Papa John's International, Inc. (NASDAQ:PZZA) Q1 2024 Earnings Conference Call May 9, 2024 8:00 AM ET Company Participants Stacy Frole - VP, IR Ravi Thanawala - Interim Chief Executive Officer & CFO Rob Lynch - President & CEO Conference Call Participants Jim Salera - Stephens Inc. Eric Gonzalez - KeyBanc Sara Senatore - Bank of America Brian Mullan - Piper Sandler Brian Bittner - Oppenheimer\ Lauren Silverman - Deutsche Bank Andrew Strelzik - BMO Capital Markets Alexander Slagle - Jefferies Dennis Geiger - ...

For the quarter ended March 2024, Papa John's (PZZA) reported revenue of $513.92 million, down 2.5% over the same period last year. EPS came in at $0.67, compared to $0.68 in the year-ago quarter.The reported revenue represents a surprise of -5.52% over the Zacks Consensus Estimate of $543.94 million. With the consensus EPS estimate being $0.58, the EPS surprise was +15.52%.While investors closely watch year-over-year changes in headline numbers -- revenue and earnings -- and how they compare to Wall Street ...

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for Papa John's International, Inc. as of March 31, 2024, and for the three months then ended, covering Balance Sheets, Statements of Operations, and Cash Flows, along with detailed notes [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheet Highlights (Unaudited, in thousands) | (In thousands) | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $27,768 | $40,587 | | Total current assets | $225,927 | $231,018 | | Total assets | $847,167 | $875,005 | | **Liabilities & Stockholders' Deficit** | | | | Total current liabilities | $282,634 | $304,596 | | Long-term debt, less current portion, net | $761,317 | $757,422 | | Total liabilities | $1,292,649 | $1,317,770 | | Total stockholders' deficit | ($446,423) | ($443,616) | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q1 2024 vs. Q1 2023 Statement of Operations (Unaudited, in thousands) | (In thousands, except per share amounts) | Three Months Ended Mar 31, 2024 | Three Months Ended Mar 26, 2023 | | :--- | :--- | :--- | | Total revenues | $513,916 | $527,049 | | Operating income | $33,718 | $37,796 | | Net income attributable to the Company | $14,636 | $22,376 | | Diluted earnings per common share | $0.44 | $0.65 | | Dividends declared per common share | $0.46 | $0.42 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Q1 2024 vs. Q1 2023 Cash Flow Summary (Unaudited, in thousands) | (In thousands) | Three Months Ended Mar 31, 2024 | Three Months Ended Mar 26, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $11,987 | $40,788 | | Net cash used in investing activities | ($10,152) | ($18,275) | | Net cash used in financing activities | ($14,602) | ($23,212) | | Change in cash and cash equivalents | ($12,819) | ($665) | | Cash and cash equivalents at end of period | $27,768 | $46,708 | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) - The company is executing an International Transformation Plan, which includes closing 43 underperforming Company-owned restaurants in the UK, resulting in restructuring costs of **$9.5 million** in Q1 2024, primarily from asset impairment charges[66](index=66&type=chunk)[68](index=68&type=chunk) - Total estimated pre-tax costs for the International Transformation Plan are approximately **$25 million to $35 million**, with **$11.7 million** incurred through Q1 2024, and the remainder expected through 2024 and 2025[69](index=69&type=chunk) - Total debt outstanding was **$769.3 million** as of March 31, 2024, consisting of **$400.0 million** in senior notes and **$369.3 million** under revolving facilities, with the company in compliance with all debt covenants[58](index=58&type=chunk)[137](index=137&type=chunk) - In 2023, the company acquired 118 previously franchised restaurants in the UK for a total consideration of approximately **$15.2 million**, which resulted in the recognition of **$4.3 million** in goodwill[79](index=79&type=chunk)[81](index=81&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2024 financial results, highlighting a **2.5% decrease in total revenues to $513.9 million**, covering segment performance, strategic initiatives, profitability, liquidity, and capital resources - The company is focused on its "Back to BETTER 2.0" initiative, aiming to enhance marketing, accelerate North America development, and evolve the Domestic Commissary business for franchisee cost savings[88](index=88&type=chunk) - The International Transformation Plan involves establishing regional hubs and optimizing the UK market, including closing **43 underperforming company-owned stores**, which is expected to improve long-term profitability[91](index=91&type=chunk)[95](index=95&type=chunk) Q1 2024 vs Q1 2023 Key Performance Metrics | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Total Revenues | $513.9M | $527.0M | | Operating Income | $33.7M | $37.8M | | Adjusted Operating Income (Non-GAAP) | $43.2M | $39.2M | | Diluted EPS | $0.44 | $0.65 | | Adjusted Diluted EPS (Non-GAAP) | $0.67 | $0.68 | Q1 2024 Comparable Sales Growth (Constant Dollar) | Segment | Comparable Sales Growth | | :--- | :--- | | Domestic Company-owned restaurants | (3.0)% | | North America franchised restaurants | (1.5)% | | North America restaurants | (1.8)% | | International restaurants | (2.6)% | [Results of Operations](index=27&type=section&id=Results%20of%20Operations) - Total revenues decreased by **$13.1 million (2.5%)** in Q1 2024, primarily due to lower North America commissary revenues, a decline in Domestic Company-owned restaurant sales, and lower marketing fund revenues[99](index=99&type=chunk) - International revenues increased by **$9.2 million (29.4%)**, mainly due to the acquisition of 118 UK franchisee restaurants in 2023, though excluding this impact, international revenues would have decreased slightly[98](index=98&type=chunk)[104](index=104&type=chunk) - Operating income decreased by **$4.1 million to $33.7 million**, while adjusted operating income (non-GAAP) increased by **$4.1 million to $43.2 million**, driven by improved profitability in Domestic Company-owned restaurants and North America commissaries[117](index=117&type=chunk) - General and Administrative (G&A) expenses increased by **$6.6 million**, largely due to **$9.5 million** in costs related to the International Transformation Plan[113](index=113&type=chunk) - The effective tax rate rose to **34.2%** in Q1 2024 from **21.6%** in Q1 2023, driven by non-deductible impairment charges from the international restructuring and a tax shortfall from stock-based compensation[122](index=122&type=chunk) [Liquidity and Capital Resources](index=32&type=section&id=Liquidity%20and%20Capital%20Resources) - Cash from operating activities decreased significantly to **$12.0 million** in Q1 2024 from **$40.8 million** in Q1 2023, mainly due to unfavorable working capital changes related to the timing of payments[129](index=129&type=chunk)[130](index=130&type=chunk) - The company had a negative free cash flow of **($1.1) million** in Q1 2024, compared to a positive free cash flow of **$22.4 million** in Q1 2023[145](index=145&type=chunk) - No shares were repurchased in Q1 2024, while in Q1 2023, the company repurchased **2.5 million shares** for **$209.6 million**, with approximately **$90.2 million** remaining available under the current share repurchase program[52](index=52&type=chunk)[142](index=142&type=chunk) - A quarterly dividend of **$0.46 per share** was paid in Q1 2024, totaling **$15.1 million**, and the Board declared a second-quarter dividend of **$0.46 per share** to be paid in May 2024[54](index=54&type=chunk)[143](index=143&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=36&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks including interest rate fluctuations on variable-rate debt, foreign currency exchange rate risk from international operations, and commodity price volatility for key ingredients like cheese - The company is exposed to interest rate changes on its revolving credit facilities and uses interest rate swaps to mitigate this risk[151](index=151&type=chunk) - Foreign currency fluctuations had a favorable impact of **$1.0 million** on international revenues but an unfavorable impact of **$0.9 million** on operating income in Q1 2024[153](index=153&type=chunk) - The company faces commodity price volatility for food and paper products, with cheese being the largest ingredient cost, using some forward pricing agreements but remaining exposed to market fluctuations[154](index=154&type=chunk) [Controls and Procedures](index=36&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the Interim CEO and CFO, concluded the company's disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal control over financial reporting during the quarter - The Interim CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[155](index=155&type=chunk) - No changes were made in the Company's internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, these controls[156](index=156&type=chunk) [PART II. OTHER INFORMATION](index=37&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=37&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various ordinary course legal proceedings, including a **$5.0 million** settlement in principle for the 'In re Papa John's Employee & Franchise Employee Antitrust Litigation' as detailed in Note 10 - The company is involved in ordinary course lawsuits and has made accruals where appropriate, with specific details incorporated by reference from Note 10 of the financial statements[157](index=157&type=chunk)[71](index=71&type=chunk) [Risk Factors](index=37&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors were reported from those previously disclosed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2023 - No material changes to risk factors from the Annual Report on Form 10-K for the fiscal year ended December 31, 2023[158](index=158&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=37&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details share repurchase activity, noting no shares were repurchased under the publicly announced program in Q1 2024, though approximately **45,000 shares** were acquired from employees for tax withholding Share Repurchase Activity Q1 2024 | Fiscal Period | Total Number of Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | 1/01/2024 - 3/31/2024 | — | $ — | - The company acquired approximately **45,000 shares** from employees to satisfy minimum tax withholding obligations on vested restricted stock[161](index=161&type=chunk) [Other Information](index=38&type=section&id=Item%205.%20Other%20Information) No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the first quarter of 2024 - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter[162](index=162&type=chunk) [Exhibits](index=38&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including CEO/CFO certifications and financial statements formatted in iXBRL - Lists required exhibits, including Sarbanes-Oxley certifications and iXBRL data files[163](index=163&type=chunk)

Exhibit 99.1 PAPA JOHNS ANNOUNCES FIRST QUARTER 2024 FINANCIAL RESULTS Louisville, Kentucky (May 9, 2024) – Papa John's International, Inc. (Nasdaq: PZZA) ("Papa Johns ") (the "Company") today announced financial results for the first quarter ended March 31, 2024. ® Highlights "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 ...

Papa John's International, Inc. (PZZA) is scheduled to report first-quarter 2024 results on May 9 before the opening bell. In the last reported quarter, its earnings beat the Zacks Consensus Estimate by 24.7%.Q1 EstimatesThe Zacks Consensus Estimate for earnings is pegged at 58 cents per share, suggesting a decline of 14.7% from the prior-year quarter. Over the past 30 days, the consensus estimate for earnings has witnessed downward revisions of 1.7%. The consensus mark for revenues is pegged at $543.9 mill ...

Wall Street analysts forecast that Papa John's (PZZA) will report quarterly earnings of $0.58 per share in its upcoming release, pointing to a year-over-year decline of 14.7%. It is anticipated that revenues will amount to $543.94 million, exhibiting an increase of 3.2% compared to the year-ago quarter.The consensus EPS estimate for the quarter has been revised 1.4% lower over the last 30 days to the current level. This reflects how the analysts covering the stock have collectively reevaluated their initial ...

Papa John’s International, Inc. (PZZA) strengthens its partnership with franchisee Nadeem Bajwa and his company, The Bajco Group. The collaboration aims to expand PZZA's presence in North America, with plans to open 50 new stores by 2028. The Bajco Group, a long-term franchisee, has been integral to PZZA's growth, making this expansion a strategic move for the company.The new agreement will expand Papa John’s footprint in The Bajco Group’s existing markets across the Midwest and Arizona, Pennsylvania and Fl ...

EDMONTON, Alberta, April 02, 2024 (GLOBE NEWSWIRE) -- Papa Johns announced today the limited-time release of its brand-new Crispy Cuppy ‘Roni menu platform. This launch gives consumers three craveable ways to enjoy the premium, new cupping pepperonis from Papa Johns. "We're always looking for fresh ways to show up for pizza lovers and what better way to honour their pizza devotion than a lineup of cupping pepperoni menu items like no other," says Kimberly Bean, Senior Vice President of Menu Strategy and Pro ...

Key TakeawaysShake Shack has replaced its chief executive with the CEO of Papa John's International.Rob Lynch will leave Papa John's and take over for Randy Garutti, who has led Shake Shack for a dozen years.Papa John's named CFO Ravi Thanawala as interim CEO as it searches for a replacement.Papa John's shares fell more than 5% Thursday afternoon following the announcement. Shares of Papa John’s International (PZZA) dipped more than 5% in intraday trading Thursday after Shake Shack Inc. (SHAK) announced the ...

Key PointsPapa John's had a solid quarter but fell short of top-line estimates, sparking volatility in the stock price. The company returned to growth and widened margin, driving solid cash flow and capital return. Sell-side activity is mixed but puts a floor in the market, setting the stock up to rally over the long term. 5 stocks we like better than Papa John's InternationalPapa John’s International NASDAQ: PZZA share price has suffered for the last two years as competition and shifting consumer trends cu ...