Papa John’s(US:PZZA)2025-11-06 12:02Restaurant Operations - As of September 28, 2025, Papa John's operates 5,994 restaurants, including 558 company-owned and 5,436 franchised locations across 51 countries[110]. - The company opened 45 new restaurants in Q3 2025, with 18 in North America and 27 in international markets[115]. Financial Performance - In Q3 2025, total revenues increased by $1.3 million, or 0.3%, to $508.2 million, while revenues for the nine months ended September 28, 2025, rose by $27.0 million, or 1.8%, to $1.56 billion compared to the prior year[125]. - Total comparable sales growth for the company was reported at (0.2)% for Q3 2025, with a total global system-wide restaurant sales growth of 1.8%[121]. - Company-owned restaurant sales decreased by $2.7 million, or 1.6%, for the three months ended September 28, 2025, and decreased by $25.7 million, or 4.7%, for the nine months ended September 28, 2025, compared to the prior year[126]. - Operating income decreased by $49.1 million for the three months ended September 28, 2025, compared to $65.2 million for the same period in 2024[150]. - Net income attributable to the company was $4.7 million for the three months ended September 28, 2025, a decrease of $37.1 million compared to the prior year[150]. - Diluted earnings per common share were $0.13 for the three months ended September 28, 2025, down from $1.27 in the prior year, representing a decrease of $1.14[155]. - Adjusted EBITDA for the three months ended September 28, 2025, was $47.8 million, compared to $49.9 million for the same period in 2024[158]. Sales and Royalties - Comparable sales for Domestic Company-owned restaurants declined by 3.1% in Q3 2025, while International restaurants saw an increase of 7.1% during the same period[121]. - Franchise royalties and fees increased by 2.7% to $47.1 million in Q3 2025 compared to the same period in 2024[124]. - Franchise royalties and fees increased by $1.2 million, or 2.7%, for the three months and by $3.9 million, or 2.8%, for the nine months ended September 28, 2025, driven by International franchisee growth of 7.1% and 4.7% in comparable sales[128]. - North America franchise restaurant sales decreased to $714.6 million, or 0.8%, for the three months ended September 28, 2025, but increased to $2.23 billion, or 1.1%, for the nine months[129]. - International franchise restaurant sales increased to $328.3 million, or 10.1%, for the three months and to $950.4 million, or 10.0%, for the nine months ended September 28, 2025, excluding foreign currency fluctuations[130]. Costs and Expenses - Total costs and expenses were approximately $492.0 million, or 96.8% of total revenues, for the three months ended September 28, 2025, compared to $441.6 million, or 87.1% of total revenues, in the prior year[134]. - General and administrative expenses increased to $56.5 million, or 11.1% of revenues, for the three months ended September 28, 2025, compared to $12.9 million, or 2.5% of revenues, in the prior year[140]. - Depreciation and amortization expenses were $24.9 million, or 4.9% of total revenues, for the three months ended September 28, 2025, reflecting an increase due to accelerated depreciation of legacy technology assets[141]. - Other revenues, primarily from online and mobile ordering, increased by $1.9 million, or 9.7%, for the three months ended September 28, 2025, driven by higher technology service revenues[132]. - Advertising funds revenue increased by $0.3 million, or 0.7%, for the three months ended September 28, 2025, supported by global system-wide restaurant sales growth of 1.8%[133]. - Advertising funds expenses were $41.5 million or 99.5% of advertising revenues for the three months ended September 28, 2025, compared to $41.4 million or 100.0% for the prior year[144]. Cash Flow and Debt - Total cash provided by operating activities increased to $106.2 million for the nine months ended September 28, 2025, compared to $55.9 million for the same period in 2024, reflecting a $50.3 million increase[165]. - Total cash used in investing activities was $37.6 million for the nine months ended September 28, 2025, compared to cash provided of $7.4 million for the same period in 2024, primarily due to $52.1 million in capital expenditures[166]. - Free cash flow for the nine months ended September 28, 2025, was $59.2 million, significantly up from $8.9 million for the same period in 2024[183]. - Outstanding debt as of September 28, 2025, was $736.7 million, consisting of $400.0 million in senior notes, $200.0 million in Term Loan borrowings, and $136.7 million under the PJI Revolving Facility[172]. - The Company paid cash dividends totaling $45.8 million ($1.38 per share) for the nine months ended September 28, 2025, compared to $45.4 million ($1.38 per share) for the same period in 2024[180]. - The Second Amended and Restated Credit Agreement provides for a senior secured term loan of $200.0 million and a revolving credit facility of $600.0 million[162]. Future Outlook and Challenges - The company expects to achieve at least $50 million in supply chain savings starting in 2026 through productivity initiatives in its North American supply chain[115]. - The company anticipates completing the rollout of a new omnichannel platform by the end of 2026, with an estimated additional depreciation expense of $17 million to $22 million during this period[114]. - The International Transformation Plan is expected to incur total pre-tax costs of approximately $35 million, with $34.3 million already recognized through Q3 2025[116]. - The company has experienced price increases in food items, labor, and energy costs due to inflationary pressures, impacting profitability directly and indirectly[185]. - The company is managing food costs, particularly cheese, through pricing agreements and forward purchase contracts[185]. - The company does not anticipate significant negative impacts from proposed tariffs, as a substantial portion of ingredients is sourced domestically[185]. - The company faces risks related to labor shortages and increased operating costs, which may affect restaurant openings both domestically and internationally[186]. - Forward-looking statements include projections on revenue, earnings, cash flow, and adjusted EBITDA, but actual outcomes may differ due to various risks and uncertainties[186]. - The company is focused on managing macroeconomic challenges and retaining key management amidst staffing shortages[186]. - Expense control measures are being deployed to offset higher costs when possible[185]. - The company is assessing the impact of tariffs on discretionary spending patterns and franchisee profitability[185]. - The company has outlined potential risks in its Annual Report on Form 10-K for the fiscal year ended December 29, 2024[187]. - The company undertakes no obligation to update forward-looking statements except as required by law[187].