Papa John's International Reports Q2 2026 Results: Full Earnings Call Transcript

Papa John's International (NASDAQ: PZZA ) reported second-quarter financial results on Thursday. The transcript from the company's second-quarter earnings call has been provided below. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

View the webcast at Summary Papa John's International reported a 5% decline in global system-wide restaurant sales, with international sales growth offset by declining North American sales. The company is not pursuing a sale but is focusing on a transformation plan to improve long-term value through digital investments, restaurant optimization, and supply chain savings. Management announced several leadership changes and is investing in AI technologies to enhance customer experiences, with the Papa Rewards program surpassing 42 million members. 3% decline attributed to reduced order volume, although loyalty customers outperformed non-loyalty customers.

For 2026, Papa John's expects a 2% to 4% decline in global sales and adjusted EBITDA of $180-$190 million, including an $18 million investment to support franchisees. The company is focusing on creating a balanced value proposition with targeted promotions rather than extreme discounting, and plans further investment in technology and supply chain improvements. Papa John's is optimizing its restaurant portfolio by closing underperforming locations to improve the financial health of remaining outlets. Marketing strategies include enhancing local co-op advertising, leveraging new technology platforms for personalized customer engagement, and partnering with aggregators.

The company suspended its quarterly dividend to increase investment flexibility for strategic transformation efforts. Full Transcript OPERATOR Good day, and thank you for standing by. Welcome to the Papa John's International second quarter 2026 conference call and webcast. At this time, all participants are in a listen-only mode.

After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 again.

Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Heather Hollander, Senior Vice President, Investor Relations, FP&A and Strategy. Please go ahead. Heather Hollander, Senior Vice President, Investor Relations, FP&A and Strategy Good morning, and welcome to our second quarter 2026 earnings conference call.

com under the News and Events tab, or by contacting our Investor Relations department. Joining me on the call this morning are Todd Penegor, President and Chief Executive Officer, and Chris Collins, Interim Chief Financial Officer and Senior Vice President, Corporate Finance and Principal Accounting Officer. Comments made during this call will include forward-looking statements within the meaning of the federal securities laws. These statements may involve risks and uncertainties that could cause actual results to differ materially from these statements.

Forward-looking statements should be considered in conjunction with the cautionary statements in our earnings release and the risk factors included in our SEC filings. In addition, please refer to our earnings release and our investor relations website for the required reconciliation of non-GAAP financial measures discussed on today's call. Lastly, we ask that you please limit your questions to one question and one follow-up. And now I'll turn the call over to Todd.

Todd Penegor, President & CEO Thank you, Heather, and good morning, everyone. Today we will discuss our second quarter financial results and provide an update on our outlook for the remainder of the year. Before we get to this, I'd like to briefly address the ongoing media speculation regarding Papa John's International and a potential sale of the company. The Board and the management team are committed to maximizing value for our shareholders, and consistent with that commitment, we conducted a comprehensive review of our strategy over the past 18 months.

We thoroughly explored whether alternative opportunities were available, including a potential sale of the business. We have been well advised in these efforts, supported by our financial and legal advisors. This work has made clear that for Papa John's International, the value creation opportunity that is actionable is the execution of our transformation plan. Of course, the Board remains open to other alternatives to maximize value.

However, these options need to be actionable, provide certainty, and serve the best interests of our shareholders. We believe it is in the best interest of the company and all of our shareholders to focus 100% of our attention on Papa John's International's transformation and the initiatives we are discussing today. In the second quarter, we continued to advance our transformation while strengthening the foundation for long-term growth and value creation.

We are seeing encouraging signs of progress, including a growing and highly engaged Papa Rewards membership, meaningful progress on initiatives to improve restaurant-level economics through supply chain savings and restaurant portfolio optimization, and early results from AI and digital investments that are enhancing the customer ordering experience. At the same time, we felt the impacts of the softer consumer backdrop and highly promotional QSR environment, which have continued to challenge our financial performance. And while our focus is unrelenting, it's clear that our transformation is taking longer than expected.

We know that we must execute better and move faster, and as we look ahead, we're making adjustments where needed across our strategic priorities and leadership team to improve results and position Papa John's International for 2027 and beyond. To lead the changes we're making and ensure we drive high performance across the enterprise, we announced several key management changes today. Chris Lyn-Sue, who serves as Senior Vice President, General Manager of International, has been named Global Chief Marketing Officer. Jenna Bromberg is departing the company to pursue other opportunities as Chris Lyn-Sue assumes this role.

Chris Phylactou, who serves as Managing Director, UK, Europe and Canada, has been named Senior Vice President, International. In this role he will be responsible for leading our highly successful international business. Finally, John Mater, who serves as Senior Vice President, General Counsel, has been named to the newly created position of Global Chief Development Officer, where he will lead global growth and development strategy, including expansion, franchise development, and strategic partnerships. These leaders have already made important contributions to our transformation, giving me great confidence in the impact they'll have in these positions.

For example, Chris Lyn-Sue and Chris Phylactou were instrumental in driving meaningful change and outperformance in our international business. John has been a key leader in our highly successful international development and transformation efforts, as well as leading our North American development team, portfolio optimization work, and strategic partnership negotiations. 5% comparable sales growth in the quarter, marking our seventh consecutive quarter of positive comps and reflecting the continued benefit of our transformation work.

Performance was particularly strong in the UK, where comparable sales increased 10%, driven by continued strong operational execution, an enhanced customer experience, and increased media investment, including a 20% increase in PSAs over the course of the transformation that is elevating brand awareness in this market. Korea also delivered strong results with comparable sales up 9%, supported by product innovation, strategic partnerships, and holiday demand. In the Middle East, comparable sales were effectively flat, as ongoing conflict in the region pressured performance. 3%, driven by reduced order volume and continued pressure from lower customer acquisition.

Our loyalty program remained a clear area of strength in the quarter, with comparable sales from loyalty customers outperforming non-loyalty customers by 12 percentage points and our Papa Rewards program surpassing 42 million members in the second quarter. These loyalty members are our most valuable customers, generating tickets that are 6% higher per order and ordering approximately twice as often as non-loyalty customers. Within our core pizza business, orders with multiple pizzas again saw improvement, with pies per order up 6%, positively impacting our overall system ticket, which was flat compared with last year.

This upside was offset by pizza mix shifting to smaller non-specialty pizzas, resulting in mid-single-digit declines in overall pizza sales. Outside of pizza, comparable sales were pressured by declines in sides and desserts, while sales of our new sandwiches almost fully offset the removal of Papadias and opened an entirely new food category for us without complicating our makeline and operations. Taking into account our performance and the pressured consumer environment, which we expect to continue throughout the year, we have revised our outlook for 2026.

Chris will provide more detail in his remarks, but at a high level, we now expect global system-wide sales to decline between 2% and 4% compared to last year and adjusted EBITDA between $180 and $190 million, which now includes an incremental $18 million of investment to support our franchisees and accelerate our transformation. While our financial performance isn't where we'd like it to be, we have a clear understanding of how to improve our results and gain market share. These focus areas work in tandem with our ongoing strategic transformation efforts.

As we have discussed previously, we continue to see two clear opportunities to gain share: continuing to strengthen our value perception with more targeted, personalized offers and a consistent, elevated customer experience; and attracting new customers through a sharper aggregator strategy, total addressable market expansion, our rebuilt innovation pipeline, and a re-energized local presence through re-established co-ops. Looking at our value proposition, we recognize the importance of meeting the customer where they are in this challenged environment.

To do so, we focused on offering customers their favorite menu items at compelling price points while balancing restaurant margin. This quarter we featured our Papa Pairings offer and local carryout specials. Our sandwiches were added to Papa Pairings, increasing choices within our mix and match. 99 price point.

Looking ahead, we're taking a targeted approach to improving our value proposition rather than engaging in sustained, extreme discounting at the national level, as we've seen some of our competitors do. In the second half of the year, we'll deploy a more traditional barbell strategy, focusing on our most popular fan-favorite products with short, targeted windows of disruptive value. We are also in phase one of the rollout of our new personalization engine within our CRM platform. This engine is a sophisticated, multi-channel, AI-powered tool that leverages a mix of national and local offers and delivers a higher degree of personalization.

We believe that once fully deployed, this technology will allow us to better tailor communications and offers to our customers, drive incremental purchases from both new and lapsed customers, and preserve restaurant margins while offering customers compelling value in key moments. We'll use learnings from this initial phase to optimize the broader multi-channel rollout planned for the fourth quarter. Turning to operations, we understand that value extends beyond price. To that end, we are also continuing to elevate the customer experience to differentiate Papa John's in the marketplace and drive incremental transactions.

We have made significant progress over the last two years strengthening execution across the system. , resulting in less market-level oversight and fewer in-restaurant touchpoints than we needed. Since then we've built a brand standards coaching team made up of pizza experts who have initiated in-person training workshops, coaching sessions, and restaurant evaluations. However, there is still more work ahead as certain restaurants and operators are lagging behind.

For example, in the second quarter there was a 400 basis point gap in comparable sales, comparable orders, and restaurant margin performance between restaurants in the highest quintile of operation scores versus the lowest quintile. Raising the bar for the bottom quintile of operators is one of the single most important things we are doing to improve the consistency of our customer experience, brand perception, and top line performance.

To help underperforming restaurants raise their level of execution, we are providing dedicated coaching, earned financial incentives which raise the bar on operational performance, and a regional franchise business director model designed to provide closer in-market support and greater accountability. This includes more frequent restaurant visits, regular business reviews, documented follow-up, and standardized scorecards to drive measurable improvement. Beyond improved execution, we're also leveraging consumer insights to elevate and optimize our core product, further differentiating Papa John's International on quality in a highly competitive marketplace.

This work starts with a clear understanding of what matters most to our customers: better ingredients, craveable flavor, consistent execution, and value they see and taste. We are applying those insights across the menu to improve the fundamentals of the pizza experience from dough optimization and bake consistency to toppings, cheese, sauce, and overall product presentation. We are targeting refinements that enhance the customer experience while remaining operationally simple and scalable across the system. We believe these actions will strengthen brand preference, improve repeat purchase behavior, and reinforce Papa John's long-standing quality positioning.

Turning to new customer acquisition, we see a meaningful opportunity to accelerate trial through a more focused aggregator strategy. These platforms continue to play an important role in introducing new customers to the brand and we believe there's an opportunity to improve both our visibility and effectiveness. To do so, we're optimizing our promotional approach, featuring a mix of value-driven offers and signature products while also refining our allocation of national and local third-party marketing spend to maximize returns. As we broaden our reach through aggregators, we're also taking steps to increase brand awareness and drive consideration at a larger scale.

To support that effort, we're rebalancing our media mix in the second half. Innovation also supports a brand proposition that drives new customer acquisition. We're working off a reinvigorated innovation pipeline, having introduced pan pizza, oven-toasted sandwiches, a cheesy garlic bread side, and our latest menu addition, personal pizzas, the perfect size for individual portions. Combined, these product launches are helping to elevate our pizza mix and expand our total addressable market beyond core pizza.

While innovation remains an important lever, this quarter we saw that innovation alone did not generate the level of new customer trial we expected. Going forward, we're pairing innovation with a sharper aggregator strategy and our new first-party CRM platform to improve reach, trial, and conversion. Our international innovation continues to raise the bar, with encouraging results behind the launch of our artisanal sourdough pizza in the UK — a lighter, thinner, more premium pizza focused on expanding our addressable market.

This product is distinctive within scaled QSR pizza and attracts new customers, delivers higher profit margin, and further elevates the Papa John's brand in the market. In addition to new menu items, we're also sharpening our marketing message to drive more meaningful impact with our customers. First, we are rebalancing our media mix toward greater mass exposure and higher TRPs. In this highly competitive environment, we recognize the importance of protecting share of voice on mass channels while still supporting a balanced channel mix to reach customers where they engage most.

Maximizing the impact of our marketing investment requires balancing broad national awareness with local relevance. S. to improve market-level targeting, increase relevance, and better connect with customers in local communities. S.

restaurant system is supported by local co-ops and we're encouraged by the early results. Markets supported by co-ops and meaningful supplemental local spend are outperforming other markets by 200 basis points.