Papa John's International, Inc. Q4 FY2025 earnings call

• Brand health, customer experience, restaurant fleet, and cost structure have been improved. Loyalty members' orders redeeming Papa Do increased from 24% to 48%. International business has had five consecutive quarters of positive sales comps. - Progress made on technology roadmap. Established plan for $60,000,000 system-wide supply chain cost savings and $25,000,000 non-customer-facing corporate cost savings by 2027. - In fourth quarter, strength in loyalty and existing customers in North America, but new customer acquisition lower. Core pizza resilient but order mix shifted. International had strong 6% comp sales growth. - Promotions like 50% carryout deal and $9.99 create your own pizza improved value perception. Launched pan pizza platform with positive early results. - Innovation pipeline includes new sandwiches, protein crust pizza, and other product innovations. - Partnerships with brands and strategic collaborations, reestablished co-ops in 50 US markets. - Launched new omnichannel apps, partnered with PAR Technology for POS migration, and with Google Cloud for advanced features. - Loyalty program Papa Rewards is valuable, connecting with nearly 41,000,000 fans. - Optimizing North American supply chain to achieve at least $60,000,000 system-wide cost savings, refranchising restaurants, and reviewing restaurant fleet for closures to strengthen the system. - Reducing menu complexity by eliminating Papadias and Papa Bites in North America.

In North America, fourth quarter comparable sales decreased 5% due to a 5.5% decrease in transaction comps, with carryout growing 1% but offset by declines in total delivery. Core pizza remains resilient with total pizzas sold increasing 1%, but single pie orders declined and total pizza sales declined low single digits as order mix shifted. International business delivered 6% comparable sales growth, with 7% comp sales growth in the UK. Global system-wide restaurant sales were $1,230,000,000, down 1% in constant currency. Fourth quarter consolidated revenue was $498,000,000, down 6%, with international revenues partially offsetting declines in domestic segments. Domestic company-owned revenues decreased due to refranchising, North America commissary revenues decreased due to lower pricing but slightly offset by higher volumes, and other business unit revenues decreased due to lower advertising fund revenue. Fourth quarter consolidated adjusted EBITDA was $51,000,000, and consolidated adjusted EBITDA for 2025 was $201,000,000.

• 2026 global system-wide sales expected to range between flat and low single-digits decline. - North America comparable sales expected to be down 2% to 4%. - Internationally, comparable sales expected to increase between 2%-4%. - 2026 consolidated adjusted EBITDA expected to be between $202,000,000–$210,000,000. - Expect to incur restructuring charges of approximately $16,000,000 to $23,000,000 associated with transformation work. - Expect to close approximately 200 North America restaurants in 2026 and 100 in 2027. - 2026 net interest expense expected between $35,000,000 and $40,000,000, adjusted D&A between $70,000,000 and $75,000,000, and capital expenditures between $70,000,000 and $80,000,000. - Expect 2026 GAAP effective tax rate to be in the range of 30% to 34%, with Q1 tax rate between 34%–38%. - Expect to open between 40 and 50 gross new restaurants in North America in 2026 and 180 to 220 gross new restaurants internationally.

Q: One of your competitors suggested the QSR pizza industry as a whole is pretty stable, in fact, growing. And your same-store sales guidance for 2026 is a 2% to 4% decline. And the question is just what is holding you back from holding or taking share in 2026 in your view? I realize you see a cautious consumer out there, but it seems like your guidance does assume a market share decline in 2026 and just would like your commentary on that. And then I just have a quick follow-up.

A: Todd Penegor mentioned about bringing innovation calendar to life, recruiting new customers, protecting and driving frequency with existing customers, core pizza business, and the need to compete in 3P channel. Ravi Thanawala added about dimensionalizing 2025 comp pressure. Follow-up: Todd Penegor talked about competing on value, meeting consumer where they are, innovation, and the importance of recruiting new customers.

Q: How do you guys think about competing on value? I know it is kind of derivative of the previous question, but how do you think of competing on value when you think of going against a larger scale competitor? And then I just have a quick follow-up. And do you mind letting me know how you guys see growth? Is that coming more from aggregator platforms, or if there is an opportunity to drive growth primarily through the one key platform?

A: Ravi Thanawala talked about capturing margin upside through supply chain and other levers. Todd Penegor said they have been first movers on aggregators and will continue to lean in both first party and third party.

Q: Can you maybe take the metrics that you gave us for unit-level EBITDA for company and apply that to the overall base, how much that 500 restaurants system that they are operate a rough—company and apply that to the overall base, how much that—different perspectives in terms of managing ticket versus transaction as well that could impact individual franchisees' performance. But what we are all rallied around—is recapturing 200 basis points of margin rate upside. And as I think about 2026 relative to 2025, we expect four-wall profitability to slightly increase year on year on a dollar basis.

A: Ravi Thanawala couldn't give specifics but talked about the plan to reaccelerate. Todd Penegor added about the strategic review of closures.

Q: I wanted to get a little bit more feedback on the delivery channel. Any feedback on how the third party performed relative to first party? And what do you think the biggest unlock or opportunity ahead is to really drive increased check and traffic in that channel?

A: Ravi Thanawala said third-party delivery grew low single digits on a dollar basis with decline from first party, and mentioned working on improving consumer satisfaction scores, leveraging Google Cloud partnership, and using CRM.