Domino’s Pizza: Announces Q1-2018 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 first quarter of fiscal 2018, comprised of strong growth in same store sales, global store counts and earnings per share. Domestic same store sales grew 8.3 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 5.0 percent during the quarter. The first quarter marked the 97th consecutive quarter of positive international same store sales growth and the 28th consecutive quarter of positive domestic same store sales growth. The Company also had first quarter global net store growth of 110 stores, comprised of 79 net new international stores and 31 net new domestic stores. First quarter diluted EPS was USD 2.00, up 58.7 percent over the prior year quarter.

During the first quarter of 2018, the Company repurchased 448’008 shares of its common stock for approximately USD 101.1 million. Additionally, on April 24, 2018, the Board of Directors declared a 55-cent per share quarterly dividend for shareholders of record as of June 15, 2018, to be paid on June 29, 2018.

«The first quarter of 2018 was another outstanding performance by our franchisees and managers across the globe», said J. Patrick Doyle, Domino’s President and Chief Executive Officer. «We delivered in every way: from global retail sales growth through strong domestic and international same store sales comps, to new stores, and through both delivery and carryout.

«As my tenure as CEO comes to a close, I am extremely proud of what we have accomplished as a global system over the past several years, and I am confident the future of Domino’s is in good hands. Our business model works, thanks to our committed and hard-working franchisees, our dedicated store managers and the visionary leaders who are among the best in the restaurant industry».

First Quarter 2018 Highlights

(dollars in millions, except per share data) First Quarter of 2018 First Quarter of 2017
Net income USD 88.8 USD 62.5
Weighted average diluted shares 44’377’509 49’706’023
Diluted earnings per share USD 2.00 USD 1.26

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  • Revenues increased USD 161.2 million, or 25.8 percent, in the first 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 82.2 million in domestic franchise advertising revenues related to contributions from domestic franchisees to Domino’s National Advertising Fund Inc. (DNAF), the Company’s consolidated not-for-profit advertising fund. In the first quarter of 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 domestic Company-owned store, domestic franchise and international franchise revenues resulting from higher same store sales and store count growth also contributed to the increase. Consolidated revenues also benefited from the positive impact of changes in foreign currency exchange rates.
  • Net Income increased USD 26.4 million, or 42.2 percent, in the first quarter of 2018. This increase was driven by an increase in global royalty revenues and higher supply chain volumes, partially offset by higher general and administrative expenses. A lower statutory tax rate resulting from the enactment of the Tax Cuts and Jobs Act of 2017 and a higher deduction related to excess tax benefits from equity-based compensation also positively impacted net income in the first quarter of 2018 through a reduction in the provision for income taxes. This increase in net income was partially offset by higher interest expense resulting from a higher average debt balance due to our recapitalization in 2017.
  • Diluted EPS was USD 2.00 for the first quarter versus USD 1.26 in the prior year quarter. This represents a 74-cent or 58.7 percent increase over the prior year quarter. This was driven by higher net income, as well as lower diluted share count, primarily resulting from share repurchases.

The table below outlines certain statistical measures utilized by the Company to analyze its performance. Refer to the Comments on Regulation G section on page four for additional details.

First Quarter of 2018 First Quarter of 2017
Same store sales growth: (versus prior year period)
Domestic Company-owned stores + 6.4 % + 14.1 %
Domestic franchise stores + 8.4 % + 9.8 %
Domestic stores + 8.3 % + 10.2 %
International stores (excluding foreign currency impact) + 5.0 % + 4.3 %
Global retail sales growth: (versus prior year period)
Domestic stores + 12.7 % + 13.4 %
International stores + 20.8 % + 13.0 %
Total + 16.8 % + 13.2 %
Global retail sales growth: (versus prior year period, excluding foreign currency impact)
Domestic stores + 12.7 % + 13.4 %
International stores + 13.4 % + 17.0 %
Total + 13.1 % + 15.2 %

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Domestic Company- owned Stores Domestic Franchise Stores Total Domestic Stores International Stores Total
Store counts:
Store count at December 31, 2017 392 5’195 5’587 9’269 14’856
Openings 5 30 35 104 139
Closings (4) (4) (25) (29)
Transfers (1) 31 31 (31)
Store count at March 25, 2018 397 5’252 5’649 9’317 14’966
First quarter 2018 net change 5 57 62 48 110
Trailing four quarters net change 2 248 250 716 966

(1)In the first quarter of 2018, the Company began managing its franchised stores in Alaska and Hawaii as part of its Domestic Stores segment. Prior to 2018, the revenues from these franchised stores were included in the Company’s International Franchise segment. Consolidated results of the Company have not been impacted by this change and prior year amounts have not been reclassified to conform to the current year presentation.

Adoption of New Accounting Guidance

The Company adopted ASC 606 during the first quarter of 2018. ASC 606 requires a gross presentation on the consolidated statement of income for franchisee contributions received by and related expenses of DNAF, the Company’s consolidated not-for-profit advertising fund. Under prior accounting guidance, the Company had presented the restricted assets and liabilities of DNAF in its consolidated balance sheets and had determined that it acted as an agent for accounting purposes with regard to franchise store contributions and disbursements. As a result, the Company historically presented the activities of DNAF net in its consolidated statement of income and consolidated statement of cash flows. Upon the adoption of ASC 606, the Company determined that there are not performance obligations associated with the franchise advertising contributions received by DNAF that are separate from our domestic royalty payment stream, and as a result, these franchise contributions and the related expenses are presented gross in the Company’s consolidated statement of income and consolidated statement of cash flows. While this change will materially impact the gross amount of reported franchise revenues and expenses, the impact is generally expected to be an offsetting increase to both revenues and expenses such that the impact on income from operations and net income is not expected to be material. Refer to the Company’s Form 10-Q for the fiscal quarter ended March 25, 2018 for additional information regarding the adoption of ASC 606.

The Company also adopted ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (ASU 2016-18), which requires that restricted cash and cash equivalents be included as components of total cash and cash equivalents as presented on the statement of cash flows. The Company historically presented changes in restricted cash and cash equivalents in the investing section of its consolidated statement of cash flows. This new guidance did not impact the Company’s financial results, but did result in a change in the presentation of restricted cash and restricted cash equivalents within the statement of cash flows. Refer to the Company’s Form 10-Q for the fiscal quarter ended March 25, 2018 for additional information regarding the adoption of ASU 2016-18.

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