. Thank you.

You're welcome.

Your next question comes from the line of Karen Holthouse with Goldman Sachs. Please proceed with your question.

Hi. Just a couple of quick modeling cleanups. Can you let us know what CapEx and free cash flow were for the quarter?

CapEx, I don't have the specific number. Our full year estimate for CapEx is around the $2 million range and so we were right in line with kind of a run rate from that standpoint, Karen. And cash flow would have been right around the $8 million range.

Great. Thank you. And within the (inaudible) quarter was there anything to call out regionally in terms of performance? Texas has been called out by a handful of other companies as an area that there's even regions of Texas that might be a little bit impacted by what's been going on in the energy markets. Is there just anything regionally that you would note?

So we don't break down the comps by geography's typically, but we have made comments on Texas in the past. I think one of the data points to point towards is our Company's store performance 14 of 19 company stores we have are in Texas and they obviously continue to perform very well. 12 of those 14 are in the Dallas/Fort Worth market, which is our largest market in Texas, so that continues to be a positive for us. Our smaller markets as we mentioned in the past that are particularly exposed to oil do tend to run behind a little bit and have softened. Even the first quarter I'll tell you that comps remain strong in Texas overall but the state did trail the overall system average.

And that segue's nicely into my final question, which is it's one of the wider gaps we've seen in terms of comp performance for company with franchise stores. It sounds like geography is a little bit of it. Is there anything else obvious to point to in terms of digital order penetration or the sort of scale of local advertising or anything that's sort of mechanical that would help explain that?

No. This is Charlie. The maturity of the restaurants has historically been part of the equation of the continued comp performance, and I think, as you know Texas is one of our most mature, the most mature market that we have in the system, continues to grow well despite some of the challenges economically that the state has seen. The brand and its momentum have continued to carry forward very nicely in this market. So aside from that, and, you know, Mike's great leadership, I don't think there's much else I would specifically identify there.

All right, great. Thank you.

Karen, one cleanup. CapEx was $300,000 for the quarter.

There you go. Thank you.

All right. Thank you.

(Operator Instructions). If there are no more questions at this time, that would conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time.