wing-20230930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)


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

For the quarterly period ended September 30, 2023


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

For the transition period from _____ to _____

Commission File No. 001-37425

WINGSTOP INC.

(Exact name of registrant as specified in its charter)


Delaware						47-3494862
(State or other jurisdiction of incorporation or organization)						(IRS Employer Identification No.)


15505 Wright Brothers Drive
Addison, Texas						75001
(Address of principal executive offices)						(Zip Code)

(972) 686-6500

(Registrant’s telephone number, including area code)


Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	WING	NASDAQ Global Select Market

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

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

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

Large accelerated filer

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes x No

On October 31, 2023 there were 29,414,920 shares of common stock outstanding.

TABLE OF CONTENTS


		Page
PART I	Financial Information	4
Item 1.	Financial Statements	4
	Consolidated Balance Sheets - September 30 , 2023 (Unaudited) and December 31, 2022	4
	Consolidated Statements of Comprehensive Income (Unaudited) - Thirteen and Thirty-nine Weeks Ended September 30 , 2023 and September 2 4 , 2022	5

	Consolidated Statements of Stockholders’ Deficit (Unaudited) - Thirteen and Thirty-nine Weeks Ended September 30 , 2023 and September 2 4 , 2022	6
	Consolidated Statements of Cash Flows (Unaudited) - Thirty-nine Weeks Ended September 30 , 2023 and September 2 4 , 2022	8
	Notes to Consolidated Financial Statements (Unaudited)	9
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	29

PART II	Other Information	30
Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 3.	Defaults Upon Senior Securities	30
Item 4.	Mine Safety Disclosures	30
Item 5.	Other Information	30
Item 6.	Exhibits	31
	Signatures	32

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

WINGSTOP INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(amounts in thousands, except share and par value amounts)


	September 30, 2023		December 31, 2022
	(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	77,983	$	184,496
Restricted cash	11,444		13,296
Accounts receivable, net	11,951		9,461
Prepaid expenses and other current assets	5,907		4,252
Advertising fund assets, restricted	25,558		15,167
Total current assets	132,843		226,672
Property and equipment, net	84,344		66,851
Goodwill	65,175		62,514
Trademarks	32,700		32,700
Customer relationships, net	8,059		9,015
Other non-current assets	28,555		26,438
Total assets	$	351,676	$	424,190
Liabilities and stockholders' deficit
Current liabilities
Accounts payable	$	5,104	$	5,219
Other current liabilities	36,670		34,726
Current portion of debt	—		7,300
Advertising fund liabilities	25,558		15,167
Total current liabilities	67,332		62,412
Long-term debt, net	711,867		706,846
Deferred revenues, net of current	28,769		27,052
Deferred income tax liabilities, net	2,980		4,180
Other non-current liabilities	16,170		14,561
Total liabilities	827,118		815,051
Commitments and contingencies (see Note 7)
Stockholders' deficit
Common stock, $0.01 par value; 100,000,000 shares authorized; 29,414,920 and 29,932,668 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively	294		300
Additional paid-in-capital	1,238		2,797

Retained deficit	(476,413)		(393,321)
Accumulated other comprehensive loss	(561)		(637)
Total stockholders' deficit	(475,442)		(390,861)
Total liabilities and stockholders' deficit	$	351,676	$	424,190

See accompanying notes to consolidated financial statements.

WINGSTOP INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

(amounts in thousands, except per share data)

(Unaudited)


	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
	September 30, 2023		September 24, 2022		September 30, 2023		September 24, 2022
Revenue:
Royalty revenue, franchise fees and other	$	53,200	$	40,363	$	149,372	$	111,477
Advertising fees	39,951		32,146		114,010		83,672
Company-owned restaurant sales	23,953		20,163		69,616		57,505
Total revenue	117,104		92,672		332,998		252,654
Costs and expenses:
Cost of sales (1)	17,622		15,724		50,959		46,297
Advertising expenses	42,381		33,106		120,753		85,958
Selling, general and administrative	23,047		16,686		68,820		48,721
Depreciation and amortization	3,384		2,836		9,591		7,610
Loss on disposal of assets	18		239		95		1,006
Total costs and expenses	86,452		68,591		250,218		189,592
Operating income	30,652		24,081		82,780		63,062
Interest expense, net	4,520		5,742		13,337		15,920
Loss on debt extinguishment	—		—		—		814
Other (income) expense	(19)		290		123		381
Income before income tax expense	26,151		18,049		69,320		45,947
Income tax expense	6,640		4,681		17,959		10,596
Net income	$	19,511	$	13,368	$	51,361	$	35,351

Earnings per share
Basic	$	0.66	$	0.45	$	1.72	$	1.18
Diluted	$	0.65	$	0.45	$	1.71	$	1.18

Weighted average shares outstanding
Basic	29,750		29,915		29,889		29,882
Diluted	29,818		29,967		29,969		29,951

Dividends per share	$	0.22	$	0.19	$	0.60	$	4.53

Other comprehensive income (loss)
Currency translation adjustment	$	(199)	$	(391)	$	76	$	(728)
Other comprehensive income (loss)	(199)		(391)		76		(728)
Comprehensive income	$	19,312	$	12,977	$	51,437	$	34,623

(1) Cost of sales includes all operating expenses of company-owned restaurants, including advertising expenses, and excludes depreciation and amortization, which are presented separately.

See accompanying notes to consolidated financial statements.

WINGSTOP INC. AND SUBSIDIARIES

Consolidated Statements of Stockholders' Deficit

For the Thirty-Nine Weeks Ended September 24, 2022

(amounts in thousands, except share data)

(Unaudited)


	Common Stock
	Shares	Amount		Additional Paid-In Capital		Retained Deficit		Accumulated Other Comprehensive Loss		Total Stockholders’ Deficit
Balance at December 25, 2021	29,837,454	$	299	$	463	$	(310,031)	$	(256)	$	(309,525)

Net income	—	—		—		8,676		—		8,676
Shares issued under stock plans	41,289	—		125		—		—		125
Tax payments for restricted stock upon vesting	(1,923)	—		—		(298)		—		(298)
Stock-based compensation expense, net of forfeitures	—	—		2,191		—		—		2,191
Dividends declared on common stock and equivalents	—	—		(2,370)		(122,960)		—		(125,330)
Currency translation adjustment	—	—		—		—		(66)		(66)
Balance at March 26, 2022	29,876,820	299		409		(424,613)		(322)		(424,227)
Net income	—	—		—		13,307		—		13,307
Shares issued under stock plans	37,594	—		1,838		—		—		1,838
Tax payments for restricted stock upon vesting	(46)	—		—		(4)		—		(4)
Stock-based compensation expense, net of forfeitures	—	—		(1,601)		—		—		(1,601)
Dividends declared on common stock and equivalents	—	—		—		(4,512)		—		(4,512)
Currency translation adjustment	—	—		—		—		(271)		(271)
Balance at June 25, 2022	29,914,368	299		646		(415,822)		(593)		(415,470)
Net income	—	—		—		13,368		—		13,368
Shares issued under stock plans	1,815	—		—		—		—		—

Stock-based compensation expense, net of forfeitures	—	—		1,528		—		—		1,528
Dividends declared on common stock and equivalents	—	—		(1,183)		(4,448)		—		(5,631)
Currency translation adjustment	—	$	—	$	—	$	—	$	(391)	$	(391)
Balance at September 24, 2022	29,916,183	$	299	$	991	$	(406,902)	$	(984)	$	(406,596)

See accompanying notes to consolidated financial statements.

WINGSTOP INC. AND SUBSIDIARIES

Consolidated Statements of Stockholders' Deficit

For the Thirty-Nine Weeks Ended September 30, 2023

(amounts in thousands, except share data)

(Unaudited)


	Common Stock
	Shares	Amount		Additional Paid-In Capital		Retained Deficit		Accumulated Other Comprehensive Loss		Total Stockholders’ Deficit
Balance at December 31, 2022	29,932,668	$	300	$	2,797	$	(393,321)	$	(637)	$	(390,861)
Net income	—	—		—		15,669		—		15,669
Shares issued under stock plans	49,817	—		111		—		—		111
Tax payments for restricted stock upon vesting	(13,613)	—		—		(2,292)		—		(2,292)
Stock-based compensation expense, net of forfeitures	—	—		3,345		—		—		3,345
Dividends declared on common stock and equivalents	—	—		(5,444)		(465)		—		(5,909)
Currency translation adjustment	—	—		—		—		147		147
Balance at April 1, 2023	29,968,872	300		809		(380,409)		(490)		(379,790)
Net income	—	—		—		16,181		—		16,181
Shares issued under stock plans	9,084	—		362		—		—		362
Tax payments for restricted stock upon vesting	(342)	—		—		(69)		—		(69)
Stock-based compensation expense, net of forfeitures	—	—		3,546		—		—		3,546
Dividends declared on common stock and equivalents	—	—		(2,679)		(3,030)		—		(5,709)
Currency translation adjustment	—	—		—		—		128		128
Balance at July 1, 2023	29,977,614	300		2,038		(367,327)		(362)		(365,351)
Net income	—	—		—		19,511		—		19,511
Shares issued under stock plans	4,857	—		270		—		—		270

Tax payments for restricted stock upon vesting	(400)	—		—		(66)		—		(66)
Stock-based compensation expense, net of forfeitures	—	—		3,128		—		—		3,128
Dividends declared on common stock and equivalents	—	—		(3,957)		(2,653)		—		(6,610)
Purchases of common stock	(567,151)	(6)		(241)		(125,878)		—		(126,125)
Currency translation adjustment	—	—		—		—		(199)		(199)
Balance at September 30, 2023	29,414,920	$	294	$	1,238	$	(476,413)	$	(561)	$	(475,442)

See accompanying notes to consolidated financial statements.

WINGSTOP INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(amounts in thousands)

(Unaudited)


	Thirty-Nine Weeks Ended
	September 30, 2023		September 24, 2022

Operating activities
Net income	$	51,361	$	35,351
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization	9,591		7,610
Deferred income taxes	(1,200)		(675)
Stock-based compensation expense	10,019		2,118
Loss on disposal of assets	95		1,006
Amortization of debt issuance costs	1,530		1,387
Loss on debt extinguishment	—		814
Changes in operating assets and liabilities:
Accounts receivable	(2,490)		(1,836)
Prepaid expenses and other assets	(20)		12
Advertising fund assets and liabilities, net	9,596		11,291
Accounts payable and other current liabilities	2,992		(2,794)
Deferred revenue	2,054		(858)
Other non-current liabilities	219		(268)
Cash provided by operating activities	83,747		53,158

Investing activities
Purchases of property and equipment	(28,295)		(18,961)
Acquisition of restaurants from franchisee	(4,396)		(1,738)
Proceeds from sales of assets	—		4,063
Payments for investments	(808)		—
Cash used in investing activities	(33,499)		(16,636)

Financing activities

Borrowings of long-term debt	—		250,000
Repayments of long-term debt	(3,650)		(1,200)
Payment of deferred financing costs and other debt-related costs	—		(5,442)
Proceeds from exercise of stock options	743		1,963
Purchases of common stock	(125,250)		—
Tax payments for restricted stock upon vesting	(2,427)		(302)
Dividends paid	(18,433)		(135,587)
Cash provided by (used in) financing activities	(149,017)		109,432

Net increase (decrease) in cash, cash equivalents, and restricted cash	(98,769)		145,954
Cash, cash equivalents, and restricted cash at beginning of period	205,715		54,906
Cash, cash equivalents, and restricted cash at end of period	$	106,946	$	200,860

Supplemental information:
Accrued capital expenditures	$	4,622	$	5,880

See accompanying notes to consolidated financial statements.

WINGSTOP INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

(1) Basis of Presentation and Update to Significant Accounting Policies

Nature of operations. Wingstop Inc., together with its consolidated subsidiaries (collectively, “Wingstop” or the “Company”), is in the business of franchising and operating Wingstop restaurants. As of September 30, 2023, the Company had a total of 2,099 restaurants in its system. The Company’s restaurant base is approximately 98% franchised, with 2,053 franchised locations (including 262 international locations) and 46 company-owned restaurants as of September 30, 2023.

Basis of presentation. The accompanying unaudited consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. Consequently, financial information and disclosures normally included in financial statements prepared annually in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted. Balance sheet amounts are as of September 30, 2023 and December 31, 2022, and operating results are for the thirteen and thirty-nine weeks ended September 30, 2023 and September 24, 2022.

In the Company’s opinion, all necessary adjustments have been made for the fair presentation of the results of the interim periods presented. The results of operations for such interim periods are not necessarily indicative of the results to be expected for the full year. The accompanying interim unaudited consolidated financial statements should be read in conjunction with the audited financial statements and the related notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

Fiscal year. The Company uses a 52- or 53-week fiscal year that ends on the last Saturday of the calendar year. Fiscal years 2023 and 2022 have 52 and 53 weeks, respectively.

Cash, Cash Equivalents, and Restricted Cash. Cash, cash equivalents, and restricted cash within the Consolidated Balance Sheets and the Consolidated Statements of Cash Flows as of September 30, 2023 and December 31, 2022 were as follows (in thousands):


	September 30, 2023		December 31, 2022
Cash and cash equivalents	$	77,983	$	184,496
Restricted cash	11,444		13,296
Restricted cash, included in Advertising fund assets, restricted	17,519		7,923
Total cash, cash equivalents, and restricted cash	$	106,946	$	205,715

Recently issued accounting pronouncements. We reviewed all recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a significant impact on our consolidated financial statements.

(2) Earnings per Share

Basic earnings per share is computed by dividing income available to common stockholders by the weighted average number of shares of common stock outstanding for the reporting period. Diluted earnings per share reflects the potential dilution that could occur if securities convertible into, or other contracts to issue, common stock were exercised or converted into common stock. For the calculation of diluted earnings per share, the basic weighted average number of shares is increased by the dilutive effect of the exercise and vesting of stock options and restricted stock units, respectively, as determined using the treasury stock method.

WINGSTOP INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

Basic weighted average shares outstanding is reconciled to diluted weighted average shares outstanding as follows (in thousands):


	Thirteen Weeks Ended		Thirty-Nine Weeks Ended
	September 30, 2023	September 24, 2022	September 30, 2023	September 24, 2022
Basic weighted average shares outstanding	29,750	29,915	29,889	29,882
Dilutive shares	68	52	80	69
Diluted weighted average shares outstanding	29,818	29,967	29,969	29,951

For the thirteen weeks ended September 30, 2023 and September 24, 2022, equity awards representing approximately 9,000 and 21,000 shares, respectively, were excluded from the dilutive earnings per share calculation because the effect would have been anti-dilutive.

For the thirty-nine weeks ended September 30, 2023 and September 24, 2022, equity awards representing approximately 5,000 and 31,000 shares, respectively, were excluded from the dilutive earnings per share calculation because the effect would have been anti-dilutive.

(3) Stockholders’ Deficit

Dividends

In connection with the Company’s regular dividend program, the Company’s Board of Directors declared a quarterly dividend of $0.19 per share of common stock in each of the first two quarters of 2023, and a quarterly dividend of $0.22 per share of common stock in the third quarter of 2023, resulting in aggregate dividend payments of $18.0 million, or $0.60 per share of common stock, during the thirty-nine weeks ended September 30, 2023.

Subsequent to the third quarter, on October 31, 2023, the Company’s Board of Directors declared a quarterly dividend of $0.22 per share of common stock for stockholders of record as of November 17, 2023. The regular quarterly dividend is to be paid on December 8, 2023, totaling approximately $6.5 million.

Share Repurchase Program

On August 16, 2023, the Company’s Board of Directors approved a new share repurchase program with authorization to purchase up to $250.0 million of its outstanding shares of common stock (the “Share Repurchase Authorization”).

On August 23, 2023, the Company entered into an accelerated share repurchase agreement (the “ASR Agreement”) with a third-party financial institution to repurchase $125.0 million of the Company’s common stock as part of the Share Repurchase Authorization. Under the ASR Agreement, the Company made an initial payment to the financial institution of $125.0 million in cash and received and retired an initial delivery of 567,151 shares of common stock, representing an estimated 75% of the total shares expected to be delivered under the ASR Agreement, based on the closing price on the date of initial delivery of $165.30. The delivery of any remaining shares will occur at the final settlement of the the transactions under the ASR Agreement, which is scheduled in the fiscal fourth quarter of 2023. The number of shares to be delivered upon final settlement is based on the daily volume-weighted average share prices during the valuation period specified in the ASR Agreement, less a discount and subject to adjustments. As of September 30, 2023, the Company had a total remaining authorized amount for share repurchases under the program of approximately $125.0 million.

(4) Fair Value Measurements

Fair value is the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. Assets and liabilities are classified using a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value as follows:

Level 1 — Unadjusted quoted prices for identical instruments traded in active markets.

Level 2 — Observable market-based inputs or unobservable inputs corroborated by market data.

Level 3 — Unobservable inputs reflecting management’s estimates and assumptions.

WINGSTOP INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

The carrying values of cash and cash equivalents, accounts receivable, and accounts payable approximate fair value due to their short-term nature. Fair value of debt and the investment in bonds issued by the Company’s United Kingdom master franchisee, Lemon Pepper Holdings Ltd. (“LPH”), are determined on a non-recurring basis, which results are summarized as follows (in thousands):


	Fair Value Hierarchy	September 30, 2023				December 31, 2022
		Carrying Value		Fair Value		Carrying Value		Fair Value
Securitized Financing Facility:
2020-1 Class A-2 Senior Secured Notes (1)	Level 2	$	472,800	$	407,275	$	475,200	$	406,462
2022-1 Class A-2 Senior Secured Notes (1)	Level 2	$	248,125	$	215,075	$	249,375	$	215,709
Investments in bonds of LPH (2)	Level 3	$	3,362	$	4,079	$	3,196	$	3,906

(1) The fair value of the 2020-1 and 2022-1 Class A-2 Senior Secured Notes was estimated using available market information.

(2) The fair value approximates discounted cash flows using current market rates for debt investments with similar maturities and credit risk.

The Company also measures certain non-financial assets (primarily long-lived assets, intangible assets, and goodwill) at fair value on a non-recurring basis in connection with its periodic evaluations of such assets for potential impairment.

(5) Income Taxes

Income tax expense and the effective tax rate were $6.6 million and 25.4%, respectively, for the thirteen weeks ended September 30, 2023, and $4.7 million and 25.9%, respectively, for the thirteen weeks ended September 24, 2022. Income tax expense and the effective tax rate were $18.0 million and 25.9%, respectively, for the thirty-nine weeks ended September 30, 2023, and $10.6 million and 23.1%, respectively, for the thirty-nine weeks ended September 24, 2022. The main component of the increase in effective tax rates during the year-to-date period was the impact of stock awards forfeited during the thirty-nine weeks ended September 24, 2022.

(6) Debt Obligations

Long-term debt consisted of the following components (in thousands):


	September 30, 2023		December 31, 2022
2020-1 Class A-2 Senior Secured Notes	$	472,800	$	475,200
2022-1 Class A-2 Senior Secured Notes	248,125		249,375
Debt issuance costs, net of amortization	(9,058)		(10,429)
Total debt	711,867		714,146
Less: current portion of debt	—		(7,300)
Long-term debt, net	$	711,867	$	706,846

The Company’s outstanding debt was issued by Wingstop Funding LLC, a limited-purpose, bankruptcy-remote, wholly-owned indirect subsidiary of Wingstop Inc. and consists of (i) Series 2020-1 2.84% Fixed Rate Senior Secured Notes, Class A-2 (the “2020 Class A-2 Notes”), (ii) Series 2022-1 3.734% Fixed Rate Senior Secured Notes, Class A-2 (the “2022 Class A-2 Notes”), and (iii) a revolving financing facility of Series 2022-1 Variable Funding Senior Notes, Class A-1 (the “2022 Variable Funding Notes,” and together with the 2022 Class A-2 Notes, the “2022 Notes”), which permits borrowings of up to a maximum principal amount of $200 million, subject to certain borrowing conditions, a portion of which may be used to issue letters of credit.

No borrowings were outstanding under the 2022 Variable Funding Notes as of September 30, 2023 and December 31, 2022.

As of September 30, 2023, the Company’s leverage ratio under the 2020 Class A-2 Notes and the 2022 Class A-2 Notes was less than 5.0x. Per the terms of the Company’s debt agreements, principal payments can be suspended at the borrower’s election until the repayment date as long as the Company maintains a leverage ratio of less than 5.0x. Accordingly, the Company elected to suspend payments following the principal payment made in the second quarter of 2023, and the entire outstanding balance of

WINGSTOP INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

$720.9 million of the 2020 Class A-2 Notes and the 2022 Class A-2 Notes has been classified as long-term debt due after fiscal year 2026.

The 2020 Class A-2 Notes and 2022 Notes were issued in securitization transactions, and are guaranteed by certain limited-purpose, bankruptcy-remote, wholly-owned indirect subsidiaries of the Company and secured by a security interest in substantially all of their assets, including certain domestic and foreign revenue-generating assets, consisting principally of franchise-related agreements, intellectual property, and vendor rebate contracts.

(7) Commitments and Contingencies

The Company is subject to legal proceedings, claims, and liabilities, including claims and actions resulting from employment-related and franchise-related matters, which arise in the ordinary course of business and are generally covered by insurance. In the opinion of management, the amount of ultimate liability with respect to such actions is not likely to have a material adverse impact on the Company’s financial position, results of operations, or cash flows.

(8) Stock-Based Compensation

During the thirty-nine weeks ended September 30, 2023, the Company granted 46,879 restricted stock units (“RSUs”) to certain employees. The RSUs granted to certain employees generally vest in equal annual amounts over a three-year period subsequent to the grant date and had a weighted-average grant-date fair value of $172.27 per unit.

In addition, the Company granted 39,886 performance stock units (“PSUs”) to certain employees during the thirty-nine weeks ended September 30, 2023. Of the total PSUs granted, 32,201 PSUs are subject to a service condition and a performance vesting condition based on return on incremental invested capital (“ROI PSUs”). The ROI PSUs are generally eligible to cliff-vest approximately three years from the grant date, and the maximum vesting percentage that could be realized for each of the ROI PSUs is 250% based on the level of performance achieved for the awards. The remaining 7,685 PSUs granted are subject to a service condition and a performance vesting condition based on the number of net new restaurants opened over the performance period (“NNR PSUs”). The NNR PSUs vest in equal annual amounts over a three-year period, and the maximum vesting percentage that could be realized for each of the NNR PSUs is 100% based on the level of performance achieved for the awards. The PSUs had a weighted-average grant-date fair value of $172.96 per unit. Total compensation cost for the PSUs is determined based on the most likely outcome of the performance condition and the number of awards expected to vest based on the outcome.

Total compensation expense related to all share-based awards, net of forfeitures recognized, was $10.0 million and $2.1 million for the thirty-nine weeks ended September 30, 2023 and September 24, 2022, respectively, and was included in Selling, general and administrative (“SG&A”) expense in the Consolidated Statements of Comprehensive Income.

(9) Revenue from Contracts with Customers

The following table represents a disaggregation of revenue from contracts with customers for the thirteen and thirty-nine weeks ended September 30, 2023 and September 24, 2022 (in thousands):

Thirteen Weeks Ended

Thirty-Nine Weeks Ended

September 30, 2023

September 24, 2022

September 30, 2023

September 24, 2022

Royalty revenue

47,546

36,778

SEC Form 10-Q filed by Wingstop Inc.