LOUISVILLE, Ky. - (BUSINESS WIRE) - Feb. 24, 2022 - Papa John’s International, Inc. (Nasdaq: PZZA) today announced financial results for the three months and full year ended December 26, 2021.
Fourth quarter 2021 highlights compared to prior year fourth quarter
Full year 2021 highlights compared to prior year
“In 2021 Papa Johns achieved strong comparable sales growth and industry outperformance for a second consecutive year, driving 15% system-wide sales gains and demonstrating our ability to sustain growth, even during one of the most uncertain and difficult business environments we have ever seen,” said President & CEO Rob Lynch. “On a two-year basis, comparable sales rose 29% in North America and 26% internationally last quarter, as our innovation culture continued to deliver high-value, premium products that customers love, such as Epic Stuffed Crust and New York Style pizza. With North America average annual unit sales exceeding $1.1 million and 2021 adjusted EPS of $3.51, a company record, I’m proud to say that we also delivered great value to our franchisees and shareholders.”
Mr. Lynch continued, “While the current labor and commodity environment presents great challenges across the restaurant industry and the economy as a whole, we have been able to continue growing and protect margins thanks to Papa Johns differentiated strategy, premium position and our dedicated franchisees and team members, especially in our restaurants and vertically integrated supply chain. In addition, Papa Johns development momentum is at an all-time high. In one of our best years, we opened 250 net new units in 2021 and since last summer we have signed multiple historic development deals for the brand, including most recently for 1,350 new stores in southern China. In short, Papa Johns long-term growth outlook has never been brighter.”
Financial Highlights
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Quarterly Results
Consolidated revenues of $528.9 million in the fourth quarter of 2021 increased $59.1 million, or 12.6%, compared to the fourth quarter of the prior year primarily as a result of comparable sales increases of 11.1% and 2.4% for North America and International restaurants, respectively, which benefited from our menu innovation and growth strategies and higher customer retention from our customer rewards program which drove higher company-owned restaurant revenues, franchise royalties and commissary sales.
Consolidated operating income of $38.2 million for the fourth quarter of 2021 increased $18.5 million compared to the fourth quarter of 2020. The increase reflects stronger consolidated revenue from higher comparable sales and year-over-year restaurant unit growth internationally. These benefits more than offset an increase in expenses, including higher labor costs as a result of labor shortages in the market and higher commodity costs associated with our supply chain.
Diluted earnings per share was $0.67 for the fourth quarter of 2021 representing an increase of $0.39 over the fourth quarter of 2020. Excluding the impact of Special items, adjusted diluted earnings per share was $0.75 representing an increase of $0.35 over the fourth quarter of 2020.
Full Year Results
Consolidated revenues increased 14.1% to $2.1 billion for the year ended December 26, 2021, compared to the prior year, primarily due to higher comparable sales which benefited each of the company’s operating segments. Consolidated operating income increased $78.0 million for the year ended December 26, 2021 ($85.1 million excluding Special items), compared to the prior year, primarily due to double-digit comparable sales growth and strong net unit growth domestically and internationally.
For the year ended December 26, 2021, diluted earnings per share was $0.12 representing a decrease of $1.16 over the prior year period. Diluted earnings per share includes a $3.10 diluted impact from the repurchase and conversion of all shares of Series B Preferred Stock in the second quarter of 2021, which reflects the excess of the one-time cash payment over the carrying value of the Series B Preferred Stock. Excluding Special items, adjusted diluted earnings per share was $3.51 representing an increase of $2.11 over the prior year.
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 26, 2021.
Global Restaurant Sales Information
Global restaurant and comparable sales information for the three months and full year ended December 26, 2021, compared to the three months and full year ended December 27, 2020 are as follows (See “Supplemental Information and Financial Statements” below for related definitions):
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Global Restaurant Unit Data
As of December 26, 2021, there were 5,650 Papa John’s restaurants operating in 50 countries and territories, as follows:
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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):
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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.
The company paid cash dividends of $12.7 million ($0.35 per common share) in the fourth quarter of 2021. On January 27, 2022, our Board of Directors declared a first quarter dividend of $0.35 per common share. The common share dividend was paid on February 18, 2022 to stockholders of record as of the close of business on February 7, 2022. The declaration and payment of any future dividends will be at the discretion of our Board of Directors.
As previously announced, in October 2021, our Board of Directors approved a new share repurchase program with an indefinite duration for up to $425.0 million of the company’s common stock. In the fourth quarter, the new share repurchase program operated alongside our previous $75.0 million share repurchase authorization, which expired on December 26, 2021. During the fourth quarter, a total of approximately 408,000 shares with an aggregate cost of $51.9 million and an average price of $127.44 per share were repurchased under these programs. Subsequent to the fourth quarter, we acquired an additional 109,000 shares at an aggregate cost of $13.3 million. Approximately $411.5 million remained available under the Company’s share repurchase program as of February 17, 2022.
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.
Given on-going uncertainty surrounding the future impact of COVID-19, and especially the Omicron variant, we are not providing comprehensive outlook metrics for 2022 at this time.
A conference call is scheduled for February 24, 2022 at 8:00 a.m. Eastern Time to review the company’s fourth quarter and full year 2021 earnings results. The call can be accessed from the company’s web page. The conference call will be available for replay, including by downloadable podcast, from the company’s website. The Conference ID is 3070297.
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 COVID-19 pandemic and the related restrictions, 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, labor shortages, inflation, reorganization costs and the related organizational, employment and real estate changes from opening our new office in Atlanta, royalty relief, the effectiveness of our menu innovations and other business initiatives, marketing efforts, liquidity, compliance with debt covenants, strategic decisions and actions, dividends, effective tax rates, regulatory changes and impacts, 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.
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 or the cessation thereof in the future, 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 and our quality control centers; impact of delayed new store openings, both domestically and internationally; vaccine mandates; 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 fully realize the anticipated benefits of our corporate reorganization and new office in Atlanta, Georgia. Actual outcomes and results may differ materially from those matters expressed or implied in such forward-looking statements. These and other risks, uncertainties and assumptions that are involved in our forward-looking statements are discussed in detail in “Part I. Item 1A. – Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 26, 2021. We undertake no obligation to update publicly any forward-looking statements, whether as a result of future events, new information or otherwise, except as required by law.
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 North America, international and global restaurant and comparable sales growth and Global system-wide restaurant sales information is useful in analyzing our results since our franchisees pay royalties and marketing fund contributions that are based on a percentage of franchise sales. Comparable sales and Global system-wide restaurant sales results for restaurants operating outside of the United States are reported on a constant dollar basis, which excludes the impact of foreign currency translation. Franchise sales also generate commissary revenue in the United States and in certain international markets. Franchise restaurant and comparable sales growth information is also useful for comparison to industry trends and evaluating the strength of our brand. Management believes the presentation of franchise restaurant sales growth, excluding the impact of foreign currency, provides investors with useful information regarding underlying sales trends and the impact of new unit growth without being impacted by swings in the external factor of foreign currency. Franchise restaurant sales are not included in the company’s revenues.
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.
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SOURCE Papa John’s International, Inc.
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