Wingstop Inc. (WING) Q1 2016 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Wingstop, Inc. Fiscal First Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions]. Please note that this conference is being recorded today, May 5, 2016 On the call, we have Charlie Morrison, President and Chief Executive Officer and Mike Mravle, Chief Financial Officer. I would now like to turn the conference over to Mike. Please go ahead.

Thank you, operator, and good afternoon. By now everyone should have access to our fiscal first quarter 2016 earnings release. If not, it can be found at www.wingstop.com under the Investor Relations section. Before we begin our formal remarks, I need to remind everyone that our discussion today will include forward-looking statements. These forward-looking statements are not guarantees of future performance and therefore you should not put undue reliance on them. These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. We refer all of you to our recent SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial condition. Lastly, during today's call, we will discuss certain non-GAAP financial measures, which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP and reconciliations to comparable GAAP measures are available in our earnings release. With that, I would like to turn the call over to Charlie.

Thank you, Mike. Hello everyone and thank you for joining us. I would like to begin this afternoon with a few highlights from the quarter and then transition into a discussion about how we are executing on three strategic priorities that will continue to drive our performance; solid unit development, investments in technology to grow online ordering, and migrating to a national advertising platform. Mike will then review our first quarter financial results and update our annual guidance for fiscal 2016. Afterwards I will conclude our remarks with some closing thoughts before we open the line for questions. We had a solid start to the year with an impressive first quarter which has enabled us to raise our fiscal 2016 annual guidance for revenue and profitability even as we continue lap strong numbers from the prior years. Revenue grew 16% while adjusted EBITDA and adjusted net income grew even at higher rates up 24% and 33% respectively. We added 28 net new restaurants during the first quarter and ended with 873 restaurants across 39 states and six countries representing a unit growth rate of 17% over the prior year period. We are currently on track with our targeted range of 125 to 135 net openings in 2016 and by year-end we anticipate that we will be just short of 1,000 restaurants worldwide. We still have a long runway ahead of us to reach our long-term target of 2,500 domestic restaurants. During the first quarter, domestic same store sales rose 4.6% with our company operated units posting 9.0% growth. Our primary long-term growth strategy is new restaurant development. This is feel by the strong unit economic model that we offer to franchisees. At the end of the first quarter our average unit volumes exceeded $1.1 million. With the target investment cost of $370,000 our model yields are best in class sales to investment ratio of three times. For new units our target model delivers unlevered cash on cash returns between 35% and 40% in year two of operation. These targets are based on results of our 2013 class of restaurants. And sales performance of new units has been in line with the targets that we set. In combination of low entry cost and high returns provide a compelling investment opportunity for our franchisees that has helped drive the continued growth of our system. And with only about half of our potential footprints sold we still have a significant amount of growth ahead of us. Our second core long-term strategy is to increase our business through our online channels. As we have spoken about in the past, advances in technology will drive our business forward both from a sales and operations standpoint and we have invested heavily over the past few years to improve the guest experience and realize greater overall efficiencies. At the end of the first quarter we reached 60% implementation with our new point of sale system and expect this new system to be about 90% implemented by year-end. The new POS system is also integrated with our online ordering capabilities. During the first quarter online sales comprised 15.8% of total sales, which compares favorably to approximately 11% mix reached in the first quarter last year. You may recall that online orders generate a $4 higher average checked than all other orders and 60% of our total orders still come in over the phone today. For the first quarter of 2016 20% of our domestic restaurants had online sales mix in excess of 20% of total sales. That and our 75% mix of takeout orders gives us confidence that we can continue to grow our online ordering mix much higher overtime. In the first quarter we continue to increase our digital advertising spend which yields a much higher return on investment by driving current and new guest to our website to place their orders. Our third strategic growth priority is to migrate to a national advertising platform. We held our worldwide franchise convention last month in Las Vegas bringing together over 600 franchisees, key suppliers, and Wingstock corporate employees from all over the world to celebrate our success, learn from each other, and plan for an even brighter future. One of the primary topics we discussed at the convention was the migration to a national advertising platform. We had previously communicated to you that our franchise agreement calls for the transition to national advertising at the earliest of 1,000 domestic restaurants or 2018. We are excited to inform you that we have received an almost unanimous vote from our franchisees at the convention to accelerate this transition to a national ad fund beginning in the first part of 2017. This pivotal decision now allows us to buy media more efficiently and increase brand awareness in all markets including significant benefits in smaller and newer markets where we don’t currently leverage TV and Radio. We are working on the details of this transition and will provide updates on future earnings calls as we develop our plan for national advertising in 2017. In summary our results in the first quarter continue to be strong and are ahead of our expectations. And we are therefore comfortable raising our guidance for the full year. Our key strategic imperatives are in place and we’re executing on our plan very well. We’re excited about the future growth opportunities discussed today and look forward to continuing the strong momentum in our business. With that let me turn it over to Mike for further comments on our performance.

Thanks Charlie, lets now review our quarterly results for the 13 week period ended March 26, 2016. Total revenues increased 16% to $22.1 million for the first quarter of 2016 from $19 million in the first quarter last year. Given that the Wingstock system is overwhelmingly franchised, most of our revenues are made up of royalties and franchise fees and they increased 21% to $13.5 million for the first quarter compared to $11.2 million in last year’s first quarter. As Charlie stated there were 28 net new restaurant openings during the first quarter, all franchise locations, bringing our quarter-end total to 873 total system-wide restaurants. This represented a unit growth rate of approximately 17%. In addition to restaurant development, revenue growth was also driven by domestic same store sales growth of 4.6% in the first quarter. Our company-owned restaurant revenue increased to $8.6 million from $7.9 million in the prior year, driven entirely by 9% growth in same store sales. Cost of sales increased 5.9% to $6.1 million from $5.7 million in the prior fiscal year’s first quarter. As a percentage of company-owned restaurant sales, cost of sales decreased 210 basis points to 70.8% from 72.9%. The decrease was primarily due to the leveraging of fixed costs as the company-owned same store sales increased 9% and a 1.5% decrease in commodities rate for bone-in chicken wings as compared to the prior year period. Selling, general, and administrative expenses remained flat at $7.7 million as compared to the prior year comparable period. This year’s first quarter include $450,000 of transaction costs related to the March 2016 secondary offering, whereas last year’s SG&A included $1.3 million of expenses associated with our preparation to be a public company. The decrease in non-recurring costs was offset primarily by increases related to head count additions and other recurring costs associated with being a public company. Adjusted EBITDA, a non-GAAP measure, increased 24% to $8.9 million from $7.2 million last year. Please review the reconciliation table provided in our earnings release between adjusted EBITDA and net income, it’s most directly comparable GAAP measure. For the quarter, income tax expense was $2.5 million. Our effective tax rate was 37.3% compared to 38.2% in the comparable period in the prior year. This is consistent with our expectation of an effective tax rate between 37% and 38% in 2016. Net income increased to $4.3 million or $0.15 per diluted share compared to net income of $2.6 million or $0.10 per diluted share in the same quarter last year. Weighted average diluted shares outstanding were approximately $29 million for the first quarter of 2016 and approximately $26.6 million for the prior year period. Adjusted net income, a non-GAAP measure, increased 33.2% to $4.6 million or $0.16 per pro forma diluted share compared to $3.4 million or $0.12 per pro forma diluted share last year. Please review the reconciliation table provided in our earnings release between adjusted net income and net income and pro forma diluted shares to diluted shares, to most directly comparable GAAP measures. In terms of our liquidity and balance sheet as of March 26, 2016, we had cash and cash equivalents of approximately $8.3 million and outstanding debt of $85.5 million. During the first quarter we made a voluntary prepayment on our term loan of $10 million. Note that we do not have a required principle payment on our current term loan until 2020. On a trailing 12-month basis, our net debt-to-adjusted EBITDA ratio was approximately 2.5 times. Given our traction to date we are pleased to be raising several key metrics as it relates to the annual guidance for 2016. Specifically, we are raising our range for total revenues to be between $89 million and $90 million. This represents 14.1% to 15.4% growth over 2015. We are maintaining our forecast of 125 to 135 net new system-wide restaurant openings, representing approximately 15% annual unit growth. Included in this range is one additional corporate restaurant that should open in the second or third fiscal quarter. Consistent with our long term guidance, domestic same store sales growth of low-single digits, SG&A expenses are projected between $33 million and $34 million inclusive of approximately $1.3 million of stock-based compensation expense, $0.9 million of expenses associated with our franchise convention, $0.8 million of expenses associated with the 53rd week, $0.8 million of incremental ongoing public company costs, and $0.5 million of transaction costs related to the March 2016 secondary stock offering. Adjusted EBITDA is now anticipated to be approximately $33.5 million, up from $33 million, representing 16% growth over 2015. Pro forma adjusted fully diluted EPS has been raised to approximately $0.57 per share from $0.55 per share. And finally fully diluted share count should be approximately 29 million shares which is unchanged from prior guidance. Before I turn the call back to Charlie I would like to provide a few additional comments for modeling purposes. Fiscal year 2016 includes a 53rd week and all the guidance just provided includes the 53rd week impact. For context, the impact of the 53rd week is estimated to contribute approximately $1.4 million of revenue and $0.3 million of adjusted EBITDA. Secondly, we hosted our franchisee convention in April which is held every 18 months. There was a net zero impact of profit dollars from this event but we will have expenses associated with the convention of approximately $0.9 million in SG&A in the second quarter with offsetting revenue from support we received to fund the convention. Lastly, I want to provide some incremental color on same store sales. As we look at the cadence of quarterly counts for the balance of the year we reviewed both two and three year stat counts. In the second quarter of 2016 we will be lapping two year comps that were significantly higher than any other quarter in 2015. A strong performance in the prior year was partially due to the boxing match between Floyd Mayweather and Manny Pacquiao. As we overlapped those strong result we would anticipate our same store sales in the second quarter to be somewhat impacted against our incoming trend. And now I will turn the call back over to Charlie for closing remarks before we begin Q&A.

Thank you Mike our mission is to serve the world flavor and we execute our business by trying to deliver on our commitments to our guests, our franchisees, our team members, and our stockholders. I am energized by the opportunities in the business and the engagement of our franchisees. A resounding feedback from our franchisees at our convention was that it was the best one yet and this is in large part due to the performance of the business and the success our franchisees are enjoying through their investment and hard work. Although we’ll be closing in on nearly 1,000 restaurants worldwide by the end of 2016 we’re still far away from our 2,500 unit domestic potential. Thanks again for joining us this afternoon. We appreciate your interest in Wingstop and would be happy to answer any questions that you may have. Operator, please open the lines for questions.

Thank you. At this time we’ll be conducting a question-and-answer session. [Operator Instructions]. Our first question comes from the line of John Glass with Morgan Stanley. Please proceed with your question.

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

Hey John, it's Mike. So as we have looked at guidance first of all, we’re guiding the annual terms, our long-term guidance is for low single-digits and we like to just reiterate that coupled with a really strong unit development that we have. We had great growth for the shareholders. From a first quarter standpoint I wouldn’t point out -- we don’t break down the comps by period. I would tell you that we were very proud of the results in the first quarter and it does signify the underlying momentum that does continue to exist in the brand. And that same underlying momentum we believe continues to exist into the second quarter. We don’t provide quarterly guidance so we are not going to talk about April results to date but we did point out obviously the tough overlap that we have. We do have the Mayweather Pacquiao fight that we have to overlap from last year. The NDA playoffs we are monitoring really strong performance from the prior year based on the teams that we’re in and the match ups. And also some of the Houston floods that came in the second quarter as well. So from monitoring all those things we’re not implying, call it flat to even plus one comps in the guidance. We believe the underlying momentum still to be strong in the business but as we said we anticipate a moderation from Q1 levels to one in the Q2.

And have you already over -– I don’t remember when that fight was last year, have you already rolled over that or is that something that you're anticipating and that’s why you are more cautious.

No, it was on Saturday, this past Saturday, we rolled over it.

Got it, okay, so you do have a good setting for your run rate?

Yes.

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

Sure and excellent question. We’re very excited about the opportunity to move to national advertising. The total spin that a franchisee will spend on marketing will not change in terms of their allocation of spin. What -– and it’s a 4% spin that we have in our contractual obligation to the franchise agreement. Historically that’s been 2% that’s paid to the national and 2% that’s spent locally. In certain of our markets, franchisees have joined the co-ops, some -– certain of the larger markets, Dallas being one of those as an example. But in every case as we analyzed they approached to national advertising, we found that even against what those markets are buying today in terms of media on a national basis by pooling the dollars together and spending 3% national instead of 2%, we would be able to actually deliver more TRPs, meaning more media wave across every market across the country instead of the 13 markets that had co-ops in place today. It does not have an impact to our P&L specifically, this is purely our national ad fund and it’s just a reallocation of the dollars, again, out of those co-op markets and out of the field at a local market spend and consolidating that nationally.

Thank you very much.

You're welcome.

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

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

Yes, sure. I think it just comes down to the favorability that we saw relative to our own expectations for Q1. Obviously there is a range of possibilities with both single-digits and with the unit count and also it reflects the strength that we're seeing in the company store performance which we don’t provide guidance on.

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

Yes, I think the national digital transition was effectively a precursor to what we wanted to do on a national TV and radio media budget overall. We've been very pleased with the results simply because we've been able to consolidate our buying power by digital media much more effectively from a national perspective and deploy more dollars. Typically what those dollars yield is a very high return on investment as it relates to customers that come in and utilize our online ordering platform, simply clicking through in some of these ads. But we also migrated to a digital video platform to help increase brand awareness in markets where we may not have had a presence previously. And I think the same principles apply when we go to a national advertising platform where, as I mentioned in the prior question, all markets benefit because we’ll be able to spend at a higher rate than any other market could otherwise spend, which means that we’ll be able to generate awareness across the brand in all the markets we're in. 39 states across the country already in the U.S. and most, if not all, the major metro areas. So we think it’s going to be beneficial to the brand for the long-term by being able to continue to raise awareness through these platforms.

Great, thank you.

You're welcome.

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

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

Yes, sure. Thanks for reminding me I did miss that one Matt. You know the Easter shift for us is not that material in either quarter. It does move a little bit but particularly as we are looking at the end result it is not something I would point out that’s material for us. And so what were the questions on sports calendar?

And then I guess you made a point to call out I guess the playoff schedule is not as favorable. I am assuming what's the big team that you are missing there this year, is it Houston going a little farther than they did last year? Or going less than -– getting cut out in the first rather than going 2 rounds?

Yes, so if you look at the compositions of the teams it was very -- comparable to last year but the match ups last year on the first round you had Houston playing Dallas and they won 7 games then you had Clippers playing first. That’s right Charlie they won 7 games as well in the first round. Those were two really strong series last year and favorable markets for us. And like I said the teams that are in this year are comparable but the series weren’t as compelling, they won shorter games and also the time slots on TV then weren't as favorable when the match is compelling. And so obviously San Antonio made it through but it didn’t last and that is a pretty big market for us. So we’re hopeful they do well, the balance of the quarter which would help us out.

Okay and then just curious anything, do you get any sort of lift from Hockey ever being at Dallas at this year and they weren't in at last year?

No, nothing that we can measure or see.

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

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

Okay, thank you very much.

You’re welcome.

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

Yes, thank you very much. Couple of questions; first, in terms of the industry we’re seeing maybe more competitive nature across the Wing category whether it’s like a buffalo wild wings pushing more into takeout or seems like we -– push as part of a broad business with wings. I am just wondering if you could think of that as a competitive threat or do you think maybe a customer experience would totally differentiate relative to what those guys are offering?

Jeffrey, its Charlie. You cut out on the second brand you mentioned, I am just curious what that other brand was. I heard buffalo wild wings.

Just seems like bar and grill players in general -– there is pushing more aside?

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

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

So what we have mentioned on the script was the first quarter wing prices were down 1.5% over the prior year. And I think on our earnings call, our last earnings call we mentioned our expectation that wing prices would generally be flat 2.15 on an annual basis. And so we are about there in Q1. Wing prices have remained elevated a bit as we have gotten past March madness. But we still feel like based on what we’re hearing from economist and the supply dynamic in the industry that on an annual basis roughly flat to prior years to where we would expect it to be. From a basket standpoint there is nothing significant, it’s outside of the wing category, it’s a pretty flat year.

And just lastly any update on the remodels where it is front counter or dedicated areas. I know you are wondering what the franchisees commitment to those upgrades are?

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

Got it, thank you very much.

You’re welcome.

Our next question comes from the line Andrew Charles with Cowen & Company. Please proceed with your question.

Great, thank you. If I remember correctly some of your digital capabilities in marketing are under national spend like social media and search engine. As you transitioned to a national ad world, digital continue to be the priority you know things away from social and search engines for instance, app interface, or functionality or the franchisees more adamant around adding TV advertising?

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

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

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

Great, thank you.

You’re welcome.

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

Thanks, just staying with online for a minute. So, you guys eluded to this that it was almost 16% of sales in Q1, I am just curious what you are seeing as it relates to potential throughput benefits, inventory management, labor benefits, anything like that, that you guys see as the online ordering mix continues to move higher?

We haven't specifically quantified anything in terms of the absolute benefit on the P&L per say. But what I can tell you is that an online order is much easier to execute for our operators simply because that order comes straight into the restaurant, passes through the point of sale system, and delivers the ticket to the make table which allows one step of the process which is taking the phone order or the counter order and putting that into the POS. So that time is saved for either redeployment or to add capacity for growing restaurants which we know we have. As it relates to any of the back office features, that’s really a part of our point of sale system platform that we are putting into the system right now. And as I think Mike mentioned or we talked about before, that’s in 60% of the restaurants today. We expect to be over 90% deployed by the end of the year and that functionality gives our franchisees and all of our restaurant operators the ability to have a theoretical food cost system as well as a very robust labor management system to monitor and operate their business. So I think the tie in between the POS and the online platform, that full integration creates a lot of technological efficiencies that help our operators.

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

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

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

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

Okay, thank you.

You’re welcome.

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

Hi, just to ask a couple of quick modeling cleanups, can you let us on CAPEX and free cash flow were for the quarter?

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

Okay, thank you. And within the comp sales in the quarter was there anything to call out regionally in terms of performance. Texas has been caught out by a handful of other companies as an area that there is even regions that Texas that might be a little bit impacted by what's been going on in the energy markets, just anything regionally that you would know?

Yes, so we don’t breakdown the comp by geographies typically but we have made some comments on Texas in the past. I think one of the data points to point towards is our company’s performance 14 and 19 company stores we have are in Texas and they obviously continue to perform very well. All of those 14 are in the Dallas Fort Worth market which is our largest market in Texas. And so that continues to be a positive for us. Our smaller markets that we mentioned in the past that are particularly exposed to oil tend to run behind a little bit and have softened. Even the first quarter I would tell you that comps coming strong and positive in Texas overall but they did trail -- the state did trail the overall system average.

And then actually if I can my final question which is what are the wider gaps we’ve seen in terms of comp performance for a company versus franchise stores, it sounds like geography is a little bit of it, is there anything else obvious to point to in terms of digital order penetration or the sort of scale up of local advertising or anything that is sort of mechanical that would help explain that?

Karen, this is Charlie. I think the maturity of the restaurants has historically been part of the equation of the continued comp performance. I think Texas is one of our most mature market that we have in this system and continues to grow well despite some of the challenges economically. But the state has seen the brand in its momentum, have continued to carry forward very nicely in this market. So, aside from that Mike's great leadership, I don’t think there is much else I would specifically identify there.

Alright, great. Thank you.

Karen just one clean up, CAPEX was $300,000 for the quarter. That's it, thank you.

Alright, thank you.

[Operator Instructions]. As there are no more questions at this time that would conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time.