Papa John’s Earnings: International Strength Offsets U.S. Softness
- Hardik Shah
- 8 minutes ago
- 4 min read
TLDR
Revenue Strength: Q3 revenue $508M, essentially flat; global system sales +2% in constant currency to $1.21B.
Margin Trends: Adjusted EBITDA $47.8M (slightly down); adjusted EPS $0.32; GAAP EPS $0.13.
Forward Outlook: FY25 guide trimmed: system-wide sales +1–2%, NA comps -2 to -2.5%, International comps +5–6%; adjusted EBITDA $190–$200M.
Business Overview
Papa John’s is the world’s #3 pizza delivery chain with ~6,000 restaurants across ~50 countries/territories and a brand built on “Better Ingredients. Better Pizza.” Digital channels (first-party apps/site and aggregators) drive ~70% of sales, with a growing loyalty base. Q3 ended with 5,994 stores (3,507 North America; 2,487 International).
Channels & Footprint: First-party digital, delivery, carryout, and third-party aggregators; strongest momentum internationally (Europe, Middle East, APAC).
Papa John's Earnings
Revenue: $508.2M (+0.3% YoY). Mix: Company-owned $168.4M; Franchise royalties/fees $47.1M; Commissary $229.6M; Other $21.4M; Advertising funds $41.7M. Gains internationally offset softness in North America.
System Sales & Comps: Global system-wide sales $1.21B (+2% constant currency). NA comps -2.7%; International comps +7.1%; total global comps ~flat.
Profitability: Adjusted EBITDA $47.8M (vs. $49.9M LY). GAAP EPS $0.13 (prior year included a large QC Center real-estate gain); adjusted EPS $0.32 (vs. $0.43). Drivers: higher G&A (marketing and incentive comp), tech depreciation, International outperformance, and some commodity deflation benefit at NA commissaries.
Free Cash Flow (nine months): $59.2M (vs. $9.0M LY), aided by working capital/tax timing and lower International transformation spend.
Forward Guidance (FY25)
System-wide sales: +1% to +2% (from +2% to +5%).
North America comps: -2% to -2.5% (from flat to +2%).
International comps: +5% to +6% (from +2% to +4%).
Adjusted EBITDA: $190–$200M (from $200–$220M).
Capex: $75–$85M; Adjusted D&A: $70–$75M; Interest: $40–$42M; Tax: 27–30%.
Risks & Opportunities: Softer U.S. consumer and promotional Quick-Service Restaurant (QSR) backdrop; benefits from International transformation, a rebuilt innovation pipeline, and omnichannel tech upgrades that could lift conversion and loyalty.
Operational Performance
International transformation: Four consecutive positive comp quarters; +7.1% comps in Q3 with notable strength across Europe, Middle East, and APAC.
North America: Pizza units sold up, but mix shifted to medium/fewer toppings; sides/desserts softness pressured total tickets. Value levers (BOGO, $6.99 Papa Pairings, 50% off carryout) drove selective order improvements and record Halloween sales day.
Supply chain & productivity: At least $50M identified supply-chain savings by 2028; ~100 bps restaurant-level profit tailwind expected.
Technology: New mobile app ordering platform live; website modernization targeted (December). Higher conversion from improved UX; CRM engagement rising. ~70% of sales through owned digital platforms.
“We have identified at least $25M of savings outside of marketing over the next two years… and expect at least 100 bps of four-wall EBITDA improvement from supply-chain savings by 2028.” — Ravi Thanawala (CFO)
Segment Snapshot (selected):
NA Company-owned restaurant EBITDA margin: ~2.4% (incl. G&A); mix and labor pressure largely offset by higher average ticket.
NA Commissary adjusted EBITDA margin: ~7.4%, +100 bps YoY on volume (pizzas sold +3%).
Market Insights
The U.S. category remains highly promotional; value messaging is critical to defend transactions, especially among smaller-basket, lower-income web customers. Aggregator channel sales grew low-teens and skew to a more affluent audience, remaining accretive to four-wall profitability. Internationally, on-trend innovation (e.g., croissant pizza) is driving media buzz and mix gains.
Consumer Behavior & Sentiment
“To meet the consumer where they are, we sharpened value with BOGO and a 50% off carryout offer; early reads show improved order trends.” — CEO Todd Penegor.
Pressure on add-on items (wings, sides, desserts) as consumers focus on center-of-plate; increased order frequency among loyalty cohorts with 40M total loyalty accounts and higher redemptions of Papa Dough. Younger cohorts show slightly higher pullback on small transactions—hence targeted value and “basket starter” carryout deals.
Strategic Initiatives
“We are aligning our system around a more comprehensive value proposition… and rebuilding our innovation pipeline with a relentless flow of innovation.” — CEO Todd Penegor.
Product & Innovation: New frameworks (form, size, platform). Examples: Papa Dippa (form) and Grand Papa (size). 2026 pipeline adds right-priced sides and pizzeria-style platforms beyond traditional QSR pizza.
Tech & Digital: Modernized apps, forthcoming site redesign, data/AI-driven CRM and personalization to lift conversion/retention.
Cost & Efficiency: Incremental $25M G&A savings targeted across 2026–2027 (non-marketing); $50M supply-chain savings by 2028.
Portfolio Optimization: Accelerating refranchising to reduce company-owned mix to mid-single-digits of NA system; pending sale of 85-store JV in 4Q (negligible NI impact; revenue mechanically lower).
Capital Allocation
Dividend: Q3 cash dividends $15.3M ($0.46/share); Q4 dividend of $0.46 declared (payable Nov 28, 2025).
Liquidity & Leverage: ~$502M available liquidity; gross leverage ~3.4x.
The Bottom Line
(1) International is carrying the load while U.S. value and mix headwinds persist
(2) tangible cost actions (supply chain, G&A) plus tech/CRM upgrades should help margins and traffic into 2026
(3) refranchising and a steady innovation cadence (sides, platforms) are pivotal to reigniting comps. Watch NA transactions, add-on attach rates, and execution on the $25M G&A / $50M supply-chain savings glidepath.
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