LOUISVILLE, Ky.–(BUSINESS WIRE)–Papa John’s International, Inc. (Nasdaq: PZZA) (“Papa Johns®”) (the “Company”) today announced financial results for the fourth quarter and year ended December 29, 2024.
Fourth Quarter Highlights
- North America comparable sales(a) were down 4% from a year ago as Domestic Company-owned restaurants were down 6% and North America franchised restaurants were down 4%; International comparable sales(a) were up 2% compared with the prior year period.
- 122 net restaurant openings in the fourth quarter, driven by 63 gross openings in North America and 83 gross openings in International markets.
- Global system-wide restaurant sales were $1.23 billion, an 8%(b) decrease from a year ago due to the additional week of operations in the fourth quarter of 2023. Excluding the additional week, global system-wide sales were flat(b) from the prior year period.
- Total revenues of $531 million were down 7% compared with the fourth quarter of 2023. Excluding the 53rd week in 2023, Total revenues were roughly flat from the prior year period.
- Diluted earnings per common share of $0.44 compared with $0.79 for the fourth quarter of 2023; Adjusted diluted earnings per common share(c) was $0.63 compared with $0.91 for the fourth quarter of 2023.
Full Year Highlights
- North America comparable sales(d) were down 4% from 2023 as Domestic Company-owned restaurants were down 5% and North America franchised restaurants were down 4%; International comparable sales(d) were down 1%.
- 124 net restaurant openings for the full year 2024, driven by 112 gross openings in North America and 198 gross openings in International markets.
- Global system-wide restaurant sales were $4.85 billion, a 3%(b) decrease over the prior year. Excluding the 53rd week in 2023, global system-wide sales were down approximately 1%(b).
- Total revenues of $2.06 billion were down $76 million, or 4%, from 2023. Excluding the 53rd week in 2023, Total revenues were down 2%.
- Diluted earnings per common share of $2.54 compared with $2.48 for 2023; adjusted diluted earnings per common share(c) was $2.34 compared with $2.71 in 2023.
|
(a) |
Comparable sales growth (decline) for the fourth quarter of 2024 is reported on a 13-week basis comparing September 30, 2024 through December 29, 2024 with October 2, 2023 through December 31, 2023. |
|
(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 measures. |
|
(d) |
Comparable sales growth (decline) for the fiscal year 2024 is reported on a 52-week basis comparing January 1, 2024 through December 29, 2024 with January 2, 2023 through December 31, 2023. |
CEO Commentary
“I am pleased with the early progress we are seeing in our transformation as we work to improve our value perception, simplify our operations, and enhance our digital and loyalty experiences. These efforts helped to deliver results consistent with our fourth quarter expectations,” said Todd Penegor, president and CEO.
“We have defined our strategic priorities to take market share as we move forward with urgency to execute on initiatives to drive sales momentum in the near-term while meaningfully increasing profitability over time,” continued Penegor. “Our number one priority continues to be creating great experiences for our customers and team members in our restaurants – ensuring the restaurant economic model remains strong. We are confident that we have the right plan in place to deliver on our promise to be the best pizza makers in the business.”
Financial Highlights
Beginning with the year ended December 29, 2024, the Company implemented changes to the presentation and classification of its financial statements concurrent with the adoption of Accounting Standard Update 2023-07, “Improvements to Reportable Segment Disclosures”. Please refer to the Supplemental Information and Financial Statements section in this release for additional information.
|
|
|
Three Months Ended |
|
Twelve Months Ended |
||||||||||||||||
|
(In thousands, except per share amounts) |
|
December 29, |
|
December 31, |
|
Increase |
|
December 29, |
|
December 31, |
|
Increase |
||||||||
|
Total revenues |
|
$ |
530,770 |
|
$ |
571,322 |
|
$ |
(40,552 |
) |
|
$ |
2,059,387 |
|
$ |
2,135,713 |
|
$ |
(76,326 |
) |
|
Operating income |
|
$ |
29,531 |
|
$ |
42,566 |
|
$ |
(13,035 |
) |
|
$ |
156,704 |
|
$ |
147,142 |
|
$ |
9,562 |
|
|
Adjusted operating income (c) |
|
$ |
37,290 |
|
$ |
47,354 |
|
$ |
(10,064 |
) |
|
$ |
148,183 |
|
$ |
157,025 |
|
$ |
(8,842 |
) |
|
Net income attributable to the Company |
|
$ |
14,799 |
|
$ |
26,093 |
|
$ |
(11,294 |
) |
|
$ |
83,486 |
|
$ |
82,098 |
|
$ |
1,388 |
|
|
Diluted earnings per common share |
|
$ |
0.44 |
|
$ |
0.79 |
|
$ |
(0.35 |
) |
|
$ |
2.54 |
|
$ |
2.48 |
|
$ |
0.06 |
|
|
Adjusted diluted earnings per common share (c) |
|
$ |
0.63 |
|
$ |
0.91 |
|
$ |
(0.28 |
) |
|
$ |
2.34 |
|
$ |
2.71 |
|
$ |
(0.37 |
) |
Results for the fourth quarter and fiscal year 2024 are not directly comparable with the fourth quarter and fiscal year 2023, as year-over-year comparisons are affected by an additional week of operations in the fourth quarter of 2023. For comparability purposes we describe the estimated impact of the 53rd week in the discussion below.
Additionally, the acquisition of 118 formerly franchised restaurants in the UK in the second and third quarters of 2023 (the “UK franchisee acquisitions”), and the subsequent closure and refranchising of all but 13 restaurants impacts the comparability of revenues and expenses from the International segment for both 2023 and 2024.
Fourth Quarter 2024 Results
Revenue: Total revenues of $530.8 million in the fourth quarter of 2024 decreased $40.6 million, or 7.1%, compared with the prior year period. The lower revenues were largely attributable to approximately $41 million in 2023 from the additional week of operations and a $17.8 million decrease in Company-owned restaurant revenues, which now includes both Domestic and International Company-owned restaurants. The decline in Company-owned restaurant revenues on a comparable week basis is largely attributable to: 1) an approximately $13 million decline at our International Company-owned restaurants, primarily related to lower revenues in the quarter from our Company-owned restaurants in the UK, as 105 formerly Company-owned restaurants were previously refranchised or closed; and 2) an approximately $5 million decline at our Domestic Company-owned restaurants primarily due to lower comparable sales.
Offsetting the decline in Company-owned restaurant revenues on a comparable week basis was a $14.0 million increase in Commissary revenues, reflecting higher prices partially offset by lower transaction volumes and a $3.2 million increase in Advertising funds revenues, reflecting the 100 basis point increase to the National Marketing Fund contribution rate beginning in the second quarter of 2024.
System-wide sales: For the fourth quarter of 2024, Global system-wide restaurant sales were $1.23 billion, down 7.9%(b) from the prior year quarter, largely driven by the additional week of operations in the prior year period. Excluding the additional week in the fourth quarter of 2023, Global system-wide sales were flat(b).
Operating Income: Fourth quarter 2024 Operating income was $29.5 million, a $13.0 million decrease compared with the prior year fourth quarter, primarily due to an approximate $8 million benefit from the additional week of operations in 2023 and lower operating margins at our Domestic Company-owned restaurants as the Company strategically reinvested some of its first-half savings into improving its value perception with consumers.
Adjusted operating income(c) was $37.3 million, a $10.1 million decrease from the same period a year ago. The variance between Operating income and Adjusted operating income was due to $7.8 million of International restructuring costs in the UK.
The decrease in Adjusted operating income(c) in the fourth quarter of 2024 compared with the prior year period was primarily due to the same factors impacting Operating income discussed above.
Earnings per share: Diluted earnings per common share was $0.44 for the fourth quarter of 2024 compared with $0.79 in the fourth quarter of 2023. Adjusted diluted earnings per common share(c) was $0.63 for the fourth quarter of 2024 compared with $0.91 in the fourth quarter of 2023. These changes were driven by the same factors impacting Operating income and Adjusted operating income(c) discussed above. In addition, diluted earnings per common share and Adjusted diluted earnings per common share reflected lower interest expense compared with the fourth quarter of 2023. Interest expense decreased largely due to lower average outstanding debt compared with the prior year fourth quarter.
Full Year 2024 Results
Revenue: Total revenues of $2.1 billion for 2024 decreased $76.3 million, or 3.6%, compared with the prior year. The lower revenues were largely attributable to: 1) approximately $41 million in 2023 from the additional week of operations; 2) a $20.7 million decrease in Company-owned restaurant revenues primarily due to an approximately $20 million decline at our Domestic Company-owned restaurants related to lower comparable sales; 3) a $12.9 million decrease in Other revenues, primarily related to Preferred Marketing, our formerly wholly-owned print and promotions company, which was sold in the fourth quarter of 2023; and 4) a $4.7 million decrease in Commissary revenues, reflecting lower overall transaction volumes. These decreases were partially offset by a $7.5 million increase in Advertising funds revenues, reflecting the 100 basis point increase to the National Marketing Fund contribution rate beginning in the second quarter of 2024.
System-wide sales: For 2024, global system-wide restaurant sales were $4.85 billion, down 3.1%(b) from a year ago. The decrease was largely due to the additional week of operations in the prior year. Excluding the 53rd week in 2023, Global system-wide sales were down approximately 1%(b), due to lower comparable sales, partially offset by 2.1% global net restaurant growth compared with the prior year.
Operating income: Operating income of $156.7 million for 2024 increased $9.6 million compared with the prior year. The increase in Operating income was primarily driven by $41.3 million of pre-tax gains associated with the sale(e) of two Quality Control Center properties (“QC Centers”) in the current year third quarter along with a $5.2 million increase in North America Commissaries primarily driven by the higher gross margin rate in 2024. The increase was mostly offset by lower comparable sales in 2024 and a roughly $8 million benefit in 2023 from the additional week of operations.
Adjusted operating income(c) was $148.2 million for 2024, an $8.8 million, or 5.6%, decrease compared with the prior year. The variance between Operating income and Adjusted operating income was due to the aforementioned gains from the QC Center sales, $27.3 million of International restructuring costs, primarily in the UK, and $5.5 million in non-cash impairment charges primarily related to fixed and intangible assets from the refranchising of 15 Domestic restaurants.
The decrease in Adjusted operating income(c) for 2024 compared with the prior year was primarily driven by the approximately $8 million benefit from the additional week of operations and lower comparable sales partially offset by the aforementioned increase in the commissary fixed operating margin in 2024.
Earnings per share: Diluted earnings per common share was $2.54 for 2024 compared with $2.48 in 2023. Adjusted diluted earnings per common share(c) was $2.34 compared with $2.71 in 2023. These changes were driven by the same factors impacting operating income and adjusted operating income(c) as discussed above. In addition, diluted earnings per common share and adjusted diluted earnings per common share reflect a higher effective tax rate in 2024 compared with 2023. The higher tax rate was primarily driven by impairment charges related to the International Transformation Plan, as well as higher foreign withholding taxes and a tax shortfall generated by stock option exercises and vesting of restricted shares in 2024.
|
(a) |
Comparable sales growth (decline) for the fourth quarter of 2024 is reported on a 13-week basis comparing September 30, 2024 through December 29, 2024 with October 2, 2023 through December 31, 2023. |
|
(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 measures. |
|
(d) |
Comparable sales growth (decline) for the fiscal year 2024 is reported on a 52-week basis comparing January 1, 2024 through December 29, 2024 with January 2, 2023 through December 31, 2023. |
|
(e) |
Properties were subsequently leased back by the Company. See “Note 22. Divestitures” in the Company’s Annual Report on Form 10-K for the year ended December 29, 2024. |
2025 Outlook
The Company is introducing 2025 annual guidance around the following metrics:
- System-wide sales: 2% to 5%
- North America comparable sales: Flat to up 2%
- International comparable sales: Flat to up 2%
-
Restaurant development:
- North America: 85 to 115 gross openings
- International: 180 to 200 gross openings
- Adjusted EBITDA: $200 million to $220 million
- Depreciation & amortization: $70 million to $75 million
- Interest expense: $40 million to $45 million
- Capital expenditures: $75 million to $85 million
- Tax rate: 28% to 32%
This release includes forward-looking projections for certain non-GAAP financial measures, including Adjusted EBITDA (See “Definitions”). The Company excludes certain expenses and benefits from Adjusted EBITDA that, due to the uncertainty and variability of the nature and amount of those expenses and benefits, the Company is unable to, without unreasonable effort or expense, provide a reconciliation to Net income of those projected measures.
See the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of our Annual Report on Form 10-K filed with the SEC for additional information concerning our operating results for the year ended December 29, 2024.
Global Restaurant Sales Information
Global restaurant and comparable sales information for the year ended December 29, 2024, compared with the year ended December 31, 2023 are as follows (See “Supplemental Information and Financial Statements” below for related definitions):
|
|
|
Three Months Ended |
|
Twelve Months Ended |
||||||||
|
Amounts below exclude the impact of foreign currency |
|
December 29, |
|
December 31, |
|
December 29, |
|
December 31, |
||||
|
Comparable sales growth (decline) (a, d): |
|
|
|
|
|
|
|
|
||||
|
Domestic Company-owned restaurants |
|
(5.7 |
)% |
|
2.2 |
% |
|
(4.9 |
)% |
|
3.4 |
% |
|
North America franchised restaurants |
|
(4.0 |
)% |
|
1.7 |
% |
|
(3.5 |
)% |
|
0.1 |
% |
|
North America restaurants |
|
(4.4 |
)% |
|
1.8 |
% |
|
(3.8 |
)% |
|
0.8 |
% |
|
International restaurants |
|
2.1 |
% |
|
(5.5 |
)% |
|
(0.8 |
)% |
|
(3.1 |
)% |
|
Total comparable sales growth (decline) |
|
(2.8 |
)% |
|
0.1 |
% |
|
(3.1 |
)% |
|
(0.1 |
)% |
|
System-wide restaurant sales growth (decline) (f): |
|
|
|
|
|
|
|
|
||||
|
Domestic Company-owned restaurants |
|
(9.9 |
)% |
|
12.4 |
% |
|
(4.7 |
)% |
|
6.7 |
% |
|
North America franchised restaurants |
|
(8.7 |
)% |
|
10.9 |
% |
|
(4.1 |
)% |
|
3.6 |
% |
|
North America restaurants |
|
(8.9 |
)% |
|
11.2 |
% |
|
(4.2 |
)% |
|
4.1 |
% |
|
International restaurants |
|
(4.7 |
)% |
|
10.5 |
% |
|
0.4 |
% |
|
7.7 |
% |
|
Total global system-wide restaurant sales growth (decline) |
|
(7.9 |
)% |
|
11.0 |
% |
|
(3.1 |
)% |
|
5.0 |
% |
|
(a) |
Comparable sales growth (decline) for the fourth quarter of 2024 is reported on a 13-week basis comparing September 30, 2024 through December 29, 2024 with October 2, 2023 through December 31, 2023. |
|
(d) |
Comparable sales growth (decline) for the fiscal year 2024 is reported on a 52-week basis comparing January 1, 2024 through December 29, 2024 with January 2, 2023 through December 31, 2023. |
|
(f) |
System-wide restaurant sales growth includes 14 weeks in the fourth quarter of 2023 and 53 weeks in fiscal year 2023. |
Global Restaurants
As of December 29, 2024, there were 6,030 Papa Johns restaurants operating in 51 countries and territories, as follows:
|
Fourth Quarter |
Domestic |
|
Franchised |
|
Total |
|
International |
|
International |
|
Total |
|
System- |
||||||
|
Beginning – September 29, 2024 |
537 |
|
|
2,917 |
|
|
3,454 |
|
|
13 |
|
2,441 |
|
|
2,454 |
|
|
5,908 |
|
|
Opened |
16 |
|
|
47 |
|
|
63 |
|
|
— |
|
83 |
|
|
83 |
|
|
146 |
|
|
Closed |
— |
|
|
(3 |
) |
|
(3 |
) |
|
— |
|
(21 |
) |
|
(21 |
) |
|
(24 |
) |
|
Sold |
— |
|
|
(1 |
) |
|
(1 |
) |
|
— |
|
— |
|
|
— |
|
|
(1 |
) |
|
Acquired |
1 |
|
|
— |
|
|
1 |
|
|
— |
|
— |
|
|
— |
|
|
1 |
|
|
Refranchised |
(15 |
) |
|
15 |
|
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
Ending – December 29, 2024 |
539 |
|
|
2,975 |
|
|
3,514 |
|
|
13 |
|
2,503 |
|
|
2,516 |
|
|
6,030 |
|
|
Net restaurant growth/(decline) |
2 |
|
|
58 |
|
|
60 |
|
|
— |
|
62 |
|
|
62 |
|
|
122 |
|
|
Full year |
|
Domestic |
|
Franchised |
|
Total |
|
International |
|
International |
|
Total |
|
System- |
|||||||
|
Beginning December 31, 2023 |
|
531 |
|
|
2,902 |
|
|
3,433 |
|
|
117 |
|
|
2,356 |
|
|
2,473 |
|
|
5,906 |
|
|
Opened |
|
22 |
|
|
90 |
|
|
112 |
|
|
— |
|
|
198 |
|
|
198 |
|
|
310 |
|
|
Closed |
|
— |
|
|
(31 |
) |
|
(31 |
) |
|
(43 |
) |
|
(112 |
) |
|
(155 |
) |
|
(186 |
) |
|
Sold |
|
— |
|
|
(1 |
) |
|
(1 |
) |
|
— |
|
|
— |
|
|
— |
|
|
(1 |
) |
|
Acquired |
|
1 |
|
|
— |
|
|
1 |
|
|
— |
|
|
— |
|
|
— |
|
|
1 |
|
|
Refranchised |
|
(15 |
) |
|
15 |
|
|
— |
|
|
(61 |
) |
|
61 |
|
|
— |
|
|
— |
|
|
December 29, 2024 |
|
539 |
|
2,975 |
|
|
3,514 |
|
|
13 |
|
|
2,503 |
|
|
2,516 |
|
|
6,030 |
|
|
|
Net unit growth/(decline) |
|
8 |
|
|
73 |
|
|
81 |
|
|
(104 |
) |
|
147 |
|
|
43 |
|
|
124 |
|
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 $34.1 million for the year ended December 29, 2024, compared with $116.4 million in the prior year. The year-over-year change primarily reflects unfavorable working capital changes and timing of cash payments for income taxes, partially offset by a $4.1 million decrease in capital expenditures.
|
|
|
Year Ended |
||||||
|
(in thousands) |
|
December 29, |
|
December 31, |
||||
|
Net cash provided by operating activities |
|
$ |
106,632 |
|
|
$ |
193,055 |
|
|
Purchases of property and equipment |
|
|
(72,484 |
) |
|
|
(76,620 |
) |
|
Free cash flow |
|
$ |
34,148 |
|
|
$ |
116,435 |
|
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 $15.2 million ($0.46 per common share) in the fourth quarter of 2024. On January 24, 2025, our Board of Directors declared a first quarter 2025 dividend of $0.46 per common share. The dividend was paid on February 21, 2025 to stockholders of record as of the close of business on February 10, 2025.
Conference Call
Papa Johns will host a call with analysts today, February 27, 2025, 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 Atlanta, Ga. and Louisville, Ky. and is the world’s third-largest pizza delivery company with more than 6,000 restaurants in approximately 50 countries and territories. For more information about the Company or to order pizza online, visit www.papajohns.com or download the Papa Johns mobile app for iOS or Android.
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, depreciation and amortization, interest expense, tax rates, system-wide sales, Adjusted EBITDA, 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, dividends, effective tax rates, regulatory changes and impacts, repositioning of the UK market, International restructuring plans, timing and costs, International consumer demand, adoption of new accounting standards, and other financial and operational measures. Such statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which are difficult to predict and many of which are beyond our control. Therefore, actual outcomes and results may differ materially from those matters expressed or implied in such forward-looking statements.
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 U.S. and international markets; labor shortages at Company and/or franchised restaurants and our quality control centers; increases in labor costs, changes in commodity costs, supply chain incentive-based rebates, or sustained higher other operating costs, including as a result of supply chain disruption, inflation, increased tariffs, trade barriers, immigration policies, or climate change; the potential for delayed new restaurant openings, both domestically and internationally, or lower net unit development due to changing circumstances outside of our control; the increased risk of phishing, ransomware and other cyber-attacks; risks and disruptions to the global economy and our business related to geopolitical conflicts including conflicts in Ukraine and the Middle East and risks related to a possible economic recession or downturn that could reduce consumer spending or demand. These and other risks, uncertainties and assumptions that are involved in our forward-looking statements are discussed in detail in “Part I.
Contacts
Papa Johns Investor Relations
[email protected]