Papa John's International, Inc. Q3 FY2025 earnings call

• Product Innovation: Rebuilt the innovation pipeline with 3 major platforms, launching Papa Dippa (form innovation) and Grand Papa (size innovation), and reimagining sides to drive add-ons.
• Marketing and Value Proposition: Sharpened the value proposition with promotions like Buy One Get One Free and 50% off carryout, emphasizing the 6 simple ingredients of fresh, never frozen original dough.
• Technology: Launched a modernized first-party digital ordering platform, working on website modernization, and enhancing the CRM platform for customer engagement.
• Refranchising: Accelerating the refranchising program to reduce company restaurant ownership to mid-single-digit percent of the North American system, aiming to strengthen local markets and operational efficiency.
• Supply Chain and Cost: Expect $50 million in supply chain savings by 2028, with $20 million planned for 2026; initiating a G&A review to find $25 million in savings over 2-3 years.

Global comparable sales were flat in the third quarter, while North America comparable sales decreased 2.7%. Core pizza sales in North America were flat, with 3% more pizzas sold and 4% more pizzas per order, but total pizza sales were flat due to order mix shift. International comparable sales grew 7.1%. Global system-wide restaurant sales were $1.21 billion, up 2% in constant currency. North America revenues decreased approximately $6 million, while international revenue increased approximately $6 million. Consolidated adjusted EBITDA declined slightly to $48 million.

• Global system-wide sales expected to increase 1%-2% in 2025.
• North America comparable sales expected to decrease 2%-2.5% in 2025.
• International comparable sales outlook raised to 5%-6% for 2025.
• 2025 consolidated adjusted EBITDA expected $190 million-$200 million.
• Finalization of selling 85 Mid-Atlantic restaurants expected to reduce 2025 revenues by ~$60 million.
• Stock-based compensation to be $4M-$5M per quarter, net interest expense $40M-$42M, capex $75M-$85M, adjusted G&A $70M-$75M.

• Weaker consumer sentiment impacting sales performance.
• More promotional QSR marketplace in North America putting pressure on sales.
• Dependence on successful execution of transformation initiatives for long-term growth.

Q: On acceleration of refranchising program and G&A efficiencies A: Todd Penegor mentioned accelerating refranchising to partner with well-capitalized franchisees, and G&A review to find $25M in savings over 2 years, with half expected in 2026.

Q: Turnaround progress and innovation A: Todd Penegor discussed improved brand value proposition, rebuilt innovation pipeline, progress in international business, and focus on transaction-driving mindset.

Q: International results and sustainability A: Ravi Thanawala highlighted focus on priority markets in U.K. and China, product execution, and Perfect Bake program driving international growth.

Q: Value perception and marketing spending A: Todd Penegor and Ravi Thanawala talked about improving value perception, marketing spending on testing and promotions, and focus on center of plate sales.

Q: Exposure to lower income consumers A: Ravi Thanawala noted over 50% of sales from above $100k income, focus on loyalty and aggregator channels to balance consumer segments.