Domino’s Pizza: Announces Q2-2018 Financial Results

Ann Arbor / MG. (dp) Domino’s Pizza Inc., the largest pizza company in the world based on global retail sales, announced results for the second quarter of fiscal 2018, comprised of strong growth in same store sales, global store counts and earnings per share. Domestic same store sales grew 6.9 percent during the quarter versus the year-ago period, continuing the positive sales momentum in the Company’s domestic business. The international division also posted positive results, with same store sales growth of 4.0 percent during the quarter. The second quarter marked the 98th consecutive quarter of positive international same store sales growth and the 29th consecutive quarter of positive domestic same store sales growth. The Company also had second quarter global net store growth of 156 stores, comprised of 113 net new international stores and 43 net new domestic stores.

Diluted EPS was USD 1.78 for the second quarter, which was up 34.8 percent over the Company’s diluted EPS in the prior year quarter. Diluted EPS was negatively impacted by expenses related to the Company’s recapitalization, as further discussed below. Diluted EPS, as adjusted, was USD 1.84 for the second quarter, which was up 39.4 percent over the Company’s diluted EPS in the prior year quarter.

In connection with the Company’s April 2018 recapitalization, the Company borrowed USD 825.0 million and used a portion of the proceeds to repay the remaining USD 490.1 million in outstanding principal and interest under its 2015 five-year fixed rate notes, pre-fund a portion of the principal and interest payable on the 2018 notes, pay transaction fees and expenses and repurchase and retire shares of the Company’s common stock.

During the second quarter of 2018, the Company repurchased 905,556 shares of its common stock pursuant to its Board of Directors-approved open market share repurchase program for approximately USD 219.0 million. The Company’s Board of Directors also declared a USD 0.55 per share quarterly dividend for shareholders of record as of June 15, 2018, that was paid on June 29, 2018. Additionally, on July 18, 2018, the Board of Directors declared a USD 0.55 per share quarterly dividend for shareholders of record as of September 14, 2018, to be paid on September 28, 2018.

«I’m delighted to report that our franchisees and team members continued to deliver great results across the global Domino’s system», said Ritch Allison, Domino’s Chief Executive Officer.

«Global retail sales remain strong as we see our franchisees building new stores, growing same store sales and bringing customers back again and again. Our second quarter was highlighted by yet another innovation in food delivery with the launch of «Domino’s HotSpots», of which there are now more than 200,000 across the United States. The energy, passion and operational execution of our franchisees and managers around the world inspire me as I begin my role as CEO».

Second Quarter 2018 Highlights

Revenues increased USD 150.8 million, or 24.0 percent, in the second quarter of 2018. The Company adopted Accounting Standards Codification 606, Revenue from Contracts with Customers (ASC 606) in the first quarter of 2018. This resulted in the recognition of USD 80.9 million in domestic franchise advertising revenues during the second quarter of 2018 related to contributions from domestic franchisees to Domino’s National Advertising Fund Inc. (DNAF), the Company’s consolidated not-for-profit advertising fund. In 2017, under accounting standards in effect at that time, the Company had presented these contributions net with the related disbursements in its consolidated statement of income. Refer to the «Adoption of New Accounting Guidance» section on page three for additional information related to the adoption of this accounting standard. The remaining increase in revenues was due primarily to higher supply chain volumes resulting from order and store count growth. Higher international franchise, domestic Company-owned store and domestic franchise revenues resulting from higher retail sales also contributed to the increase. Consolidated revenues also benefited from the positive impact of changes in foreign currency exchange rates.

Net Income increased USD 11.7 million, or 17.7 percent, in the second quarter of 2018. This increase was driven by higher global royalty revenues and higher supply chain volumes, partially offset by an increase in general and administrative expenses and higher net interest expense. A lower tax rate resulting from regulations under the Tax Cuts and Jobs Act of 2017 (the «2017 Tax Act») also positively impacted net income in the second quarter and two fiscal quarters of 2018 through a reduction in the provision for income taxes, but was partially offset by lower excess tax benefits from equity-based compensation as compared to the prior year.

Diluted EPS was USD 1.78 for the second quarter versus USD 1.32 in the prior year quarter. This represents a USD 0.46 or 34.8 percent increase over the prior year quarter. Diluted EPS, as adjusted, was USD 1.84 for the second quarter versus USD 1.32 in the prior year quarter, which represents a USD 0.52 or 39.4 percent increase over the prior year quarter. These increases were driven by higher net income, as well as lower diluted share count, primarily as a result of the share repurchases made during the trailing four quarters.