Domino's Pizza Announces First Quarter 2022 Financial Results
Global retail sales growth (excluding foreign currency impact) of 3.6% - U.S. same store sales decline of 3.6%
Domino's Pizza, Inc. (NYSE: DPZ) announced results for the first quarter of 2022. Global retail sales increased 3.6% in the first quarter of 2022, excluding the negative impact of foreign currency. Without adjusting for the impact of foreign currency, global retail sales increased 0.3% in the first quarter of 2022.
U.S. same store sales declined 3.6% during the first quarter of 2022. International same store sales (excluding foreign currency impact) increased 1.2% during the first quarter of 2022, marking the 113th consecutive quarter of international same store sales growth. The Company had first quarter global net store growth of 213 stores, comprised of 37 net U.S. store openings and 176 net international store openings. Diluted EPS for the first quarter of 2022 was $2.50, a decrease of 16.7% from the prior year quarter.
Subsequent to the end of the first quarter of 2022, on April 26, 2022, the Company's Board of Directors declared a $1.10 per share quarterly dividend on its outstanding common stock for shareholders of record as of June 15, 2022 to be paid on June 30, 2022.
"We faced a number of headwinds during the first quarter, from the Omicron surge, to staffing shortages, to unprecedented inflation, which pressured our results. We are actively implementing strategies designed to address them; however, we expect some of these headwinds are likely to persist further into 2022," said Ritch Allison, Domino's Chief Executive Officer. "The strength of the Domino's brand is not defined in the short term, but instead by our outstanding long-term track record and the ongoing commitment of our team members and franchisees, as evidenced by continued strong store growth, including the opening of our 19,000th global store during the quarter. As I hand the leadership of the Company over to Russell Weiner on May 1, I do so with great confidence that he and our talented team will take this great global brand to the next level in the years to come."
First Quarter Highlights (Unaudited):
| (in millions, except share and per share data) | First | First | ||||||
| Net income | $ | 91.0 | $ | 117.8 | ||||
| Weighted average diluted shares | 36,435,038 | 39,208,383 | ||||||
| Diluted EPS | $ | 2.50 | $ | 3.00 | ||||
- Revenues increased $27.5 million, or 2.8%, in the first quarter of 2022 as compared to the first quarter of 2021, primarily due to higher supply chain revenues attributable to increases in our market basket pricing to stores. Our market basket pricing to stores increased 11.9% during the first quarter of 2022. International franchise revenues also increased due to international retail sales growth, but were negatively impacted by approximately $4.3 million resulting from changes in foreign currency exchange rates. These increases were partially offset by lower U.S. stores revenues due to a 1.4% decline in U.S. retail sales.
- Net Income decreased $26.8 million, or 22.8%, in the first quarter of 2022 as compared to the first quarter of 2021. This decrease was primarily driven by lower income from operations of $22.0 million resulting from lower U.S. Company-owned store and supply chain operating margins and higher general and administrative expenses. The decrease in net income was also due to higher net interest expense of $7.4 million due to a higher average debt balance resulting from the Company's recapitalization transaction completed in April 2021, as well as lower other income of $2.5 million resulting from the unrealized gain recorded on the Company's investment in DPC Dash Ltd in the first quarter of 2021. These decreases in net income were partially offset by a decrease in the provision for income taxes of $5.1 million in the first quarter of 2022 due to a decrease in income before provision for income taxes. The effective tax rate increased to 22.7% during the first quarter of 2022 as compared to 21.3% in the first quarter of 2021, driven in part by a 0.5 percentage point change in the impact of excess tax benefits from equity-based compensation, which are recorded as a reduction to the income tax provision.
- Diluted EPS was $2.50 in the first quarter of 2022 versus $3.00 in the first quarter of 2021, representing a $0.50, or 16.7%, decrease from the prior year quarter. The decrease in diluted EPS was driven by lower net income in the first quarter of 2022 as compared to the prior year quarter and was partially offset by a lower weighted average diluted share count, resulting from the Company's share repurchases during the trailing four quarters.
The tables below outline certain statistical measures utilized by the Company to analyze its performance (unaudited). Refer to Comments on Regulation G below for additional details.
| First | First | First | ||||
| Same store sales growth: (versus prior year period) | ||||||
| U.S. Company-owned stores (1) | (10.5)% | + 6.3% | + 3.9% | |||
| U.S. franchise stores (1) | (3.2)% | + 13.9% | + 1.5% | |||
| U.S. stores | (3.6)% | + 13.4% | + 1.6% | |||
| International stores (excluding foreign currency impact) | + 1.2% | + 11.8% | + 1.5% | |||
| Global retail sales growth: (versus prior year period) | ||||||
| U.S. stores | (1.4)% | + 15.3% | + 4.9% | |||
| International stores | + 2.0% | + 18.0% | + 3.9% | |||
| Total | + 0.3% | + 16.7% | + 4.4% | |||
| Global retail sales growth: (versus prior year period, | ||||||
| U.S. stores | (1.4)% | + 15.3% | + 4.9% | |||
| International stores | + 8.4% | + 12.8% | + 6.8% | |||
| Total | + 3.6% | + 14.0% | + 5.9% |
| (1) | During the first quarter of 2022, the Company purchased 23 U.S. franchised stores from certain existing U.S. franchisees. The same store sales growth for these stores is reflected in U.S. Company-owned stores in the first quarter of 2022. |
| U.S. Company- | U.S. Franchise | Total | International | Total | ||||||
| Store counts: | ||||||||||
| Store count at January 2, 2022 | 375 | 6,185 | 6,560 | 12,288 | 18,848 | |||||
| Openings | 2 | 38 | 40 | 217 | 257 | |||||
| Closings (1) | — | (3) | (3) | (41) | (44) | |||||
| Transfers (2) | 23 | (23) | — | — | — | |||||
| Store count at March 27, 2022 | 400 | 6,197 | 6,597 | 12,464 | 19,061 | |||||
| First quarter 2022 net store growth | 2 | 35 | 37 | 176 | 213 | |||||
| Trailing four quarters net store growth | 13 | 193 | 206 | 1,036 | 1,242 |
| (1) | Temporary store closures are not treated as store closures and affected stores are included in the ending store count. Based on information reported to the Company by its master franchisees, the Company estimates that as of March 27, 2022, there were approximately 200 international stores temporarily closed. |
| (2) | Net store growth does not include the effect of transfers. During the first quarter of 2022, the Company purchased 23 U.S. franchised stores from certain existing U.S. franchisees. |
Share Repurchases
During the first quarter of 2022, the Company repurchased and retired 100,810 shares of common stock for a total of $47.7 million. As of March 27, 2022, the Company had a total remaining authorized amount for share repurchases of $656.4 million.
Liquidity
As of March 27, 2022, the Company had approximately:
- $165.0 million of unrestricted cash and cash equivalents;
- $5.06 billion in total debt; and
- $155.8 million of available borrowing capacity under its 2021 variable funding notes, net of letters of credit issued of $44.2 million.
Net cash provided by operating activities was $78.8 million during the first quarter of 2022. The Company invested $12.5 million in capital expenditures during the first quarter of 2022. Free cash flow, as reconciled below to net cash provided by operating activities, as determined under accounting principles generally accepted in the United States of America ("GAAP"), was approximately $66.3 million during the first quarter of 2022 (refer to Comments on Regulation G below for additional details).
| (in thousands) | First | |||
| Net cash provided by operating activities | $ | 78,789 | ||
| Capital expenditures | (12,454) | |||
| Free cash flow | $ | 66,335 | ||
Comments on Regulation G
In addition to the GAAP financial measures set forth in this press release, the Company has included non-GAAP financial measures within the meaning of Regulation G, including free cash flow metrics. The Company has also included metrics such as global retail sales, global retail sales growth, global retail sales growth, excluding foreign currency impact and same store sales growth, which are commonly used statistical measures in the quick-service restaurant industry that are important to understanding Company performance.
The Company uses "Global retail sales" to refer to total worldwide retail sales at Company-owned and franchise stores. The Company believes global retail sales information is useful in analyzing revenues because franchisees pay royalties and advertising fees that are based on a percentage of franchise retail sales. The Company reviews comparable industry global retail sales information to assess business trends and to track the growth of the Domino's Pizza brand. In addition, supply chain revenues are directly impacted by changes in franchise retail sales. Retail sales for franchise stores are reported to the Company by its franchisees and are not included in Company revenues. "Global retail sales growth" is calculated as the change of U.S. Dollar global retail sales against the comparable period of the prior year. "Global retail sales growth, excluding foreign currency impact" is calculated as the change of international local currency global retail sales against the comparable period of the prior year.
The Company uses "Same store sales growth," which is calculated by including only sales from stores that also had sales in the comparable weeks of both years. International same store sales growth is calculated similarly to U.S. same store sales growth. Changes in international same store sales are reported excluding foreign currency impacts, which reflect changes in international local currency sales.
The Company uses "Free cash flow," which is calculated as net cash provided by operating activities, less capital expenditures, both as reported under GAAP. The Company believes that the free cash flow measure is important to investors and other interested persons, and that such persons benefit from having a measure which communicates how much cash flow is available for working capital needs or to be used for repurchasing debt, making acquisitions, repurchasing common stock or paying dividends.
About Domino's Pizza
Founded in 1960, Domino's Pizza is the largest pizza company in the world, with a significant business in both delivery and carryout pizza. It ranks among the world's top public restaurant brands with a global enterprise of more than 19,000 stores in over 90 markets. Domino's had global retail sales of nearly $17.8 billion in 2021, with over $8.6 billion in the U.S. and over $9.1 billion internationally. In the first quarter of 2022, Domino's had global retail sales of over $4.0 billion, with over $1.9 billion in the U.S. and nearly $2.1 billion internationally. Its system is comprised of independent franchise owners who accounted for 98% of Domino's stores as of the end of the first quarter of 2022. Emphasis on technology innovation helped Domino's achieve more than half of all global retail sales in 2021 from digital channels. In the U.S., Domino's generated more than 75% of U.S. retail sales in 2021 via digital channels and has developed several innovative ordering platforms, including those for Google Home, Facebook Messenger, Apple Watch, Amazon Echo, Twitter and more.
| Domino's Pizza, Inc. and Subsidiaries | ||||||||||||||||
| Condensed Consolidated Statements of Income | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| Fiscal Quarter Ended | ||||||||||||||||
| March 27, | % of | March 28, | % of | |||||||||||||
| (In thousands, except per share data) | ||||||||||||||||
| Revenues: | ||||||||||||||||
| U.S. Company-owned stores | $ | 103,895 | $ | 112,744 | ||||||||||||
| U.S. franchise royalties and fees | 122,285 | 124,486 | ||||||||||||||
| Supply chain | 609,547 | 568,338 | ||||||||||||||
| International franchise royalties and fees | 68,833 | 66,770 | ||||||||||||||
| U.S. franchise advertising | 106,589 | 111,360 | ||||||||||||||
| Total revenues | 1,011,149 | 100.0 | % | 983,698 | 100.0 | % | ||||||||||
| Cost of sales: | ||||||||||||||||
| U.S. Company-owned stores | 87,375 | 85,742 | ||||||||||||||
| Supply chain | 555,150 | 508,805 | ||||||||||||||
| Total cost of sales | 642,525 | 63.5 | % | 594,547 | 60.4 | % | ||||||||||
| Operating margin | 368,624 | 36.5 | % | 389,151 | 39.6 | % | ||||||||||
| General and administrative | 97,494 | 9.7 | % | 91,253 | 9.3 | % | ||||||||||
| U.S. franchise advertising | 106,589 | 10.5 | % | 111,360 | 11.3 | % | ||||||||||
| Income from operations | 164,541 | 16.3 | % | 186,538 | 19.0 | % | ||||||||||
| Other income | — | 0.0 | % | 2,500 | 0.2 | % | ||||||||||
| Interest expense, net | (46,823) | (4.7) | % | (39,400) | (4.0) | % | ||||||||||
| Income before provision for income taxes | 117,718 | 11.6 | % | 149,638 | 15.2 | % | ||||||||||
| Provision for income taxes | 26,754 | 2.6 | % | 31,877 | 3.2 | % | ||||||||||
| Net income | $ | 90,964 | 9.0 | % | $ | 117,761 | 12.0 | % | ||||||||
| Earnings per share: | ||||||||||||||||
| Common stock – diluted | $ | 2.50 | $ | 3.00 | ||||||||||||
| Domino's Pizza, Inc. and Subsidiaries | ||||||||
| Condensed Consolidated Balance Sheets | ||||||||
| (Unaudited) | ||||||||
| March 27, | January 2, | |||||||
| (In thousands) | ||||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 164,962 | $ | 148,160 | ||||
| Restricted cash and cash equivalents | 168,241 | 180,579 | ||||||
| Accounts receivable, net | 246,978 | 255,327 | ||||||
| Inventories | 77,711 | 68,328 | ||||||
| Prepaid expenses and other | 27,857 | 27,242 | ||||||
| Advertising fund assets, restricted | 175,488 | 180,904 | ||||||
| Total current assets | 861,237 | 860,540 | ||||||
| Property, plant and equipment, net | 319,647 | 324,065 | ||||||
| Operating lease right-of-use assets | 209,099 | 210,702 | ||||||
| Investments | 125,840 | 125,840 | ||||||
| Other assets | 158,199 | 150,669 | ||||||
| Total assets | $ | 1,674,022 | $ | 1,671,816 | ||||
| Liabilities and stockholders' deficit | ||||||||
| Current liabilities: | ||||||||
| Current portion of long-term debt | $ | 55,632 | $ | 55,588 | ||||
| Accounts payable | 92,353 | 91,547 | ||||||
| Operating lease liabilities | 37,384 | 37,155 | ||||||
| Advertising fund liabilities | 168,161 | 173,737 | ||||||
| Other accrued liabilities | 241,294 | 232,714 | ||||||
| Total current liabilities | 594,824 | 590,741 | ||||||
| Long-term liabilities: | ||||||||
| Long-term debt, less current portion | 5,002,092 | 5,014,638 | ||||||
| Operating lease liabilities | 182,369 | 184,471 | ||||||
| Other accrued liabilities | 93,379 | 91,502 | ||||||
| Total long-term liabilities | 5,277,840 | 5,290,611 | ||||||
| Total stockholders' deficit | (4,198,642) | (4,209,536) | ||||||
| Total liabilities and stockholders' deficit | $ | 1,674,022 | $ | 1,671,816 | ||||
| Domino's Pizza, Inc. and Subsidiaries | ||||||||
| Condensed Consolidated Statements of Cash Flows | ||||||||
| (Unaudited) | ||||||||
| Fiscal Quarter Ended | ||||||||
| March 27, | March 28, | |||||||
| (In thousands) | ||||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 90,964 | $ | 117,761 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 18,976 | 16,465 | ||||||
| Loss on sale/disposal of assets | 195 | 161 | ||||||
| Amortization of debt issuance costs | 1,319 | 1,203 | ||||||
| Provision for deferred income taxes | 1,319 | 1,578 | ||||||
| Non-cash compensation expense | 7,265 | 5,204 | ||||||
| Excess tax benefits from equity-based compensation | (86) | (914) | ||||||
| Provision for losses on accounts and notes receivable | 1,462 | 180 | ||||||
| Unrealized gain on investments | — | (2,500) | ||||||
| Changes in operating assets and liabilities | (34,718) | (1,634) | ||||||
| Changes in advertising fund assets and liabilities, restricted | (7,907) | 15,347 | ||||||
| Net cash provided by operating activities | 78,789 | 152,851 | ||||||
| Cash flows from investing activities: | ||||||||
| Capital expenditures | (12,454) | (16,561) | ||||||
| Purchase of investments | — | (40,000) | ||||||
| Purchase of franchise operations and other assets | (6,814) | — | ||||||
| Other | (1,368) | 121 | ||||||
| Net cash used in investing activities | (20,636) | (56,440) | ||||||
| Cash flows from financing activities: | ||||||||
| Repayments of long-term debt and finance lease obligations | (13,861) | (704) | ||||||
| Proceeds from exercise of stock options | 266 | 3,693 | ||||||
| Purchases of common stock | (47,661) | (25,000) | ||||||
| Tax payments for restricted stock upon vesting | (789) | (1,044) | ||||||
| Payments of common stock dividends and equivalents | (51) | (64) | ||||||
| Net cash used in financing activities | (62,096) | (23,119) | ||||||
| Effect of exchange rate changes on cash | 374 | 161 | ||||||
| Change in cash and cash equivalents, restricted cash and cash equivalents | (3,569) | 73,453 | ||||||
| Cash and cash equivalents, beginning of period | 148,160 | 168,821 | ||||||
| Restricted cash and cash equivalents, beginning of period | 180,579 | 217,453 | ||||||
| Cash and cash equivalents included in advertising fund assets, restricted, | 161,741 | 115,872 | ||||||
| Cash and cash equivalents, restricted cash and cash equivalents and | 490,480 | 502,146 | ||||||
| Cash and cash equivalents, end of period | 164,962 | 267,719 | ||||||
| Restricted cash and cash equivalents, end of period | 168,241 | 176,029 | ||||||
| Cash and cash equivalents included in advertising fund assets, restricted, | 153,708 | 131,851 | ||||||
| Cash and cash equivalents, restricted cash and cash equivalents and cash and | $ | 486,911 | $ | 575,599 | ||||
SOURCE Domino's Pizza, Inc.
