Papa John’s Announces Third Quarter 2021 Financial Results and Additional $425 Million Share Repurchase Program
Third quarter 2021 highlights compared to prior year
- Total company revenues increased 8.4% to
$512.8 million - Comparable sales up 6.9% in
North America and 8.3% Internationally; Global system-wide restaurant sales of$1.2 billion , up 11.2% driven by continued benefit from innovation strategies and accelerating unit growth - 46 net unit openings driven by strong International openings
- Earnings per diluted share of
$0.79 ; Adjusted earnings per diluted share grew to$0.83 from$0.35 a year ago - For first nine months of 2021, cash flow from operations of
$193.6 million , up from$168.5 million a year ago; free cash flow of$145.9 million up from$134.0 million - New
$425 million share repurchase program authorized
“With hard work, dedication and the support of our customers, Papa John’s team members and franchisees delivered another quarter of industry outperformance in Q3, as system-wide sales grew 11.2% and adjusted EPS more than doubled. Comparable sales in
Financial Highlights
Three Months Ended | Nine Months Ended | |||||||||||||||||||
In thousands, except per share amounts | 2021 |
2020 |
Increase | 2021 |
2020 |
Increase (Decrease) |
||||||||||||||
Revenue |
$ |
512,782 |
$ |
472,941 |
$ |
39,841 |
$ |
1,539,536 |
|
$ |
1,343,423 |
$ |
196,113 |
|
||||||
Operating income |
|
38,577 |
|
24,549 |
|
14,028 |
|
130,076 |
|
|
70,555 |
|
59,521 |
|
||||||
Net income |
|
29,256 |
|
15,708 |
|
13,548 |
|
95,393 |
|
|
44,765 |
|
50,628 |
|
||||||
Diluted earnings (loss) per share |
|
0.79 |
|
0.35 |
|
0.44 |
|
(0.59 |
) |
|
0.99 |
|
(1.58 |
) |
||||||
Adjusted diluted earnings per share (a) |
|
0.83 |
|
0.35 |
|
0.48 |
|
2.76 |
|
|
0.99 |
|
1.77 |
|
(a) |
Adjusted diluted earnings per share is a non-GAAP measure that excludes “Special items,” which impact comparability. Special items include strategic corporate reorganization costs associated with the company’s new office in |
Revenues
Consolidated revenues of
Operating Results
Consolidated operating income of
The effective income tax rate was 11.7% for the third quarter of 2021 representing a decrease of 9.9% from the prior year period. The decrease in the effective rate was primarily due to the finalization of our 2020 federal income tax return, which resulted in a
Global Restaurant Sales Information
Global restaurant and comparable sales information for the three and nine months ended
Three Months Ended | Nine Months Ended | |||||||
2021 |
2020 |
2021 |
2020 |
|||||
Comparable sales growth: | ||||||||
Domestic company-owned restaurants |
7.4% |
18.2% |
11.6% |
15.6% |
||||
6.8% |
25.6% |
12.3% |
20.0% |
|||||
6.9% |
23.8% |
12.1% |
19.0% |
|||||
International restaurants |
8.3% |
20.7% |
17.1% |
9.4% |
||||
Total comparable sales growth |
7.3% |
23.0% |
13.4% |
16.5% |
||||
System-wide restaurant sales growth: | ||||||||
(excluding the impact of foreign currency) | ||||||||
Domestic company-owned restaurants |
7.3% |
8.3% |
11.1% |
7.3% |
||||
8.0% |
26.2% |
13.1% |
20.4% |
|||||
7.9% |
21.8% |
12.7% |
17.3% |
|||||
International restaurants |
21.4% |
22.9% |
28.2% |
12.2% |
||||
Total global system-wide restaurant sales growth |
11.2% |
22.1% |
16.2% |
16.0% |
Global Restaurant Unit Data
As of
Domestic Company- owned |
Franchised North America |
Total North America |
International | System-wide | |||||||
Third Quarter | |||||||||||
Beginning - |
589 |
|
2,720 |
|
3,309 |
|
2,214 |
|
5,523 |
|
|
Opened |
2 |
|
21 |
|
23 |
|
71 |
|
94 |
|
|
Closed |
- |
|
(9 |
) |
(9 |
) |
(39 |
) |
(48 |
) |
|
Ending - |
591 |
|
2,732 |
|
3,323 |
|
2,246 |
|
5,569 |
|
|
Net unit growth |
2 |
|
12 |
|
14 |
|
32 |
|
46 |
|
|
Trailing four quarters net store growth/(decline) |
(6 |
) |
43 |
|
37 |
|
172 |
|
209 |
|
Free Cash Flow
The company’s free cash flow (a non-GAAP financial measure defined as net cash provided by operating activities, less purchases of property and equipment and dividends paid to preferred shareholders) was as follows (in thousands):
Nine Months Ended |
||||||||
|
|
|
||||||
2021 |
|
2020 |
||||||
Net cash provided by operating activities |
$ |
193,624 |
|
$ |
168,547 |
|
||
Purchases of property and equipment |
|
(41,328 |
) |
|
(24,269 |
) |
||
Dividends paid to preferred shareholders (1) |
|
(6,394 |
) |
|
(10,237 |
) |
||
Free cash flow |
$ |
145,902 |
|
$ |
134,041 |
|
(1) |
Excludes cash consideration of |
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.
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
Senior Notes Offering and Refinancing of Revolving Credit Facility
On
Cash Dividend
The company paid cash dividends of
New
Subsequent to the end of the third quarter, on
The timing and volume of share repurchases under the new share repurchase program may be executed at the discretion of management on an opportunistic basis, subject to market and business conditions, regulatory requirements and other factors, or pursuant to trading plans or other arrangements. Repurchases under the new program may be made through open market, block, and privately negotiated transactions, including Rule 10b5-1 plans, at times and in such amounts as management deems appropriate. Repurchases under the company’s share repurchase program may be commenced or suspended from time to time at the company’s discretion without prior notice.
Conference Call
A conference call is scheduled for
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,” “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 financial impact of the temporary business opportunities, disruptions and temporary changes in demand we are experiencing related to the current outbreak of the novel coronavirus disease (COVID-19), commodity costs, currency fluctuations, profit margins, unit growth, unit level performance, capital expenditures, restaurant and franchise development, the duration of changes in consumer behavior caused by the pandemic, reorganization costs and the related organizational, employment and real estate changes from opening our new office in
Our forward-looking statements are based on our assumptions which are based on currently available information, including assumptions about our ability to manage difficulties and opportunities associated with or related to the COVID-19 pandemic, including risks related to: the impact of governmental restrictions on freedom of movement and business operations including quarantines, social distancing requirements and mandatory business closures; changes in consumer demand or behavior; labor shortages at company and/or franchised stores; impact of delayed new store openings, both domestically and internationally; our ability to navigate changing governmental programs and regulations relating to the pandemic; the increased risk of phishing, ransomware and other cyber-attacks; and our ability to successfully implement or fully realize the anticipated benefits of our corporate reorganization and new office in
For more information about the company, please visit www.papajohns.com.
Supplemental Information and Financial Statements
Definition
“Comparable sales” represents the change in year-over-year sales for the same base of restaurants for the same fiscal periods. “Global system-wide restaurant sales” represents total restaurant sales for all company-owned and franchised stores open during the comparable periods, and “Global system-wide restaurant sales growth” represents the change in such sales year-over-year. We believe
Reconciliation of Non-GAAP Financial Measures
The table below reconciles our GAAP financial results to our adjusted financial results, which are non-GAAP measures. The non-GAAP adjusted results shown below and within this press release, which exclude the items in the table below (collectively defined as “Special items”), should not be construed as a substitute for or a better indicator of the company’s performance than the company’s GAAP results. Management believes presenting certain financial information excluding the Special items is important for purposes of comparison to current year results. In addition, management uses these metrics to evaluate the company’s underlying operating performance and to analyze trends.
Three Months Ended |
|
Nine Months Ended |
||||||||||||
|
|
|
|
|
|
|
||||||||
(In thousands, except per share amounts) |
2021 |
|
2020 |
|
2021 |
|
2020 |
|||||||
GAAP operating income |
$ |
38,577 |
|
$ |
24,549 |
$ |
130,076 |
|
$ |
70,555 |
||||
Strategic corporate reorganization costs (1) |
|
2,153 |
|
|
- |
|
9,364 |
|
|
- |
||||
Adjusted operating income |
$ |
40,730 |
|
$ |
24,549 |
$ |
139,440 |
|
$ |
70,555 |
||||
GAAP net income/(loss) attributable to common shareholders |
$ |
28,961 |
|
$ |
11,457 |
$ |
(20,423 |
) |
$ |
32,410 |
||||
Strategic corporate reorganization costs (1) |
|
2,153 |
|
|
- |
|
9,364 |
|
|
- |
||||
Repurchase and conversion of Series B Preferred Stock (2) |
|
- |
|
|
- |
|
109,852 |
|
|
- |
||||
Tax effect of strategic corporate reorganization costs (3) |
|
(483 |
) |
|
- |
|
(2,098 |
) |
|
- |
||||
Adjusted net income attributable to common shareholders |
$ |
30,631 |
|
$ |
11,457 |
$ |
96,695 |
|
$ |
32,410 |
||||
GAAP diluted earnings/(loss) per common share |
$ |
0.79 |
|
$ |
0.35 |
$ |
(0.59 |
) |
$ |
0.99 |
||||
Strategic corporate reorganization costs (1) |
|
0.05 |
|
|
- |
|
0.27 |
|
|
- |
||||
Repurchase and conversion of Series B Preferred Stock (2) |
|
- |
|
|
- |
|
3.14 |
|
|
- |
||||
Tax effect of strategic corporate reorganization costs (3) |
|
(0.01 |
) |
|
- |
|
(0.06 |
) |
|
- |
||||
Adjusted diluted earnings per common share |
$ |
0.83 |
|
$ |
0.35 |
$ |
2.76 |
|
$ |
0.99 |
(Note) The above table does not include the impact of allocation of undistributed earnings to participating securities for Special items. |
|
(1) |
Represents strategic corporate reorganization costs associated with our new office in |
(2) |
Represents the one-time charge related to the repurchase and conversion of all shares of Series B Preferred Stock and includes related professional fees incurred as part of the transaction. |
(3) |
The tax effect for strategic corporate reorganization costs was calculated by applying the 2021 marginal tax rate of 22.4%. There was no tax effect on the repurchase and conversion of the Series B Preferred Stock as the one-time charge was non-deductible for tax purposes. |
Condensed Consolidated Balance Sheets | ||||||||
|
|
|
||||||
2021 |
|
2020 |
||||||
(In thousands) | (Unaudited) | (Note) | ||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents |
$ |
105,813 |
|
$ |
130,204 |
|
||
Accounts receivable, net |
|
79,534 |
|
|
90,135 |
|
||
Notes receivable, current portion |
|
13,075 |
|
|
11,318 |
|
||
Income tax receivable |
|
599 |
|
|
1,273 |
|
||
Inventories |
|
33,490 |
|
|
30,265 |
|
||
Prepaid expenses and other current assets |
|
39,249 |
|
|
43,212 |
|
||
Total current assets |
|
271,760 |
|
|
306,407 |
|
||
Property and equipment, net |
|
209,072 |
|
|
200,895 |
|
||
Finance lease right-of-use assets, net |
|
21,917 |
|
|
16,840 |
|
||
Operating lease right-of-use assets |
|
174,119 |
|
|
148,110 |
|
||
Notes receivable, less current portion, net |
|
37,263 |
|
|
36,538 |
|
||
|
80,906 |
|
|
80,791 |
|
|||
Deferred income taxes |
|
13,926 |
|
|
10,800 |
|
||
Other assets |
|
80,991 |
|
|
72,389 |
|
||
Total assets |
$ |
889,954 |
|
$ |
872,770 |
|
||
Liabilities, Series B Convertible Preferred Stock, Redeemable noncontrolling interests and Stockholders' deficit | ||||||||
Current liabilities: | ||||||||
Accounts payable |
$ |
42,384 |
|
$ |
37,370 |
|
||
Income and other taxes payable |
|
26,221 |
|
|
10,263 |
|
||
Accrued expenses and other current liabilities |
|
201,528 |
|
|
174,563 |
|
||
Current deferred revenue |
|
20,617 |
|
|
19,590 |
|
||
Current finance lease liabilities |
|
4,914 |
|
|
3,545 |
|
||
Current operating lease liabilities |
|
22,455 |
|
|
23,538 |
|
||
Current portion of long-term debt |
|
- |
|
|
20,000 |
|
||
Total current liabilities |
|
318,119 |
|
|
288,869 |
|
||
Deferred revenue |
|
12,471 |
|
|
13,664 |
|
||
Long-term finance lease liabilities |
|
17,555 |
|
|
13,531 |
|
||
Long-term operating lease liabilities |
|
157,359 |
|
|
124,666 |
|
||
Long-term debt, less current portion, net |
|
414,915 |
|
|
328,292 |
|
||
Deferred income taxes |
|
178 |
|
|
948 |
|
||
Other long-term liabilities |
|
98,872 |
|
|
111,364 |
|
||
Total liabilities |
|
1,019,469 |
|
|
881,334 |
|
||
Series B Convertible Preferred Stock |
|
— |
|
|
251,901 |
|
||
Redeemable noncontrolling interests |
|
7,531 |
|
|
6,474 |
|
||
Total Stockholders' deficit |
|
(137,046 |
) |
|
(266,939 |
) |
||
Total liabilities, Series B Convertible Preferred Stock, Redeemable noncontrolling interests and Stockholders' deficit |
$ |
889,954 |
|
$ |
872,770 |
|
||
Note: The Condensed Consolidated Balance Sheet at |
Condensed Consolidated Statements of Operations | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
2021 |
2020 |
2021 |
2020 |
|||||||||||||
(In thousands, except per share amounts) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||
Revenues: | ||||||||||||||||
Domestic company-owned restaurant sales |
$ |
191,584 |
|
$ |
178,371 |
|
$ |
584,942 |
|
$ |
526,317 |
|
||||
|
31,933 |
|
|
25,281 |
|
|
97,123 |
|
|
68,895 |
|
|||||
|
189,224 |
|
|
181,338 |
|
|
560,743 |
|
|
504,379 |
|
|||||
International revenues |
|
38,408 |
|
|
33,440 |
|
|
110,629 |
|
|
87,592 |
|
||||
Other revenues |
|
61,633 |
|
|
54,511 |
|
|
186,099 |
|
|
156,240 |
|
||||
Total revenues |
|
512,782 |
|
|
472,941 |
|
|
1,539,536 |
|
|
1,343,423 |
|
||||
Costs and expenses: | ||||||||||||||||
Operating costs (excluding depreciation and amortization shown separately below): | ||||||||||||||||
Domestic company-owned restaurant expenses |
|
155,477 |
|
|
144,803 |
|
|
465,658 |
|
|
419,082 |
|
||||
|
175,399 |
|
|
167,937 |
|
|
518,310 |
|
|
466,676 |
|
|||||
International expenses |
|
21,743 |
|
|
19,370 |
|
|
62,791 |
|
|
52,775 |
|
||||
Other expenses |
|
56,039 |
|
|
50,917 |
|
|
168,092 |
|
|
148,219 |
|
||||
General and administrative expenses |
|
54,070 |
|
|
52,601 |
|
|
157,779 |
|
|
148,680 |
|
||||
Depreciation and amortization |
|
11,477 |
|
|
12,764 |
|
|
36,830 |
|
|
37,436 |
|
||||
Total costs and expenses |
|
474,205 |
|
|
448,392 |
|
|
1,409,460 |
|
|
1,272,868 |
|
||||
Operating income |
|
38,577 |
|
|
24,549 |
|
|
130,076 |
|
|
70,555 |
|
||||
Net interest expense |
|
(3,979 |
) |
|
(3,636 |
) |
|
(11,275 |
) |
|
(11,230 |
) |
||||
Income before income taxes |
|
34,598 |
|
|
20,913 |
|
|
118,801 |
|
|
59,325 |
|
||||
Income tax expense |
|
4,057 |
|
|
4,516 |
|
|
19,387 |
|
|
11,984 |
|
||||
Net income before attribution to noncontrolling interests |
|
30,541 |
|
|
16,397 |
|
|
99,414 |
|
|
47,341 |
|
||||
Net income attributable to noncontrolling interests |
|
(1,285 |
) |
|
(689 |
) |
|
(4,021 |
) |
|
(2,576 |
) |
||||
Net income attributable to the company |
$ |
29,256 |
|
$ |
15,708 |
|
$ |
95,393 |
|
$ |
44,765 |
|
||||
Calculation of net income (loss) for earnings per share: | ||||||||||||||||
Net income attributable to the company |
$ |
29,256 |
|
$ |
15,708 |
|
$ |
95,393 |
|
$ |
44,765 |
|
||||
Dividends on redemption of Series B Convertible Preferred Stock |
|
— |
|
|
— |
|
|
(109,852 |
) |
|
— |
|
||||
Dividends paid to participating securities |
|
(137 |
) |
|
(3,548 |
) |
|
(5,964 |
) |
|
(10,546 |
) |
||||
Net income attributable to participating securities |
|
(158 |
) |
|
(703 |
) |
|
— |
|
|
(1,809 |
) |
||||
Net income (loss) attributable to common shareholders |
$ |
28,961 |
|
$ |
11,457 |
|
$ |
(20,423 |
) |
$ |
32,410 |
|
||||
Basic earnings (loss) per common share |
$ |
0.80 |
|
$ |
0.35 |
|
$ |
(0.59 |
) |
$ |
1.00 |
|
||||
Diluted earnings (loss) per common share |
$ |
0.79 |
|
$ |
0.35 |
|
$ |
(0.59 |
) |
$ |
0.99 |
|
||||
Basic weighted average common shares outstanding |
|
36,387 |
|
|
32,616 |
|
|
34,619 |
|
|
32,347 |
|
||||
Diluted weighted average common shares outstanding |
|
36,719 |
|
|
32,971 |
|
|
34,619 |
|
|
32,643 |
|
||||
Dividends declared per common share |
$ |
0.350 |
|
$ |
0.225 |
|
$ |
0.800 |
|
$ |
0.675 |
|
Condensed Consolidated Statements of Cash Flows | ||||||||
Nine Months Ended | ||||||||
(In thousands) | 2021 |
2020 |
||||||
(Unaudited) | (Unaudited) | |||||||
Operating activities | ||||||||
Net income before attribution to noncontrolling interests |
$ |
99,414 |
|
$ |
47,341 |
|
||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Benefit for allowance for credit losses on accounts and notes receivable |
|
(920 |
) |
|
(334 |
) |
||
Depreciation and amortization |
|
36,830 |
|
|
37,436 |
|
||
Deferred income taxes |
|
(5,113 |
) |
|
(4,696 |
) |
||
Stock-based compensation expense |
|
12,519 |
|
|
13,071 |
|
||
Other |
|
1,052 |
|
|
1,233 |
|
||
Changes in operating assets and liabilities, net of acquisitions: | ||||||||
Accounts receivable |
|
5,955 |
|
|
(4,378 |
) |
||
Income tax receivable |
|
674 |
|
|
3,131 |
|
||
Inventories |
|
(3,217 |
) |
|
(1,173 |
) |
||
Prepaid expenses and other current assets |
|
11,277 |
|
|
14,393 |
|
||
Other assets and liabilities |
|
(8,627 |
) |
|
18,080 |
|
||
Accounts payable |
|
5,014 |
|
|
3,147 |
|
||
Income and other taxes payable |
|
15,958 |
|
|
2,435 |
|
||
Accrued expenses and other current liabilities |
|
24,001 |
|
|
40,112 |
|
||
Deferred revenue |
|
(1,193 |
) |
|
(1,251 |
) |
||
Net cash provided by operating activities |
|
193,624 |
|
|
168,547 |
|
||
Investing activities | ||||||||
Purchases of property and equipment |
|
(41,328 |
) |
|
(24,269 |
) |
||
Notes issued |
|
(14,637 |
) |
|
(13,240 |
) |
||
Repayments of notes issued |
|
15,352 |
|
|
8,906 |
|
||
Acquisitions, net of cash acquired |
|
(699 |
) |
|
— |
|
||
Other |
|
121 |
|
|
15 |
|
||
Net cash used in investing activities |
|
(41,191 |
) |
|
(28,588 |
) |
||
Financing activities | ||||||||
Proceeds from issuance of senior notes |
|
400,000 |
|
|
— |
|
||
Repayment of term loan |
|
(340,000 |
) |
|
(15,000 |
) |
||
Net proceeds (repayments) of revolving credit facilities |
|
15,000 |
|
|
(5,000 |
) |
||
Debt issuance costs |
|
(9,179 |
) |
|
— |
|
||
Proceeds from exercise of stock options |
|
11,211 |
|
|
29,204 |
|
||
Dividends paid to common stockholders |
|
(27,640 |
) |
|
(21,856 |
) |
||
Dividends paid to preferred stockholders |
|
(6,394 |
) |
|
(10,237 |
) |
||
Tax payments for equity award issuances |
|
(5,310 |
) |
|
(1,665 |
) |
||
Repurchase of Series B Convertible Preferred Stock |
|
(188,647 |
) |
|
— |
|
||
Acquisition of Company common stock |
|
(20,555 |
) |
|
— |
|
||
Distributions to noncontrolling interests |
|
(2,914 |
) |
|
(1,778 |
) |
||
Other |
|
(2,630 |
) |
|
(1,105 |
) |
||
Net cash used in financing activities |
|
(177,058 |
) |
|
(27,437 |
) |
||
Effect of exchange rate changes on cash and cash equivalents |
|
234 |
|
|
(383 |
) |
||
Change in cash and cash equivalents |
|
(24,391 |
) |
|
112,139 |
|
||
Cash and cash equivalents at beginning of period |
|
130,204 |
|
|
27,911 |
|
||
Cash and cash equivalents at end of period |
$ |
105,813 |
|
$ |
140,050 |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20211104005163/en/
Chief Financial Officer
502-261-7272
Senior Vice President of Financial Operations, Accounting and Reporting
502-261-7272
Source: Papa John’s