Wingstop Inc

NASDAQ:WING

Earnings Call Transcript 2021-Q4

[Operator]

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Wingstop Inc. Fiscal Fourth Quarter 2021 Earnings Conference Call. [Operator Instructions] Please note that, this conference is being recorded today, Thursday, February 16, 2022. On the call today are Charlie Morrison, Chairman and Chief Executive Officer; Michael Skipworth, President and Chief Operation Officer; and Alex Kaleida, Senior Vice President and Chief Financial Officer. I would now like to turn the call over to Susana Arevalo, Vice President of FP&A and Investor Relations. Please go ahead.

[Susana Arevalo, Investor Relations]

Thank you, and welcome. Everyone should have access to our Fiscal Fourth Quarter and Full Year 2021 Earnings Release. A copy is posted under the Investor Relations tab on our website at ir.wingstop.com. Our discussion today includes forward-looking statements. These statements are not guarantees of future performance, and are subject to numerous risks and uncertainties that could cause our actual results to differ materially from what we currently expect. Our SEC filings describe various risks that could affect our future operating results and financial condition. We use certain non-GAAP financial measures that we believe can be useful in evaluating our performance. Presentation of such information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. Reconciliations to comparable GAAP measures are contained in our earnings release. Lastly for the Q&A session, we ask that you please each keep to one question and a follow-up to allow as many participants as possible to ask a question. With that, I would like to turn the call over to Charlie.

[Charlie Morrison, Chairman and Chief Executive Officer]

Thank you and good morning. Our fourth quarter and full year results reflect continued momentum in our brand despite the challenging operating environments. Today, I want to reflect on our journey since our initial public offering in June of 2015. Since that time, our shareholders who invested with us at that time and are still with us today have enjoyed a nearly 900% return. That returned includes more than $0.5 billion in cash returned by way of dividends. Over that time, our team combined with our investments in people and technology, and the efforts of our franchisees, whom we affectionately call our brand partners, has delivered industry leading results year after year. Over that time, domestic same store sales growth has averaged 8.7% each year, new unit development has increased 13.5% annually. System sales growth has averaged 19.4% and adjusted EBITDA growth has averaged 20.2%. We continue to streak of same store sales growth that is now 18 years in length. I provide that context as a baseline for our results in 2021, as well as our outlook in 2022. In March 2020, our world changed dramatically. No one ever prepares their business for a pandemic, but Wingstop was ready. We were able to pivot quickly and leverage our strategic decision to invest in a robust technology stack that delivered best-in-class guest experience for digital and delivery ordering. We closed our dining rooms to protect our teams and our guests from the virus and settled into a year of record growth for the brand. Domestic same store sales increased 21% in 2020. Many thought it would be hard for Wingstop to eclipse that performance in 2021 as the economy began to reopen, and restaurants thankfully were able to accept customers for dining occasions again. In 2021. Many brands saw same store sales growth similar to what Wingstop experienced in 2020 as they lapped the challenges of the prior year due to the shutdowns. Wingstop continued to execute our strategic playbook in 2021. And as we sit here today, we are proud to say that not only did we lap the performance of 2021, delivering our 18th consecutive year of positive same store sales growth, and increasing our domestic average unit volumes to 1.6 million. But we did so in the face of an even tougher operating environment. The challenges we have seen associated with the extraordinary amount of stimulus that was pumped into the economy in 2020 and early ‘21 have led to the tightest job market we have seen in years, as well as a now 40 year high for inflation, peaking recently at 7.5% in January, but Wingstop experienced even greater inflationary pressures as the spot price of bone-in chicken wings rose more than 70% in the year. As a reminder bone-in chicken wings are the core of our menu and make up approximately 65% of all product purchases. Our simple operating model allows us to absorb these swings, and still keep our focus on our long-term strategies. Our brand partners understand this volatility and have aligned with us on price and product changes that we believe have mitigated most of the challenges and positioned us for continued growth. In the face of such adversity, we continued our pattern of industry leading growth. We opened 193 net new units, a new record for the brand. That is 12.5% growth. We ended the year with more than 700 commitments for domestic development, thus replenishing the pipeline from the start of 2021 and positioning us for another record year in 2022. Despite the cost headwinds of 2021, we delivered another year of 20% plus adjusted EBITDA growth, continuing on the trend our shareholders have enjoyed since our IPO. And our international business has returned to pre pandemic levels, and experienced net growth in the face of a challenging operating environment and plan to open new markets in 2022 to pursue our goal of 3,000 plus restaurants overseas. Our performance in 2021 was not just the result of rolling over a year after the pandemic subsided. It is reflective of a brand that is well positioned in a category all by itself. A brand that has stayed true to a proven strategy that has not changed in years. We are not in a turnaround. We have continued momentum that will take us well into the future. As I look to 2022, I'm as excited as ever for the Wingstop brand. In collaboration with our brand partners, we are going to take our 1% Local Marketing allocation and consolidate it with our national fund to increase our total marketing spend to more than $100 million. We have built the infrastructure to convert our marketing approach from a promotional brand to a true Martec platform focus, leveraging our database of more than 27 million users. We will also continue to build on our multiyear $50 million investment we started in 2021 to redefine our tech stack, and position Wingstop for the future, expanding our global platform. This is not a story of a great quarter or a great year. This is a story about a unique brand that has been able to withstand the toughest tests and continue to showcase industry leading results. We are not concerned with what is going to happen in any given quarter. We see that the economy could slow down later in 2022. But we will stay true to our strategy. Shareholders expect us to deliver long-term sustainable growth, even in the face of headwinds that might cause other brands to slow. That has been the experience so far, and we intend to continue our long-term growth. Our momentum is strong. In 2022, we intend to deliver on our midterm algorithm of mid-single digit domestic same store sales growth and achieve our new record of approximately 200 net new restaurants. We will continue to make strategic investments to scale our business well into the future. With that we now believe that our domestic footprint can scale to 4,000 restaurants, and maintain our position for 3,000 international restaurants. That's a potential of 7,000 plus total restaurants. Our performance since our IPO has delivered approximately 900% total shareholder return. And this is something to be very proud of that we believe we are just getting started. I'm very proud of the strong relationship we have with our brand partners who are growing this business with us. I'm honored to work with the strongest management team in the industry, and thankful to our long-term shareholders for their continued confidence in Wingstop. 2021 was yet another great year for Wingstop. And we believe that 2022 is shaping up to be another one as well. With that let me turn it over to Alex.

[Alex Kaleida]

Thanks Charlie. Our fourth quarter and full year performance demonstrates the strength and resiliency of our model. And we're pleased with our continued momentum amidst a challenging macro-economic backdrop. Domestic same store sales grew by 7.5% during the fourth quarter and 8% for the full year, which on a two year basis equates to 25.7% for the fourth quarter, and 29.4% for the full year. In addition to many price increases to address inflation, approximately half of our sales growth in 2021 was driven by transactions, which underscores the power of our one to many and one-to-one marketing efforts. This exceptional top line performance paired with another record development year with 193 net new units resulted in $2.3 billion in system-wide sales during 2021. An increase of 20.2% versus the full year 2020. Royalty revenue, franchise fees and other revenue increased by $5.1 million during the fourth quarter to $33.1 million. The increase was largely due to domestic same source sales growth of 7.5% and 189 net franchise openings during 2021. Company-owned restaurant sales increased by $1.1 million during the fourth quarter to $17.1 million. This increase was mainly driven by company-owned same store sales growth of 5.3%. In today's release, and associated with our expansion into Manhattan, we introduced an additional cost of sales metric to provide clarity into the impact of one time pre-opening expenses. We believe this presentation provides better insight into our core restaurant margins. Cost of sales as a percentage of company owned sales, excluding pre-opening expenses increased by eight percentage points during the fourth quarter. The increase in cost of sales was primarily due to record high bone-in wing prices. Urner Barry prices for jumbo wings increased 41% when compared to the fourth quarter last year. However, our restaurants saw an increase in landed costs of only 27.5% thanks to our price mitigation strategies. One of our stated strategies is to mitigate the volatility we see in food costs. And we are actively exploring a variety of strategic options to gain more control of our supply chain. Our goal is to deliver a more predictable food costs for our brand partners and continue to deliver best-in- class returns. With regards to wing inflation, we believe the worst is behind us, and are pleased to see sequential quarter improvement in company-owned restaurant margins of 280 basis points. This sequential improvement has carried into 2022 as we continue to see a declining trend in the price of jumbo wings, now at $2.60 per pound, as well as the benefit for menu price increases. As these positive trends continue, we anticipate year-over-year deflation in wing prices in the second half of the year. Leveraging our entrepreneurial spirit, we recently opened a company on prototype restaurant with a delivery and carry out only format, allowing us to rapidly test new equipment and layouts and initiatives to reach 100% digital transactions. We also have been three locations in Manhattan at the end of 2021 and expect to open six to eight additional restaurants during 2022 as we execute on our strategy to show up in a big way in New York City and we remain excited by the potential this market has for our brand. In the fourth quarter, SG&A expenses decreased by $900,000 to $18 million. The change in SG&A expense compared to the same quarter prior year was primarily due to a decrease of $1.3 million related to COVID-19 costs and support provided to international franchisees as well as a $900,000 decrease in consulting expenses to support our strategic initiatives. These decreases were partially offset by $1.4 million investment in people to support the growth in our business, inclusive of stock-based compensation expense. In the fourth quarter, we noted in today's release in accrual adjustments for $1.2 million associated with outperformance of our incentive plan in light of another record year. This adjustment was not contemplated in prior SG&A guidance. Adjusted EBITDA and non-GAAP measure was $20.2 million for the fourth quarter, an increase of 24.5%. As Charlie mentioned, 2021 marks another year of more than 20% growth in adjusted EBITDA. And since our first year as a public company, our adjusted EBITDA growth rate has averaged 20%. Adjusted net income and adjusted earnings per diluted share, both non-GAAP measures were $7.3 million and $0.24 per diluted share, up 38% and 33% respectively, compared to the same quarter last year. The performance based compensation booked in the fourth quarter had a $0.04 per share impact to our adjusted EPS. Reconciliations between non-GAAP and their most comparable GAAP measures are included in today's earnings release. We ended the year with $425.6 million of net debt and a leverage ratio of 4.8x net debt-to-adjusted EBITDA, and improvement of 1.2 turns versus the same period last year. We continue to delever quickly with our strong cash flow generation from our asset light highly franchise model. We are consistently evaluating the most effective uses of capital as well as monitoring the macro environment. Today, our board of directors announced a quarterly dividend of $0.17 per share of common stock payable to stockholders of record as of March 11, 2022. This dividends totaling approximately $5.1 million will be paid on March 25, 2022. As you clearly heard from Charlie, we remain confident in Wingstop’s long-term outlook. And we will continue to make the appropriate investments to drive long-term growth. As we look ahead, we are confident in our growth algorithms with 2022 guidance of mid-single digit, domestic same store sales growth and 200 net new restaurants, we estimate reported SG&A for 2022 to be between $73 million and $76 million, which includes an estimated $12 million to $13 million of stock-based compensation expense, as we continue to invest behind resources that will enable global brand growth. Also, I want to remind everyone for modeling purposes that 2022 includes a 53rd week. Before we open the call for Q&A, I'd like to take a moment to celebrate Wingstop Charities and their efforts in the communities we serve. In 2021, we crossed an important milestone with Wingstop Charities providing over $1 million to community organizations and restaurant team members in need since its inception. During 2021 alone, Wingstop Charities provided over $100,000 organizations and restaurant team members. In addition, our contribution and No Kid Hungry provided 1 million meals to our youth. We appreciate all the hard work by team members both in the restaurant and at our Support Center. Our Brand partners and our supplier partners who all helped deliver another banner year for Wingstop despite ongoing challenges created by the pandemic. We believe our culture is a differentiator and drives our tremendous growth and momentum. While we remain focused on executing our strategic growth priorities to fulfill our vision of becoming a Top 10 global restaurant brand. With that, let's turn to Q&A. Operator, please open the line for questions.

[Operator]

[Operator Instructions] The first question is from David Tarantino of Baird.

[David Tarantino, Baird]

Hi, good morning. Charlie, my question is on your same store sales outlook. I think in your prepared remarks you mentioned that you expect to deliver on your midterm algorithm of mid-single digit growth. But you also mentioned some concerns about the economy potentially slowing as you move through the year. So I'm just wondering if you could comment on your degree of confidence and your Outlook as you sit here today. And perhaps how do you see the year playing out, given the comparisons you're facing? Thanks.

[Charlie Morrison, Chairman and Chief Executive Officer]

Good morning, David. Thank you for the question. Yes, I think my comments centered on confidence in achieving our mid-single digit midterm algorithm. We're very confident that we can achieve that this year, the commentary on the economy is more tailored towards, not towards the challenges and the headwinds that various years present to any particular brand. But at Wingstop, I think we've been able to demonstrate that no matter what the headwind is, we've been able to be able to navigate through that, quite frankly, if there was a slowing, I think that's actually to the advantage of Wingstop. Our customers tend to protect their indulgent occasions that they love Wingstop for. And we've seen that our frequency doesn't change, even when some of the macro pressures come to play. And I think we saw that over the last two years. We'll continue to see that this year.

[Operator]

The next question is from John Glass of Morgan Stanley.

[John Glass, Morgan Stanley]

Thanks. Good morning. I wanted to visit or revisit the unit guidance for 2022 understanding it's a new record year versus ‘21. But it isn't that much of an increase versus ‘21. And so I'm just trying to parse out what is conservatism in your view, versus what are maybe some real factors that whether it's the cost inflationary environment or the development environment that may prohibit increased unit development. So I guess just how conservatives 200, one of the factors behind it as you thought about that number.

[Charlie Morrison, Chairman and Chief Executive Officer]

Yes. Good morning, John. I think we're very confident in achieving that target at 200. We've had a strong start to the year. And we hope that momentum continues. Obviously, there's always the consideration to any macro challenges that might exist in the past couple of years. We've been-- we've all been thrown some challenges here and there, but we've been able to withstand that and I think in 2021 we demonstrated clearly that we could hit yet another record, even in the face of some macro headwinds and notably inflation, there's nothing in front of us that we see right now, that would cause us to lose the momentum that we have, we always have clarity into the six month outlook on our development pipeline. And as I mentioned, it was a strong starts already to the year, when we get into quarter two and closer to quarter three, we'll have more clarity, as we always do, we have always err on the side of being thoughtful in our guidance on that, but also have been able to deliver against the expectations that we set if not beat them. So as we stand right now, a lot of positives in front of us, the price of chicken wings is coming down has come down a lot in the fourth quarter, and even more so in in recent weeks. If that trend continues, that's definitely a positive for our franchisees, as they look to continuing their development pace that we're seeing them going through now, and then also call attention to the international markets, we have a strong finish to the year in the fourth quarter and opening 18 international restaurants just in the quarter alone, which is a demonstration that our franchisees overseas are continuing to open restaurants and build them and that those businesses are back to their pre-pandemic levels. We have new markets coming on board, they take a little bit more time. But overall, we feel very good about the pipeline that's in front of us. And barring any challenges, I believe that number is certainly achievable. And if the momentum continues, we'll see where we are in another quarter.

[John Glass, Morgan Stanley]

Great, thank you for that, very clear. On your same store sales guidance for ’22, what's the implied price increase? I know you talked last quarter about taking some pricing at some of the rolls off, but maybe just contextualize what was the fourth? In fact, what was the pricing component of fourth quarter? And what do you generally assume that will be in ‘22? Just to help understand how, what drives comps?

[Charlie Morrison, Chairman and Chief Executive Officer]

Yes, I think we noted last quarter that franchisees were taking price going into the fourth quarter that may taper off that the actual effect of the price increase would start to take effect, I should say in Q1. So we do anticipate that quarter one is certainly stronger as we wind our way off some of that pricing through the balance of the year that may taper a little bit. But overall, I would expect that a fairly consistent comp throughout the year on a two year basis is the way to think about how we're looking at the overall effect. But the one year comp will have some noise in it only because of some of that pricing starting to wane in the back half of the year.

[Operator]

The next question is from Jeffrey Bernstein of Barclays.

[Jeffrey Bernstein, Barclays]

Great, thank you very much. First, just following up on the menu pricing. I believe based on your commentary last quarter that maybe you're starting the year now with roughly 10% menu pricing taken by franchisees. On the face of it, it seems aggressive considering we do target the lower income consumer. So I am just wondering, I know you mentioned that the consumer seems to protect their indulgent occasions like Wingstop, any concern related to elasticity or anything you've seen thus far where franchisees perhaps are now looking to offer more bundles or deals to ease some of the pressure on the consumer spend side of things and then one follow up.

[Charlie Morrison, Chairman and Chief Executive Officer]

Yes, good morning, Jeff. One thing to keep in consideration is that the effect of total price increases last year was about 10 points. However, starting in the first quarter, we do roll over some price increases were taken in the prior year. So the net impact of that is probably about half of that. As it relates to the consumer and our pricing power, I think we've been able to demonstrate, as Alex mentioned on the call, the ability to continue to grow transactions. Even when we're taking a pretty significant price increase, we do expect that we'll get back to our normal cadence of price increases, which usually is about one to two points of price per year in the comp. And but we'll have to get through some of the rollover effect of the price increases we took last year, but we do not see that it is having a negative effect on transaction volume. And quite frankly, I think the consumer and with the general nature of inflation in the economy and the amount of money they have, is a good indicator that they're willing to take those higher prices, not only with Wingstop, but with many other retail and other occasions.

[John Glass, Morgan Stanley]

Understood and then my follow up was just on the marketing commentary you made. I think you said there's another 50 basis point or 100 basis points maybe you could just confirm that's shifting from local to national so I want to make sure that franchisees aren't spending more. They're just reallocating it more to national. And if you could just provide some color on how much that is and how you plan on spending that kind of broken up between channels that would be great. Thank you.

[Charlie Morrison, Chairman and Chief Executive Officer]

Yes, and thank you for that question. I appreciate you capturing that. I think it's very important as a reflection on our overall marketing strategy. What we did agree to with our franchisees was to take what was a local cooperative marketing spend that was distributed around the country, notably in our larger markets, and consolidate that now with our national spend. So we will be spending 5% of sales on a national basis going forward. What we believe in the analysis we did and why we arrived at this decision with our brand partners was centered on the fact that we can use that money much more efficiently on a national basis than we can on a local, there are a couple strategies that drive that number one is the one-to-one marketing platform that we're developing for Wingstop that capitalizes on these 27 million plus users that are in our database today, our ability to market to them one-to-one is much more efficient than more of a scattered approach in a local market. The other thing we notice is that we don't need to be buying things like Facebook advertising at the local level, just to buy it also at the national level, we can consolidate that purchase, and in many cases do substantially better 30% to 40% better with our money in terms of the efficiency we gain. So I think this will overall positively affect our overall marketing spend, our effectiveness of that spend and really targeted so that it matches up with our long-term strategy of this macro approach to filling the top of the funnel bringing people into our brand. And then at the micro level, one-to-one marketing, that really enhances the guest experience for our customers. So we think it's a big win for the future.

[John Glass, Morgan Stanley]

Are you shifting 1% from local to national? Is there any local remaining or is that now 5%, 100% National?

[Charlie Morrison, Chairman and Chief Executive Officer]

It is 100% national. There is no local remaining. That is correct.

[Operator]

The next question is from Nicole Miller of Piper Sandler.

[Nicole Miller, Piper Sandler]

Thank you and good morning. I want to ask about frequency. So in the last couple of years, we have been about attracting new guests and maybe say the 27 million loyalty members are a proxy of that, we can go back to the January 2022 Analyst Day and look at what you shared in terms of light, medium and heavy users. And I think you can average out 12 visits a year there's enough information with AUV, and what you provided at the time. And if these new guests come in as let's say light users, like four times a year, but then you kind of plot out what happens if they turn into your average guests at 12 times a year. It just seems like a major influence to AUV from frequency. So new units matter, new customers matter. But how much does translating these new guests to come more often impact your strategy?

[Charlie Morrison, Chairman and Chief Executive Officer]

Thank you for the very thoughtful question, Nicole. I agree with you that the impact of this strategy should deliver long-term sustainable same store sales growth for the brand. By way of increasing frequency amongst both existing and new users to the brand. I'll call attention to an interesting note that we've talked about over the last year and a half, which is so many new customers coming into the brand associated with our technology, sophistication and readiness during the pandemic, we've been able to retain those guests at a frequency level that is at or better than what we've seen in the past, we also are able to now segment those customers in this database and understand a lot more about them and tailor our efforts towards the type of customer that we believe is going to be a more frequent user of Wingstop and invite them back faster. Over the course of last year, we saw an increasing trend and momentum on our retention rates for new guests coming into the business. And as we take these new marketing dollars and consolidate them nationally and put them to work. We believe that we can continue to improve upon the retention rates that we've even seen so far, and expect those to increase over time. Which as I think you alluded to and we agree with it is a long-term driver of continued same store sales growth momentum for the brand.

[Operator]

The next question is from Jeff Farmer of Gordon Haskett.

[Jeff Farmer, Gordon Haskett]

Good morning and thank you and wanted to shift gears a bit. So with the introduction of the Thighstop virtual concept, I think that was June of 2021. You guys followed that up with the introduction of thigh I believe, to the core Wingstop in September of 2021. Question I have is what sales mix shift have you seen between bone-in wings, boneless wings thighs? So the bigger question there is, has the introduction of thighs as a prominent menu item done everything you've hoped?

[Charlie Morrison, Chairman and Chief Executive Officer]

Yes, good morning, Jeff. I think it's definitely done what we hoped which is helped us understand how to use more parts of the bird in our product mix, we continually are working with the product to make sure that we've got it optimized for long-term success. We've seen the consistent cadence of mix performance in the product since we've launched and then brought it onto the full menu. And it's done its job to help mitigate some of the volatility in wing prices, or at least reduce our food cost, because the product is actually cheaper to acquire. So I think all of those things have played into success for thigh stock. I think the question will come about what does that mean for the current year? And what do we expect it to have as an impact to royalties, because we have provided our franchisees with a royalty free impact of the thigh product itself on the sales from that product. And we believe that we'll be about 5.7% for the full year of 2022 just to help with that question that I know is probably the next one.

[Jeff Farmer, Gordon Haskett]

Yes, I would have got to that. But just to take advantage of the fact that you just answered that with just one follow up on this. So in terms of thinking about sort of broad strokes, I know you can't provide too much detail, but just in terms of thinking about cost of goods sold across the three different products, meaning bone-in wings and thighs, is there any sort of high level commentary you can provide there?

[Charlie Morrison, Chairman and Chief Executive Officer]

I think that the best way to put it is we expect us to, and we've talked about this before we expect this product to follow the cadence of boneless wings way back when we launched it a long time ago. It's a slow build. It's not growing, perhaps at the rate that some would expect, we're fine with that. It is certainly optimizing the supply chain for us and making an impact there. It's helping us in terms of the number of whole birds we can buy and negotiate for in the marketplace. And that is a big deal for us. So long term, we expect this product to continue to grow. As I mentioned, we're going to continue to look at ways that we can optimize size into the mix, but it'll take some time. And I think that's been our consistent message from the get go.

[Operator]

The next question is from Andrew Charles of Cowen.

[Andrew Charles, Cowen]

Awesome. So Charlie, because we don't talk about the royalty. Can you talk about the increased target to 4,000 ultimate US stores from 3,000 previously? What I'm trying to figure out is how much of the increased target ties to new store formats like ghost kitchens, like the new restaurant the feature prototype or should we think about it as a certain new geography or trade zone we foresee increased penetration versus your prior expectation.

[Charlie Morrison, Chairman and Chief Executive Officer]

Thank you, Andrew. You -- I had you right in the proper sequence for that question. I would say, look, if we look back to when we went public, and we talked about 3,000 restaurants domestic, we look at a market like Dallas Fort Worth that had 80 to 90 restaurants. And today we're sitting here at 130 restaurants and growing which would be a great extrapolation to why we believe 4,000 is certainly achievable. Core markets are still our focus. So the major MSA is are going to be where we're going to focus our efforts to penetrate and ultimately fortress those markets long term. The mix of assets is an excellent question because we have seen with the advancement we've had with ghost kitchens and the productivity of those that they do fit a proper model. Good example is we launched in New York City with a ghost kitchen first, and then complimented that with street side locations. And we're going to continue to expand Manhattan that way, going forward with a mix of both. And then to your point about our new format that we unveiled here in Dallas. What we've done is almost reverted back to where we started the brand in the very beginning. It's a counter only location, no seats, a refocus kitchen that we believe will be more efficient. And that's something we learned a lot about when we started our efforts in London and grew the UK business. We can handle a lot more transaction volume in that kitchen, we'd like that more efficient to execute. all of those factor into what will be generally a much smaller, more stealth, execution of the brand, which means it's playing upon the experience we've seen so far at over 60% digital, heavy delivery focus. And the fact that we haven't still open the vast majority of our dining rooms across the country here in the US, we believe the brand is well positioned to be able to show up just about anywhere.

[Andrew Charles, Cowen]

That's really helpful. Thanks. And then last question for you. I mean, when you look at the ‘22 SG&A guidance as percentage system sales, should we think of this as a peek of the heavy lifting behind the tech stack project behind international development investments that will hopefully allow you to lever SG&A in 2023 and beyond?

[Charlie Morrison, Chairman and Chief Executive Officer]

Yes, Andrew, I think we've pointed to that are, where we feel we're going to gain that leverage comparable to other peers is in the long term, we're going to continue to make those investments in the business that support areas, strategic areas like technology and development. So I think you'll see us continue to invest as we got it to this year to support the business up for the long term.

[Operator]

The next question is from James Rutherford of Stephens.

[James Rutherford, Stephens, Inc.]

Thank you. I was just curious if you could talk about the performance of your 2020 and 2021 classes of restaurants and just what kind of unit volumes those are producing kind of compared to prior vintages. And whether you're seeing the historical pattern play out where they open and steadily build volumes, kind of off of that base.

[Charlie Morrison, Chairman and Chief Executive Officer]

Good morning, yes, still opening in the $1.1 million to $1.2 million range. And that has been a big increase in the shift over the past two or three years from what was about $850,000 and growing, we are still seeing them mature. As we mentioned, our average unit volume for the system in the US is $1.6 million. So we expect these restaurants to continue to grow as we've seen that same cadence as expected there's to say the different way there's not a honeymoon associated with the opening of these restaurants that causes them to fall back.

[James Rutherford, Stephens, Inc.]

Okay, it's good to hear and then if I'm not mistaken, it's been just over a year since you entered into the contract with your largest suppliers to give you those kind of favorable pricing on bone-in wings. How should we think about the go forward impact and your exposure to spot price movements something we know the duration of that contract but just how do we think about that as wing prices are coming down, but should we still expect a delta between spot and what you are paying? Thank you very much.

[Charlie Morrison, Chairman and Chief Executive Officer]

Yes, we are very thankful to our largest suppliers for working with us on that mitigation. And most of those are still in effect. And we expect those to maintain until we see this highly inflationary environment subside, which really has a lot to do with getting people back to work in these plants and expanding their practical capacity, which we believe will help. Over the course of this year, I think things are lining up, such that we should see some continued improvement in the price of chicken wings, which will benefit our P&L certainly, and continue to do so even over the past week, we've seen about a $0.04 decline in the Urner Barry price for chicken wings. So post Super Bowl, we expected that to be the case, we hope that continues. But I think over the long term, we're going to really exercise a lot of effort towards what we can do to take a little bit more control in the supply chain, whether that be through strategies to partner with certain suppliers on dedicating volume to Wingstop. Whether that has to do with acquiring or building or evaluating various ways in which we can involve ourselves closer to the production of the product. So a lot more to come on that. But right now, we're feel very good about just the spot prices and where they're going in the direction they're heading.

[Operator]

The next question is from Chris O'Cull of Stifel.

[Chris O'Cull, Stifel]

Thanks. Good morning, guys. Charlie, you mentioned the company was expecting to be less reliant on promotional activity. So does this change your willingness to introduce new products, sauces, for example? And are there other cuts of the chicken that the company's testing to determine if it could be -- if could benefit the supply chain or create a lot of demand?

[Charlie Morrison, Chairman and Chief Executive Officer]

Good morning. By being less promotional, I want to clarify that statement, there's still the necessity to promote the brand at the macro level, so that people know about Wingstop, that there's a call to action as it relates to any new innovations, products or otherwise. And quite frankly, in the last part of 2021, we launched a new flavor, Orange Szechuan, which was a fan favorite, and was successful for us. And so we'll continue to do that, we've got a lineup of flavor opportunities that we'll continue to do. And that's been our cadence and sequence for quite some time. Going forward, where we use out of their cuts of the chicken, certainly, we've evaluated a lot of those. The key was to leverage the dark meat on the bird, through the thigh and the drum. And I think our innovation on creating side bites as an example, which is a boneless version of our existing all white meat boneless wing, is a great example of a really solid innovation that we think not only do guests love the product, that we think it has long-term effect in terms of being a high mix item as we continue to develop that product. So overall, we're going to continue to look at other ways to use the bird and expand the whole the whole bird concept that we've talked about, which should ladder up to our supply chain strategies and how we can control more of the supply.

[Operator]

The next question is from Michael Tamas of Oppenheimer.

[Michael Tamas, Oppenheimer]

Thanks. Good morning, everyone. You mentioned the benefit of shifting the national advertising to help you drive greater one-to-one marketing capabilities. So can you just talk about how impactful this can be? It sounds like you have a lot of information supporting this change. And so can you just share what you're seeing either from customer frequency or spend or just anything in general that help drive that decision? Thanks.

[Charlie Morrison, Chairman and Chief Executive Officer]

Yes, if I go back to what I commented on earlier, there are two benefits to it. The analysis just on the math, exercise of efficiency says that we can meaningfully increase the effectiveness of our marketing without spending any more dollars, which in a sense transfers to more impressions more TRPs more ways to deploy our marketing dollars much more efficiently than we were doing in the local markets. And I think that's just a demonstration of the scale efficiencies we're creating as a brand. As it relates to frequency, our strategy really is now one that's focused on a mark tech Martec platform more so than a promotional approach that most restaurant brands take, which means that we can regardless of whether we have a new product or not, we can really start to point our advertising directly to consumers, a lot of our Facebook advertising for example, now is not just a scattershot of Facebook ads, but we're going directly to the consumer and marketing directly to them, and delivering unique messages to different segments based on who they are, how they use us, what their flavor preferences are, et cetera, it all now becomes very tailored. And that's what we're doing with this increase spin nationally is continuing to make that more precise, and I do believe long term, it will be a lot more effective, it will increase our frequency and start to shift the mix quite frankly of our customer base to our advantage to a higher frequency, higher potential user of our brands.

[Michael Tamas, Oppenheimer]

Great. Thanks. And then think last quarter, you talked about delivery pricing premium about 15%. And you had the option to sort of flex that down if you thought you needed to, to help drive some incremental traffic. So is it still a 15% premium? And how are you thinking about that in 2022? And do you expect to maybe flex that lever? Thanks.

[Charlie Morrison, Chairman and Chief Executive Officer]

Yes, we have held that premium in play. And I would expect it will hold that for some time. I think the benefit for the customer is they have two choices. One is to go through a marketplace where that premium exists and utilize our brand. And then the other is to come to wingstop.com, where they would enjoy our standard menu prices and enjoy that value. And I think we're going to maintain that for the time being. I think if we've demonstrated that it's not having a negative effect in any way on transaction volume. And so the longer we hold that out there, I think, well in this inflationary environment, the better for our franchisees and their profitability.

[Operator]

The next question is from Jared Garber of Goldman Sachs.

[Jared Garber, Goldman Sachs]

Hi, thanks for taking the question. I wanted to circle back to sort of the margin discussion and then thinking about maybe over the longer term, the next couple of years how we sort of think about getting back to the maybe pre-COVID restaurant level margins. Is it, Charlie, in your estimation, is it really just a matter of those wing prices coming down? Or are there ways that we can think about other efficiencies flowing through the boxes? And I'm wondering specifically, maybe how you think about automation as part of that. Obviously, a big piece of the strategy over the last several years, especially pre-COVID, I think was operating efficiencies and reducing menu skews and things of that nature. So just wondering how we should be thinking about some of those margin items over the longer term. Thanks.

[Charlie Morrison, Chairman and Chief Executive Officer]

Yes, good morning. Certainly, we do expect wing prices to come down over time. As I'd mentioned before, we also, as I mentioned, are evaluating strategies to take more control of the supply chain and not be as dependent upon the spot market, which we believe will stabilize the overall impact that wings have on our P&L, said another way mitigate the volatility and keep it much lower than what we've seen. That said, as bone-in wing prices continue to go down as we get closer to the $2 range. That's a great impact, a huge impact to our P&L and we know that but at the same time, we didn't just wait for that, we took price when we needed to. We made the product decisions that we needed to with thigh stop to really mitigate the impact of that, and we're going to continue to work on that. That's the menu and pricing side of it. On the other side of it, we are working on innovations, and we mentioned earlier, our new prototype restaurant we believe, solves a lot of opportunities for the brand. Notably, this restaurant is highly digital, and driving digital transactions. And our stated goal of digitizing every transaction is still well within play. That restaurant alone exceeds 70% in terms of its digital sales, which is indicative of what we think the future is, we use QR codes on our menu boards to encourage guests to use their phone, which is their kiosk in their pocket, to be able to transact with us digitally even at the front counter, or continue to look at strategies to take to create efficiencies in the stores by way of the telephone. That's our biggest opportunity because it still represents as much as 30% of our transaction volume today. And we'd like to find ways either through automation, or other mechanisms to drive people towards digital transactions. When we do we know that we enjoy about a $5 higher average ticket and we can redeploy or reduce the dependency on labor in the restaurants for those transactions. And so beyond that, I think, if you look at the way the brand is set up now in the model setup, our average unit volume exceeding $1.6 million, on average, a low investment, a low roster size to be able to operate this restaurant, and a very simple product execution, still deliver exceptional returns for our franchisees, and hence why they are still developing at a record pace today.

[Operator]

The next question is from Dennis Geiger of UBS.

[Dennis Geiger, UBS]

Great. Thank you, Charlie. Wondering if you could speak a bit more to the considerations for that mid-single digit comp growth this year, you highlighted a few key points of focus on the call already, but if you could talk a bit more about maybe some of the biggest drivers that you are most excited about to support that momentum, in addition to the pricing, despite the difficult operating environment, I would appreciate any additional commentary there is first question.

[Charlie Morrison, Chairman and Chief Executive Officer]

Well, I think the levers we've spoken about that I would summarize that we're bullish about include the transition of that 1% marketing to national basis and be more efficient with it. And then next to that the deployment of those dollars towards a strong one-to-one effort and our Martec platform that we're building against this 27 million and growing database of customers, those two areas alone are great levers that any business would love to have to be able to drive our long-term sustainable, same store sales growth. So by putting those two out there, those are the keys. And then I think just the continued momentum of the brand. This year, if you pull together all of our marketing dollars, we're going to be well over $100 million spend level in the market, which puts us up in the best-in-class. And so we're excited about the ability to continue to just increase our marketing efforts, grow the top line, grow awareness of the brand, and then engage those customers and drive a higher frequency by way of that one-to-one effort.

[Dennis Geiger, UBS]

Great, thank you. And then just a quick point of clarification, I think you mentioned a fairly consistent two year comp and is the way to think about the year. So I just wanted to confirm, please if you meant kind of two your consistency, or if you meant relative to 2019 on sort of a three year basis consistency through the year. Thank you.

[Charlie Morrison, Chairman and Chief Executive Officer]

Well, yes. So obviously, we're going to roll over in Q2, a big comp number that will cause a two year to drop. But that's natural, but the continuity from there still should be the same, three years an exceptional way to look at it. And I do support that.

[Operator]

The next question is from Brian Mullan of Deutsche Bank.

[Brian Mullan, Deutsche Bank]

Thank you. Just question on China. Last call you mentioned pandemic delayed some of the progress in the market a bit. Totally understandable. Maybe you could just elaborate on some of the groundwork you've been laying there lately. And where you are in the process with evaluation of potential joint venture partners, just any color will be great.

[Charlie Morrison, Chairman and Chief Executive Officer]

Good morning. Thank you for the question on international, I'm really excited about the potential for our international expansion now that we've gotten through the worst of this pandemic. And our markets are back to where they were in 2019 levels. I'm also really excited about the pipeline for international deals. I mean, if you combine our domestic pipeline with our international, we've got over 1,100 potential new sites for the brand, a big chunk of those are in international markets. We're getting ready to open Canada, here and probably late first, probably early second quarter. We have a proposed record year coming for the UK, in our development on strong average unit volumes over $2 million per store, our partners in Mexico have been with us for a long time are continuing their cadence of new restaurant development, as well as our partners in Indonesia and Singapore. So the brand is very strong right now, on an international basis. Our pipeline for continued growth is there. We're looking at a lot of expansion, not only in expanding in Western Europe, the Middle East, but we also are looking at Asian expansion as well. China's certainly on our radar, it's a market we've been spending a lot of time and effort developing the right relationships and starting to really hone in the strategy there. We're not going to let our foot off the gas there but it has been more challenging, as you can imagine to get started in China. But I still believe we have great potential there. Markets like Korea, also present great opportunities for us as well. So we're very excited about where our horizons are internationally and getting that business back on track for the momentum it had when the pandemic started a couple years ago.

[Brian Mullan, Deutsche Bank]

Thanks. And just as a follow up, in Canada, I know you have 100 unit development agreement. But could you speak to maybe the pace, you would expect your partner to go there? And then maybe over the longer term what -- how do you see the longer term opportunity because that could be a big market?

[Charlie Morrison, Chairman and Chief Executive Officer]

Yes, we think it could be a big market, 100 restaurants is a great representation of the potential for the brand. We haven't talked about what we see beyond that, what I will say is, usually our international development deals have a slow ramp that includes one to three restaurants in the first year of operation, followed by a pacing up to 5 to 10 restaurants as they get through years, two, three, and four, and then sustain from there. So that's been the consistent cadence, we would expect the same to be the case for Canada. That's, we saw that with the UK and they're on fire right now and growing quickly. So I think if you use UK as a benchmark of what we think the potential is there that would follow suit.

[Operator]

The next question is from Nick Setyan of Wedbush.

[Nick Setyan, Wedbush Securities]

Thank you. I think you mentioned that you expect deflation in the second half of ’22 in terms of wing costs, just given where the prices are going into Q2 and the pricing you've taken away, why can’t we see deflation as early as Q2?

[Charlie Morrison, Chairman and Chief Executive Officer]

I, deflation in wing cost, Nick, I just want make sure you're talking about wing deflation. Yes, I think, look, I think the potential is there. I think it has -- there a lot of factors outside of our control that drive that. But I do believe that there's potential for that. Yes.

[Nick Setyan, Wedbush Securities]

Okay. And then just I know last year, we talked about staffing quite a bit. Was there an impact in terms of on the comp from staffing challenges? Has that improved in terms of the staffing levels? Does that continue to improve?

[Charlie Morrison, Chairman and Chief Executive Officer]

Yes, we have not seen an impact to the comp associated with staff levels. That's very isolated, there are few experiences we've seen where we've had restaurants trim hours, but that's very, very small number. Overall, it's been a challenge in terms of the wage rate inflation we've seen, which is much like anybody else exceeded 10% or more. But as it relates to filling the rosters and having enough people in the restaurants, the beauty of Wingstop is our roster sizes are quite small. Today, we're achieving about an 80% roster fill rate, which is plenty to be able to staff the restaurant on a full volume, we'd like those numbers to be higher, and they are seeing the market opened up a little bit more, and we're getting hiring done. So I expect that that issue to subside going into the second quarter.

[Nick Setyan, Wedbush Securities]

And just last follow up, I know you said you gave us the royalty rate for a year. When we take a step back, I think there's about a 10 basis points benefit from ongoing uptick in royalties from the newer contracts still contributing. And so versus 2019 we were much higher in terms of that golden royalty rate, once the sort of thigh royalty moratorium end what can that royalty look like beyond say ‘22? Could it be 20 bps higher 40 bps higher, just pick us from 2019 to ‘23. That's quite a few years and obviously have the offsetting impact from international.

[Charlie Morrison, Chairman and Chief Executive Officer]

It's an excellent question I would say this, I do expect that the size thigh impact to wane in the back half of the year. And so that would help increase the effective royalty rate. But that's all factored into the number that I provided earlier. So I just want to be clear on that. We do have some incentive based royalty impact out there. It's not a lot, but it does impact and that's within existing franchisees and their development, cadence drives some near-term royalty efficiency. Other than that, we should be back on the cadence of seeing that increase as we approach 6% long term. So hopefully that gives you that answer but the 5,7 I mentioned earlier does take into effect the impact of thigh stop settling down in the back half of the year.

[Operator]

The next question is from Andrew Strelzik of BMO.

[Andrew Strelzik, BMO Capital Markets]

Hey, good morning. Thanks for taking the question. I know it's still early and certainly not a normal environment. But I was hoping you could share some learnings from the New York City stores. So far, I think you had expected that performance will be similar to typical company stores, I don't know if there's any reason to think differently, or there's differences or nuances between the ghost kitchens and the traditional sites. And then if you could share the split between the two formats in ‘22 for the openings, that would be helpful as well. Thanks.

[Charlie Morrison, Chairman and Chief Executive Officer]

Yes, so the ghost kitchens, especially when they go in on their own on and advertise tend to start a little slower than a street side location purely because of the visibility. However, these restaurants, collectively are on a very consistent cadence with what we would see with new stores coming on board. So they follow that pattern we discussed earlier of having an AUV in the low to mid $1 million range and growing, we're very happy with the performance so far. Notably the city of Manhattan or the Borough of Manhattan is not as occupied as it historically has been. And we're still yet seeing good solid performance as people get back to work, we think that's going to be a great opportunity for Wingstop as well. So all systems go on that we're very pleased with the investment over the course of the year, probably a little heavier skew toward street side locations than ghost kitchens. But we'll have a complement of both. But I think we're at one to three right now ghost kitchen to street sides will probably pick up more of a 60% to 70% street side and the ghost kitchens as we go forward.

[Operator]

The next question is from Jake Bartlet of Truist.

[Jake Bartlet, Truist]

Great, thanks for taking the question. My first is a follow up on that last one about the performance of the new stores. And I'm wondering how much those new stores are pressuring restaurant level margins near term. I'm assuming quite a bit, but maybe you can confirm that. And what is your expectation as to how those margins will trend for the maybe specifically the Manhattan stores over time as they mature? And I have a follow up.

[Charlie Morrison, Chairman and Chief Executive Officer]

Okay, sure. Thank you for the question. It's a good opportunity to call attention to the sequential improvement in restaurant EBITDA quarter-over-quarter from Q3 to Q4, especially given the pre-opening expenses that are typically not shown on our P&L, and we thought it was important for you to understand the impact that has so that you can better understand that we are seeing sequential improvement in margins, because of pricing and the improvement in cost sales associated with the falling off of the Urner Barry. So we're happy about that, we expect that to continue. Those restaurants will have a slight drag, I can let Alex comment on that simply because of the newness of those restaurants and the operating costs associated with operating in Manhattan. But also a good reason why I think Wingstop has a great advantage of having a mix of ghost kitchens and street side locations, those two things will balance out over time. And we like that, and it's much more efficient and effective to run a ghost kitchen than it is a street side location, it costs less to build out and costs less to operate. There are a lot of advantages there. But I think the complement of the two kind of washes things out long term, but in the near term, yes, there will be some margin impact associated with it. Do you want to add anything?

[Alex Kaleida]

No, Jake, just add I think you can see the confidence of our franchisees in development and opening restaurants because we have this near end challenge of record inflation last year. But we've seen that steady uptick in openings with the restaurants through the quarters in 2021. And I think that's just points to our brands -- our franchisees think about the long term, the confidence they have in the returns, we'll see.

[Jake Bartlet, Truist]

Great. I was looking at kind of labor, it was up 200 basis points, whereas actually got leverage last quarter. So I'm assuming that's because of those new stores. But maybe we can touch on it after the call.

[Charlie Morrison, Chairman and Chief Executive Officer]

Yes. Let me address that for your real quick, because I didn't talk specific to labor. I didn't talk about food. There is some training and COVID related expenses, meaning retention compensation in that number that drove that. So with the Omicron onset, there was a little bit of noise there in that 200 bps of difference from on a year-over-year basis and even sequentially, so I think it is important to call that out.

[Jake Bartlet, Truist]

Great and then the next question is on the commitments, it's nice to see that you've retained the commitments. But if I look at the new stores you open and backing into incremental commitments of last few years, this is the lowest amount of new commitments that you've gotten in – for the better to the three years. So just maybe frame that it, would you think there's any sort of delay in getting new stores signed? Because of because of some of the environment or, I mean, how confident are you in the new commitments, given that it did decrease a little bit in terms of the incremental commitment?

[Charlie Morrison, Chairman and Chief Executive Officer]

Well, I think the best way to answer that question is we're very bullish on the opportunity to get to 4,000 restaurants now. So the size of the pipeline, in its absolute form is not really something that is indicative of the momentum that's within that pipeline. Last year, we opened 193 net new units, if you compare that to prior years and the refill of the pipeline, I actually feel like the net pipelines bigger than it was a year ago with more stores that were open, meaning you depleted more out of the pipeline to have to fill those back up. So I don't see that as a concern whatsoever.

[Jake Bartlet, Truist]

Got it, and just to clarify, this is 700, this is all domestic. So we should be thinking about this, the domestic stores that were opened that deplete, so we're talking about 700 last year than 700 this year domestically, right?

[Charlie Morrison, Chairman and Chief Executive Officer]

Correct. Yes, true. Yes. That's correct.

[Operator]

The next question is from Chris Carril of RBC.

[Chris Carril, RBC]

Hi. Apologies if I missed it [Indiscernible] have you seen any -- cross channels? Mentioned transactional?

[Charlie Morrison, Chairman and Chief Executive Officer]

Hey, Chris, your phone is really choppy. We're only getting about every third syllable. Can you try again? Yes. We'll talk later. Sorry. Let's go to the next caller, Peter Saleh.

[Operator]

The next question is from Peter Saleh of BTIG.

[Peter Saleh, BTIG]

Great, thanks. Can you guys hear me, okay? Excellent. Thank you. Charlie, I think you mentioned automation in the kitchen. And mentioned some automation, maybe around the phone in orders. Can you just elaborate on that? And are you seeing any opportunities to automate any of that in the back of the house to ease some of these labor pressures? Is that something a focus for ‘22? Or is that something further out in the future?

[Charlie Morrison, Chairman and Chief Executive Officer]

Yes, I did not. And my apologies, if I suggested we automated anything in the back of the house, we optimize the back of the house and the flow that did not include any specific automation necessarily, but as it relates to the telephone and the ability to automate there, it's all about the artificial intelligence engine that we've been testing for some time, trying to perfect that, once perfected, we believe that can intercept a substantial number of the phone calls that come in, which would reduce the burden in the restaurant. That said, I mean, we still can operate a Wingstop restaurant at peak volumes with as few as four to five people in the back of the house. So it's not a lot of labor that's required. So any adjustments or efficiencies would be a big deal. Also, it's important to note that our primary cooking platform is a fryer. And there are not a lot of technologies out there yet that have satisfied the true automation of that process to yield the quality that we expect. So really, I think it's more at the front of the house, the front counter and the telephones where we believe we can achieve the greatest efficiencies.

[Peter Saleh, BTIG]

Great. And then just on the whole bird supply chain strategy, I think you mentioned you're still evaluating strategies. Do you have any sense on when you guys will kind of push harder on this whole bird strategy? Is this in 2022? Or is the fact that when prices are starting to come down, kind of put it more on the backburner now, just trying to get your pulse on this strategy?

[Charlie Morrison, Chairman and Chief Executive Officer]

Yes, we're pressing very hard on this. We're working with a lot of outside experts on what the right strategy is for Wingstop long term in terms of taking more control of the supply chain. Right now we don't have anything specific in front of us, other than we clearly understand what efficiencies we can generate for the system once we achieve that ability to generate more control and alleviate ourselves from the spot market. But in the meantime, we're not going to allow a drop in wing prices, which we expect to see to keep us on the sideline on that initiative. Quite frankly, we think it's the right thing to do for the long term of the brand, to continue to dig deep and find ways to, again, take more control.

[Operator]

The next question is from Jim Sanderson of Northcoast Research.

[Jim Sanderson, Northcoast Research]

Hey, thanks for the question. I wanted to dig a little bit more to the bone-in chicken wing costs. And if you've done any type of analysis to help us understand how store margins will change as the cost of chicken wings declines in the back half of the year, how that could improve store margins, sort of sensitivity to fluctuations.

[Charlie Morrison, Chairman and Chief Executive Officer]

Yes, James, a good rule of thumb is that for every $0.10 of improvement in the Urner Barry price of bone-in chicken wings, is about 10 bps to the P&L. And so it moves very quickly as these prices come down.

[Jim Sanderson, Northcoast Research]

Very good. Also, a quick follow up. Did you have any, I think that your digital sales mix declined slightly compared to prior quarter. What about your percentage of delivery sales mix versus third quarter? Is that still about 27%?

[Charlie Morrison, Chairman and Chief Executive Officer]

That is correct. It's comparable to where it was in the prior quarter.

[Jim Sanderson, Northcoast Research]

And just a quick follow up to that is the balance between the orders placed through marketplaces and through wingstop.com also similar or has that changed at all?

[Charlie Morrison, Chairman and Chief Executive Officer]

That also is similar, yes. This concludes our question-and-answer session. The conference has now ended. Thank you for attending today's presentation. You may now disconnect.