DOMINOS PIZZA INC

Previous wording

The 2024 and 2023 first quarters referenced herein represent the twelve-week periods ended March 24, 2024 and March 26, 2023, respectively. In this section, we discuss the results of our operations for the first quarter of 2024 as compared to the first quarter of 2023.

Current wording

The 2024 and 2023 second quarters referenced herein represent the twelve-week periods ended June 16, 2024 and June 18, 2023, respectively. The 2024 and 2023 two fiscal quarters referenced herein represent the twenty-four-week periods ended June 16, 2024 and June 18, 2023, respectively. In this section, we discuss the results of our operations for the second quarter and two fiscal quarters of 2024 as compared to the second quarter and two fiscal quarters of 2023.

Previous wording

Domino’s is the largest pizza company in the world, with more than 20,700 locations in over 90 markets around the world as of March 24, 2024, and operates two distinct service models within its stores with a significant business in both delivery and carryout. We are a highly recognized global brand, and we focus on value while serving neighborhoods locally through our large worldwide network of franchise owners and U.S. Company-owned stores through both the delivery and carryout service models. We have been selling quality, affordable food to our customers since 1960. We became “Domino’s Pizza” in 1965 and opened our first franchised store in 1967. Over more than 60 years, we have built Domino’s into one of the most widely-recognized consumer brands in the world. We believe our commitment to value, convenience, quality and new products continues to keep consumers engaged with the brand.

Current wording

Domino’s is the largest pizza company in the world, with more than 20,900 locations in over 90 markets around the world as of June 16, 2024, and operates two distinct service models within its stores with a significant business in both delivery and carryout. We are a highly recognized global brand, and we focus on value while serving neighborhoods locally through our large worldwide network of franchise owners and U.S. Company-owned stores through both the delivery and carryout service models. We have been selling quality, affordable food to our customers since 1960. We became “Domino’s Pizza” in 1965 and opened our first franchised store in 1967. Over more than 60 years, we have built Domino’s into one of the most widely-recognized consumer brands in the world. We believe our commitment to value, convenience, quality and new products continues to keep consumers engaged with the brand.

Previous wording

Operational Excellence: We are relentless in our focus on convenience, consistency and efficiency for both our and our franchisees’ customers.

Current wording

Operational Excellence: We are relentless in our focus on convenience, consistency and efficiency for our customers.

Previous wording

Renowned Value: We are committed to continuing to offer competitive pricing and personalized value for our customers.

Current wording

Renowned Value: We are committed to continuing to offer competitive pricing and personalized value for our customers that is innovative and memorable.

Previous wording

MORE Sales: Global retail sales, excluding foreign currency impact (which includes total retail sales at Company-owned and franchised stores worldwide), increased 7.3% as compared to the first quarter of 2023. U.S. retail sales increased 7.8% and international retail sales, excluding foreign currency impact, increased 6.8% as compared to the first quarter of 2023. Same store sales increased 5.6% in our U.S. stores and increased 0.9% in our international stores (excluding foreign currency impact).

Current wording

MORE Sales: Global retail sales, excluding foreign currency impact (which includes total retail sales at Company-owned and franchised stores worldwide), increased 7.2% as compared to the second quarter of 2023. U.S. retail sales increased 6.8% and international retail sales, excluding foreign currency impact, increased 7.7% as compared to the second quarter of 2023. Same store sales increased 4.8% in our U.S. stores and increased 2.1% in our international stores (excluding foreign currency impact).

Previous wording

MORE Stores: Global net store growth of 164.

Current wording

MORE Stores: Global net store growth of 175.

Previous wording

MORE Profits: Income from operations increased 18.6%.

Current wording

MORE Profits: Income from operations increased 0.4%.

Previous wording

Excluding the negative impact of foreign currency, Domino’s experienced global retail sales growth during the first quarter of 2024, driven by same store sales growth and net store growth in both our U.S. and international businesses. These factors also contributed to an increase in income from operations. Overall, we believe our global retail sales growth (excluding foreign currency impact), emphasis on technology, operations and marketing initiatives, have combined to strengthen our brand. These financial and statistical measures are described in additional detail below.

Current wording

Excluding the negative impact of foreign currency, Domino’s experienced global retail sales growth during the second quarter and two fiscal quarters of 2024, driven by same store sales growth and net store growth in both our U.S. and international businesses. These factors also contributed to an increase in income from operations. In the second quarter, these increases in income from operations were partially offset by higher general and administrative expenses primarily driven by higher labor costs as well as expenses for our Worldwide Rally that takes place every two years. Overall, we believe our global retail sales growth (excluding foreign currency impact), emphasis on technology, operations and marketing initiatives have combined to strengthen our brand. These financial and statistical measures are described in additional detail below.

Previous wording

Global retail sales is a commonly used statistical measure in the quick-service restaurant industry that is important to understanding performance. Global retail sales refers to total worldwide retail sales at Company-owned and franchised stores. We believe global retail sales information is useful in analyzing revenues because franchisees pay royalties and, in the U.S., advertising fees that are based on a percentage of franchise retail sales. We review comparable industry global retail sales information to assess business trends and to track the growth of the Domino’s Pizza brand, and we believe they are indicative of the financial health of our franchisee base. In addition, supply chain revenues are directly impacted by changes in franchise retail sales in the U.S. and Canada. As a result, sales by Domino’s franchisees have a direct effect on the Company’s profitability. Retail sales for franchised stores are reported to us by our franchisees and are not included in our revenues.

Current wording

Global retail sales is a commonly used statistical measure in the quick-service restaurant industry that is important to understanding performance. Global retail sales refers to total worldwide retail sales at Company-owned and franchised stores. We believe global retail sales information is useful in analyzing revenues because franchisees pay royalties and, in the U.S., advertising fees that are based on a percentage of franchise retail sales. We review comparable industry global retail sales information to assess business trends and to track the growth of the Domino’s Pizza brand, and we believe they are indicative of the financial health of our franchisee base. In addition, supply chain revenues are directly impacted by changes in franchise retail sales in the U.S. and Canada. As a result, sales by Domino’s franchisees have a direct effect on our profitability. Retail sales for franchised stores are reported to us by our franchisees and are not included in our revenues.

Previous wording

U.S. same store sales increased 5.6% in the first quarter of 2024, rolling over an increase in U.S. same store sales of 3.6% in the first quarter of 2023. The increase in U.S. same store sales was attributable to higher customer transaction counts in both our delivery and carryout businesses, driven primarily by our Domino’s Rewards loyalty program and other national offers. International same store sales (excluding foreign currency impact) increased 0.9% in the first quarter of 2024, rolling over an increase in international same store sales (excluding foreign currency impact) of 1.2% in the first quarter of 2023. The increase in international same store sales was attributable to a higher average ticket per transaction across our international markets.

Current wording

U.S. same store sales increased 4.8% in the second quarter of 2024, rolling over an increase in U.S. same store sales of 0.1% in the second quarter of 2023. U.S. same store sales increased 5.2% in the two fiscal quarters of 2024, rolling over an increase in U.S. same store sales of 1.8% in the two fiscal quarters of 2023. The increases in U.S. same store sales in the second quarter and two fiscal quarters of 2024 were primarily driven by higher customer transaction counts in both our delivery and carryout businesses, driven by our Domino’s Rewards loyalty program and other national offers. International same store sales (excluding foreign currency impact) increased 2.1% in the second quarter of 2024, rolling over an increase in international same store sales (excluding foreign currency impact) of 3.6% in the second quarter of 2023. International same store sales (excluding foreign currency impact) increased 1.5% in the two fiscal quarters of 2024, rolling over an increase in international same store sales (excluding foreign currency impact) of 2.3% in the two fiscal quarters of 2023. The increase in international same store sales (excluding foreign currency impact) in the second quarter of 2024 was primarily attributable to higher customer transaction counts across our international markets, while the increase in international same store sales (excluding foreign currency impact) in the two fiscal quarters of 2024 was attributable to a higher average ticket per transaction across our international markets.

Previous wording

Net store growth is a commonly used statistical measure in the quick-service restaurant industry that is important to understanding performance. Net store growth is calculated by netting gross store openings with gross store closures during the period. Transfers between Company-owned stores and franchised stores are excluded from the calculation of net store growth. As previously announced, the remaining 143 net stores in Russia were reflected as closed in the third quarter of 2023. Including those remaining closures, 153 net stores in Russia were closed in the trailing four quarters ended March 24, 2024.

Current wording

Net store growth is a commonly used statistical measure in the quick-service restaurant industry that is important to understanding performance. Net store growth is calculated by netting gross store openings with gross store closures during the period. Transfers between Company-owned stores and franchised stores are excluded from the calculation of net store growth. As previously announced, the remaining 143 net stores in Russia were reflected as closed in the third quarter of 2023 and are reflected as closures in the trailing four quarters ended June 16, 2024.

Previous wording

On August 21, 2023, our master franchisee that owned and operated Domino’s Pizza stores in Russia announced its intent to file for bankruptcy with respect to the stores in that market. Therefore, as of August 21, 2023, we have considered the stores in the Russia market to be closed and they are excluded from our ending store count as of the end of the third quarter of 2023. We have presented our statistical measure of global retail sales growth, excluding foreign currency impact, for the first quarter of 2024 excluding the impact of the retail sales from the Russia market. We believe the impact of the Russia market on our statistical measure of global retail sales growth, excluding foreign currency impact, for the first quarter of 2023 was immaterial and prior amounts have not been adjusted to conform to the current year presentation. We believe the impact of the Russia market on our statistical measure of same store sales growth for the periods presented was immaterial, and we also believe the impact of the Russia market on our consolidated statements of income related to international franchise royalties and fee revenues and general and administrative expenses for the first quarter of 2023 was immaterial.

Current wording

On August 21, 2023, our master franchisee that owned and operated Domino’s Pizza stores in Russia announced its intent to file for bankruptcy with respect to the stores in that market. Therefore, as of August 21, 2023, we have considered the stores in the Russia market to be closed and they are excluded from our ending store count as of the end of the third quarter of 2023. We have presented our statistical measure of global retail sales growth, excluding foreign currency impact, for the second quarter and two fiscal quarters of 2024 excluding the impact of the retail sales from the Russia market. We believe the impact of the Russia market on our statistical measure of global retail sales growth, excluding foreign currency impact, for the second quarter and two fiscal quarters of 2023 was immaterial and prior amounts have not been adjusted to conform to the current year presentation. We believe the impact of the Russia market on our statistical measure of same store sales growth for the periods presented was immaterial, and we also believe the impact of the Russia market on our consolidated statements of income related to international franchise royalties and fee revenues and general and administrative expenses for the second quarter and two fiscal quarters of 2023 was immaterial.

Previous wording

Revenues from U.S. Company-owned store operations increased $7.7 million, or 9.1%, in the first quarter of 2024 primarily due to higher same store sales. U.S. Company-owned same store sales increased 8.5% in the first quarter of 2024 and increased 7.3% in the first quarter of 2023.

Current wording

Revenues from U.S. Company-owned store operations increased $4.6 million, or 5.2%, in the second quarter of 2024, and increased $12.3 million, or 7.1%, in the two fiscal quarters of 2024 primarily due to higher same store sales.

Previous wording

Consolidated revenues increased $60.2 million, or 5.9%, in the first quarter of 2024 as compared to the first quarter of 2023, primarily due to higher supply chain revenues and U.S. franchise royalties and fees, as well as higher U.S. Company-owned store revenues. The increase in supply chain revenues was attributable to higher order volumes, partially offset by a shift in the relative mix of the products we sell and a decrease in our food basket pricing to stores. U.S. franchise royalties and fees benefited from an increase in fees paid by U.S. franchisees for the use of our technology platforms, in addition to higher same store sales and net store growth. U.S. Company-owned store revenues increased due to higher same store sales. These changes in revenues are described in more detail below.

Current wording

Revenues from U.S. franchise royalties and fees increased $8.3 million, or 6.0%, in the second quarter of 2024 primarily due to higher same store sales and net store growth. Additionally, U.S. franchise royalties and fees benefited from an increase in digital transactions which resulted in an increase in fees paid by our franchisees for the use of our technology platforms, but this increase was offset by a $0.04 decrease in the digital per transaction technology fee to $0.355 effectuated as of March 25, 2024. Revenues from U.S. franchise royalties and fees increased $26.0 million, or 9.5%, in the two fiscal quarters of 2024 primarily due to higher same store sales and an increase in fees paid by U.S. franchisees for the use of our technology platforms, as well as net store growth.

Previous wording

Revenues from U.S. franchise advertising decreased $2.4 million, or 2.2%, in the first quarter of 2024 primarily due to an increase in advertising incentives related to our Emergency Pizza promotion in the first quarter of 2024, as well as a temporary reduction of 0.25% to the standard 6.0% advertising contribution rate, which was effectuated at the beginning of the second quarter of 2023 (and expired at the beginning of the second quarter of 2024). Higher same store sales and an increase in the average number of U.S. franchised stores open during the period resulting from net store growth partially offset the decrease in U.S. franchise advertising revenue.

Current wording

Revenues from U.S. franchise advertising increased $13.5 million, or 12.1%, in the second quarter of 2024 primarily due to higher same store sales, the return to the standard 6.0% advertising contribution rate at the beginning of the second quarter of 2024 following the end of the temporary reduction to 5.75% which began in the second quarter of 2023, and net store growth. Revenues from U.S. franchise advertising increased $11.1 million, or 4.9%, in the two fiscal quarters of 2024 primarily due to higher same store sales and net store growth. An increase in advertising incentives related to our Emergency Pizza promotion in the first quarter of 2024 partially offset the increase in U.S. franchise advertising revenue in the two fiscal quarters of 2024.

Previous wording

Supply chain revenues increased $35.0 million, or 5.6%, in the first quarter of 2024 primarily due to higher order volumes at our U.S. franchised stores, partially offset by a shift in the relative mix of products we sell and a decrease in our food basket pricing to stores of 1.9% in the first quarter of 2024, which resulted in an estimated $10 million decrease in supply chain revenues. The food basket pricing change, a statistical measure utilized by management, is calculated as the percentage change of the food basket (including both food and cardboard products) purchased by an average U.S. store (based on average weekly unit sales) from our U.S. supply chain centers against the comparable period of the prior year. We believe this measure is important to understanding Company performance because as our food basket prices fluctuate, our revenues, cost of sales and gross margin percentages in our supply chain segment also fluctuate.

Current wording

Supply chain revenues increased $43.5 million, or 7.1%, in the second quarter of 2024 primarily due to higher order volumes, as well as an increase in our food basket pricing to stores, but was partially offset by a shift in the relative mix of products we sell. Our food basket pricing to stores increased 0.7% in the second quarter of 2024, which resulted in an estimated $3 million increase in supply chain revenues. Supply chain revenues increased $78.5 million, or 6.3%, in the two fiscal quarters of 2024 primarily due to higher order volumes, but was partially offset by a shift in the relative mix of products we sell and a decrease in our food basket pricing to stores. Our food basket pricing to stores decreased 0.6% in the two fiscal quarters of 2024, which resulted in an estimated $9 million decrease in supply chain revenues. The food basket pricing change, a statistical measure utilized by management, is calculated as the percentage change of the food basket (including both food and cardboard products) purchased by an average U.S. store (based on average weekly unit sales) from our U.S. supply chain centers against the comparable period of the prior year. We believe this measure is important to understanding Company performance because as our food basket prices fluctuate, our revenues, cost of sales and gross margin percentages in our supply chain segment also fluctuate.

Previous wording

Revenues from international franchise royalties and fees increased $2.3 million, or 3.3%, in the first quarter of 2024 primarily due to an increase in the average number of international franchised stores open during the period resulting from net store growth, as well as higher same store sales. The negative impact of changes in foreign currency exchange rates on international franchise royalty revenues of $1.4 million in the first quarter of 2024 partially offset the increase in international franchise royalties and fees. The impact of changes in foreign currency exchange rates on international franchise royalty revenues, a statistical measure utilized by management, is calculated as the difference in international franchise royalty revenues resulting from translating current year local currency results to U.S. dollars at current year exchange rates as compared to prior year exchange rates. We believe this measure is important to understanding Company performance given the significant variability in international franchise royalty revenues that can be driven by changes in foreign currency exchange rates.

Current wording

Revenues from international franchise royalties and fees increased $3.2 million, or 4.5%, in the second quarter of 2024, and increased $5.5 million, or 3.9%, in the two fiscal quarters of 2024 primarily due to an increase in the average number of international franchised stores open during the period resulting from net store growth as well as same store sales growth (excluding foreign currency impact), but was partially offset by the negative impact of changes in foreign currency exchange rates of approximately $2.7 million in the second quarter of 2024 and $4.1 million in the two fiscal quarters of 2024. The impact of changes in foreign currency exchange rates on international franchise royalty revenues, a statistical measure utilized by management, is calculated as the difference in international franchise royalty revenues resulting from translating current year local currency results to U.S. dollars at current year exchange rates as compared to prior year exchange rates. We believe this measure is important to understanding Company performance given the significant variability in international franchise royalty revenues that can be driven by changes in foreign currency exchange rates.

Previous wording

Consolidated cost of sales consists of U.S. Company-owned store and supply chain costs incurred to generate related revenues. Components of consolidated cost of sales primarily include food, labor, delivery and occupancy costs. Consolidated gross margin (which we define as revenues less cost of sales) increased $36.4 million, or 9.4%, in the first quarter of 2024 primarily due to higher global franchise royalty revenues, as well as gross margin improvement within supply chain, discussed below. Franchise revenues do not have a cost of sales component, so changes in these revenues have a disproportionate effect on gross margin. Additionally, as food basket prices fluctuate, revenues, cost of sales and gross margin percentages in our supply chain segment also fluctuate, and further, cost of sales, gross margins and gross margin percentages for our U.S. Company-owned stores also fluctuate.

Current wording

Consolidated cost of sales consists of U.S. Company-owned store and supply chain costs incurred to generate related revenues. Components of consolidated cost of sales primarily include food, labor, delivery and occupancy costs. Consolidated gross margin (which we define as revenues less cost of sales) increased $32.3 million, or 8.0%, in the second quarter of 2024, and increased $68.7 million, or 8.7%, in the two fiscal quarters of 2024 primarily due to higher global franchise royalty revenues, as well as gross margin dollar growth within supply chain, discussed below. Franchise revenues do not have a cost of sales component, so changes in these revenues have a disproportionate effect on gross margin. Additionally, as food basket prices fluctuate, revenues, cost of sales and gross margin percentages in our supply chain segment also fluctuate, and further, cost of sales, gross margins and gross margin percentages for our U.S. Company-owned stores also fluctuate.

Previous wording

As a percentage of revenues, the consolidated gross margin increased 1.3 percentage points in the first quarter of 2024. U.S. Company-owned store gross margin increased 0.6 percentage points in the first quarter of 2024. Supply chain gross margin increased 2.1 percentage points in the first quarter of 2024. These changes in gross margin are described in more detail below.

Current wording

As a percentage of revenues, the consolidated gross margin increased 0.3 and 0.8 percentage points in the second quarter and two fiscal quarters of 2024, respectively. U.S. Company-owned store gross margin decreased 1.0 percentage point in the second quarter of 2024, and decreased 0.2 percentage points in the two fiscal quarters of 2024. Supply chain gross margin increased 0.4 and 1.3 percentage points in the second quarter and two fiscal quarters of 2024, respectively. These changes in gross margin are described in more detail below.

Previous wording

U.S. Company-owned store gross margin (which does not include certain store-level costs such as royalties and advertising) increased $1.8 million, or 12.9%, in the first quarter of 2024. As a percentage of store revenues, U.S. Company-owned store gross margin increased 0.6 percentage points in the first quarter of 2024. These changes in gross margin as a percentage of revenues are discussed in additional detail below.

Current wording

U.S. Company-owned store gross margin (which does not include certain store-level costs such as royalties and advertising) decreased $0.1 million, or 0.4%, in the second quarter of 2024, and increased $1.8 million, or 5.8%, in the two fiscal quarters of 2024. As a percentage of store revenues, U.S. Company-owned store gross margin decreased 1.0 percentage point in the second quarter of 2024, and decreased 0.2 percentage points in the two fiscal quarters of 2024. These changes in gross margin as a percentage of revenues are discussed in additional detail below.

Previous wording

Labor costs increased 0.7 percentage points to 32.0% in the first quarter of 2024, driven primarily by higher wage rates in our U.S. Company-owned stores.

Current wording

Labor costs increased 0.2 percentage points to 30.9% in the second quarter of 2024 and increased 0.4 percentage points to 31.4% in the two fiscal quarters of 2024 due to higher wage rates in our U.S. Company-owned stores.

Previous wording

Sales leverage driven by higher customer transaction counts contributed to the remaining increase in U.S. Company-owned store gross margin as a percentage of revenues.

Current wording

Sales leverage driven by higher customer transaction counts partially offset the decreases in U.S. Company-owned store gross margin as a percentage of revenues described above.

Previous wording

Supply chain gross margin increased $17.0 million, or 30.3%, in the first quarter of 2024. As a percentage of supply chain revenues, the supply chain gross margin increased 2.1 percentage points in the first quarter of 2024 due to lower food costs resulting from procurement productivity and a decrease in the cost of our food basket, as well as slightly lower delivery costs.

Current wording

Supply chain gross margin increased $7.4 million, or 11.1%, in the second quarter of 2024, and increased $24.3 million, or 19.8%, in the two fiscal quarters of 2024. As a percentage of supply chain revenues, the supply chain gross margin increased 0.4 percentage points in the second quarter of 2024, and increased 1.3 percentage points in the two fiscal quarters of 2024. The increase in supply chain gross margin as a percentage of revenues in the second quarter of 2024 was primarily due to procurement productivity, partially offset by investments in supply chain labor. The increase in supply chain gross margin as a percentage of revenue in the two fiscal quarters of 2024 was primarily due to lower food costs resulting from procurement productivity and a decrease in the cost of our food basket.

Previous wording

U.S. franchise advertising expenses decreased $2.4 million, or 2.2%, consistent with the decrease in U.S. franchise advertising revenues in the first quarter of 2024. U.S. franchise advertising costs are accrued and expensed when the related U.S. franchise advertising revenues are recognized, as our consolidated not-for-profit advertising fund is obligated to expend such revenues on advertising and other activities that promote the Domino’s brand, and these revenues cannot be used for general corporate purposes.

Current wording

U.S. franchise advertising expenses increased $13.5 million, or 12.1%, in the second quarter of 2024, and increased $11.1 million, or 4.9%, in the two fiscal quarters of 2024 consistent with the increases in U.S. franchise advertising revenues. U.S. franchise advertising costs are accrued and expensed when the related U.S. franchise advertising revenues are recognized, as our consolidated not-for-profit advertising fund is obligated to expend such revenues on advertising and other activities that promote the Domino’s brand, and these revenues cannot be used for general corporate purposes.

Previous wording

During each of the first quarters of 2024 and 2023, we refranchised one U.S. Company-owned store for proceeds of less than $0.1 million. The pre-tax refranchising losses associated with the sales of the related assets and liabilities, including goodwill, were each approximately $0.1 million and were recorded in refranchising loss in our condensed consolidated statements of income.

Current wording

During each of the first and second quarters of 2024, we refranchised one U.S. Company-owned store, for proceeds of less than $0.1 million each. The pre-tax refranchising losses associated with the sale of the related assets and liabilities, including goodwill, were approximately $0.1 million each and were recorded in refranchising loss in our condensed consolidated statements of income.

Previous wording

During the first quarter of 2024, we recorded an $18.7 million unrealized loss on our investment in DPC Dash (Note 6) based on the active exchange quoted price for the equity security. We did not record any adjustments to the carrying amount in the first quarter of 2023.

Current wording

During the second quarter of 2024, we recorded an $11.4 million unrealized gain on our investment in DPC Dash (Note 6). During the two fiscal quarters of 2024, we recorded a $7.3 million unrealized loss on our investment in DPC Dash. During the second quarter of 2023, we recorded a $15.0 million unrealized loss on our investment in DPC Dash. We did not record any adjustments to the carrying amount in the first quarter of 2023. These unrealized gains and losses were based on the active exchange quoted price for the equity security.

Previous wording

Interest expense, net decreased $2.0 million, or 4.6%, in the first quarter of 2024, driven by higher interest income on our cash equivalents.

Current wording

Interest expense, net, decreased $1.9 million, or 4.5%, in the second quarter of 2024, and decreased $3.9 million or 4.6%, in the two fiscal quarters of 2024, each driven by higher interest income on our cash equivalents.

Previous wording

Our weighted average borrowing rate was 3.8% in both the first quarter of 2024 and 2023.

Current wording

Our weighted average borrowing rate was 3.8% in each of the second quarter and two fiscal quarters of 2024 and 2023.

Previous wording

Provision for income taxes decreased $4.8 million, or 16.7%, in the first quarter of 2024 due to a lower effective tax rate, partially offset by higher income before provision for income taxes. The effective tax rate decreased to 15.9% during the first quarter of 2024 as compared to 21.4% in the first quarter of 2023, driven by a 5.6 percentage point change in the impact of excess tax benefits from equity-based compensation, which are recorded as a reduction to the provision for income taxes.

Current wording

Provision for income taxes decreased $3.6 million, or 12.7%, in the second quarter of 2024 due to a lower effective tax rate, partially offset by higher income before provision for income taxes. The effective tax rate decreased to 15.0% in the second quarter of 2024 as compared to 20.8% in the second quarter of 2023, driven by a 7.0 percentage point change in the impact of excess tax benefits from equity-based compensation, which are recorded as a reduction to the provision for income taxes.

Previous wording

U.S. stores Segment Income increased $23.4 million, or 20.8%, in the first quarter of 2024, primarily due to higher U.S. franchise royalties and fees revenues, as well as the $1.8 million increase in U.S. Company-owned store gross margin, each as discussed above. U.S. franchise revenues do not have a cost of sales component, so changes in these revenues have a disproportionate effect on U.S. stores Segment Income. U.S. franchise advertising costs are accrued and expensed when the related U.S. franchise advertising revenues are recognized and had no impact on U.S. stores Segment Income.

Current wording

U.S. stores Segment Income increased $5.9 million, or 4.8%, in the second quarter of 2024 primarily due to higher U.S. franchise royalties and fees revenues, as discussed above. U.S. stores Segment Income increased $29.3 million, or 12.4%, in the two fiscal quarters of 2024 primarily due to higher U.S. franchise royalties and fees revenues, as well as the $1.8 million increase in U.S. Company-owned store gross margin, each as discussed above. U.S. franchise revenues do not have a cost of sales component, so changes in these revenues have a disproportionate effect on U.S. stores Segment Income. U.S. franchise advertising costs are accrued and expensed when the related U.S. franchise advertising revenues are recognized and had no impact on U.S. stores Segment Income. These increases were partially offset by expenses for our Worldwide Rally that takes place every two years.

Previous wording

International franchise Segment Income increased $1.2 million, or 2.1%, in the first quarter of 2024, primarily due to higher international franchise royalties and fees revenues, as discussed above. International franchise revenues do not have a cost of sales component, so changes in these revenues have a disproportionate effect on international franchise Segment Income.

Current wording

International franchise Segment Income increased $0.2 million, or 0.3%, in the second quarter of 2024, and increased $1.4 million, or 1.2%, in the two fiscal quarters of 2024 primarily due to higher international franchise royalties and fees revenues, as discussed above. International franchise revenues do not have a cost of sales component, so changes in these revenues have a disproportionate effect on international franchise Segment Income. These increases were partially offset by expenses for our Worldwide Rally that takes place every two years.

Previous wording

Historically, our receivable collection periods and inventory turn rates are faster than the normal payment terms on our current liabilities resulting in efficient deployment of working capital. We generally collect our receivables within three weeks from the date of the related sale and we generally experience multiple inventory turns per month. In addition, our sales are not typically seasonal, which further limits variations in our working capital requirements. As of March 24, 2024, we had working capital of $173.3 million, excluding restricted cash and cash equivalents of $209.8 million, advertising fund assets, restricted, of $77.0 million and advertising fund liabilities of $75.1 million. Working capital includes total unrestricted cash and cash equivalents of $203.9 million.

Current wording

Historically, our receivable collection periods and inventory turn rates are faster than the normal payment terms on our current liabilities resulting in efficient deployment of working capital. We generally collect our receivables within three weeks from the date of the related sale and we generally experience multiple inventory turns per month. In addition, our sales are not typically seasonal, which further limits variations in our working capital requirements. As of June 16, 2024, we had working capital of $279.2 million, excluding restricted cash and cash equivalents of $197.0 million, advertising fund assets, restricted, of $99.8 million and advertising fund liabilities of $97.8 million. Working capital includes total unrestricted cash and cash equivalents of $283.7 million.

Previous wording

Our primary sources of liquidity are cash flows from operations and availability of borrowings under our 2022 and 2021 Variable Funding Notes (as defined below). During the first quarter of 2024, we experienced an increase in both U.S. and international same store sales (excluding foreign currency impact) versus the comparable periods in the prior year. Additionally, both our U.S. and international businesses grew store counts during the first quarter of 2024. These factors contributed to our continued ability to generate positive operating cash flows. In addition to our cash flows from operations, we have two variable funding note facilities. These facilities include our Series 2022-1 Variable Funding Senior Secured Notes, Class A-1 Notes (the “2022 Variable Funding Notes”), which allows for advances of up to $120.0 million, as well as our Series 2021-1 Variable Funding Senior Secured Notes, Class A-1 Notes (the “2021 Variable Funding Notes,” and, together with the 2022 Variable Funding Notes, the “2022 and 2021 Variable Funding Notes”), which allows for advances of up to $200.0 million and certain other credit instruments, including letters of credit. The letters of credit primarily relate to our casualty insurance programs. As of March 24, 2024, we had no outstanding borrowings and $278.9 million of available borrowing capacity under our 2022 and 2021 Variable Funding Notes, net of letters of credit issued of $41.1 million.

Current wording

Our primary sources of liquidity are cash flows from operations and availability of borrowings under our 2022 and 2021 Variable Funding Notes (as defined below). During the second quarter and two fiscal quarters of 2024, we experienced an increase in both U.S. and international same store sales (excluding foreign currency impact) versus the comparable periods in the prior year. Additionally, both our U.S. and international businesses grew store counts during the second quarter and two fiscal quarters of 2024. These factors contributed to our continued ability to generate positive operating cash flows. In addition to our cash flows from operations, we have two variable funding note facilities. These facilities include our Series 2022-1 Variable Funding Senior Secured Notes, Class A-1 Notes (the “2022 Variable Funding Notes”), which allows for advances of up to $120.0 million, as well as our Series 2021-1 Variable Funding Senior Secured Notes, Class A-1 Notes (the “2021 Variable Funding Notes,” and, together with the 2022 Variable Funding Notes, the “2022 and 2021 Variable Funding Notes”), which allows for advances of up to $200.0 million and certain other credit instruments, including letters of credit. The letters of credit primarily relate to our casualty insurance programs. As of June 16, 2024, we had no outstanding borrowings and $278.9 million of available borrowing capacity under our 2022 and 2021 Variable Funding Notes, net of letters of credit issued of $41.1 million.

Previous wording

As of March 24, 2024, we had $158.7 million of restricted cash held for future principal and interest payments and other working capital requirements of our asset-backed securitization structure, $50.9 million of restricted cash held in a three-month interest reserve as required by the related debt agreements and $0.2 million of other restricted cash for a total of $209.8 million of restricted cash and cash equivalents. As of March 24, 2024, we also held $56.0 million of advertising fund restricted cash and cash equivalents, which can only be used for activities that promote the Domino’s brand.

Current wording

As of June 16, 2024, we had $145.9 million of restricted cash held for future principal and interest payments and other working capital requirements of our asset-backed securitization structure, $50.9 million of restricted cash held in a three-month interest reserve as required by the related debt agreements and $0.2 million of other restricted cash for a total of $197.0 million of restricted cash and cash equivalents. As of June 16, 2024, we also held $80.0 million of advertising fund restricted cash and cash equivalents, which can only be used for activities that promote the Domino’s brand.

Previous wording

As of March 24, 2024, we had approximately $4.98 billion of long-term debt, of which $4.9 million was classified as a current liability. As of March 24, 2024, our fixed rate notes from the recapitalizations we completed in 2021, 2019, 2018, 2017 and 2015 had original scheduled principal payments of $38.6 million in the remainder of 2024, $1.17 billion in 2025, $39.3 million in 2026, $1.31 billion in 2027, $811.5 million in 2028, $625.9 million in 2029, $10.0 million in 2030 and $905.0 million in 2031. However, in accordance with our debt agreements, the payment of principal on our outstanding senior notes may be suspended if our Holdco Leverage Ratio is less than or equal to 5.0x total debt to adjusted EBITDA, as defined in the related agreements, and no catch-up provisions are applicable. As of the end of the first quarter of 2024, we had a Holdco Leverage Ratio of less than 5.0x, and accordingly, did not make the previously scheduled debt amortization payment on our outstanding notes beginning in the second quarter of 2024. Accordingly, all principal amounts of our outstanding notes have been classified as long-term debt in our condensed consolidated balance sheet as of March 24, 2024.

Current wording

As of June 16, 2024, we had approximately $4.98 billion of long-term debt, of which $4.9 million was classified as a current liability. As of June 16, 2024, our fixed rate notes from the recapitalizations we completed in 2021, 2019, 2018, 2017 and 2015 had original scheduled principal payments of $38.6 million in the remainder of 2024, $1.17 billion in 2025, $39.3 million in 2026, $1.31 billion in 2027, $811.5 million in 2028, $625.9 million in 2029, $10.0 million in 2030 and $905.0 million in 2031. However, in accordance with our debt agreements, the payment of principal on our outstanding senior notes may be suspended if our Holdco Leverage Ratio is less than or equal to 5.0x total debt to adjusted EBITDA, as defined in the related agreements, and no catch-up provisions are applicable. As of the end of the first and second quarters of 2024, we had a Holdco Leverage Ratio of less than 5.0x, and accordingly, did not make the previously scheduled debt amortization payments on our outstanding notes beginning in the second quarter of 2024. Accordingly, all principal amounts of our outstanding notes have been classified as long-term debt in our condensed consolidated balance sheet as of June 16, 2024.

Previous wording

During the first quarter of 2024, we repurchased and retired 56,372 shares of our common stock under our Board of Directors-approved share repurchase program for a total of approximately $25.0 million. As of March 24, 2024, we had a total remaining authorized amount for share repurchases of approximately $1.12 billion.

Current wording

During the two fiscal quarters of 2024, we repurchased and retired 56,372 shares of our common stock under our Board of Directors-approved share repurchase program for a total of approximately $25.0 million. As of June 16, 2024, we had a total remaining authorized amount for share repurchases of approximately $1.12 billion.

Previous wording

On February 21, 2024, our Board of Directors declared a $1.51 per share quarterly dividend on our outstanding common stock for shareholders of record as of March 15, 2024, which was paid on March 29, 2024. We had approximately $54.1 million accrued for common stock dividends at March 24, 2024. Subsequent to the end of the first quarter, on April 25, 2024, our Board of Directors declared a $1.51 per share quarterly dividend on our outstanding common stock for shareholders of record as of June 14, 2024, to be paid on June 28, 2024.

Current wording

On April 25, 2024, our Board of Directors declared a $1.51 per share quarterly dividend on our outstanding common stock for shareholders of record as of June 14, 2024, which was paid on June 28, 2024. We had approximately $54.5 million accrued for common stock dividends at June 16, 2024. Subsequent to the end of the second quarter, on July 16, 2024, our Board of Directors declared a $1.51 per share quarterly dividend on our outstanding common stock for shareholders of record as of September 13, 2024, to be paid on September 30, 2024.

Previous wording

Cash provided by operating activities increased $8.8 million in the first quarter of 2024, as a result of higher net income, excluding non-cash operating activities, partially offset by the negative impact of changes in operating assets and liabilities and advertising fund assets and liabilities, restricted. Net income increased $21.1 million and non-cash adjustments increased $23.1 million, resulting in an overall increase to cash provided by operating activities in the first quarter of 2024 as compared to the first quarter of 2023 of $44.2 million. The negative impact of changes in operating assets and liabilities of $25.8 million primarily related to the timing of payments on accrued liabilities and inventory in the first quarter of 2024 as compared to the first quarter of 2023. Additionally, the $9.6 million negative impact of changes in advertising fund assets and liabilities, restricted, in the first quarter of 2024 as compared to the first quarter of 2023 was a result of payments for advertising activities outpacing receipts for advertising contributions.

Current wording

Cash provided by operating activities increased $31.9 million in the two fiscal quarters of 2024, as a result of higher net income, excluding non-cash operating activities, partially offset by the negative impact of changes in operating assets and liabilities and advertising fund assets and liabilities, restricted. Net income increased $53.7 million and non-cash adjustments increased $0.9 million, resulting in an overall increase to cash provided by operating activities in the two fiscal quarters of 2024 as compared to the two fiscal quarters of 2023 of $54.6 million. The negative impact of changes in operating assets and liabilities of $18.0 million primarily related to payments on income taxes, accrued liabilities and inventory in the two fiscal quarters of 2024 as compared to the two fiscal quarters of 2023. Additionally, the $4.7 million negative impact of changes in advertising fund assets and liabilities, restricted, in the two fiscal quarters of 2024 as compared to the two fiscal quarters of 2023 was a result of payments for advertising activities outpacing receipts for advertising contributions.

Previous wording

Cash used in investing activities was $21.5 million in the first quarter of 2024, which primarily consisted of $20.2 million of capital expenditures (driven primarily by investments in technological initiatives, supply chain centers and corporate store operations).

Current wording

Cash used in investing activities was $45.0 million in the two fiscal quarters of 2024, which primarily consisted of $43.7 million of capital expenditures (driven primarily by investments in technological initiatives, supply chain centers and corporate store operations).

Previous wording

Cash used in financing activities was $34.8 million in the first quarter of 2024, which included the repurchase of approximately $25.0 million in common stock under our Board of Directors-approved share repurchase program, repayments of long-term debt and finance lease obligations of $13.5 million, tax payments for the vesting of restricted stock of $6.7 million and dividend payments of $0.3 million. These uses of cash were partially offset by proceeds from the exercise of stock options of $10.8 million.

Current wording

Cash used in financing activities was $70.7 million in the two fiscal quarters of 2024, which included dividend payments of $53.1 million, the repurchase of approximately $25.0 million in common stock under our Board of Directors-approved share repurchase program, repayments of long-term debt and finance lease obligations of $14.8 million and tax payments for the vesting of restricted stock of $9.3 million. These uses of cash were partially offset by proceeds from the exercise of stock options of $31.5 million.