Papa Johns Announces First Quarter 2024 Financial Results
Papa John's International, Inc. announced financial results for Q1 2024, with North America comparable sales down 2% and International down 3%. Total revenues were $514 million, operating income decreased 11%, but adjusted operating income increased 10%. Diluted earnings per share was $0.44. Papa Johns aims for sustainable growth with Back to Better 2.0 and International Transformation initiatives.
Adjusted operating income increased by 10% due to improved margins and cost discipline.
Global system-wide restaurant sales totaled $1.23 billion despite a decrease of 1% due to the 53rd week in 2023 shifting between quarters.
Net unit growth of 8 in North America and plans to reach over 20% net unit growth relative to 2023.
Diluted earnings per common share decreased to $0.44 from $0.65 in the first quarter of 2023.
Total revenues were down 2% compared to a year ago, affected by lower revenues in North America commissary segment.
Operating income decreased by 11% compared to Q1 2023.
Insights
Highlights
-
North America comparable sales(a) were down2% from a year ago as Domestic Company-owned restaurants were down3% andNorth America franchised restaurants were down2% ; International comparable sales(a) were down3% from the prior year period. -
8 net unit openings in the first quarter driven by
North America growth; on track to achieveNorth America net unit growth of more than20% relative to 2023 net unit openings and International gross openings between 100 and 140 new restaurants. -
Global system-wide restaurant sales were
, a$1.23 billion 1% (b) decrease compared with the prior year first quarter due entirely to the 53rd week in 2023 which shifted the week between Christmas and New Years into the fourth quarter. -
Total revenues of
were down$514 million 2% compared with a year ago largely driven by lower revenues in ourNorth America commissary segment due to commodity price declines. -
Operating income of
decreased$34 million 11% compared with the first quarter of 2023, while Adjusted operating income(c) of increased$43 million 10% on improved restaurant-level margins and continued focus on cost discipline. -
Diluted earnings per common share of
compared with$0.44 for the first quarter of 2023; Adjusted diluted earnings per common share(c) was$0.65 compared with$0.67 for the first quarter a year ago.$0.68
“Our teams are taking a disciplined approach to running the business, improving restaurant-level margins and increasing operating profits despite a challenging environment in the first quarter,” said Ravi Thanawala, Papa Johns Interim Chief Executive Officer and Chief Financial Officer. “More importantly, we’re making meaningful progress on our Back to Better 2.0 and International Transformation initiatives. The foundational improvements we are implementing in our restaurant operations, digital solutions, and marketing platforms are designed to drive sustainable, profitable growth around the globe. We are confident that our consumer-centric focus and drive to increase franchisee profitability will contribute to our long-term success.”
“The Board of Directors has great confidence in the work that is taking place under Ravi and the Papa Johns leadership team,” said Christopher Coleman, Chair of the Board. “This team, which has significant restaurant, digital, and international experience, is executing on our strategy and evolving our business model for the next chapter of growth. Importantly, their strategic execution is driven by their passion and vision for the Papa Johns brand and an unwavering focus on the consumer and our franchisees. Concurrent with the team’s efforts, the Board is conducting a thorough search process for our next Papa Johns CEO to lead this work into the future.”
_______________________________________________________
(a) |
|
(b) | Excludes the impact of foreign currency. |
(c) | Represents a non-GAAP financial measure. See “Non-GAAP Financial Measures” for a reconciliation to the most comparable US GAAP measure. |
Financial Highlights
|
|
Three Months Ended |
||||||||
(In thousands, except per share amounts) |
|
March 31,
|
|
March 26,
|
|
Increase
|
||||
Total revenues |
|
$ |
513,916 |
|
$ |
527,049 |
|
$ |
(13,133 |
) |
Operating income |
|
$ |
33,718 |
|
$ |
37,796 |
|
$ |
(4,078 |
) |
Adjusted operating income (a) |
|
$ |
43,241 |
|
$ |
39,152 |
|
$ |
4,089 |
|
Net income attributable to the Company |
|
$ |
14,636 |
|
$ |
22,376 |
|
$ |
(7,740 |
) |
Diluted earnings per common share |
|
$ |
0.44 |
|
$ |
0.65 |
|
$ |
(0.21 |
) |
Adjusted diluted earnings per common share (a) |
|
$ |
0.67 |
|
$ |
0.68 |
|
$ |
(0.01 |
) |
Results for the first quarter of 2024 are not directly comparable with the first quarter of 2023, as year-over-year comparisons are impacted by the
Quarterly Results
Total revenues of
Somewhat offsetting these declines was a net increase of approximately
For the first quarter of 2024, global system-wide restaurant sales were
First quarter Operating income was
Adjusted operating income in the first quarter of 2024 improved
Diluted earnings per common share was
See the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of our Quarterly Report on Form 10-Q filed with the SEC for additional information concerning our operating results for the three months ended March 31, 2024.
(a) Represents a Non-GAAP financial measure. See “Non-GAAP Financial Measures” for a reconciliation to the most comparable US GAAP measures.
Global Restaurant Sales Information
Global restaurant and comparable sales information for the first quarter ended March 31, 2024, compared with the first quarter ended March 26, 2023 are as follows (See “Supplemental Information and Financial Statements” below for related definitions):
|
|
Three Months Ended |
||||
Amounts below exclude the impact of foreign currency |
|
March 31,
|
|
March 26,
|
||
Comparable sales growth (decline): |
|
|
|
|
||
Domestic Company-owned restaurants |
|
(3.0 |
)% |
|
3.4 |
% |
|
|
(1.5 |
)% |
|
(0.8 |
)% |
|
|
(1.8 |
)% |
|
— |
% |
International restaurants |
|
(2.6 |
)% |
|
(5.8 |
)% |
Total comparable sales growth (decline) |
|
(2.0 |
)% |
|
(1.3 |
)% |
System-wide restaurant sales growth (decline): |
|
|
|
|
||
Domestic Company-owned restaurants |
|
(2.0 |
)% |
|
4.9 |
% |
|
|
(1.6 |
)% |
|
0.8 |
% |
|
|
(1.7 |
)% |
|
1.6 |
% |
International restaurants |
|
1.4 |
% |
|
3.3 |
% |
Total global system-wide restaurant sales growth (decline) |
|
(0.9 |
)% |
|
2.0 |
% |
Global Restaurant Unit Data
As of March 31, 2024, there were 5,914 Papa Johns restaurants operating in 49 countries and territories, as follows:
First Quarter |
Domestic Company Owned |
|
Franchised |
|
Total |
|
International Company Owned |
|
International Franchised |
|
Total International |
|
System-wide |
|||||
Beginning - December 31, 2023 |
531 |
|
2,902 |
|
|
3,433 |
|
|
117 |
|
2,356 |
|
|
2,473 |
|
|
5,906 |
|
Opened |
5 |
|
16 |
|
|
21 |
|
|
— |
|
23 |
|
|
23 |
|
|
44 |
|
Closed |
— |
|
(7 |
) |
|
(7 |
) |
|
— |
|
(29 |
) |
|
(29 |
) |
|
(36 |
) |
Ending - March 31, 2024 |
536 |
|
2,911 |
|
|
3,447 |
|
|
117 |
|
2,350 |
|
|
2,467 |
|
|
5,914 |
|
Net unit growth/(decline) |
5 |
|
9 |
|
|
14 |
|
|
— |
|
(6 |
) |
|
(6 |
) |
|
8 |
|
Trailing four quarters net store growth |
16 |
|
47 |
|
|
63 |
|
|
117 |
|
9 |
|
|
126 |
|
|
189 |
|
Free Cash Flow
Free cash flow, a non-GAAP financial measure which the Company defines as net cash provided by operating activities, less purchases of property and equipment, was an outflow of
|
|
Three Months Ended |
||||||
(in thousands) |
|
March 31,
|
|
March 26,
|
||||
Net cash provided by operating activities |
|
$ |
11,987 |
|
|
$ |
40,788 |
|
Purchases of property and equipment |
|
|
(13,058 |
) |
|
|
(18,410 |
) |
Free cash flow |
|
$ |
(1,071 |
) |
|
$ |
22,378 |
|
We view free cash flow as an important financial measure because it is one factor that management uses in determining the amount of cash available for discretionary investment. Free cash flow is not a term defined by GAAP, and as a result, our measure of free cash flow might not be comparable to similarly titled measures used by other companies. Free cash flow should not be construed as a substitute for or a better indicator of the Company’s performance than the Company’s GAAP measures.
Cash Dividend
The Company paid cash dividends of
Conference Call
Papa Johns will host a call with analysts today, May 9, 2024, at 8:00 a.m. Eastern Time. To access the conference call or webcast, please register online at: ir.papajohns.com/events-presentations. A replay of the webcast will be available two hours after the call and archived on the same web page.
About Papa Johns
Papa John’s International, Inc. (Nasdaq: PZZA) opened its doors in 1984 with one goal in mind: BETTER INGREDIENTS. BETTER PIZZA.® Papa Johns believes that using high-quality ingredients leads to superior quality pizzas. Its original dough is made of only six ingredients and is fresh, never frozen. Papa Johns tops its pizzas with real cheese made from mozzarella, pizza sauce made with vine-ripened tomatoes that go from vine to can in the same day and meat free of fillers. It was the first national pizza delivery chain to announce the removal of artificial flavors and synthetic colors from its entire food menu. Papa Johns is co-headquartered in
Forward-Looking Statements
Certain matters discussed in this press release and other Company communications that are not statements of historical fact constitute forward-looking statements within the meaning of the federal securities laws. Generally, the use of words such as “expect,” “intend,” “estimate,” “believe,” “anticipate,” “will,” “forecast,” “outlook”, “plan,” “project,” or similar words identify forward-looking statements that we intend to be included within the safe harbor protections provided by the federal securities laws. Such forward-looking statements include or may relate to projections or guidance concerning business performance, revenue, earnings, cash flow, earnings per share, share repurchases, the current economic environment, commodity and labor costs, currency fluctuations, profit margins, supply chain operating margin, net unit growth, unit level performance, capital expenditures, restaurant and franchise development, restaurant acquisitions, restaurant closures, labor shortages, labor cost increases, inflation, royalty relief, franchisee support and incentives, the effectiveness of our menu innovations and other business initiatives, investments in product and digital innovation, marketing efforts and investments, liquidity, compliance with debt covenants, impairments, strategic decisions and actions, changes to our national marketing fund, changes to our commissary model, dividends, effective tax rates, regulatory changes and impacts, investments and repositioning of the
Our forward-looking statements are based on our assumptions which are based on currently available information. Actual outcomes and results may differ materially from those matters expressed or implied in our forward-looking statements as a result of various factors, including but not limited to risks related to: deteriorating economic conditions in the
For more information about the company, please visit www.papajohns.com.
Supplemental Information and Financial Statements
Definitions
“Comparable sales” represents sales for the same base of restaurants for the same fiscal periods. “Comparable sales growth (decline)” represents the change in year-over-year comparable sales. “Global system-wide restaurant sales” represents total restaurant sales for all Company-owned and franchised restaurants open during the comparable periods, and “Global system-wide restaurant sales growth (decline)” represents the change in global system-wide restaurant sales year-over-year. Comparable sales, Comparable sales growth (decline), Global system-wide restaurant sales and Global system-wide sales growth (decline) exclude franchisees for which we suspended corporate support.
“Equivalent units” represents the number of restaurants open at the beginning of a given period, adjusted for restaurants opened, closed, acquired or sold during the period on a weighted average basis.
We believe Domestic Company-owned,
Non-GAAP Financial Measures
In addition to the results provided in accordance with
|
|
Three Months Ended |
||||||
(In thousands, except per share amounts) |
|
March 31,
|
|
March 26,
|
||||
Operating income |
|
$ |
33,718 |
|
|
$ |
37,796 |
|
International restructuring costs (a) |
|
|
9,523 |
|
|
|
— |
|
Other costs (b) |
|
|
— |
|
|
|
1,356 |
|
Adjusted operating income |
|
$ |
43,241 |
|
|
$ |
39,152 |
|
|
|
|
|
|
||||
Net income attributable to common shareholders |
|
$ |
14,636 |
|
|
$ |
22,376 |
|
International restructuring costs (a) |
|
|
9,523 |
|
|
|
— |
|
Other costs (b) |
|
|
— |
|
|
|
1,356 |
|
Tax effect of adjustments (c) |
|
|
(2,152 |
) |
|
|
(309 |
) |
Adjusted net income attributable to common shareholders |
|
$ |
22,007 |
|
|
$ |
23,423 |
|
|
|
|
|
|
||||
Diluted earnings per common share |
|
$ |
0.44 |
|
|
$ |
0.65 |
|
International restructuring costs (a) |
|
|
0.29 |
|
|
|
— |
|
Other costs (b) |
|
|
— |
|
|
|
0.04 |
|
Tax effect of adjustments (c) |
|
|
(0.06 |
) |
|
|
(0.01 |
) |
Adjusted diluted earnings per common share |
|
$ |
0.67 |
|
|
$ |
0.68 |
|
Refer to footnotes on following page.
Footnotes to Non-GAAP Financial Measures
(a) |
Represents costs associated with the Company’s International Restructuring plan. For the three months ended March 31, 2024, these costs are comprised primarily of leased and fixed asset impairment charges related to planned store closures in the |
(b) |
Represents severance and related costs associated with the transition of certain executives, recorded in General and administrative expenses. |
(c) |
The tax effect on non-GAAP adjustments was calculated by applying the marginal tax rates of |
Papa John’s International, Inc. and Subsidiaries Condensed Consolidated Balance Sheets |
||||||||
(In $ thousands, except per share amounts) |
|
March 31,
|
|
December 31,
|
||||
|
|
(Unaudited) |
|
|
||||
Assets |
|
|
|
|
||||
Current assets: |
|
|
|
|
||||
Cash and cash equivalents |
|
$ |
27,768 |
|
|
$ |
40,587 |
|
Accounts receivable, net |
|
|
94,506 |
|
|
|
104,244 |
|
Notes receivable, current portion |
|
|
5,802 |
|
|
|
5,199 |
|
Income tax receivable |
|
|
1,906 |
|
|
|
2,577 |
|
Inventories |
|
|
38,073 |
|
|
|
36,126 |
|
Prepaid expenses and other current assets |
|
|
57,872 |
|
|
|
42,285 |
|
Total current assets |
|
|
225,927 |
|
|
|
231,018 |
|
Property and equipment, net |
|
|
273,303 |
|
|
|
282,812 |
|
Finance lease right-of-use assets, net |
|
|
30,747 |
|
|
|
31,740 |
|
Operating lease right-of-use assets |
|
|
153,880 |
|
|
|
164,158 |
|
Notes receivable, less current portion, net |
|
|
11,010 |
|
|
|
12,346 |
|
Goodwill |
|
|
75,975 |
|
|
|
76,206 |
|
Other assets |
|
|
76,325 |
|
|
|
76,725 |
|
Total assets |
|
$ |
847,167 |
|
|
$ |
875,005 |
|
|
|
|
|
|
||||
Liabilities, Redeemable noncontrolling interests and Stockholders’ deficit |
|
|
|
|
||||
Current liabilities: |
|
|
|
|
||||
Accounts payable |
|
$ |
61,014 |
|
|
$ |
74,949 |
|
Income and other taxes payable |
|
|
22,487 |
|
|
|
17,948 |
|
Accrued expenses and other current liabilities |
|
|
143,401 |
|
|
|
158,167 |
|
Current deferred revenue |
|
|
20,727 |
|
|
|
20,427 |
|
Current finance lease liabilities |
|
|
8,495 |
|
|
|
9,029 |
|
Current operating lease liabilities |
|
|
24,710 |
|
|
|
24,076 |
|
Current portion of long-term debt |
|
|
1,800 |
|
|
|
— |
|
Total current liabilities |
|
|
282,634 |
|
|
|
304,596 |
|
Deferred revenue |
|
|
18,780 |
|
|
|
20,366 |
|
Long-term finance lease liabilities |
|
|
23,726 |
|
|
|
24,144 |
|
Long-term operating lease liabilities |
|
|
143,797 |
|
|
|
151,050 |
|
Long-term debt, less current portion, net |
|
|
761,317 |
|
|
|
757,422 |
|
Other long-term liabilities |
|
|
62,395 |
|
|
|
60,192 |
|
Total liabilities |
|
|
1,292,649 |
|
|
|
1,317,770 |
|
|
|
|
|
|
||||
Redeemable noncontrolling interests |
|
|
941 |
|
|
|
851 |
|
|
|
|
|
|
||||
Stockholders’ deficit: |
|
|
|
|
||||
Common stock ( |
|
|
493 |
|
|
|
492 |
|
Additional paid-in capital |
|
|
444,793 |
|
|
|
452,290 |
|
Accumulated other comprehensive loss |
|
|
(7,554 |
) |
|
|
(7,803 |
) |
Retained earnings |
|
|
218,608 |
|
|
|
219,027 |
|
Treasury stock (16,674 shares at March 31, 2024 and 16,747 shares at December 31, 2023, at cost) |
|
|
(1,118,196 |
) |
|
|
(1,123,098 |
) |
Total stockholders’ deficit |
|
|
(461,856 |
) |
|
|
(459,092 |
) |
Noncontrolling interests in subsidiaries |
|
|
15,433 |
|
|
|
15,476 |
|
Total Stockholders’ deficit |
|
|
(446,423 |
) |
|
|
(443,616 |
) |
Total Liabilities, Redeemable noncontrolling interests and Stockholders’ deficit |
|
$ |
847,167 |
|
|
$ |
875,005 |
|
Papa John’s International, Inc. and Subsidiaries Condensed Consolidated Statements of Operations (Unaudited) |
||||||||
|
|
Three Months Ended |
||||||
(In $ thousands, except per share amounts) |
|
March 31,
|
|
March 26,
|
||||
Revenues: |
|
|
|
|
||||
Domestic Company-owned restaurant sales |
|
$ |
176,224 |
|
|
$ |
179,866 |
|
|
|
|
35,697 |
|
|
|
36,072 |
|
|
|
|
203,287 |
|
|
|
212,566 |
|
International revenues |
|
|
40,708 |
|
|
|
31,463 |
|
Other revenues |
|
|
58,000 |
|
|
|
67,082 |
|
Total revenues |
|
|
513,916 |
|
|
|
527,049 |
|
Costs and expenses: |
|
|
|
|
||||
Operating costs (excluding depreciation and amortization shown separately below): |
|
|
|
|
||||
Domestic Company-owned restaurant expenses |
|
|
138,753 |
|
|
|
147,784 |
|
|
|
|
185,199 |
|
|
|
196,415 |
|
International expenses |
|
|
28,346 |
|
|
|
17,311 |
|
Other expenses |
|
|
51,767 |
|
|
|
61,078 |
|
General and administrative expenses |
|
|
58,459 |
|
|
|
51,944 |
|
Depreciation and amortization |
|
|
17,674 |
|
|
|
14,721 |
|
Total costs and expenses |
|
|
480,198 |
|
|
|
489,253 |
|
Operating income |
|
|
33,718 |
|
|
|
37,796 |
|
Net interest expense |
|
|
(11,063 |
) |
|
|
(9,021 |
) |
Income before income taxes |
|
|
22,655 |
|
|
|
28,775 |
|
Income tax expense |
|
|
7,741 |
|
|
|
6,229 |
|
Net income before attribution to noncontrolling interests |
|
|
14,914 |
|
|
|
22,546 |
|
Net income attributable to noncontrolling interests |
|
|
(278 |
) |
|
|
(170 |
) |
Net income attributable to the Company |
|
$ |
14,636 |
|
|
$ |
22,376 |
|
|
|
|
|
|
||||
|
|
|
|
|
||||
Basic earnings per common share |
|
$ |
0.45 |
|
|
$ |
0.66 |
|
Diluted earnings per common share |
|
$ |
0.44 |
|
|
$ |
0.65 |
|
|
|
|
|
|
||||
Basic weighted average common shares outstanding |
|
|
32,644 |
|
|
|
34,155 |
|
Diluted weighted average common shares outstanding |
|
|
32,909 |
|
|
|
34,324 |
|
|
|
|
|
|
||||
Dividends declared per common share |
|
$ |
0.46 |
|
|
$ |
0.42 |
|
Papa John’s International, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited) |
||||||||
|
|
Three Months Ended |
||||||
(In $ thousands) |
|
March 31,
|
|
March 26,
|
||||
Operating activities |
|
|
|
|
||||
Net income before attribution to noncontrolling interests |
|
$ |
14,914 |
|
|
$ |
22,546 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
||||
Provision for allowance for credit losses on accounts and notes receivable |
|
|
604 |
|
|
|
513 |
|
Depreciation and amortization |
|
|
17,674 |
|
|
|
14,721 |
|
Deferred income taxes |
|
|
532 |
|
|
|
2,031 |
|
Stock-based compensation expense |
|
|
(370 |
) |
|
|
3,898 |
|
Impairment loss |
|
|
7,554 |
|
|
|
— |
|
Loss on disposal of property and equipment |
|
|
688 |
|
|
|
— |
|
Other |
|
|
315 |
|
|
|
496 |
|
Changes in operating assets and liabilities, net of acquisitions: |
|
|
|
|
||||
Accounts receivable |
|
|
9,084 |
|
|
|
2,182 |
|
Income tax receivable |
|
|
660 |
|
|
|
2,822 |
|
Inventories |
|
|
(1,981 |
) |
|
|
4,330 |
|
Prepaid expenses and other current assets |
|
|
(4,137 |
) |
|
|
(4,351 |
) |
Other assets and liabilities |
|
|
1,873 |
|
|
|
71 |
|
Accounts payable |
|
|
(14,406 |
) |
|
|
(310 |
) |
Income and other taxes payable |
|
|
4,718 |
|
|
|
(512 |
) |
Accrued expenses and other current liabilities |
|
|
(24,451 |
) |
|
|
(5,413 |
) |
Deferred revenue |
|
|
(1,284 |
) |
|
|
(2,236 |
) |
Net cash provided by operating activities |
|
|
11,987 |
|
|
|
40,788 |
|
Investing activities |
|
|
|
|
||||
Purchases of property and equipment |
|
|
(13,058 |
) |
|
|
(18,410 |
) |
Notes issued |
|
|
(154 |
) |
|
|
(976 |
) |
Repayments of notes issued |
|
|
886 |
|
|
|
1,069 |
|
Other |
|
|
2,174 |
|
|
|
42 |
|
Net cash used in investing activities |
|
|
(10,152 |
) |
|
|
(18,275 |
) |
Financing activities |
|
|
|
|
||||
Net proceeds of revolving credit facilities |
|
|
5,300 |
|
|
|
208,200 |
|
Proceeds from exercise of stock options |
|
|
840 |
|
|
|
614 |
|
Acquisition of Company common stock |
|
|
— |
|
|
|
(209,640 |
) |
Dividends paid to common stockholders |
|
|
(15,068 |
) |
|
|
(14,603 |
) |
Tax payments for equity award issuances |
|
|
(3,192 |
) |
|
|
(5,999 |
) |
Distributions to noncontrolling interests |
|
|
(231 |
) |
|
|
(23 |
) |
Principal payments on finance leases |
|
|
(2,433 |
) |
|
|
(1,743 |
) |
Other |
|
|
182 |
|
|
|
(18 |
) |
Net cash used in financing activities |
|
|
(14,602 |
) |
|
|
(23,212 |
) |
Effect of exchange rate changes on cash and cash equivalents |
|
|
(52 |
) |
|
|
34 |
|
Change in cash and cash equivalents |
|
|
(12,819 |
) |
|
|
(665 |
) |
Cash and cash equivalents at beginning of period |
|
|
40,587 |
|
|
|
47,373 |
|
Cash and cash equivalents at end of period |
|
$ |
27,768 |
|
|
$ |
46,708 |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20240507887364/en/
Papa Johns Investor Relations
investor_relations@papajohns.com
Source: Papa John’s International, Inc.
FAQ
What were Papa John's Q1 2024 financial results?
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