PAPA JOHNS INTERNATIONAL INC 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview Papa John’s International, Inc. (referred to as the “Company,” “Papa John’s,” “Papa Johns” or in the first-person notations of “we,” “us” and “our”) operates and franchises pizza delivery and carryout restaurants and, in certain international markets, dine-in and delivery restaurants under the trademark “Papa John’s.” Papa Johns began operations in 1984. As of September 29, 2024, there were 5,908 Papa John’s restaurants in operation, consisting of 550 Company-owned and 5,358 franchised restaurants operating in 49 countries and territories. Our revenues are derived from retail sales of pizza and other food and beverage products to the general public by Company-owned restaurants, franchise royalties, and sales of franchise and development rights. Additionally, we derive revenues from sales to franchisees of various items including food and paper products from our Domestic Quality Control Centers (“QC Centers”), operation of our International QC Center in the United Kingdom (“UK”), contributions received by Papa John’s Marketing Fund (“PJMF”) which is our national marketing fund, information systems equipment, and software and related services. We believe that in addition to supporting both Company and franchised profitability and growth, these activities contribute to product quality and consistency throughout the Papa Johns system. In discussions of our business, “Domestic” is defined as within the contiguous United States, “North America” includes Canada, and “International” includes the rest of the world other than North America. Recent Developments and Trends The Company has focused on executing strategic priorities and building a foundation for long-term success, while navigating a challenging macroeconomic environment. In this current economic cycle, consumers have become more deliberate in managing their overall ticket and are showing a preference for brands that are offering compelling value. As such, we are shifting our efforts and investments to focus on initiatives that improve our price/value perception and improve our digital and loyalty experience to increase conversion and reduce friction within the customer experience. While we are making progress against our strategic initiatives in 2024, as described below, we anticipate the challenging sales trends we experienced in the third quarter to continue throughout the remainder of the fiscal year and into 2025. North America Strategic Initiatives • Product innovation and marketing strategy: In the second quarter, the approved contribution rate increase to PJMF became effective, while local marketing spend remains optional. This strategy shift was intended to increase the productivity of franchisees’ marketing contributions by leveraging the scale that national investments deliver. Additionally, in the first half of 2024 we launched an all-new brand platform “Better Get You Some” that was part of our deepened commitment to, and investment in, our new marketing strategy. These investments were focused on improving audience segmentation, building consumer loyalty and driving cultural relevance. In the third quarter, we evolved our messaging and promotions to showcase our better ingredients, better pizza at appropriately-valued price points to improve our overall value perception. We believe if we maintain an appropriate balance of value offerings and premium products, it will lead to improving sales trends over time. • Digital and loyalty strategy: Most of our sales occur through digital channels and we are actively identifying opportunities to more quickly access information, streamline the ordering journey and improve the overall user experience. In the third quarter, we rolled out an App update that improves call to actions and navigation, elevates imagery and more prominently features loyalty rewards. • Domestic commissary growth strategy: Our previously-announced change in the Domestic Commissary profit model was implemented during the first quarter, with the fixed operating margin that Domestic QC Centers charge increasing to 5% paired with increased rebate opportunities for franchisees. The operating income of the North America Commissary business has also increased, reflecting benefits for both franchisees as well as the Commissary. We also continue to pursue productivity efficiencies throughout the supply chain through improved operations and supplier relationships. 23 International Transformation Plan In December 2023, the Company announced international transformation initiatives (“International Transformation Plan”) designed to evolve our business structure to deliver an enhanced value proposition to our International customers and franchisees, ensure targeted investments and efficient resource management, and better position our largest markets, including the UK, for long-term profitable growth and brand strength. Total estimated pre-tax costs associated with the International Transformation Plan are expected to be approximately $25 million to $35 million (inclusive of the $21.7 million incurred through the third quarter of 2024), which the Company currently expects to be recognized in 2024 and 2025. See “Note 9. Restructuring” of “Notes to Condensed Consolidated Financial Statements” for additional details. During 2024, the Company has made significant progress in executing the International Transformation Plan, with specific actions around UK Optimization as follows: • During the second quarter, we completed the planned closure of 43 underperforming UK Company-owned restaurants and successfully refranchised 40 formerly Company-owned restaurants to existing franchisees. • During the third quarter, we refranchised an additional 20 formerly Company-owned restaurants to primarily existing franchisees, with only 13 Company-owned restaurants remaining in operation in the UK. We have also continued evaluating and right-sizing the UK franchise base, resulting in the closure of 11 franchised locations during the third quarter and 30 total franchised locations during the first nine months of 2024. As a result of these actions, we saw year-over-year improvement in the profitability of the UK market in the third quarter, and we continue to optimize the region through exiting leases and other contracts as well as transforming our operations to increase efficiency and effectiveness. • We have completed nearly all of the strategic restaurant closures in the UK market and the Company’s efforts are turning towards growth opportunities and mitigating closure-related costs as we complete optimization of the portfolio. Global Restaurant Sales and Unit Information “Comparable sales” represents sales for the same base of restaurants for the same fiscal periods. “Comparable sales growth (decline)” represents the change in year-over-year comparable sales. “Global system-wide restaurant sales” represents total restaurant sales for all Company-owned and franchised restaurants open during the comparable periods, and “Global system-wide restaurant sales growth (decline)” represents the change in global system-wide restaurant sales year-over-year. Comparable sales, Comparable sales growth (decline), Global system-wide restaurant sales and Global system-wide sales growth (decline) exclude franchisees for which we suspended corporate support. “Equivalent units” represents the number of restaurants open at the beginning of a given period, adjusted for restaurants opened, closed, acquired or sold during the period on a weighted average basis. We believe Domestic Company-owned, North America franchised, and International Comparable sales growth (decline) and Global system-wide restaurant sales information is useful in analyzing our results since our franchisees pay royalties and marketing fund contributions that are based on a percentage of franchise sales. Comparable sales and Global system-wide restaurant sales results for restaurants operating outside of the United States are reported on a constant dollar basis, which excludes the impact of foreign currency translation. Franchise sales also generate commissary revenue in the United States and in certain international markets. Comparable sales growth (decline) and Global system-wide restaurant sales information is also useful for comparison to industry trends and evaluating the strength of our brand. Management believes the presentation of Global system-wide restaurant sales growth, excluding the impact of foreign currency, provides investors with useful information regarding underlying sales trends and the impact of new unit growth without being impacted by swings in the external factor of foreign currency. Franchise restaurant sales are not included in the Company’s revenues. 24 Three Months Ended Nine Months Ended Amounts below exclude the impact of foreign currency September 29, 2024 September 24, 2023 September 29, 2024 September 24, 2023 Comparable sales growth (decline): Domestic Company-owned restaurants (6.7)% 5.9% (4.6)% 3.8% North America franchised restaurants (5.3)% 2.2% (3.4)% (0.4)% North America restaurants (5.6)% 2.9% (3.6)% 0.4% International restaurants (2.8)% (0.3)% (1.8)% (2.3)% Total comparable sales growth (decline) (4.9)% 2.2% (3.2)% (0.2)% System-wide restaurant sales growth (decline): Domestic Company-owned restaurants (4.8)% 6.7% (2.8)% 4.7% North America franchised restaurants (3.8)% 3.2% (2.4)% 1.1% North America restaurants (4.0)% 3.9% (2.5)% 1.8% International restaurants (a) —% 8.8% 2.2% 6.8% Total global system-wide restaurant sales growth (decline) (a) (3.0)% 5.1% (1.4)% 3.0% ___________________________________ (a) System-wide sales for the nine months ended September 29, 2024 includes $7.1 million of International sales related to the first and second quarters of 2024 that were erroneously omitted in prior periods. 25 Restaurant Progression Three Months Ended Nine Months Ended September 29, 2024 September 24, 2023 September 29, 2024 September 24, 2023 North America Company-owned: Beginning of period 537 521 531 522 Opened — — 6 — Closed — — — (2) Acquired — 9 — 10 Refranchised — (4) — (4) End of period 537 526 537 526 North America franchised: Beginning of period 2,910 2,868 2,902 2,854 Opened 18 15 43 44 Closed (11) (7) (28) (21) Sold — (9) — (10) Refranchised — 4 — 4 End of period 2,917 2,871 2,917 2,871 International Company-owned Beginning of period 33 91 117 — Closed — — (43) — Acquired — 27 — 118 Refranchised (20) — (61) — End of period 13 118 13 118 International franchised: Beginning of period 2,403 2,292 2,356 2,322 Opened 36 55 115 153 Closed (18) (18) (91) (55) Sold — (27) — (118) Refranchised 20 — 61 — End of period 2,441 2,302 2,441 2,302 Total restaurants – end of period 5,908 5,817 5,908 5,817 Trailing four quarters net restaurant growth 91 236 26 Results of Operations Revenues The following table sets forth the various components of Revenues from the Condensed Consolidated Statements of Operations. Three Months Ended Nine Months Ended Increase (Decrease) (In thousands) September 29, 2024 September 24, 2023 September 29, 2024 September 24, 2023 QTD YTD Revenues: Domestic Company-owned restaurant sales $ 168,672 $ 177,195 $ 518,103 $ 532,841 (4.8) % (2.8) % North America franchise royalties and fees 33,831 35,041 103,937 105,824 (3.5) % (1.8) % North America commissary revenues 210,389 204,887 611,873 624,433 2.7 % (2.0) % International revenues 33,024 42,927 113,433 108,998 (23.1) % 4.1 % Other revenues 60,891 62,762 181,271 192,295 (3.0) % (5.7) % Total revenues $ 506,807 $ 522,812 $ 1,528,617 $ 1,564,391 (3.1) % (2.3) % The comparability of results between 2024 and 2023 is impacted by transactions that have changed the composition of restaurants in the UK during the periods presented. In the second and third quarters of 2023, the Company acquired 118 formerly franchised restaurants in the UK (the “UK franchisee acquisitions”). In the second and third quarters of 2024, the Company completed the closure of 43 Company-owned restaurants in the UK and also refranchised 60 formerly Company-owned restaurants in the UK. After prior disposals of two mobile restaurants, the Company operated 13 UK Company-owned restaurants during the third quarter of 2024. These transactions impact the composition of International revenues and the results of the International segment during the periods presented. See “Note 9. Restructuring” of the “Notes to Condensed Consolidated Financial Statements” for additional information on these transactions. Total revenues decreased $16.0 million, or 3.1%, to $506.8 million for the three months ended September 29, 2024 and decreased $35.8 million, or 2.3%, to $1.5 billion for the nine months ended September 29, 2024, as compared to each prior year comparable period. Domestic Company-owned restaurant sales decreased $8.5 million, or 4.8%, for the three months ended September 29, 2024 and decreased $14.7 million, or 2.8%, for the nine months ended September 29, 2024, as compared to each prior year comparable period. The decreases were primarily due to declines in comparable sales of 6.7% and 4.6% for the three and nine months ended September 29, 2024, respectively, due to lower transaction volumes. The comparable sales declines were partially offset by increased equivalent units of 3.8% and 2.2% for the same respective periods. North America franchise royalties and fees decreased $1.2 million, or 3.5%, for the three months ended September 29, 2024 and decreased $1.9 million, or 1.8%, for the nine months ended September 29, 2024, as compared to each prior year comparable period. The decreases are primarily due to comparable sales declines of 5.3% and 3.4% for the three and nine months ended September 29, 2024, respectively, partially offset by growth in equivalent units and lower royalty waivers in 2024 as compared to 2023. Equivalent units increased 3.5% and 2.7% for the three and nine months ended September 29, 2024, respectively, as compared to each prior year comparable period. North America franchise restaurant sales decreased 3.9% to $720.7 million for the three months ended September 29, 2024 compared to the prior year comparable period. North America franchise restaurant sales decreased 2.5% to $2.2 billion for the nine months ended September 29, 2024 as compared to the prior year comparable period. North America franchise restaurant sales are not included in Company revenues; however, our North America franchise royalties are derived from these sales. The main drivers in the lower franchise restaurant sales were the North America comparable sales declines, partially offset by equivalent unit growth noted above. North America commissary revenues increased $5.5 million or 2.7% for the three months ended September 29, 2024 and decreased $12.6 million, or 2.0% for the nine months ended September 29, 2024, as compared to each prior year 27 comparable period. The increase for the three months ended September 29, 2024 was primarily due to higher commodity prices during the quarter, particularly cheese and chicken, partially offset by lower volumes. The decline for the nine months ended September 29, 2024 was due to a combination of lower commodity prices during the first half of the year and lower volumes. North America commissary revenues during the three and nine months ended September 29, 2024 also benefited from the previously-disclosed increase to the fixed operating margin charged to Domestic QC Centers that took effect during the first quarter of 2024. International revenues decreased $9.9 million, or 23.1%, for the three months ended September 29, 2024 and increased $4.4 million, or 4.1% for the nine months ended September 29, 2024, as compared to each prior year comparable period. As mentioned above, the UK franchisee acquisitions in 2023 and the UK restaurant closures and refranchising transactions in the second and third quarters of 2024 impacted the comparability of International revenues earned in each period. The net change in revenue related to the UK franchisee acquisitions was a decrease of approximately $9.0 million and an increase of approximately $6.3 million for the three and nine months ended September 29, 2024, respectively, representing sales and royalties attributable to this group of restaurants compared to prior year. Excluding the impact of the UK franchisee acquisitions, International revenues would have decreased $0.9 million and $1.8 million for the three and nine months ended September 29, 2024, respectively, due primarily to comparable sales declines of 2.8% and 1.8%, respectively. International franchise restaurant sales increased $8.3 million to $297.6 million and decreased $15.4 million to $864.8 million for the three and nine months ended September 29, 2024, respectively. As mentioned above, the UK franchisee acquisitions in 2023 and the UK refranchising transactions in the second and third quarters of 2024 impacted the comparability of International franchise restaurant sales. Excluding the impact of the UK franchisee acquisitions and foreign currency fluctuations, International franchise restaurant sales would have increased $5.7 million, or 2.0%, and increased $26.6 million, or 3.1%, for the three and nine months ended September 29, 2024, respectively. International franchise restaurant sales are not included in Company revenues; however, our international royalty revenue is derived from these sales. Other revenues, which primarily includes our national marketing funds and online and mobile ordering business, decreased $1.9 million, or 3.0%, and decreased $11.0 million, or 5.7%, for the three and nine months ended September 29, 2024 compared to the prior year comparable periods. Our results for the three and nine months ended September 24, 2023 included revenues of $4.8 million and $14.7 million, respectively, related to Preferred Marketing, our formerly wholly-owned print and promotions company which was sold in the fourth quarter of 2023. This decrease was offset during the three and nine months ended September 29, 2024 by a $3.5 million and $7.7 million increase in marketing fees, respectively, due primarily to a planned increase in the national marketing fund contribution percentage that went into effect during the quarter and an increased in franchised locations. 28 Costs and Expenses The following table sets forth the various components of Costs and expenses from the Condensed Consolidated Statements of Operations, expressed as a percentage of the associated revenue component. (In thousands) Three Months Ended September 29, 2024 % of Related Revenues September 24, 2023 % of Related Revenues Increase (Decrease) in % of Revenues Costs and expenses: Operating costs (excluding depreciation and amortization shown separately below): Domestic Company-owned restaurant expenses $ 142,403 84.4 % $ 145,433 82.1 % 2.3 % North America commissary expenses 193,818 92.1 % 189,551 92.5 % (0.4) % International expenses 19,001 57.5 % 29,796 69.4 % (11.9) % Other expenses 55,543 91.2 % 57,587 91.8 % (0.6) % General and administrative expenses 13,553 2.7 % 52,173 10.0 % (7.3) % Depreciation and amortization 17,260 3.4 % 16,404 3.1 % 0.3 % Total costs and expenses 441,578 87.1 % 490,944 93.9 % (6.8) % Operating income $ 65,229 12.9 % $ 31,868 6.1 % 6.8 % (In thousands) Nine Months Ended September 29, 2024 % of Related Revenues September 24, 2023 % of Related Revenues Increase (Decrease) in % of Revenues Costs and expenses: Operating costs (excluding depreciation and amortization shown separately below): Domestic Company-owned restaurant expenses $ 419,189 80.9 % $ 436,922 82.0 % (1.1) % North America commissary expenses 561,316 91.7 % 576,434 92.3 % (0.6) % International expenses 74,424 65.6 % 67,542 62.0 % 3.6 % Other expenses 164,261 90.6 % 177,661 92.4 % (1.8) % General and administrative expenses 129,726 8.5 % 154,441 9.9 % (1.4) % Depreciation and amortization 52,528 3.4 % 46,815 3.0 % 0.4 % Total costs and expenses 1,401,444 91.7 % 1,459,815 93.3 % (1.6) % Operating income $ 127,173 8.3 % $ 104,576 6.7 % 1.6 % Total costs and expenses were $441.6 million or 87.1% of total revenues for the three months ended September 29, 2024 as compared to $490.9 million or 93.9% of total revenues for the prior year comparable period. Total costs and expenses for the three months ended September 29, 2024 include a pre-tax gain on sale of two Domestic QC Centers of approximately $41.3 million, net of transaction costs, which was recorded within General and administrative expenses in the Condensed Consolidated Statements of Operations. For the nine months ended September 29, 2024, total costs and expenses were $1,401.4 million, or 91.7% of total revenues, as compared to $1,459.8 million, or 93.3% of total revenues for the prior year comparable period. The changes in total costs and expenses, as percentages of revenues, were primarily due to the following: Domestic Company-owned restaurant expenses were $142.4 million, or 84.4% of related revenues for the three months ended September 29, 2024 as compared to expenses of $145.4 million, or 82.1% of related revenues for the prior year period. For the nine months ended September 29, 2024 Domestic Company-owned restaurant expenses were $419.2 million, or 80.9% of related revenues as compared to expenses of $436.9 million, or 82.0% of related revenues for the prior year comparable period. The increase of 2.3% as a percentage of revenues during the third quarter was due mainly to higher food ingredient costs, particularly cheese and chicken. The 1.1% decrease as a percentage of revenues during the nine months ended September 29, 2024 was primarily due to lower insurance expenses related to improved auto liability claims experience, lower utility costs, and lower advertising spend in the first half of the year. 29 North America commissary expenses were $193.8 million, or 92.1% of related revenues for the three months ended September 29, 2024 as compared to $189.6 million, or 92.5% of related revenues for the prior year comparable period. For the nine months ended September 29, 2024 North America commissary expenses were $561.3 million, or 91.7% of related revenues as compared to $576.4 million, or 92.3% of related revenues for the prior year comparable period. The expense, as a percentage of related revenues, decreased 0.4% and 0.6% for the three and nine months ended September 29, 2024, respectively, primarily due to an increase to the fixed operating margin charged to Domestic QC Centers that took effect during the first quarter of 2024 and lower commodity prices for cheese during the first half of the year . International expenses were $19.0 million, or 57.5% of related revenues for the three months ended September 29, 2024, as compared to $29.8 million, or 69.4% of related revenues for the prior year comparable period. For the nine months ended September 29, 2024, International expenses were $74.4 million, or 65.6% of related revenues as compared to expenses of $67.5 million, or 62.0% of related revenues for the prior year comparable period. As mentioned above, the UK franchisee acquisitions in 2023 and the UK restaurant closures and refranchising transactions in the second and third quarters of 2024 impacted the comparability of International expenses earned in each period. International expenses increased in the first six months of 2024 when compared to the prior year comparable period as a result of the UK franchisee acquisitions, which added operating costs related to Company-owned restaurants. The Company is only operating 13 UK Company-owned restaurants beginning in the third quarter of 2024, leading to a decrease in related expenses. Other expenses were $55.5 million, or 91.2% of related revenues for the three months ended September 29, 2024, as compared to $57.6 million, or 91.8% for the prior year comparable period. For the nine months ended September 29, 2024, Other expenses were $164.3 million, or 90.6% of related revenues as compared to expenses of $177.7 million, or 92.4% of related revenues for the prior year comparable period. The decrease primarily reflects $4.7 million and $14.2 million of expenses incurred for the three and nine months ended September 24, 2023 related to Preferred Marketing, our formerly wholly-owned print and promotions company, which was sold in the fourth quarter of 2023. General and Administrative Expenses General and Administrative (“G&A”) expenses were $13.6 million, or 2.7% of revenues for the three months ended September 29, 2024, as compared to $52.2 million, or 10.0% of revenues for the prior year comparable period. For the nine months ended September 29, 2024, G&A expenses were $129.7 million or 8.5% of revenues compared to $154.4 million or 9.9% of revenues for the prior year comparable period. G&A expenses consisted of the following: Three Months Ended Nine Months Ended (In thousands) September 29, 2024 September 24, 2023 September 29, 2024 September 24, 2023 Administrative and other general expenses, net (a) $ 49,485 $ 49,034 $ 146,006 $ 147,271 Gain on sale of QC Center properties (b) (41,289) — (41,289) — International restructuring costs (c) 3,862 — 19,514 — Other costs (d) 1,495 1,369 5,495 4,092 UK repositioning and acquisition-related costs (e) — 1,193 — 2,501 Legal settlement accruals (f) — 577 — 577 General and administrative expenses $ 13,553 $ 52,173 $ 129,726 $ 154,441 (a) Administrative and other general expenses, net increased by $0.5 million and decreased by $1.3 million during the three and nine months ended September 29, 2024, respectively. The decrease during the nine months ended September 29, 2024 was primarily due to lower equity compensation costs related to leadership changes and lower costs in 2024 as the bi-annual franchise operating conference took place in 2023, partially offset by higher labor costs and professional fees. (b) Represents pre-tax gain on sale of Texas and Florida QC Center properties, net of transaction costs. See “Note 11. Divestitures”. (c) Represents costs associated with the Company’s International Restructuring plan. See “Note 9. Restructuring”. (d) For the three and nine months ended September 29, 2024, represents non-cash impairment charges related primarily to fixed and intangible assets from the refranchising of 15 Domestic Company-owned restaurants. See Note 11. Divestitures. For the three and nine months ended September 24, 2023, represents severance and related costs associated with the transition of certain executives. (e) Represents costs associated with repositioning the UK portfolio as well as transaction costs related to the acquisition of restaurants from franchisees. (f) Represents accruals for certain legal settlements. 30 Depreciation and Amortization Depreciation and amortization expense was $17.3 million, or 3.4% of revenues for the three months ended September 29, 2024, as compared to $16.4 million, or 3.1% of revenues for the prior year comparable period. For the nine months ended September 29, 2024, depreciation and amortization expense was $52.5 million, or 3.4% of revenues as compared to $46.8 million, or 3.0% of revenues for the prior year comparable period. The increases of $0.9 million and $5.7 million, respectively, for the three and nine months ended September 29, 2024, were primarily due to higher depreciation expense related to our investments in technology platforms. Operating Income by Segment Operating income is summarized in the following table on a reporting segment basis. Adjusted operating income, a non-GAAP measure, is also presented below. See “Non-GAAP Measures” for a reconciliation to the most comparable U.S. GAAP measure. We believe this non-GAAP measure is important for comparability purposes. Three Months Ended September 29, 2024 Three Months Ended September 24, 2023 (In thousands) Reported Adjustments (a) Adjusted Reported Adjustments (a) Adjusted Reported Increase (Decrease) Adjusted Increase (Decrease) Domestic Company-owned restaurants $ (1,748) $ 1,495 $ (253) $ 6,147 $ — $ 6,147 $ (7,895) $ (6,400) North America franchising 31,865 — 31,865 32,234 — 32,234 (369) (369) North America commissaries 53,599 (41,289) 12,310 10,691 — 10,691 42,908 1,619 International 42 3,862 3,904 2,270 1,193 3,463 (2,228) 441 All others 2,834 — 2,834 2,379 — 2,379 455 455 Unallocated corporate expenses (21,106) — (21,106) (20,792) 577 (20,215) (314) (891) Elimination of intersegment (profits) losses (257) — (257) (1,061) — (1,061) 804 804 Total $ 65,229 $ (35,932) $ 29,297 $ 31,868 $ 1,770 $ 33,638 $ 33,361 $ (4,341) Nine Months Ended September 29, 2024 Nine Months Ended September 24, 2023 (In thousands) Reported Adjustments (a) Adjusted Reported Adjustments (a) Adjusted Reported Increase (Decrease) Adjusted Increase (Decrease) Domestic Company-owned restaurants $ 13,388 $ 5,495 $ 18,883 $ 19,438 $ — $ 19,438 $ (6,050) $ (555) North America franchising 97,985 — 97,985 97,745 — 97,745 240 240 North America commissaries 77,337 (41,289) 36,048 31,818 — 31,818 45,519 4,230 International (8,612) 19,514 10,902 13,265 2,501 15,766 (21,877) (4,864) All others 8,202 — 8,202 6,879 — 6,879 1,323 1,323 Unallocated corporate expenses (60,346) — (60,346) (63,859) 2,594 (61,265) 3,513 919 Elimination of intersegment (profits) losses (781) — (781) (710) — (710) (71) (71) Total $ 127,173 $ (16,280) $ 110,893 $ 104,576 $ 5,095 $ 109,671 $ 22,597 $ 1,222 ___________________________________ (a) See “Non-GAAP Measures” below for a detail of the adjustments in each period and for a reconciliation to the most comparable U.S. GAAP measure. Operating income was $65.2 million and $127.2 million for the three and nine months ended September 29, 2024, respectively, as compared to $31.9 million and $104.6 million for the prior year comparable periods, an increase of $33.4 million and $22.6 million, respectively. Adjusted operating income was $29.3 million and $110.9 million for the three and 31 nine months ended September 29, 2024, respectively, as compared to $33.6 million and $109.7 million for the prior year comparable periods, respectively, representing a decrease of $4.3 million and increase of $1.2 million, respectively. The fluctuations in adjusted operating income in 2024 compared to 2023 were primarily due to the following: • Domestic Company-owned restaurants decreased $6.4 million and $0.6 million for the three and nine months ended September 29, 2024. The decreases were primarily due to lower revenues from 6.7% and 4.6% declines in comparable sales for the respective periods and higher food ingredient costs during the third quarter of 2024, specifically cheese and chicken. For the most part, these food cost increases were not passed onto customers due to our focus on value perception. These factors were partially offset by lower insurance, utility costs, and commodity costs in the first half of 2024. • North America franchising decreased $0.4 million and increased $0.2 million for the three and nine months ended September 29, 2024. The variances are primarily driven by a 3.5% and 2.7% increase in equivalent units and a decrease in comparable sales of 5.3% and 3.4% for the respective periods as well as lower royalty waivers in 2024 as compared to 2023. • North America commissaries increased $1.6 million and $4.2 million for the three and nine months ended September 29, 2024, primarily due to the increase in the commissary fixed operating margin, which became effective in 2024, partially offset by anticipated franchisee rebates. • International increased $0.4 million and decreased $4.9 million for the three and nine months ended September 29, 2024. As mentioned above, we have closed 43 of the UK Company-owned restaurants and refranchised an additional 60 restaurants under the International Transformation Plan during 2024, resulting in operations of only 13 Company-owned restaurants in the UK beginning in the third quarter of 2024. These shifts in Company-owned restaurants favorably impacted International adjusted operating income during the third quarter. The year-to-date decrease in adjusted operating income was primarily driven by operating losses attributable to the UK Company-owned restaurants, including higher depreciation expense, during the periods where we were operating more restaurants. International adjusted operating income was also negatively impacted by comparable sales declines of 2.8% and 1.8% for the respective periods. • All Others, which primarily includes our online and mobile ordering business and our marketing funds, increased $0.5 million and $1.3 million during the three and nine months ended September 29, 2024 primarily due to prior year losses incurred by Preferred Marketing, our formerly wholly-owned print and promotions company, which was sold in the fourth quarter of 2023. • Unallocated corporate expenses increased $0.9 million for three months ended September 29, 2024 and decreased $0.9 million for the nine months ended September 29, 2024. The decrease during the year-to-date period was primarily due to the reversal of stock compensation expense for unvested equity compensation awards from leadership transitions incurred primarily during the first three months of 2024, which was partially offset by higher depreciation expense related to our investments in technology support initiatives. 32 Items Below Operating Income The following table sets forth the various items below Operating income from the Condensed Consolidated Statements of Operations: Three Months Ended Nine Months Ended Increase (Decrease) (In thousands, except per share amounts) September 29, 2024 September 24, 2023 September 29, 2024 September 24, 2023 QTD YTD Operating income $ 65,229 $ 31,868 $ 127,173 $ 104,576 $ 33,361 $ 22,597 Net interest expense (10,629) (11,378) (32,588) (31,674) 749 (914) Income before income taxes 54,600 20,490 94,585 72,902 34,110 21,683 Income tax expense 12,812 4,539 25,347 16,546 8,273 8,801 Net income before attribution to noncontrolling interests 41,788 15,951 69,238 56,356 25,837 12,882 Net loss (income) attributable to noncontrolling interests 20 (90) (551) (351) 110 (200) Net income attributable to the Company $ 41,808 $ 15,861 $ 68,687 $ 56,005 $ 25,947 $ 12,682 Basic earnings per common share $ 1.28 $ 0.49 $ 2.10 $ 1.69 $ 0.79 $ 0.41 Diluted earnings per common share $ 1.27 $ 0.48 $ 2.09 $ 1.68 $ 0.79 $ 0.41 Net Interest Expense Net interest expense decreased $0.7 million and increased $0.9 million for the three and nine months ended September 29, 2024, respectively. The decrease for the three months ended September 29, 2024 was due primarily to lower average outstanding debt during the quarter. The increase for the nine months ended September 29, 2024 was due to higher average outstanding debt during the nine months ended September 29, 2024. Income Tax Expense (Benefit) Our effective income tax rate was 23.5% and 26.8% for the three and nine months ended September 29, 2024, respectively, as compared to an income tax rate of 22.2% and 22.7% for the prior year comparable periods. The higher effective tax rate for the three and nine months ended September 29, 2024 was driven by impairment charges related to the International Restructuring that created unrecognized tax losses and prevented the Company from generating foreign tax credits as well as a tax shortfall generated by stock option exercises and vesting of restricted shares in 2024. Three Months Ended Nine Months Ended (Dollars in thousands) September 29, 2024 September 24, 2023 September 29, 2024 September 24, 2023 Income before income taxes $ 54,600 $ 20,490 $ 94,585 $ 72,902 Income tax expense $ 12,812 $ 4,539 $ 25,347 $ 16,546 Effective tax rate 23.5 % 22.2 % 26.8 % 22.7 % Net Income Attributable to Noncontrolling Interests Net income included losses of less than $0.1 million and income of $0.6 million attributable to noncontrolling interests for the three and nine months ended September 29, 2024, respectively, as compared to income of $0.1 million and $0.4 million for the prior year comparable periods. Diluted Earnings Per Common Share Diluted earnings per common share was $1.27 and $2.09 for the three and nine months ended September 29, 2024, respectively, as compared to $0.48 and $1.68 for the prior year comparable periods, representing increases of $0.79 and $0.41, respectively. Adjusted diluted earnings per common share, a non-GAAP measure, was $0.43 and $1.71 for the three 33 and nine months ended September 29, 2024 as compared to adjusted diluted earnings per common share of $0.53 and $1.80 for the prior year comparable periods, representing respective decreases of $0.10 and $0.09. See “Non-GAAP Measures” for additional information. 34 Non-GAAP Measures In addition to the results provided in accordance with U.S. GAAP, we provide certain non-GAAP measures, which present results on an adjusted basis. These are supplemental measures of performance that are not required by or presented in accordance with U.S. GAAP and include the following: adjusted operating income, adjusted net income attributable to common shareholders and adjusted diluted earnings per common share. We believe that our non-GAAP financial measures enable investors to assess the operating performance of our business relative to our performance based on U.S. GAAP results and relative to other companies. We believe that the disclosure of these non-GAAP measures is useful to investors as they reflect metrics that our management team and Board utilize to evaluate our operating performance, allocate resources and administer employee incentive plans. The most directly comparable U.S. GAAP measures to adjusted operating income, adjusted net income attributable to common shareholders and adjusted diluted earnings per common share are operating income, net income attributable to common shareholders and diluted earnings per common share, respectively. These non-GAAP measures should not be construed as a substitute for or a better indicator of the Company’s performance than the Company’s U.S. GAAP results. The table below reconciles our GAAP financial results to our non-GAAP financial measures. Three Months Ended Nine Months Ended (In thousands, except per share amounts) September 29, 2024 September 24, 2023 September 29, 2024 September 24, 2023 Operating income $ 65,229 $ 31,868 $ 127,173 $ 104,576 Gain on sale of QC Center properties (a) (41,289) — (41,289) — International restructuring costs (b) 3,862 — 19,514 — UK repositioning and acquisition-related costs (c) — 1,193 — 2,501 Legal settlements (d) — 577 — 577 Other costs (e) 1,495 — 5,495 2,017 Adjusted operating income $ 29,297 $ 33,638 $ 110,893 $ 109,671 Net income attributable to common shareholders $ 41,808 $ 15,861 $ 68,687 $ 56,005 Gain on sale of QC Center properties (a) (41,289) — (41,289) — International restructuring costs (b) 3,862 — 19,514 — UK repositioning and acquisition-related costs (c) — 1,193 — 2,501 Legal settlements (d) — 577 — 577 Other costs (e) 1,495 — 5,495 2,017 Tax effect of adjustments (f) 8,121 (404) 3,679 (1,162) Adjusted net income attributable to common shareholders $ 13,997 $ 17,227 $ 56,086 $ 59,938 Diluted earnings per common share $ 1.27 $ 0.48 $ 2.09 $ 1.68 Gain on sale of QC Center properties (a) (1.25) — (1.25) — International restructuring costs (b) 0.12 — 0.59 — UK repositioning and acquisition-related costs (c) — 0.04 — 0.07 Legal settlements (d) — 0.02 — 0.02 Other costs (e) 0.04 — 0.17 0.06 Tax effect of adjustments (f) 0.25 (0.01) 0.11 (0.03) Adjusted diluted earnings per common share $ 0.43 $ 0.53 $ 1.71 $ 1.80 35 ___________________________________ (a) Represents pre-tax gain on sale, net of transaction costs, realized upon the August 2, 2024 completion of the sale of our Texas and Florida QC Center properties. See “Note 11. Divestitures” for additional details. (b) Represents costs associated with the Company’s International Restructuring plan. See “Note 9. Restructuring” for additional details. (c) Represents costs associated with repositioning the UK portfolio as well as transaction costs related to the acquisition of restaurants from franchisees. (d) Represents accruals for certain legal settlements, recorded in General and administrative expenses. (e) For the three and nine months ended September 29, 2024, represents non-cash impairment and remeasurement charges related primarily to fixed and intangible assets from the refranchising of 15 Domestic Company-owned restaurants. Refer to “Note 11. Divestitures” for further details. For the three and nine months ended September 24, 2023, represents severance and related costs associated with the transition of certain executives, recorded in General and administrative expenses. (f) The tax effect on non-GAAP adjustments was calculated by applying the marginal tax rates of 22.6% and 22.8% for the three and nine months ended September 29, 2024 and September 24, 2023, respectively. In addition, we present free cash flow in this report, which is a non-GAAP measure. Please see “Liquidity and Capital Resources – Free Cash Flow” for a discussion of why we believe free cash flow provides useful information regarding our financial condition and results of operations, and a reconciliation of free cash flow to the most directly comparable U.S. GAAP measure. 36 Liquidity and Capital Resources Our primary sources of liquidity and capital resources are cash flows from operations and borrowings under our senior secured revolving credit facility (the “PJI Revolving Facility”). Our principal uses of cash are operating expenses, capital expenditures, and returning value to our shareholders in the form of cash dividends and/or share repurchases. Our capital priorities are: • investing for growth • maintaining a strong balance sheet, and • returning capital to shareholders The Company believes that its balances of cash and cash equivalents and borrowing capacity, along with cash generated by operations, will be sufficient to satisfy its cash requirements, cash dividends, interest payments and share repurchases over the next twelve months and beyond. Cash Flows The table below summarizes our cash flows for the nine months ended September 29, 2024 and September 24, 2023 (in thousands): Nine Months Ended September 29, 2024 September 24, 2023 Total cash provided by (used in): Operating activities $ 55,884 $ 126,936 Investing activities 7,448 (57,654) Financing activities (86,584) (79,139) Effect of exchange rate changes on cash and cash equivalents 215 (24) Change in cash and cash equivalents $ (23,037) $ (9,881) Operating Activities Total cash provided by operating activities was $55.9 million for the nine months ended September 29, 2024 compared to $126.9 million for the corresponding period of 2023. The decrease of $71.1 million primarily reflects lower net income after considering the gain on sale of QC Center properties as well as unfavorable working capital changes in the first nine months of 2024, principally related to the following: • Higher tax payments in 2024 due to higher income before income taxes, compared to lower prior year tax payments stemming from the application of 2022 overpayments towards 2023 tax payments; • Changes in the assets and liabilities of the advertising funds over the comparable periods related to the timing of cash receipts as compared to spending on advertising expense; and • Higher accrual balances at December 31, 2023 related to the 53rd week of our 2023 fiscal year, which resulted in higher cash outflows in 2024. Investing Activities Total cash provided by investing activities was $7.4 million for the nine months ended September 29, 2024 compared to cash used in investing activities of $57.7 million for the same period in 2023. The cash generated from investing activities was primarily due to net proceeds of $46.7 million from the sale of two Domestic QC Centers, lower capital expenditures and net repayments received on notes to franchisees in the first nine months of 2024 as compared to net issuances of notes to franchisees in 2023. We also received a $2.3 million investment distribution related to our deferred compensation plan during the first nine months of 2024. Our capital expenditures consisted primarily of capital investments for existing restaurants and new restaurant locations as well as investments in technology platforms. We estimate that our capital expenditures during 2024 will be approximately $75 million to $85 million. This estimate includes the acquisition of sites and construction costs for new Company-owned 37 restaurants that have opened or that we expect to open during 2024. We intend to fund our capital expenditures with cash generated by operations and borrowings under our PJI Revolving Facility, as necessary. Financing Activities Total cash used in financing activities was $86.6 million for the nine months ended September 29, 2024 compared to $79.1 million for the same period of 2023. In the first nine months of 2024, the principal financing outflows were related to dividend payments of $45.4 million, net repayments of $37.2 million on the PJI Revolving Facility, $6.8 million in payments related to financing leases, and $3.5 million in tax payments on equity compensation award issuances. These outflows were offset by net borrowings of $5.7 million from the PJMF revolving line of credit (the “PJMF Revolving Facility”). There were no share repurchases in the first nine months of 2024. In the first nine months of 2023, cash used for financing activities primarily reflects the impact of share repurchases of $210.3 million, which were financed through $185.8 million in net borrowing from the PJI Revolving Facility. Other financing outflows in the first nine months of 2023 included $43.6 million in dividend payments, $6.3 million in tax payments on equity award issuances and $6.0 million in payments related to financing leases. Debt Our outstanding debt as of September 29, 2024 was $732.4 million, which was comprised of $400.0 million principal amount of our 3.875% senior notes (the “Notes”) and $332.4 million outstanding under the PJI Revolving Facility and the PJMF Revolving Facility. Remaining availability under the PJI Revolving Facility was approximately $273.2 million as of September 29, 2024. Our Credit Agreement, dated September 14, 2021 and amended May 30, 2023 (as amended, the “Credit Agreement”), contains affirmative and negative covenants that, among other things, require customary reporting obligations and restrict, subject to certain exceptions, the incurrence of additional indebtedness and liens, the consummation of certain mergers, consolidations, sales of assets and similar transactions, the making of investments, equity distributions and other restricted payments, and transactions with affiliates. The Company is also subject to certain financial covenants, as shown in the following table, that could restrict or impose constraints on the liquidity of our business: Permitted Ratio Actual Ratio as of September 29, 2024 Leverage ratio Not to exceed 5.25 to 1.0 3.0 to 1.0 Interest coverage ratio Not less than 2.00 to 1.0 3.2 to 1.0 Our leverage ratio is defined as outstanding debt divided by Consolidated EBITDA (as defined in the Credit Agreement) for the most recent four fiscal quarters. Our interest coverage ratio is defined as the sum of Consolidated EBITDA and consolidated rental expense for the most recent four fiscal quarters divided by the sum of consolidated interest expense and consolidated rental expense for the most recent four fiscal quarters. We were in compliance with all financial covenants as of September 29, 2024. In addition, the Indenture governing the Notes contains customary covenants that, among other things and subject to certain exceptions, limit our ability and the ability of certain of our subsidiaries to: incur additional indebtedness and guarantee indebtedness; pay dividends or make other distributions or repurchase or redeem our capital stock; prepay, redeem or repurchase certain debt; issue certain preferred stock or similar equity securities; make loans and investments; sell assets; incur liens; enter into transactions with affiliates; enter into agreements restricting our subsidiaries’ ability to pay dividends; and consolidate, merge or sell all or substantially all of our assets. The PJMF Revolving Facility consists of a $30.0 million revolving line of credit pursuant to a Revolving Loan Agreement, dated September 30, 2015 and most recently amended on September 30, 2024. Debt outstanding under the PJMF Revolving Facility was approximately $5.7 million as of September 29, 2024. The PJMF operating results and the related debt outstanding do not impact the financial covenants under the Company’s Credit Agreement. 38 Refer to Note 12 of the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2023 for additional information. Share Repurchases As part of our long-term growth and capital allocation strategy, we may elect to invest in share repurchases to provide ongoing value and enhanced returns to our shareholders. On October 28, 2021, our Board of Directors approved a share repurchase program with an indefinite duration for up to $425.0 million of the Company’s common stock. As of September 29, 2024, approximately $90.2 million remained under the share repurchase authorization. The following table summarizes our repurchase activity under this program for the three and nine months ended September 29, 2024 and September 24, 2023: (In thousands, except average price per share) Total Number of Shares Purchased Average Price Paid per Share Aggregate Cost of Shares Purchased Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs Three Months Ended September 29, 2024 — $ — $ — $ 90,160 September 24, 2023 — $ — $ — $ 90,160 (In thousands, except average price per share) Total Number of Shares Purchased (a) Average Price Paid per Share Aggregate Cost of Shares Purchased (b) Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs Nine Months Ended September 29, 2024 — $ — $ — $ 90,160 September 24, 2023 2,523 $ 83.10 $ 209,640 $ 90,160 (a) The shares repurchased during the nine months ended September 24, 2023 included 2,176,928 shares repurchased on March 1, 2023 from certain funds affiliated with, or managed by, Starboard Value LP at a price of $82.52 per share for aggregate consideration of $179.6 million. (b) Aggregate cost of shares purchased for the nine months ended September 24, 2023 excluded $2.8 million of transaction costs directly attributable to share repurchases, including a 1% excise tax incurred under the Inflation Reduction Act of 2022. Of these costs, $2.1 million were classified as non-cash financing activities during the nine months ended September 24, 2023. The Company utilizes a written trading plan under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, from time to time to facilitate the repurchase of shares of our common stock under this share repurchase program. There can be no assurance that we will repurchase shares of our common stock either through a Rule 10b5-1 trading plan or otherwise. Dividends The Company paid aggregate cash dividends to common stockholders of $45.4 million ($1.38 per share) and $43.6 million ($1.30 per share) for the nine months ended September 29, 2024 and September 24, 2023, respectively. On October 29, 2024, our Board of Directors declared a fourth quarter dividend of $0.46 per common share (approximately $15.2 million in the aggregate), which will be paid on November 29, 2024 to stockholders of record as of the close of business on November 18, 2024. The declaration and payment of any future dividends will be at the discretion of our Board of Directors. Free Cash Flow Free cash flow, a non-GAAP measure, is defined as net cash provided by operating activities (from the Condensed Consolidated Statements of Cash Flows) less the purchases of property and equipment. We view free cash flow as an important financial measure because it is one factor that management uses in determining the amount of cash available for discretionary investment. Free cash flow is not a term defined by GAAP, and as a result, our measure of free cash flow might not be comparable to similarly titled measures used by other companies. Free cash flow should not be construed as a substitute for or a better indicator of the Company’s performance than the Company’s GAAP measures. 39 The Company’s free cash flow was as follows for the nine month periods of 2024 and 2023 (in thousands): Nine Months Ended September 29, 2024 September 24, 2023 Net cash provided by operating activities $ 55,884 $ 126,936 Purchases of property and equipment (46,931) (50,905) Free cash flow $ 8,953 $ 76,031 Cash Requirements There have been no material changes in our cash requirements other than in the ordinary course of business since the end of 2023. Refer to “Contractual Obligations” presented within “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 for additional information regarding our cash requirements. Forward-Looking Statements Certain matters discussed in this Quarterly Report on Form 10-Q and other Company communications that are not statements of historical fact constitute forward-looking statements within the meaning of the federal securities laws. Generally, the use of words such as “expect,” “intend,” “estimate,” “believe,” “anticipate,” “will,” “forecast,” “outlook”, “plan,” “project,” or similar words identify forward-looking statements that we intend to be included within the safe harbor protections provided by the federal securities laws. Such forward-looking statements include or may relate to projections or guidance concerning business performance, revenue, earnings, cash flow, earnings per share, share repurchases, the current economic environment, commodity and labor costs, currency fluctuations, profit margins, supply chain operating margin, net unit growth, unit level performance, capital expenditures, restaurant and franchise development, restaurant acquisitions, restaurant closures, labor shortages, labor cost increases, changes in management, inflation, royalty relief, franchisee support and incentives, the effectiveness of our menu innovations and other business initiatives, investments in product and digital innovation, marketing efforts and investments, liquidity, compliance with debt covenants, impairments, strategic decisions and actions, changes to our national marketing fund, changes to our commissary model, dividends, effective tax rates, regulatory changes and impacts, investments in and repositioning of the UK market, International restructuring plans, timing and costs, International consumer demand, adoption of new accounting standards, and other financial and operational measures. Such statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which are difficult to predict and many of which are beyond our control. Therefore, actual outcomes and results may differ materially from those matters expressed or implied in such forward-looking statements. The risks, uncertainties and assumptions that are involved in our forward-looking statements include, but are not limited to: • the ability of the Company to manage challenging macroeconomic conditions in the United States and internationally, including the United Kingdom; • the ability of the Company to retain key management and manage staffing and labor shortages at Company and/or franchised restaurants and our Quality Control Centers; • increases in labor costs, food costs or sustained higher other operating costs, including as a result of supply chain disruption, inflation or climate change; • the potential for delayed new restaurant openings, both domestically and internationally; • the increased risk of phishing, ransomware and other cyber-attacks; • risks to the global economy and our business related to the conflict in Ukraine and the Middle East and other international conflicts; • increased costs for branding initiatives and launching new advertising and marketing campaigns and promotions to boost consumer sentiment and sales trends, and the risk that such initiatives will not be effective; • risks related to a possible economic slowdown that could, among other things, reduce consumer spending or demand and result in changing consumer practices; • risks related to social media, including publicity adversely and rapidly impacting our brand and reputation; • aggressive changes in pricing or other marketing or promotional strategies by competitors, which may adversely affect sales and profitability; and new product and concept developments by food industry competitors; • changes in consumer preferences or consumer buying habits, including the growing popularity of delivery aggregators, as well as changes in general economic conditions or other factors that may affect consumer confidence and discretionary spending, including higher unemployment; 40 • the adverse impact on the Company or our results caused by global health concerns, product recalls, food quality or safety issues, incidences of foodborne illness, food contamination and other general public health concerns about our Company-owned or franchised restaurants or others in the restaurant industry; • the effectiveness of our technology investments and changes in unit-level operations; • the ability of the Company and its franchisees to meet planned growth targets and operate new and existing restaurants profitably, including difficulties finding qualified franchisees, restaurant level employees or suitable sites; • increases in insurance claims and related costs for programs funded by the Company up to certain retention limits, including medical, owned and non-owned vehicles, workers’ compensation, general liability and property; • disruption of our supply chain or commissary operations which could be caused by our sole source of supply of mozzarella cheese, desserts, garlic cups or limited source of suppliers for other key ingredients or more generally due to weather, natural disasters including drought, disease, or geopolitical or other disruptions beyond our control; • increased risks associated with our International operations, including economic and political conditions, instability or uncertainty in our international markets, especially emerging markets, fluctuations in currency exchange rates, difficulty in meeting planned sales targets and new restaurant growth; • the impact of current or future claims and litigation and our ability to comply with current, proposed or future legislation that could impact our business; • risks related to our indebtedness and borrowing costs, including prolonged higher interest rates, and the current state of the credit markets; • the Company’s ability to continue to pay dividends to stockholders based upon profitability, cash flows and capital adequacy if restaurant sales and operating results decline; • our ability to effectively operate and improve the performance of International Company-owned restaurants; • disruption of critical business or information technology systems, or those of our suppliers, and risks associated with systems failures and data privacy and cybersecurity incidents, including theft of confidential Company, employee and customer information, including payment cards; and • changes in Federal or state income, general and other tax laws, rules and regulations and changes in generally accepted accounting principles. These and other risk factors are discussed in detail in “Part I. Item 1A. – Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. We undertake no obligation to update publicly any forward-looking statements, whether as a result of future events, new information or otherwise, except as required by law.