Domino's Pizza® Announces First Quarter 2020 Financial Results and Business Update
Global retail sales growth (excluding foreign currency impact) of 5.9%
U.S. same store sales growth of 1.6%
International same store sales growth of 1.5%
Global net store growth of 69
Diluted EPS up 39.5% to $3.07
During the quarter, the Company opened 178 gross new stores and 69 net new stores, comprised of 30 net new
First quarter diluted EPS was
"In a time of unprecedented change in our industry, I am pleased to report that Domino's is in a very strong financial position, both at the brand and franchisee levels," said
First Quarter Highlights (Unaudited):
(dollars in millions, except per share data) |
First Quarter of 2020 |
First Quarter of 2019 |
||||||
Net income |
$ |
121.6 |
$ |
92.7 |
||||
Weighted average diluted shares |
39,633,404 |
42,202,429 |
||||||
Diluted EPS |
$ |
3.07 |
$ |
2.20 |
- Revenues increased
$37.1 million , or 4.4%, in the first quarter of 2020. This increase was primarily due to an increase in global store counts during the trailing four quarters as well asU.S. and international same store sales growth, resulting in higher supply chain andU.S. and international franchise revenues. The increases in revenues were partially offset by lowerU.S. Company -owned store revenues resulting from the previously disclosed sale of 59U.S. Company -owned stores to certain of the Company's existingU.S. franchisees during the second quarter of 2019. - Net Income increased
$29.0 million , or 31.2%, in the first quarter of 2020. This increase was primarily driven by a lower effective tax rate as compared to the prior year quarter as a result of higher tax benefits from equity-based compensation. Higher royalty revenues fromU.S. and international franchised stores and higher supply chain volumes also benefited net income. The increase in net income was partially offset by higher net interest expense as a result of a higher average debt balance. - Diluted EPS was
$3.07 for the first quarter versus$2.20 in the prior year quarter. This represents a$0.87 , or 39.5%, increase over the prior year quarter. The increase in diluted EPS was driven by higher net income, as well as lower diluted share count, primarily resulting from the Company's share repurchases during the trailing four quarters.
The table below outlines certain statistical measures utilized by the Company to analyze its performance (unaudited). Refer to the Comments on Regulation G section on page four for additional details.
First Quarter of 2020 |
First Quarter of 2019 |
|||||||
Same store sales growth: (versus prior year period) |
||||||||
|
+ 3.9 |
% |
+ 2.1 |
% |
||||
|
+ 1.5 |
% |
+ 4.1 |
% |
||||
|
+ 1.6 |
% |
+ 3.9 |
% |
||||
International stores (excluding foreign currency impact) |
+ 1.5 |
% |
+ 1.8 |
% |
||||
Global retail sales growth: (versus prior year period) |
||||||||
|
+ 4.9 |
% |
+7.9 |
% |
||||
International stores |
+ 3.9 |
% |
+1.5 |
% |
||||
Total |
+ 4.4 |
% |
+4.6 |
% |
||||
Global retail sales growth: (versus prior year period, excluding foreign currency impact) |
||||||||
|
+ 4.9 |
% |
+7.9 |
% |
||||
International stores |
+ 6.8 |
% |
+9.1 |
% |
||||
Total |
+ 5.9 |
% |
+8.5 |
% |
owned Stores |
Stores |
Total |
International Stores |
Total |
||||||||||||||||
Store counts: |
||||||||||||||||||||
Store count at |
342 |
5,784 |
6,126 |
10,894 |
17,020 |
|||||||||||||||
Openings |
4 |
31 |
35 |
143 |
178 |
|||||||||||||||
Closings (1) (2) |
(1) |
(4) |
(5) |
(104) |
(109) |
|||||||||||||||
Store count at |
345 |
5,811 |
6,156 |
10,933 |
17,089 |
|||||||||||||||
First quarter 2020 net store growth |
3 |
27 |
30 |
39 |
69 |
|||||||||||||||
Trailing four quarters net store growth (3) |
12 |
241 |
253 |
722 |
975 |
(1) |
Temporary store closures due to COVID-19 are not treated as store closures and affected stores are included in the |
(2) |
Unrelated to COVID-19, the |
(3) |
Trailing four quarters net store growth does not include the effect of transfers. In the second quarter of 2019, the Company sold a total of 59 |
Conference Call Information
The Company will file its Quarterly Report on Form 10-Q this morning. As previously announced,
Company Withdraws Two- to Three-Year Outlook
Due to the current uncertainty surrounding the global economy and the Company's business operations considering COVID-19, the Company is withdrawing its two-to three-year outlook for global retail sales growth,
Share Repurchases
During the first week of the first quarter of 2020, the Company repurchased and retired 271,064 shares of its common stock in open market repurchases under its Board of Directors-approved share repurchase program for approximately
Liquidity
As of
$200.8 million of unrestricted cash and cash equivalents;$4.10 billion in total debt; and$158.6 million of available borrowings under its$200.0 million variable funding note facility, net of letters of credit issued of$41.4 million . As previously disclosed, subsequent to the first quarter, the Company borrowed$158.0 million under its variable funding note facility.
Net cash provided by operating activities was
(in thousands) |
First Quarter of 2020 |
|||
Net cash provided by operating activities |
$ |
95,358 |
||
Capital expenditures |
(17,467) |
|||
Free cash flow |
$ |
77,891 |
Preliminary Estimated Business Update for the Available Periods of the Second Quarter of 2020 (Unaudited)
Given the unprecedented impact of the COVID-19 pandemic on the Company's business and the restaurant industry, the Company has included the below preliminary estimates of retail sales growth and same store sales growth for the first four weeks of the second quarter of 2020 for its
Weeks One - Four |
|
Same store sales growth: (versus prior year period) |
|
|
+10.6% |
|
+6.9% |
|
+7.1% |
Retail sales growth: (versus prior year period) |
|
|
+10.7% |
The Company has included the below preliminary estimates of retail sales growth and same store sales growth for the first three weeks of the second quarter of 2020 for its international business.
Weeks One - Three |
|
Same store sales growth: (versus prior year period) |
|
International stores (excluding foreign currency impact) |
(3.2)% |
Retail sales growth: (versus prior year period) |
|
International stores |
(18.9)% |
Retail sales growth: (versus prior year period, excluding foreign currency impact) |
|
International stores |
(13.2)% |
As of
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" and "Retail sales" to refer to total retail sales at Company-owned and franchise stores. The Company believes 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 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" and "Retail sales growth" are calculated as the change of
The Company uses "Same store sales growth," which is calculated for a given period by including only sales from stores that had sales in the comparable weeks of both years. International same store sales growth is calculated similarly to
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
Founded in 1960,
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SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995:
This press release contains various forward-looking statements about the Company within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Act") that are based on current management expectations that involve substantial risks and uncertainties which could cause actual results to differ materially from the results expressed in, or implied by, these forward-looking statements. The following cautionary statements are being made pursuant to the provisions of the Act and with the intention of obtaining the benefits of the "safe harbor" provisions of the Act. You can identify forward-looking statements by the use of words such as "anticipates," "believes," "could," "should," "estimates," "expects," "intends," "may," "will," "plans," "predicts," "projects," "seeks," "approximately," "potential," "outlook" and similar terms and phrases that concern our strategy, plans or intentions, including references to assumptions. These forward-looking statements address various matters including information concerning future results of operations and business strategy, our anticipated profitability, estimates in same store sales growth, the growth of our
TABLES TO FOLLOW
|
||||||||||||||||
Condensed Consolidated Statements of Income |
||||||||||||||||
(Unaudited) |
||||||||||||||||
Fiscal Quarter Ended |
||||||||||||||||
2020 |
% of Total Revenues |
2019 |
% of Total Revenues |
|||||||||||||
(In thousands, except per share data) |
||||||||||||||||
Revenues: |
||||||||||||||||
|
$ |
102,326 |
$ |
123,450 |
||||||||||||
|
104,746 |
96,708 |
||||||||||||||
Supply chain |
512,700 |
472,100 |
||||||||||||||
International franchise royalties and fees |
57,496 |
54,584 |
||||||||||||||
|
95,834 |
89,121 |
||||||||||||||
Total revenues |
873,102 |
100.0 |
% |
835,963 |
100.0 |
% |
||||||||||
Cost of sales: |
||||||||||||||||
|
79,388 |
95,540 |
||||||||||||||
Supply chain |
453,557 |
418,134 |
||||||||||||||
Total cost of sales |
532,945 |
61.0 |
% |
513,674 |
61.4 |
% |
||||||||||
Operating margin |
340,157 |
39.0 |
% |
322,289 |
38.6 |
% |
||||||||||
General and administrative |
88,489 |
10.2 |
% |
89,664 |
10.7 |
% |
||||||||||
|
95,834 |
11.0 |
% |
89,121 |
10.7 |
% |
||||||||||
Income from operations |
155,834 |
17.8 |
% |
143,504 |
17.2 |
% |
||||||||||
Interest expense, net |
(38,538) |
(4.4) |
% |
(34,361) |
(4.1) |
% |
||||||||||
Income before (benefit) provision for income taxes |
117,296 |
13.4 |
% |
109,143 |
13.1 |
% |
||||||||||
(Benefit) provision for income taxes |
(4,306) |
(0.5) |
% |
16,493 |
2.0 |
% |
||||||||||
Net income |
$ |
121,602 |
13.9 |
% |
$ |
92,650 |
11.1 |
% |
||||||||
Earnings per share: |
||||||||||||||||
Common stock – diluted |
$ |
3.07 |
$ |
2.20 |
|
||||||
Condensed Consolidated Balance Sheets |
||||||
(Unaudited) |
||||||
2020 |
2019 |
|||||
(In thousands) |
||||||
Assets |
||||||
Current assets: |
||||||
Cash and cash equivalents |
$ |
200,801 |
$ |
190,615 |
||
Restricted cash and cash equivalents |
189,370 |
209,269 |
||||
Accounts receivable, net |
219,199 |
210,260 |
||||
Inventories |
49,010 |
52,955 |
||||
Prepaid expenses and other |
26,025 |
19,129 |
||||
Advertising fund assets, restricted |
109,969 |
105,389 |
||||
Total current assets |
794,374 |
787,617 |
||||
Property, plant and equipment, net |
240,717 |
242,881 |
||||
Operating lease right-of-use assets |
228,940 |
228,785 |
||||
Other assets |
125,845 |
122,809 |
||||
Total assets |
$ |
1,389,876 |
$ |
1,382,092 |
||
Liabilities and stockholders' deficit |
||||||
Current liabilities: |
||||||
Current portion of long-term debt |
$ |
43,390 |
$ |
43,394 |
||
Accounts payable |
94,502 |
111,101 |
||||
Operating lease liabilities |
36,914 |
33,318 |
||||
Advertising fund liabilities |
106,832 |
101,921 |
||||
Other accrued liabilities |
170,531 |
164,097 |
||||
Total current liabilities |
452,169 |
453,831 |
||||
Long-term liabilities: |
||||||
Long-term debt, less current portion |
4,061,198 |
4,071,055 |
||||
Operating lease liabilities |
199,304 |
202,731 |
||||
Other accrued liabilities |
69,395 |
70,234 |
||||
Total long-term liabilities |
4,329,897 |
4,344,020 |
||||
Total stockholders' deficit |
(3,392,190) |
(3,415,759) |
||||
Total liabilities and stockholders' deficit |
$ |
1,389,876 |
$ |
1,382,092 |
|
||||||||
Condensed Consolidated Statements of Cash Flows |
||||||||
(Unaudited) |
||||||||
Fiscal Quarter Ended |
||||||||
2020 |
2019 |
|||||||
(In thousands) |
||||||||
Cash flows from operating activities: |
||||||||
Net income |
$ |
121,602 |
$ |
92,650 |
||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
Depreciation and amortization |
14,032 |
13,790 |
||||||
Loss on sale/disposal of assets |
306 |
149 |
||||||
Amortization of debt issuance costs |
1,291 |
1,101 |
||||||
Provision for deferred income taxes |
702 |
1,467 |
||||||
Non-cash compensation expense |
4,914 |
4,608 |
||||||
Excess tax benefits from equity-based compensation |
(30,449) |
(8,663) |
||||||
Provision for losses and accounts and notes receivable |
1,589 |
94 |
||||||
Changes in operating assets and liabilities |
(23,119) |
1,974 |
||||||
Changes in advertising fund assets and liabilities, restricted |
4,490 |
(10,172) |
||||||
Net cash provided by operating activities |
95,358 |
96,998 |
||||||
Cash flows from investing activities: |
||||||||
Capital expenditures |
(17,467) |
(12,222) |
||||||
Other |
(426) |
262 |
||||||
Net cash used in investing activities |
(17,893) |
(11,960) |
||||||
Cash flows from financing activities: |
||||||||
Repayments of long-term debt and finance lease obligations |
(10,849) |
(48,968) |
||||||
Proceeds from exercise of stock options |
10,105 |
4,537 |
||||||
Purchases of common stock |
(79,590) |
(8,144) |
||||||
Tax payments for restricted stock upon vesting |
(1,796) |
(2,467) |
||||||
Other |
72 |
(90) |
||||||
Net cash used in financing activities |
(82,058) |
(55,132) |
||||||
Effect of exchange rate changes on cash |
(961) |
124 |
||||||
Change in cash and cash equivalents, restricted cash and cash equivalents |
(5,554) |
30,030 |
||||||
Cash and cash equivalents, beginning of period |
190,615 |
25,438 |
||||||
Restricted cash and cash equivalents, beginning of period |
209,269 |
166,993 |
||||||
Cash and cash equivalents included in advertising fund assets, restricted, beginning of period |
84,040 |
44,988 |
||||||
Cash and cash equivalents, restricted cash and cash equivalents and cash and cash equivalents included in advertising fund assets, restricted, beginning of period |
483,924 |
237,419 |
||||||
Cash and cash equivalents, end of period |
200,801 |
83,114 |
||||||
Restricted cash and cash equivalents, end of period |
189,370 |
150,055 |
||||||
Cash and cash equivalents included in advertising fund assets, restricted, end of period |
88,199 |
34,280 |
||||||
Cash and cash equivalents, restricted cash and cash equivalents and cash and cash equivalents included in advertising fund assets, restricted, end of period |
$ |
478,370 |
$ |
267,449 |
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SOURCE
Tim McIntyre, Executive Vice President, Communication, Investor Relations and Legislative Affairs, (734) 930-3563