Papa John’s International, Inc. (NASDAQ:PZZA) Q4 2024 Earnings Conference Call February 27, 2025 8:00 AM ET Company Participants Stacy Frole - Vice President, Investor Relations Todd Penegor - President and CEO Ravi Thanawala - Executive Vice President, International and CFO Conference Call Participants Jim Salera - Stephens Sarah Senatori - Bank of America Brian Bittner - Oppenheimer Lauren Silverman - Deutsche Bank Brian Mullen - Piper Sandler Peter Saleh - BTIG Eric Gonzalez - KeyBanc Todd Brooks - The B ...

Financial Data and Key Metrics Changes - For Q4 2024, global system-wide restaurant sales were $1.23 billion, down approximately 8% in constant currency, primarily due to an additional week of operation in the prior year [29] - Total revenues for Q4 were $531 million, down 7% from last year, but excluding the impact of the additional week, revenue was largely flat [35] - Adjusted operating income for Q4 was $37 million, down $10 million from a year ago, with an adjusted operating income margin of 7%, down from 8.3% in 2023 [37] Business Line Data and Key Metrics Changes - North America comparable sales were down 4% in Q4, with transaction comps down 2% year-over-year, but showing sequential improvement [31] - International comparable sales were up 2% year-over-year in Q4, with strong performance in key markets like the Middle East [34] Market Data and Key Metrics Changes - Domestic average unit sales in North America were approximately $1.1 million in 2024, with the company opening more than 300 new restaurants globally [23] - The company opened nearly 200 new restaurants internationally in 2024 and anticipates similar growth in 2025 [25] Company Strategy and Development Direction - The company is focusing on franchisee profitability and operational excellence, with strategic priorities including product innovation, marketing amplification, and enhancing customer experience [10][11] - Plans for 2025 include investing up to an additional $25 million in marketing, focusing on both corporate and franchisee markets [17][81] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strategy to accelerate sales and drive long-term growth, despite a challenging operating environment [41] - For 2025, the company expects system-wide sales to increase between 2% and 5%, with North America comparable sales anticipated to be flat to up 2% [42] Other Important Information - The company plans to report adjusted EBITDA as a key performance measure starting in 2025, with an anticipated range of $200 million to $220 million [44] - The company refranchised 15 restaurants in Wisconsin and is in discussions to refranchise additional locations, which is expected to be neutral to slightly accretive to earnings [26] Q&A Session Summary Question: Industry expectations for 2025 and performance relative to the industry - Management acknowledged a value-focused environment and expects the pizza category to be flattish to slightly down, but believes initiatives in loyalty and marketing will help gain market share [56][58] Question: International growth and market penetration - Management highlighted a focus on nine core international markets, indicating significant growth potential and ongoing success in regions like the U.K. and the Middle East [66][70] Question: EBITDA guidance and investment breakdown - Management detailed that the EBITDA guidance includes up to $25 million in marketing investments, with a focus on both corporate and franchisee markets [76][81] Question: Development incentives and loyalty program performance - Management confirmed the three-year abatement for development incentives and noted significant growth in loyalty program membership and engagement [120][123]

Core Insights - Papa John's reported quarterly earnings of $0.63 per share, exceeding the Zacks Consensus Estimate of $0.48 per share, but down from $0.91 per share a year ago, representing an earnings surprise of 31.25% [1] - The company achieved revenues of $530.77 million for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 3.46%, although this is a decline from $571.32 million in the same quarter last year [2] - The stock has increased approximately 12.6% since the beginning of the year, outperforming the S&P 500's gain of 1.3% [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.62 on revenues of $511.98 million, and for the current fiscal year, it is $2.39 on revenues of $2.07 billion [7] - The estimate revisions trend for Papa John's is mixed, resulting in a Zacks Rank 3 (Hold), indicating expected performance in line with the market in the near future [6] Industry Context - The Retail - Restaurants industry, to which Papa John's belongs, is currently in the top 25% of over 250 Zacks industries, suggesting a favorable outlook compared to the bottom 50% [8] - Darden Restaurants, a peer in the same industry, is expected to report quarterly earnings of $2.82 per share, reflecting a year-over-year increase of 7.6%, with revenues projected at $3.22 billion, up 8.2% from the previous year [9][10]

Papa John’s International (PZZA) Q4 2024 Earnings Call February 27, 2025 08:00 AM ET Company Participants Stacy Frole - VP, IRTodd Penegor - President & CEORavi Thanawala - CFOLauren Silberman - DirectorPeter Saleh - MD - Restaurants Conference Call Participants Jim Salera - Research AnalystSara Senatore - Senior Research AnalystBrian Bittner - Senior Equity Analyst - RestaurantsBrian Mullan - Director & Senior Research AnalystEric Gonzalez - Senior Research Analyst - US RestaurantsTodd Brooks - Equity Rese ...

Restaurant Operations - As of December 29, 2024, Papa John's operates 6,030 restaurants globally, with 3,514 in North America and 2,516 internationally, reflecting a net unit growth of 124 restaurants[26] - The company opened 310 new restaurants in 2024, with 198 of those being international locations, while 186 restaurants were closed[26] - The domestic company-owned restaurant growth strategy focuses on increasing market share and operational efficiencies through the opening of new locations[27] Franchise Operations - Franchise agreements in North America typically require a 5% royalty fee on sales, with most existing agreements having a 10-year term and a 10-year renewal option[30][31] - As of December 29, 2024, net loans outstanding to franchisees totaled $13.8 million, primarily for restaurant purchases and construction[35] Workforce and Employment - The company employs approximately 11,400 individuals, with around 8,800 working in company-owned restaurants, and estimates a total of 104,000 individuals in the Papa John's system including franchisees[40][41] - The company is committed to providing competitive pay and benefits, including a comprehensive benefits package and wellness services for team members[48][49] Marketing and Customer Engagement - The marketing strategy includes national advertising and a significant increase in digital marketing efforts, responding to rising customer engagement with online platforms[36] - The company expects to see more states in the U.S. enact data privacy laws that could affect marketing strategies[56] Supply Chain and Food Costs - Papa John's supply chain includes 11 QC Centers in the U.S. that produce dough and distribute key ingredients, ensuring consistent food quality across locations[53] - The company is actively managing food costs, especially cheese, through pricing agreements and forward purchase contracts[275] Industry Challenges - The U.S. Quick Service Restaurant pizza industry is highly competitive, with challenges from both large national chains and local independent operators, while international markets present growth opportunities[51][52] - The company has experienced inflationary pressures, particularly in food items, labor, and energy costs, which directly affect profitability and gross margins[275] - The company is facing challenges related to labor shortages and increased labor costs, which may impact restaurant operations[277] Regulatory and Compliance - The company is subject to various federal and state regulations regarding franchising, which may impact its operations and franchisee relationships[55] - The company anticipates no material environmental compliance-related capital expenditures for 2024 and 2025[60] Risk Management - The company is exposed to risks from geopolitical conflicts, which could impact its global operations[277] - The company has not guaranteed future performance in its forward-looking statements, which involve various risks and uncertainties[276] Intellectual Property - The company has a focus on protecting its intellectual property through trademarks and copyrights, and actively opposes any infringement[58] Investor Relations - The company utilizes its investor relations website as a primary channel for disclosing key information to investors[62]

Sales Performance - Global system-wide sales for Q4 2024 were approximately $1.2 billion, an 8% decrease from the prior year due to an additional week of operations in fiscal 2023[4] - North America comparable sales decreased by 4% in Q4 2024, with transactions and ticket down 2% each[4] - International comparable sales increased by 2% in Q4 2024 compared to the prior year[4] - For the full year 2024, global system-wide sales were approximately $4.9 billion, a 3% decrease from fiscal year 2023[8] - North America comparable sales for the full year 2024 were down 4%, with transactions down 3% and ticket down 1%[8] Restaurant Openings - Total net new restaurants opened in Q4 2024 reached 122, with 60 in North America and 62 internationally[4] - Total net new restaurants for fiscal year 2024 was 124, with 81 in North America and 43 internationally[8] - The company opened its 6,000th restaurant in fiscal year 2024, marking a significant growth milestone[2] Future Plans - The company plans to continue working with existing franchisees and welcoming new ones to expand in high-potential markets globally[2] - Final financial results for Q4 and fiscal year 2024 are expected to be released on February 27, 2025[6]

Core Insights - Papa Johns Canada has raised $73,411 through the sales of its Shaq-a-Roni pizza, which will provide over 222,000 meals to individuals facing food insecurity in Canada [1][3] - The Shaq-a-Roni campaign, running from October 21 to December 29, 2024, donates one dollar for each pizza sold, with each dollar funding three nutritious meals [2][3] - Since the launch of the Shaq-a-Roni partnership five years ago, Papa Johns has contributed more than $270,000 to communities across Canada [3] Company Overview - Papa John's International, Inc. is the world's third-largest pizza delivery company, operating over 5,900 restaurants in 50 countries and territories [4] - The company emphasizes high-quality ingredients, using fresh, never-frozen dough made from six ingredients, and real cheese made from mozzarella [4] - Papa John's was the first national pizza delivery chain to remove artificial flavors and synthetic colors from its entire food menu [4]

Core Viewpoint - Analysts forecast a significant decline in Papa John's quarterly earnings and revenues, indicating potential challenges for the company in the upcoming financial report [1]. Financial Performance Estimates - Expected earnings per share (EPS) for the upcoming quarter is $0.48, reflecting a year-over-year decline of 47.3% [1]. - Anticipated revenues are projected at $513 million, which represents a decline of 10.2% compared to the same quarter last year [1]. - Over the last 30 days, the consensus EPS estimate has been revised downward by 0.8% [2]. Revenue Breakdown - North America franchise royalties and fees are estimated to be $34.65 million, down 10.5% year-over-year [5]. - International revenues are projected at $34.25 million, indicating a significant decline of 28.9% year-over-year [5]. - Other revenues are expected to reach $59.87 million, reflecting a decrease of 4.9% from the prior year [6]. - North America commissary revenues are forecasted at $211.15 million, down 7.4% year-over-year [6]. Comparable Sales and Restaurant Metrics - Comparable sales growth for system-wide North America restaurants is estimated at -3.6%, a stark contrast to the previous year's growth of 11.2% [7]. - The number of system-wide restaurants is expected to reach 6,004, up from 5,906 in the same quarter last year [7]. - The number of franchised North America restaurants is projected at 2,967, compared to 2,902 a year ago [7]. - Total North America restaurants are estimated to be 3,496, slightly up from 3,433 year-over-year [8]. - International franchised restaurants are expected to reach 2,493, an increase from 2,356 in the same quarter last year [8]. - The number of international restaurants is projected at 2,501, compared to 2,473 in the same quarter last year [9]. Stock Performance - Papa John's shares have increased by 23.6% over the past month, contrasting with a -1.8% change in the Zacks S&P 500 composite [10]. - The company holds a Zacks Rank of 3 (Hold), suggesting it is expected to closely follow the overall market in the near term [10].

Core Points - Papa Johns Canada donated $73,411 to Second Harvest, aimed at combating food insecurity, with funds raised through the sale of the Shaq-a-Roni pizza [1][3] - The donation will provide over 222,000 meals to Canadians, highlighting the impact of the Shaq-a-Roni campaign [3] Company Overview - Papa John's International, Inc. was founded in 1984, focusing on high-quality ingredients for superior pizza [4] - The company operates more than 5,900 restaurants across 50 countries and territories, making it the world's third-largest pizza delivery company [4] - Papa John's has a commitment to removing artificial flavors and synthetic colors from its entire food menu [4]

Core Points - Papa Johns Canada has made a donation of $73,411 to Second Harvest, which will provide over 222,000 meals to Canadians in need, raised through the sales of the Shaq-a-Roni pizza [1][3] - The Shaq-a-Roni campaign has been running for five years, contributing over $270,000 to communities across Canada [3] - The cheque presentation event is scheduled for February 25, 2025, at Papa Johns in Scarborough, Ontario [2] Company Overview - Papa John's International, Inc. is the world's third-largest pizza delivery company, with over 5,900 restaurants in 50 countries and territories [4] - The company emphasizes high-quality ingredients, using fresh dough and real cheese, and has removed artificial flavors and synthetic colors from its menu [4] - Papa Johns Canada operates more than 200 locally owned and operated stores, focusing on community engagement and support [2]