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PJ

PAPA JOHNS INTERNATIONAL INC (PZZA)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 was mixed: revenue was flat year-over-year at $508.2M while adjusted EBITDA declined to $47.8M; adjusted EPS of $0.32 missed consensus, with North America comps down amid a highly promotional U.S. QSR backdrop, offset by strong International comps (+7%) .
  • Material guidance reset: system-wide sales growth lowered to 1–2% (from 2–5%), North America comps to down 2–2.5% (from flat to up 2%), adjusted EBITDA to $190–$200M (from $200–$220M), while International comps were raised to 5–6% (from 2–4%); D&A increased and an adjusted D&A metric introduced .
  • Management identified at least $25M of G&A savings (FY26–FY27) on top of ≥$50M supply chain savings by FY2028 (≈100 bps four-wall EBITDA uplift), and will accelerate refranchising to mid-single-digit company ownership in NA over two years .
  • Strategic narrative: sharpen value proposition (e.g., 50% off carryout pulse), rebuild innovation pipeline (Papa Dippa, Grand Papa), modernize tech stack (new mobile apps, website), and strengthen international transformation; near-term softness likely persists into 2026 in NA .
  • Stock reaction catalysts: guidance cut and NA sales pressure weigh on sentiment; refranchising acceleration, cost-savings path, and strong international momentum provide medium-term offsets .

What Went Well and What Went Wrong

What Went Well

  • International delivered 7.1% comparable sales growth, with strength across Europe, Middle East, and APAC; UK comps were high single-digit and momentum continued into Q4 .
  • Digital and loyalty foundations strengthened: modernized mobile apps increased conversion; total loyalty accounts reached ~40 million (+~1M in three months), supporting repeat frequency .
  • Cost initiatives advanced: NA commissary adjusted EBITDA margin improved ~100 bps (to 7.4%) and management reiterated ≥$50M supply chain savings by 2028 (≈100 bps restaurant-level uplift) .

What Went Wrong

  • North America comps fell 2.7%; weakness concentrated in lower-income small-ticket web customers and sides/desserts, while core pizza units rose but mix shifted to medium/less toppings, suppressing average ticket .
  • Q3 adjusted EPS ($0.32) and revenue ($508.2M) missed consensus; adjusted EBITDA contracted on higher G&A including ~$4M incremental marketing and ~$2M incentive comp .
  • Guidance lowered broadly (system-wide sales, NA comps, adjusted EBITDA, D&A), with management noting softness persisted into October and a more promotional U.S. backdrop likely into 2026 .

Financial Results

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$518.3 $529.2 $508.2
Diluted EPS ($)$0.27 $0.28 $0.13
Adjusted Diluted EPS ($)$0.36 $0.41 $0.32
Adjusted EBITDA ($USD Millions)$49.6 $52.6 $47.8
Net Income ($USD Millions)$9.3 $9.7 $4.5
MetricQ3 2024Q2 2025Q3 2025 ActualQ3 2025 Consensus
Revenue ($USD Millions)$506.8 $529.2 $508.2 $524.7*
Diluted EPS ($)$1.27 $0.28 $0.13 —
Adjusted Diluted EPS ($)$0.43 $0.41 $0.32 $0.41*

Values retrieved from S&P Global.*

Segment performance (Q3):

SegmentRevenue from External Customers ($USD Millions)Adj. EBITDA ($USD Millions)Q3 2024 RevenueQ3 2024 Adj. EBITDA
Domestic Company-Owned Restaurants$165.2 $3.9 $168.7 $4.4
North America Franchising$33.8 $25.5 $33.8 $26.7
North America Commissaries$209.4 $19.2 $210.4 $16.7
International$44.7 $5.3 $39.1 $4.1

KPIs:

KPIQ3 2025Q3 2024
Global system-wide restaurant sales ($USD Billions)$1.21 —
Total comparable sales growth (decline)-0.2% (ex-FX) -4.9% (ex-FX)
North America comparable sales-2.7% (ex-FX) -5.6% (ex-FX)
International comparable sales+7.1% (ex-FX) -2.8% (ex-FX)
NA system-wide sales growth-1.1% (ex-FX) -4.0% (ex-FX)
International system-wide sales growth+10.3% (ex-FX) 0.0% (ex-FX)
Net restaurants opened (Q3)+5 system-wide (18 NA opens, 27 Intl; 40 total closures) —

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
System-wide salesFY2025Up 2% to 5% Up 1% to 2% Lowered
North America comparable salesFY2025Flat to Up 2% Down 2% to 2.5% Lowered
International comparable salesFY2025Up 2% to 4% Up 5% to 6% Raised
North America gross openingsFY202585 to 115 85 to 95 Lowered
International gross openingsFY2025180 to 200 180 to 200 Maintained
Adjusted EBITDAFY2025$200–$220M $190–$200M Lowered
Depreciation & amortizationFY2025$70–$75M $80–$95M Raised
Adjusted D&A (new)FY2025N/A$70–$75M New
Interest expenseFY2025$40–$45M $40–$42M Narrowed lower
Effective tax rateFY202528%–32% 27%–30% Lowered
Capital expendituresFY2025$75–$85M $75–$85M Maintained
DividendQ4 2025—$0.46 per share (declared Oct 29; payable Nov 28) Maintained run-rate

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2 2025)Current Period (Q3 2025)Trend
AI/Technology & DigitalAnnounced Google Cloud partnership; loyalty enhancement drove frequency; CRM engagement up; beta testing omnichannel, aim for voice AI; ~70% sales via own digital Modernized mobile apps launched; higher conversion; website redesign expected in Dec; deeper CRM engagement; personalization ambitions Execution progressing; benefits starting
Supply Chain & Margins≥$50M supply chain savings by 2028; 40% realized by 2026; ~100 bps four-wall uplift; NA commissary margins improved ≥$50M reaffirmed; $20M expected in 2026; NA commissary margin +100 bps; pursuing additional efficiencies Continued progress
Value Proposition & PromotionsBarbell strategy; Cheddar Crust, Shaq-a-Roni; social activations; incremental marketing spend ($7M Q1, $9M Q2) Pulsed BOGO offers; launched 50% off carryout; achieved highest NA sales day on Halloween; ~$4M incremental marketing in Q3 Leaning harder into value
Product InnovationPipeline rebuilding; croissant pizza in Dubai; oven calibration to unlock new forms Papa Dippa (form), Grand Papa (size); reimagined sides at accessible price points; Perfect Bake project supports ops Broader 2026 pipeline
Regional TrendsUK transformation progressing; China strategic closures; intl comps +4% in Q2 UK comps high single-digit; intl comps +7.1% with broad-based strength; India expansion Strengthening
Refranchising & PortfolioAgreement to sell JV stake (85 restaurants) by Q4; refranchising opportunities; development commitments attached Accelerating refranchising over 2 years to mid-single-digit company ownership; 85-restaurant JV sale to close Q4 Accelerated

Management Commentary

  • “We are sharpening our value proposition and rebuilding our innovation pipeline… leveraging our competitive advantages of quality, craftsmanship, and freshness at an accessible price.” — Todd Penegor, President & CEO .
  • “We have identified at least $25 million of savings outside of marketing to be captured across fiscal years 2026 and 2027… and we expect there to be additional efficiency opportunities.” — Todd Penegor .
  • “North American commissary segment adjusted EBITDA margins were 7.4% in the third quarter, an improvement of 100 basis points… we sold 3% more pizzas versus last year.” — Ravi Thanawala, CFO .
  • “We are also announcing… accelerating our refranchising program over the next two years… expect to reduce our company restaurant ownership to a mid-single-digit percent of the North American system.” — Todd Penegor .

Q&A Highlights

  • Refranchising acceleration: management sees strong buyer interest at “good multiples”; plan paced to reach mid-single-digit company ownership; 85-restaurant JV sale expected by Q4 to a well-capitalized franchisee .
  • G&A savings: at least $25M (true G&A, not marketing) across FY26–FY27; ~half expected in 2026; none embedded in 2025 guide .
  • Value/carryout tactics: 50% off carryout positioned as “basket starter” to capture small-ticket customers; national pulses (BOGO) improved orders; balance value with four-wall economics .
  • Consumer cohorts: pressure in small transaction occasion and younger cohort; aggregator channel up low-teens net sales and accretive; >50% of sales from >$100k income cohort; loyalty covers nearly half business .
  • Innovation cadence/complexity: retiring lagging side items to free capacity; design for operational simplicity; training to avoid rhythm breakers; 2026 pipeline expands TAM .

Estimates Context

  • Q3 2025 results vs consensus: adjusted EPS $0.32 vs $0.41* (miss by $0.09); revenue $508.2M vs $524.7M* (miss by ~$16.6M, ~3%) .
  • Prior quarters context: Q1 adjusted EPS $0.36 vs $0.346* (beat); Q2 adjusted EPS $0.41 vs $0.340* (beat); Q1 revenue $518.3M vs $514.0M* (beat), Q2 revenue $529.2M vs $516.1M* (beat).
    Values retrieved from S&P Global.*
MetricQ1 2025Q2 2025Q3 2025
Adjusted EPS – Actual vs Consensus ($)0.36 vs 0.346* 0.41 vs 0.340* 0.32 vs 0.407*
Revenue – Actual vs Consensus ($USD Millions)518.3 vs 514.0* 529.2 vs 516.1* 508.2 vs 524.7*
EPS Estimates (# of est.)13*14*15*
Revenue Estimates (# of est.)14*14*13*

Key Takeaways for Investors

  • Near-term: Expect estimate cuts to reflect lowered FY2025 guidance (system-wide sales, NA comps, adjusted EBITDA) and NA demand softness; risk to Q4 revenue from JV sale (~$5M reduction in Q4 revenues including eliminations) .
  • Cost actions: The path to ≥$50M supply chain savings (20% realized in 2026) plus ≥$25M G&A reductions supports margin repair and multiple re-rating when NA demand stabilizes .
  • Strategy mix: Increased promotional intensity (50% off carryout, BOGO pulses) aims to recapture small-ticket transactions; monitor four-wall margin preservation amid value messaging .
  • International: Sustained positive comps and UK transformation momentum provide diversification; elevated closures in certain markets (e.g., China) are strategic and should improve market health .
  • Refranchising: Accelerated shift to franchise model reduces capital intensity, enhances local-market agility, and could improve consolidated volatility; watch development commitments and valuation multiples .
  • Digital/loyalty: New apps and CRM personalization, coupled with ~40M loyalty accounts, are structural positives for frequency and mix; expect incremental benefits as website redesign launches in December .
  • Non-GAAP adjustments: Q3 included $6.1M accelerated software depreciation tied to new omnichannel platforms, international restructuring costs, and “other costs”; these items shaped adjusted results and carry limited ongoing impact .

Appendix: Additional Data Points

  • Global system-wide restaurant sales: $1.21B (+2% ex-FX); NA $879.8M (-1% ex-FX), International $331.5M (+10% ex-FX) .
  • Dividend: $0.46 per share declared Oct 29 (paid Nov 28) .
  • Liquidity & leverage: total available liquidity $502M; gross leverage 3.4x (per Q3 call) .
  • Free cash flow YTD: $59.2M vs $9.0M prior year, driven by timing of National Marketing Fund payments, working capital, lower cash taxes, and lower international transformation spend .