DOMINOS PIZZA INC

Previous 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.

Current wording

The 2024 and 2023 third quarters referenced herein represent the twelve-week periods ended September 8, 2024 and September 10, 2023, respectively. The 2024 and 2023 three fiscal quarters referenced herein represent the thirty-six-week periods ended September 8, 2024 and September 10, 2023, respectively. In this section, we discuss the results of our operations for the third quarter and three fiscal quarters of 2024 as compared to the third quarter and three fiscal quarters of 2023.

Previous 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.

Current wording

Domino’s is the largest pizza company in the world, with more than 21,000 locations in over 90 markets around the world as of September 8, 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

Two Fiscal Quarters of 2024 Highlights

Current wording

Third Quarter of 2024 Highlights

Previous wording

MORE Sales: Global retail sales, excluding foreign currency impact (which includes total retail sales at Company-owned and franchised stores worldwide), increased 7.2% 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).

Current wording

MORE Sales: Global retail sales, excluding foreign currency impact (which includes total retail sales at Company-owned and franchised stores worldwide), increased 5.1% as compared to the third quarter of 2023. U.S. retail sales increased 5.1% and international retail sales, excluding foreign currency impact, increased 5.1% as compared to the third quarter of 2023. Same store sales increased 3.0% in our U.S. stores and increased 0.8% in our international stores (excluding foreign currency impact).

Previous wording

MORE Stores: Global net store growth of 175.

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MORE Stores: Global net store growth of 72.

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MORE Profits: Income from operations increased 0.4%.

Current wording

MORE Profits: Income from operations increased 5.0%.

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Second Quarter of 2024 Highlights

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Three Fiscal Quarters of 2024 Highlights

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 two fiscal quarters of 2023. U.S. retail sales increased 7.3% and international retail sales, excluding foreign currency impact, increased 7.2% as compared to the two fiscal quarters of 2023. Same store sales increased 5.2% in our U.S. stores and increased 1.5% 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 6.5% as compared to the three fiscal quarters of 2023. U.S. retail sales increased 6.6% and international retail sales, excluding foreign currency impact, increased 6.5% as compared to the three fiscal quarters of 2023. Same store sales increased 4.5% in our U.S. stores and increased 1.1% in our international stores (excluding foreign currency impact).

Previous wording

MORE Stores: Global net store growth of 339.

Current wording

MORE Stores: Global net store growth of 411.

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MORE Profits: Income from operations increased 9.0%.

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MORE Profits: Income from operations increased 7.7%.

Previous 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.

Current wording

Excluding the negative impact of foreign currency, Domino’s experienced global retail sales growth during the third quarter and three 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 third quarter and three fiscal quarters of 2024, these increases in income from operations were partially offset by higher general and administrative expenses primarily driven by higher labor costs. Overall, we believe our global retail sales growth (excluding foreign currency impact) and our 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

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.

Current wording

U.S. same store sales increased 3.0% in the third quarter of 2024, rolling over a decrease in U.S. same store sales of 0.6% in the third quarter of 2023. U.S. same store sales increased 4.5% in the three fiscal quarters of 2024, rolling over an increase in U.S. same store sales of 1.0% in the three fiscal quarters of 2023. The increases in the U.S. in the third quarter and three fiscal quarters of 2024 were primarily driven by higher same store sales 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 0.8% in the third quarter of 2024, rolling over an increase in international same store sales (excluding foreign currency impact) of 3.3% in the third quarter of 2023. International same store sales (excluding foreign currency impact) increased 1.1% in the three fiscal quarters of 2024, rolling over an increase in international same store sales (excluding foreign currency impact) of 2.6% in the three fiscal quarters of 2023. The increases in international same store sales (excluding foreign currency impact) in the third quarter and three fiscal quarters of 2024 were driven primarily by 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 and are reflected as closures in the trailing four quarters ended June 16, 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.

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 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.

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 third quarter and three 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 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 third quarter and three fiscal quarters of 2023 was immaterial.

Previous wording

Consolidated revenues increased $73.1 million, or 7.1%, in the second quarter of 2024 as compared to the second quarter of 2023. Consolidated revenues increased $133.4 million, or 6.5%, in the two fiscal quarters of 2024 as compared to the two fiscal quarters of 2023. The increases in consolidated revenues in both the second quarter and two fiscal quarters of 2024 were primarily driven by higher supply chain and U.S. stores revenues. These changes in revenues are described in more detail below.

Current wording

Consolidated revenues increased $52.8 million, or 5.1%, in the third quarter of 2024 as compared to the third quarter of 2023. Consolidated revenues increased $186.1 million, or 6.0%, in the three fiscal quarters of 2024 as compared to the three fiscal quarters of 2023. The increases in consolidated revenues in both the third quarter and three fiscal quarters of 2024 were primarily driven by higher supply chain and U.S. stores revenues. These changes in revenues are described in more detail below.

Previous 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.

Current wording

Revenues from U.S. Company-owned store operations increased $2.9 million, or 3.4%, in the third quarter of 2024, and increased $15.2 million, or 5.9%, in the three fiscal quarters of 2024 primarily due to higher same store sales.

Previous wording

U.S. Company-owned same store sales increased 4.5% in the second quarter of 2024 and increased 5.5% in the second quarter of 2023. U.S. Company-owned same store sales increased 6.5% in the two fiscal quarters of 2024 and increased 6.4% in the two fiscal quarters of 2023.

Current wording

U.S. Company-owned same store sales increased 3.1% in the third quarter of 2024 and increased 2.9% in the third quarter of 2023. U.S. Company-owned same store sales increased 5.4% in the three fiscal quarters of 2024 and increased 5.2% in the three fiscal quarters of 2023.

Previous 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.

Current wording

Revenues from U.S. franchise royalties and fees increased $5.8 million, or 4.2%, in the third 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 $31.7 million, or 7.7%, in the three 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

U.S. franchise same store sales increased 4.8% in the second quarter of 2024 and declined 0.1% in the second quarter of 2023. U.S. franchise same store sales increased 5.2% in the two fiscal quarters of 2024 and increased 1.6% in the two fiscal quarters of 2023.

Current wording

U.S. franchise same store sales increased 3.0% in the third quarter of 2024 and declined 0.7% in the third quarter of 2023. U.S. franchise same store sales increased 4.4% in the three fiscal quarters of 2024 and increased 0.8% in the three fiscal quarters of 2023.

Previous 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.

Current wording

Revenues from U.S. franchise advertising increased $9.4 million, or 8.4%, in the third quarter of 2024 primarily due to 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, as well as higher same store sales and net store growth. An increase in brand promotions partially offset the increase in U.S. franchise advertising revenues in the third quarter of 2024. Revenues from U.S. franchise advertising increased $20.5 million, or 6.1%, in the three fiscal quarters of 2024 primarily due to higher same store sales, net store growth and 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. An increase in brand promotions partially offset the increase in U.S. franchise advertising revenues in the three fiscal quarters of 2024.

Previous 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.

Current wording

Supply chain revenues increased $33.2 million, or 5.4%, in the third quarter of 2024 primarily due to higher order volumes, as well as an increase in our food basket pricing to stores, but these increases were partially offset by a shift in the relative mix of products we sell. Our food basket pricing to stores increased 1.3% in the third quarter of 2024, which resulted in an estimated $9 million increase 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. Supply chain revenues increased $111.7 million, or 6.0%, in the three fiscal quarters of 2024 primarily due to higher order volumes, but this increase was partially offset by a shift in the relative mix of products we sell. Our food basket pricing was flat in the three fiscal quarters of 2024 as compared to the three fiscal quarters of 2023.

Previous 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.

Current wording

Revenues from international franchise royalties and fees increased $1.5 million, or 2.0%, in the third quarter of 2024, and increased $7.0 million, or 3.3%, in the three 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 these increases were partially offset by the negative impact of changes in foreign currency exchange rates of approximately $1.4 million in the third quarter of 2024 and $5.6 million in the three 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

International franchise same store sales increased 2.1% in the second quarter of 2024, and increased 3.6% in the second quarter of 2023, each excluding the impact of foreign currency exchange rates. International franchise same store sales increased 1.5% in the two fiscal quarters of 2024, and increased 2.3% in the two fiscal quarters of 2023, each excluding the impact of foreign currency exchange rates.

Current wording

International franchise same store sales increased 0.8% in the third quarter of 2024, and increased 3.3% in the third quarter of 2023, each excluding the impact of foreign currency exchange rates. International franchise same store sales increased 1.1% in the three fiscal quarters of 2024, and increased 2.6% in the three fiscal quarters of 2023, each excluding the impact of 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 $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.

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 $25.5 million, or 6.4%, in the third quarter of 2024, and increased $94.2 million, or 7.9%, in the three fiscal quarters of 2024 primarily due to higher global franchise 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 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.

Current wording

As a percentage of revenues, the consolidated gross margin increased 0.4 and 0.7 percentage points in the third quarter and three fiscal quarters of 2024, respectively. U.S. Company-owned store gross margin increased 1.0 percentage point in the third quarter of 2024, and increased 0.2 percentage points in the three fiscal quarters of 2024. Supply chain gross margin increased 0.6 percentage points in the third quarter of 2024, and increased 1.1 percentage points in the three fiscal quarters of 2024. 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) 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.

Current wording

U.S. Company-owned store gross margin (which does not include certain store-level costs such as royalties and advertising) increased $1.3 million, or 9.6%, in the third quarter of 2024, and increased $3.1 million, or 7.0%, in the three fiscal quarters of 2024. As a percentage of store revenues, U.S. Company-owned store gross margin increased 1.0 percentage point in the third quarter of 2024, and increased 0.2 percentage points in the three 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 0.2 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.

Current wording

Labor costs decreased 0.7 percentage points to 31.1% in the third quarter of 2024 due to sales leverage driven by higher customer transaction counts, as well as store level productivity. Labor costs increased 0.1 percentage points to 31.3% in the three 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 partially offset the decreases in U.S. Company-owned store gross margin as a percentage of revenues described above.

Current wording

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

Previous 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.

Current wording

Supply chain gross margin increased $7.6 million, or 12.4%, in the third quarter of 2024, and increased $32.0 million, or 17.3%, in the three fiscal quarters of 2024. As a percentage of supply chain revenues, the supply chain gross margin increased 0.6 percentage points in the third quarter of 2024, and increased 1.1 percentage points in the three fiscal quarters of 2024. The increases in supply chain gross margin as a percentage of revenues in the third quarter and three fiscal quarters of 2024 were primarily due to procurement productivity.

Previous 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.

Current wording

U.S. franchise advertising expenses increased $9.4 million, or 8.4%, in the third quarter of 2024, and increased $20.5 million, or 6.1%, in the three 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 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.

Current wording

During the third quarter and three fiscal quarters of 2024, we recorded a $26.2 million and $18.9 million unrealized gain, respectively, on our investment in DPC Dash (Note 6). During the third quarter and three fiscal quarters of 2023, we recorded a $28.2 million and $13.3 million unrealized gain, respectively, on our investment in DPC Dash. These unrealized gains were based on the active exchange quoted price for the equity security.

Previous 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.

Current wording

Interest expense, net, decreased $1.7 million, or 4.0%, in the third quarter of 2024, and decreased $5.6 million, or 4.4%, in the three 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 each of the second quarter and two fiscal quarters of 2024 and 2023.

Current wording

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

Previous 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.

Current wording

Provision for income taxes increased $9.8 million, or 35.1%, in the third quarter of 2024 due to a higher effective tax rate and higher income before provision for income taxes. The effective tax rate increased to 20.4% in the third quarter of 2024 as compared to 15.9% in the third quarter of 2023, driven by lower foreign tax credits as well as a 0.9 percentage point unfavorable change in the impact of excess tax benefits from equity-based compensation, which is recorded as a reduction to the provision for income taxes.

Previous wording

Provision for income taxes decreased $8.4 million, or 14.7%, in the two fiscal quarters 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 15.4% in the two fiscal quarters of 2024 as compared to 21.1% in the two fiscal quarters of 2023, driven by a 6.3 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 increased $1.4 million, or 1.6%, in the three fiscal quarters of 2024 due to higher income before provision for income taxes, partially offset by a lower effective tax rate. The effective tax rate decreased to 17.3% in the three fiscal quarters of 2024 as compared to 19.0% in the three fiscal quarters of 2023, driven by a 3.7 percentage point favorable change in the impact of excess tax benefits from equity-based compensation, which is recorded as a reduction to the provision for income taxes.

Previous 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.

Current wording

U.S. stores Segment Income increased $8.2 million, or 6.8%, in the third quarter of 2024 primarily due to higher U.S. franchise royalties and fees revenues, as well as the $1.3 million increase in U.S. Company-owned store gross margin, each as discussed above. U.S. stores Segment Income increased $37.6 million, or 10.5%, in the three fiscal quarters of 2024 primarily due to higher U.S. franchise royalties and fees revenues, as well as the $3.1 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.

Previous wording

Supply chain Segment Income increased $5.0 million, or 8.3%, in the second quarter of 2024 primarily due to the $7.4 million increase in supply chain gross margin, as discussed above. Supply chain Segment Income increased $21.0 million, or 19.4%, in the two fiscal quarters of 2024 primarily due to the $24.3 million increase in supply chain gross margin, as discussed above.

Current wording

Supply chain Segment Income increased $5.9 million, or 10.7%, in the third quarter of 2024 primarily due to the $7.6 million increase in supply chain gross margin, as discussed above. Supply chain Segment Income increased $26.9 million, or 16.4%, in the three fiscal quarters of 2024 primarily due to the $32.0 million increase in supply chain gross margin, as discussed above.

Previous 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.

Current wording

International franchise Segment Income increased $0.9 million, or 1.5%, in the third quarter of 2024, and increased $2.3 million, or 1.3%, in the three 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. The increase in international franchise Segment Income in the three fiscal quarters of 2024 was 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 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.

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 September 8, 2024, we had working capital of $174.4 million, excluding restricted cash and cash equivalents of $185.4 million, advertising fund assets, restricted, of $111.1 million and advertising fund liabilities of $109.2 million. Working capital includes total unrestricted cash and cash equivalents of $189.1 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 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.

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 third quarter and three 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 third quarter and three 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 September 8, 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.