Domino's Pizza Announces Third Quarter 2024 Financial Results

• Global retail sales growth (excluding foreign currency impact) of 5.1%
• U.S. same store sales growth of 3.0%
• International same store sales growth (excluding foreign currency impact) of 0.8%
• Global net store growth of 72
• Income from operations increased 5.0%; excluding the $1.4 million negative impact of foreign currency exchange rates on international franchise royalty revenues, income from operations increased 5.7%

Domino's Pizza, Inc. (NYSE: DPZ)announced results for the third quarter of 2024.

"Our third quarter results once again demonstrated that our Hungry for MORE strategy is resonating, despite a pressured global marketplace," said Russell Weiner, Domino's Chief Executive Officer. "In our international business, we are on track for our 31^st consecutive year of same store sales growth, demonstrating our sustained long-term track record of success. In the U.S., we drove our 4^th straight quarter of profitable order count growth, highlighting that our strategies are driving positive outcomes. The Hungry for MORE pillar of Renowned Value will be the primary focus for our business in near-term as we look to continue to create our own tailwinds around the world. Renowned Value is a competitive advantage for Domino's and one where we are industry leaders. With the slate of initiatives we have in place, I am confident that we will continue to win and grow our market share across the globe for years to come."

Third Quarter 2024 Operational and Financial Highlights (Unaudited):

The tables below outline certain statistical measures utilized by the Company to analyze its performance, as well as key financial results. This historical data is not necessarily indicative of results to be expected for any future period. Refer to Comments on Regulation G below for additional details, including definitions of these statistical measures and certain reconciliations.

• Revenues increased $52.8 million, or 5.1%, in the third quarter of 2024 as compared to the third quarter of 2023, primarily due to higher supply chain, U.S. franchise advertising and U.S. franchise royalties and fees revenues. The increase in supply chain revenues was primarily attributable to higher order volumes, as well as an increase in the Company's food basket pricing to stores, but was partially offset by a shift in the relative mix of the products sold by the Company. The Company's food basket pricing to stores increased 1.3% during the third quarter of 2024 as compared to the third quarter of 2023. U.S. franchise advertising revenues increased as a result of the return to the standard 6.0% advertising contribution rate at the beginning of the second quarter of 2024 following the end of the temporary reduction to 5.75% which began in the second quarter of 2023, as well as higher same store sales and net store growth. U.S. franchise royalties and fees increased as a result of higher same store sales and net store growth.
• U.S. Company-owned store gross margin increased 1.0 percentage point in the third quarter of 2024 as compared to the third quarter of 2023, primarily driven by sales leverage due to higher customer transaction counts.
• Supply chain gross margin increased 0.6 percentage points in the third quarter of 2024 as compared to the third quarter of 2023, primarily due to procurement productivity.
• Income from operations increased $9.4 million, or 5.0%, in the third quarter of 2024 as compared to the third quarter of 2023. Excluding the negative impact of foreign currency exchange rates on international franchise royalty revenues of $1.4 million, income from operations increased $10.8 million, or 5.7%, in the third quarter of 2024 as compared to the third quarter of 2023. These increases were primarily a result of gross margin dollar growth within supply chain as well as higher U.S. franchise royalties and fees, each as discussed above. These increases were partially offset by higher general and administrative expenses of $6.8 million, primarily driven by higher labor costs.
• Net income decreased $0.8 million, or 0.5%, in the third quarter of 2024 as compared to the third quarter of 2023 due to higher provision for income taxes. The Company's provision for income taxes increased $9.8 million in the third quarter of 2024 due to a higher effective tax rate and higher income before provision for income taxes. The effective tax rate increased to 20.4% in the third quarter of 2024 as compared to 15.9% in the third quarter of 2023, driven by lower foreign tax credits as well as a 0.9 percentage point unfavorable change in the impact of excess tax benefits from equity-based compensation, which is recorded as a reduction to the provision for income taxes.
• Diluted EPS was $4.19 in the third quarter of 2024 as compared to $4.18 in the third quarter of 2023, representing a $0.01, or 0.2%, increase. While net income decreased in the third quarter of 2024 as compared to the third quarter of 2023, the increase in diluted EPS was driven by a lower weighted average diluted share count resulting from the Company's share repurchases during the trailing four quarters.
• Net cash provided by operating activities was $446.9 million in the three fiscal quarters of 2024 as compared to $422.1 million in the three fiscal quarters of 2023. The Company spent $70.8 million on capital expenditures in the three fiscal quarters of 2024 as compared to $59.3 million in the three fiscal quarters of 2023, resulting in free cash flow of $376.1 million in the three fiscal quarters of 2024 as compared to $362.9 million in the three fiscal quarters of 2023. The increase in free cash flow was a result of higher net income, excluding non-cash operating activities and receipts for advertising contributions outpacing payments for advertising activities. These increases were partially offset by the negative impact of changes in operating assets and liabilities and higher investments in capital expenditures.

Quarterly Dividend

Subsequent to the end of the third quarter of 2024, on October 8, 2024, the Company's Board of Directors declared a $1.51 per share quarterly dividend on its outstanding common stock for shareholders of record as of December 13, 2024, to be paid on December 27, 2024.

Share Repurchases

During the third quarter and three fiscal quarters of 2024, the Company repurchased and retired 443,302 and 499,674 shares of common stock for a total of $190.0 million and $215.0 million, respectively. As of September 8, 2024, the Company had a total remaining authorized amount for share repurchases of $926.3 million.

2024 Guidance

The Company now expects the following given the challenging macroeconomic environment and its impact on current business trends across the globe¹:

• Approximately 6% annual global retail sales growth.
• Approximately 8% annual income from operations growth.
• Global net store growth of 800 to 850.

2025 Guidance 

• The Company expects annual global retail sales growth and annual income from operations growth to be generally in line with its 2024 expectations.

Long-Term Guidance (2026-2028)

The Company continues to expect the following¹:

• 7%+ Annual global retail sales growth.
• 8%+ Annual income from operations growth.

¹Annual global retail sales growth and annual income from operations growth each exclude the impact of foreign currency.

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 and income from operations, excluding foreign currency impact. The Company has also included metrics such as global retail sales, global retail sales growth (excluding foreign currency impact), same store sales growth, net store growth, food basket pricing change, impact of changes in foreign currency exchange rates on international franchise royalty revenues and the leverage ratio, 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," a statistical measure, 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 and believes they are indicative of the financial health of the Company's franchisee base. In addition, supply chain revenues are directly impacted by changes in franchise retail sales in the U.S. and Canada. As a result, sales by Domino's franchisees have a direct effect on the Company's profitability. 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 2024 and 2023 global retail sales growth measures excluding the Russia market are calculated as the growth in retail sales excluding the retail sales from the Russia market from the 2023 and 2022 retail sales base. Changes in global retail sales growth, excluding foreign currency impact, are primarily driven by same store sales growth and net store growth.

The Company uses "Same store sales growth," a statistical measure, which is calculated by including only retail sales from stores that also had sales in the comparable weeks of both periods. 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. Same store sales growth for transferred stores is reflected in their current classification.

The Company uses "Net store growth," a statistical measure, which is calculated by netting gross store openings with gross store closures during the period. Transfers between Company-owned stores and franchised stores are excluded from the calculation of net store growth.

The Company uses "Food basket pricing change," a statistical measure, which is calculated as the percentage change of the food basket (including both food and cardboard products) purchased by an average U.S. store (based on average weekly unit sales) from U.S. supply chain centers against the comparable period of the prior year. The Company believes that the food basket pricing change is important to investors and other interested persons to understand the Company's performance. As food basket prices fluctuate, revenues, cost of sales and gross margin percentages in the Company's supply chain segment also fluctuate. Additionally, cost of sales, gross margins and gross margin percentages for the Company's U.S. Company-owned stores also fluctuate.

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 most directly comparable financial measure calculated and presented in accordance with GAAP is net cash provided by operating activities. 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.

The Company uses "Income from operations, excluding foreign currency impact," which is calculated as income from operations as reported under GAAP, less the "impact of changes in foreign currency exchange rates on international franchise royalty revenues," a statistical measure. The most directly comparable financial measure calculated and presented in accordance with GAAP is income from operations. The impact of changes in foreign currency exchange rates on international franchise royalty revenues is calculated as the difference in international franchise royalty revenues resulting from translating current period local currency results to U.S. dollars at current period exchange rates as compared to prior period exchange rates. The Company believes that the impact of changes in foreign currency exchange rates on international franchise royalty revenues is important to investors and other interested persons to understand the Company's international royalty revenues given the significant variability in those revenues and that can be driven by changes in foreign currency exchanges rates. International franchise royalty revenues do not have a cost of sales component, so changes in these revenues have a direct impact on income from operations.

The Company uses the "Leverage ratio¹," which is calculated as the Company's securitized debt related to its fixed-rate notes from the recapitalizations completed in 2021, 2019, 2018, 2017 and 2015 and borrowings under its variable funding notes, divided by Segment Income as defined by the Company under Accounting Standards Codification 280, Segment Reporting on a trailing four quarters basis. The Company has historically operated with a leverage ratio between four and six times. The Company reviews its leverage ratio on at least a quarterly basis and believes its leverage ratio is important to investors and other interested persons to understand the capital structure of the Company, and to assess the ability of the Company to meet its financial obligations.

The reconciliation of the leverage ratio for the third quarters of 2024 and 2023 is as follows:

Russia Market

On August 21, 2023, the Company's master franchisee that owned and operated Domino's Pizza stores in Russia announced its intent to file for bankruptcy with respect to the stores in that market. Therefore, as of August 21, 2023, the Company has considered the stores in the Russia market to be closed and they are excluded from the Company's ending store count as of the end of the third quarter of 2023. The Company has presented its statistical measure of global retail sales growth, excluding foreign currency impact, for the third quarter and three fiscal quarters of 2024 and 2023 excluding the impact of the retail sales from the Russia market. The Company believes the impact of the Russia market on its statistical measure of same store sales growth for the periods presented was immaterial, and it also believes the impact of the Russia market on its consolidated statements of income related to international franchise royalties and fee revenues and general and administrative expenses for the third quarter and three fiscal quarters of 2023 was immaterial.

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 21,000 stores in over 90 markets. Domino's had global retail sales of over $18.9 billion for the trailing four quarters ended September 8, 2024. Its system is comprised of independent franchise owners who accounted for 99% of Domino's stores as of the end of the third quarter of 2024. In the U.S., Domino's generated more than 85% of U.S. retail sales in 2023 via digital channels and has developed several innovative ordering platforms including seven unique ways to order Domino's.

SOURCE Domino's Pizza, Inc.