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. At March 29, 2026, there were 6,020 Papa John’s restaurants in operation, consisting of 470 Company-owned and 5,550 franchised restaurants operating in 50 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 North America Quality Control Centers (“QC Centers”) and 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, and fees related to the use of information systems equipment as well as software and related services. We believe that in addition to supporting profitability and growth of both Company-owned and franchised restaurants, 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 Domestic and Canada, and “International” includes the rest of the world other than North America. Recent Developments and Trends During the first quarter of 2026, we continued progressing on our business transformation initiatives as we position the business for long-term success amidst a challenging and softer consumer environment in North America and a dynamic International market. We continued to steer our efforts and investments towards initiatives that improve our value perception and enhance the customer journey across our digital platforms to increase conversion and reduce friction within the customer experience. Our key areas of focus include: • Marketing strategy: We have partnered with our franchisees to re-establish our area advertising cooperative (“Co-op”) program, helping ensure a strong presence in key regional and local markets. Through our mix of national and local advertising, we continued investments in our messaging to highlight our six simple ingredients, fresh, never frozen original dough and the craftsmanship behind the products we serve, which we believe are key differentiators of our brand. We also sharpened our value perception with limited-time promotional offers while continuing to emphasize our Papa Pairings mix and match platform. We plan to maintain a compelling value proposition while staying true to our premium positioning and layering in exciting menu innovations, such as our new pan pizzas and oven-toasted sandwiches, to expand our addressable market and strengthen our barbell strategy. • Digital and loyalty strategy: Most of our sales occur through digital channels, and we are making significant investments in our technology infrastructure to deliver a more seamless experience across our owned channels, better connect with customers, and support greater efficiency across our operations. In 2025, we introduced our new omnichannel platform, releasing new mobile apps across both Android and iOS platforms as well as our refreshed website and mobile web experience, which we believe provides a streamlined ordering journey for our customers. We also recently announced our multi-year initiative to transition to a new point-of-sale system across all U.S. Company-owned and franchised restaurants that, if successful, will replace our existing point-of-sale system. At the time we determine that our new technology solutions, including the point-of-sale system, are feasible and will replace our legacy technology assets, these assets may require adjustments to their useful lives to better reflect remaining technology utilization. We anticipate that we may incur an incremental $5 million to $10 million of accelerated depreciation expense related to these initiatives. 23 • Transforming our cost structure: In December 2025 our Board of Directors approved a business transformation program (the “Enterprise Transformation Plan”), with the goal of creating capacity to invest in our next phase of growth by reducing non-consumer-facing spending and optimizing our restaurant portfolio to improve unit economics. The execution of actions approved under the Enterprise Transformation Plan resulted in the closure of 44 restaurants in North America during the first quarter of 2026 as well as the reduction of our corporate workforce by approximately 7%. We incurred restructuring expenses of $4.3 million during the first quarter of 2026 under the Enterprise Transformation Plan, which consisted primarily of professional services fees and non-cash charges related to Company-owned restaurant closures. We currently estimate that we will incur aggregate restructuring charges of approximately $24 million to $31 million under the Enterprise Transformation Plan related to actions approved thus far, inclusive of the $12.0 million recognized during 2025 and the first quarter of 2026, the remainder of which we expect will be recognized during 2026 and 2027. We believe that these initiatives will improve systemwide health and facilitate future growth, and we have identified at least $30 million of general and administrative expense savings, exclusive of marketing spend, to be captured across fiscal years 2026 and 2027. The implementation of the Enterprise Transformation Plan remains ongoing and may result in additional restructuring charges, although the amounts and nature of future expenses are currently not estimable as no specific additional actions have been determined or approved by management or our Board of Directors. Potential future actions likely to be approved are expected to include elevated levels of restaurant closures in North America during 2026 and 2027, as we focus on improving the health of our restaurant portfolio by closing underperforming restaurants that lack a path to sustainable financial improvement, allowing our franchisees to invest resources in their remaining restaurants to accelerate growth. • Optimizing our supply chain: We have completed our previously announced internal review of our North American supply chain and have identified productivity initiatives that we believe will optimize our commissary business in an effort to reduce the overall cost to serve across all of our Domestic Company-owned and franchised restaurants, without impacting our commitment to product quality. We expect to achieve at least $60 million in North America systemwide supply chain savings over the next two years, equating to meaningful restaurant-level margin improvement. We captured approximately $7 million of benefits in the first quarter and are on track to realize at least $25 million of savings by the end of 2026. • Development strategy: Development is a key long-term growth driver as we believe there is significant opportunity to offer our quality products to more customers globally and domestically. Our near-term development plan in North America includes focused development within our priority markets and on improving the quality and profitability of our restaurant portfolio, with fewer new restaurant openings expected in 2026. To aid our franchisees in pursuing profitable growth in conjunction with the supply chain and restaurant optimization initiatives described above, we are offering royalty incentives for new restaurants opening in 2026, which we believe will add scale in key markets and attract growth-driven franchisees. We are also providing franchise remodel incentives for eligible restaurants to refresh and elevate our customer experience. • Accelerating our refranchising program: Refranchising is a strategic action that we plan to continue to pursue across our Company-owned restaurants as it provides developing franchisees opportunities to expand their businesses and strengthens the long-term health of Papa Johns while providing additional means to reinvest into our transformation initiatives. We achieved a key milestone in the acceleration of our Domestic refranchising program during the fourth quarter of 2025, completing the refranchising of 85 restaurants, and continue exploring opportunities to refranchise additional markets. 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. 24 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. Three Months Ended Growth rates below exclude the impact of foreign currency March 29, 2026 March 30, 2025 Comparable sales growth (decline): Domestic Company-owned restaurants (a) (5.2)% (4.6)% North America franchised restaurants (a) (6.7)% (2.3)% North America restaurants (6.4)% (2.7)% International restaurants 3.6% 3.2% Total comparable sales growth (decline) (3.9)% (1.3)% System-wide restaurant sales growth (decline): Domestic Company-owned restaurants (a) (4.0)% (3.7)% North America franchised restaurants (a) (6.5)% (0.4)% North America restaurants (6.1)% (1.0)% International restaurants 6.0% 5.7% Total global system-wide restaurant sales growth (decline) (3.1)% 0.6% ___________________________________ (a) For the three months ended March 29, 2026, comparable sales decline and system-wide restaurant sales decline for Domestic Company-owned restaurants and North America franchised restaurants were adjusted to exclude the impact of refranchising 85 restaurants during the fourth quarter of 2025. See “Note 11. Divestitures” of “Notes to Condensed Consolidated Financial Statements” for additional information. 25 Restaurant Progression Three Months Ended March 29, 2026 March 30, 2025 North America Company-owned: Beginning of period 462 539 Opened — 1 Closed (5) (1) End of period 457 539 North America franchised: Beginning of period 3,061 2,975 Opened 8 17 Closed (39) (15) End of period 3,030 2,977 International Company-owned: Beginning of period 13 13 End of period 13 13 International franchised: Beginning of period 2,547 2,503 Opened 20 29 Closed (47) (42) End of period 2,520 2,490 Total restaurants – end of period 6,020 6,019 Trailing four quarters net restaurant growth 1 105 Results of Operations Revenues The following table sets forth the various components of Revenues from the Condensed Consolidated Statements of Operations: Three Months Ended Increase (Decrease) (In thousands) March 29, 2026 March 30, 2025 QTD Revenues: Company-owned restaurant sales $ 143,134 $ 173,881 (17.7) % Franchise royalties and fees 47,578 48,056 (1.0) % Commissary revenues 222,641 228,941 (2.8) % Other revenues 21,788 23,757 (8.3) % Advertising funds revenue 43,468 43,674 (0.5) % Total revenues $ 478,609 $ 518,309 (7.7) % The comparability of 2026 and 2025 results is impacted by a transaction that has changed the composition of our Domestic Company-owned restaurants and Domestic franchised restaurants. On November 24, 2025, the Company completed the refranchising of 85 Domestic Company-owned restaurants previously owned and operated by Colonel’s Limited, LLC, a consolidated joint venture (the “2025 refranchising transaction”). Upon closing of the transaction, the restaurants formerly 26 owned by the Company converted to franchised locations. See “Note 21. Divestitures” of the “Notes to Consolidated Financial Statements” of our 2025 Annual Report on Form 10-K for additional information on this transaction. Total revenues decreased $39.7 million, or 7.7%, to $478.6 million for the three months ended March 29, 2026, as compared to the prior year comparable period. Company-owned restaurant sales, which include sales from both Domestic and International Company-owned restaurants, decreased $30.7 million, or 17.7%, for the three months ended March 29, 2026 as compared to the prior year comparable period. The decrease was primarily attributable to $24.9 million in prior-period sales from the formerly-Company owned restaurants refranchised in the 2025 refranchising transaction, as detailed above. The decrease was also due to lower comparable sales of 5.2% for our Domestic Company-owned restaurants driven by lower transaction volumes, partially offset by higher average ticket. Franchise royalties and fees, which include revenues generated from both North American and International franchisees, decreased $0.5 million, or 1.0%, for the three months ended March 29, 2026 as compared to the prior year comparable period. The decrease is primarily due to a $2.1 million decrease in royalties and fees from our North America franchisees due to declines in comparable sales of 6.7%, partially offset by an increase in number of restaurants due to the 2025 refranchising transaction discussed above. International franchise royalties and fees increased $0.6 million due to growth in International systemwide sales of 6.0% for the three months ended March 29, 2026. North America franchise restaurant sales are not included in Company revenues; however, our North America franchise royalties are derived from these sales. North America franchise restaurant sales decreased 3.4% to $728.7 million for the three months ended March 29, 2026 compared to the prior year comparable period, excluding the impact of foreign currency fluctuations. The decline in franchise restaurant sales was due to a decrease in comparable sales of 6.7%, and franchise equivalent unit decrease of 1.0%, offset by the restaurant growth noted above. International franchise restaurant sales are also not included in Company revenues; however, our international royalty revenue is derived from these sales. International franchise restaurant sales increased 6.0% to $315.1 million for the three months ended March 29, 2026 compared to the prior year comparable period, excluding the impact of foreign currency fluctuations. The increase was due to growth in International comparable sales of 3.6% as well as restaurant growth. Commissary revenues, which includes sales from our North American and International QC Centers, decreased $6.3 million, or 2.8%, for the three months ended March 29, 2026 as compared to the prior year comparable period. The decrease was primarily due to food cost deflation, lower transaction volumes, and franchisee food cost subsidies during the quarter, partially offset by higher prices and an increase in commissary revenues compared to the prior year comparable period of approximately $7 million due to an increase in franchised restaurants as a result of the 2025 refranchising transaction discussed above. Other revenues, which primarily includes revenues derived from our online and mobile ordering business, decreased $2.0 million, or 8.3%, for the three months ended March 29, 2026 as compared to the prior year comparable period primarily due to lower revenues generated from technology services as a result of a decrease in the technology fee charged to franchisees that began in the second half of 2025, as well as lower North America systemwide sales. Advertising funds revenue, which includes the operations of PJMF as well as local and International marketing funds, decreased by less than 1% for the three months ended March 29, 2026 as compared to the prior year comparable period. The decrease was primarily driven by global system-wide restaurant sales decline of 3.1% for the three months ended March 29, 2026. 27 Costs and Expenses The following table sets forth the various components of Costs and expenses from the Condensed Consolidated Statements of Operations: (In thousands) Three Months Ended Increase (Decrease) March 29, 2026 March 30, 2025 QTD Costs and expenses: Cost of sales $ 340,892 $ 366,496 (7.0) % General and administrative expenses 55,996 65,167 (14.1) % Depreciation and amortization 17,729 18,343 (3.3) % Advertising funds expense 43,234 44,338 (2.5) % Total costs and expenses $ 457,851 $ 494,344 (7.4) % Total costs and expenses were $457.9 million, or 95.7% of total revenues for the three months ended March 29, 2026, as compared to $494.3 million, or 95.4% of total revenues for the prior year comparable period. Cost of sales consists of Company-owned restaurant and supply chain costs incurred to generate related revenues. Components of cost of sales primarily include food and paper products, labor, freight and delivery, occupancy costs, local advertising costs, and insurance expense. Cost of sales was $340.9 million for the three months ended March 29, 2026, a decrease of $25.6 million, or 7.0% , from the prior year comparable period. Costs of sales by segment for the three months ended March 29, 2026 and March 30, 2025 were as follows: Three Months Ended Increase (Decrease) (In thousands) March 29, 2026 March 30, 2025 QTD Domestic Company-owned restaurants (a) $ 123,295 $ 155,256 $ (31,961) North America commissaries (a) 225,767 235,731 (9,964) International (a) 21,952 19,785 2,167 Total cost of sales by segment (b) 371,014 410,772 (39,758) All other (c) 15,821 12,630 3,191 Intersegment cost of sales (45,943) (56,906) 10,963 Total cost of sales $ 340,892 $ 366,496 $ (25,604) ___________________________________ (a) Segment cost of sales include stock-based compensation expenses and other adjustments that are excluded from our segment results, which are presented on an adjusted basis (see “Note 12. Segment Information”). (b) The North America franchising segment does not incur costs of sales, and therefore is not included in total cost of sales by segment. The North America franchising segment consists of our franchise sales and support activities for our franchisees located in the United States and Canada. (c) “ All other” refers to all other business units that do not meet the quantitative or qualitative thresholds for determining reportable segments, and primarily includes our online and mobile ordering business and our marketing funds and are not operating segments. The decrease in cost of sales was due primarily to fewer Domestic Company-owned restaurants in 2026 as a result of the 2025 refranchising transaction, which resulted in an approximately $23 million decrease in cost of sales for the Domestic Company-owned restaurants. The decrease was also due to commodity deflation for our Domestic QC Centers and due to lower transaction volumes for our Domestic Company-owned restaurants and Domestic QC Centers as a result of North America comparable sales declines. These decreases in cost of sales were partially offset by higher volumes for our International restaurants due to an increase in International comparable sales. These decreases were also partially offset by 28 decreases in intersegment cost of sales due to a decrease in Domestic Company-owned restaurants as a result of the 2025 refranchising transaction discussed above. General and administrative expenses (“G&A”) expenses were $56.0 million, or 11.7% of total revenues for the three months ended March 29, 2026, as compared to $65.2 million, or 12.6% of total revenues, for the prior year comparable period. G&A expenses consisted of the following: Three Months Ended (In thousands) March 29, 2026 March 30, 2025 Administrative and other general expenses (a) $ 51,003 $ 61,565 Restructuring costs (b) 4,236 2,135 Gain on refranchising transaction, net (c) (853) — Other costs (d) 1,610 1,467 General and administrative expenses $ 55,996 $ 65,167 ___________________________________ (a) Administrative and other general expenses, net decreased by $10.6 million for the three months ended March 29, 2026. The decrease was primarily due to $4.5 million of expenses resulting from our bi-annual franchise operating conference incurred during 2025 as well as a $2.7 million year-over-year reduction in supplemental advertising costs. (b) For the three months ended March 29, 2026, represents costs associated with the Company’s Enterprise Transformation Plan. For the three months ended March 30, 2025, represents costs associated with the Company’s International Transformation Plan. Refer to “Note 9. Restructuring” for additional details. (c) Represents additional pre-tax gain on sale, net of transaction costs, associated with the 2025 refranchising transaction related to the assignment of certain remaining leases to the Buyer. See “Note 11. Divestitures” for additional details. (d) For the three months ended March 29, 2026, represents costs associated with project-based strategic initiatives that are not related to our ongoing operations. For the three months ended March 30, 2025, other costs is comprised of costs incurred, net of anticipated insurance recoveries, arising from a tornado that damaged the Texas QC Center; and costs associated with project-based strategic initiatives that are not related to our ongoing operations. Depreciation and amortization expenses were $17.7 million, or 3.7% of total revenues, for the three months ended March 29, 2026, as compared to $18.3 million, or 3.5% of total revenues for the prior year comparable period. Advertising funds expenses were $43.2 million or 99.5% of advertising revenues for the three months ended March 29, 2026, as compared to $44.3 million or 101.5% of advertising revenues for the prior year comparable period. Advertising funds expense is comprised primarily of expenses incurred by PJMF, which is designed to operate at break-even as it spends all annual contributions received from the system. The decrease for the three months ended March 29, 2026 was primarily due to a global system-wide restaurant sales decline of 3.1%. Advertising funds expense also contains expenses incurred through our international marketing funds to support our International business, which may lead to Advertising funds expense being less than or in excess of Advertising funds revenue due to timing differences. Segment Financial Performance We evaluate the performance of our reportable segments and allocate resources to them based on earnings before interest, taxes, depreciation, amortization, stock-based compensation expense, and other adjustments, referred to as segment adjusted EBITDA. See “Note 12. Segment Information” for further information regarding the Company’s segments. Segment adjusted EBITDA for each of our reportable segments is summarized in the table below. Three Months Ended (In thousands) March 29, 2026 March 30, 2025 Increase (Decrease) Domestic Company-owned restaurants $ 7,885 $ 5,032 $ 2,853 North America franchising 25,353 27,248 (1,895) North America commissaries 12,447 19,353 (6,906) International 8,143 5,381 2,762 29 Domestic Company-owned restaurants segment adjusted EBITDA increased $2.9 million for the three months ended March 29, 2026 primarily due to a prospective change in our internal cost allocation methodology to refine internal allocations of certain operating costs. This change in allocation methodology resulted in a $2.1 million increase in Domestic Company-owned restaurants segment adjusted EBITDA over the comparable periods. Please see “4-wall EBITDA” below for a discussion on this change. This increase was also due to lower cost of sales as a result of increased labor productivity for our Domestic Company-owned restaurants and commodity deflation, partially offset by a decrease in comparable sales of 5.2% over the periods compared and by fewer Domestic Company-owned restaurants as a result of the 2025 refranchising transaction. North America franchising segment adjusted EBITDA decreased $1.9 million for the three months ended March 29, 2026 primarily due to a decrease in comparable sales of 6.7%, partially offset by franchise restaurant growth over the periods compared as a result of the 2025 refranchising transaction. North America commissaries segment adjusted EBITDA decreased $6.9 million for the three months ended March 29, 2026 primarily due to franchisee food cost subsidies and timing of planned pricing during the quarter. International segment adjusted EBITDA increased $2.8 million for the three months ended March 29, 2026 primarily due to an increase in comparable sales of 3.6%, favorable foreign currency exchange rate fluctuations, and international franchise restaurant growth over the periods compared. 4-wall EBITDA 4-wall EBITDA and 4-wall EBITDA margin are non-GAAP measures used to evaluate the performance of our Domestic Company-owned restaurants. See “Non-GAAP Measures” for the definition of 4-wall EBITDA and 4-wall EBITDA margin as well as a reconciliation to the most comparable U.S. GAAP measures. 4-wall EBITDA and 4-wall EBITDA margin are presented in the table below. Segment revenue and segment cost of sales for our Domestic Company-owned restaurants in the table below are presented in the segment footnote to our Condensed Consolidated Financial Statements in accordance with Accounting Standards Codification 280. See “Note 12. Segment Information” of the “Notes to Condensed Consolidated Financial Statements,” for further information on our segments. (In thousands) Three Months Ended: March 29, 2026 % of Related Revenues March 30, 2025 % of Related Revenues Segment revenue $ 139,671 $ 170,795 Less segment cost of sales: COS - Product Costs 41,977 30.1 % 52,137 30.5 % COS - Salaries & Benefits 46,430 33.2 % 57,976 33.9 % COS - Other 34,689 24.8 % 44,900 26.3 % Cost Allocation Change - Domestic Company-owned restaurants (a) — — % (2,095) (1.2) % 4-wall EBITDA $ 16,575 $ 17,877 4-wall EBITDA margin 11.9 % 10.5 % (a) During the current year, the Company updated its internal cost allocation methodology for certain centrally incurred costs. As a result, a portion of costs previously allocated to the Domestic Company‑owned restaurants segment is now reflected within Unallocated corporate expenses and the North America commissaries segment. The change is prospective and does not affect total reported expenses. We have adjusted for the change in cost allocation in the prior period when calculating 4-wall EBITDA to ensure comparability. 4-wall EBITDA margin increased 1.4% partially due to the 2025 refranchising transaction, which drove a 0.5% increase. 4-wall EBITDA margin also increased due to lower food costs as a result of commodity deflation and due to increased labor productivity, partially offset by a 5.2% decline in comparable sales. 4-wall EBITDA decreased $1.3 million as compared to 30 the prior year comparable period due to the refranchising transaction mentioned above, which drove a decrease of approximately $1.9 million. 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 Increase (Decrease) (In thousands, except per share amounts) March 29, 2026 March 30, 2025 QTD Operating income $ 20,758 $ 23,965 $ (3,207) Net interest expense (9,683) (10,079) (396) Income before income taxes 11,075 13,886 (2,811) Income tax expense (4,137) (4,543) (406) Net income 6,938 9,343 (2,405) Net (income) loss attributable to noncontrolling interests 317 (121) (438) Net income attributable to the Company $ 7,255 $ 9,222 $ (1,967) Basic earnings per common share $ 0.21 $ 0.28 $ (0.07) Diluted earnings per common share $ 0.21 $ 0.27 $ (0.06) Net Interest Expense Net interest expense decreased $0.4 million for the three months ended March 29, 2026 primarily due to lower average interest rates during the respective periods. Income Tax Expense Our effective income tax rate was 37.4% for the three months ended March 29, 2026 as compared to an income tax rate of 32.7% for the prior year comparable period. The higher effective tax rate was primarily due to a shift in income between jurisdictions and tax shortfall generated by vesting of restricted shares. Three Months Ended (Dollars in thousands) March 29, 2026 March 30, 2025 Income before income taxes $ 11,075 $ 13,886 Income tax expense $ (4,137) $ (4,543) Effective tax rate 37.4 % 32.7 % Net Income Attributable to Noncontrolling Interests Net income included losses of $0.3 million attributable to noncontrolling interests for the three months ended March 29, 2026 as compared to income of $0.1 million for the prior year comparable period. Diluted Earnings Per Common Share Diluted earnings per common share were $0.21 for the three months ended March 29, 2026 as compared to $0.27 for the prior year comparable period, representing a decrease of $0.06. Adjusted diluted earnings per common share, a non-GAAP measure, was $0.32 for the three months ended March 29, 2026 as compared to adjusted diluted earnings per common share of $0.36 for the prior year comparable period, representing a decrease of $0.04. See “Non-GAAP Measures” for additional information. 31 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 EBITDA, 4-wall EBITDA, 4-wall EBITDA margin, 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 EBITDA, 4-wall EBITDA, adjusted net income attributable to common shareholders, and adjusted diluted earnings per common share, are net income, segment adjusted EBITDA, 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 (In thousands, except per share amounts) March 29, 2026 March 30, 2025 Net income $ 6,938 $ 9,343 Income tax expense 4,137 4,543 Net interest expense 9,683 10,079 Depreciation and amortization 17,729 18,343 Stock-based compensation expense 4,409 3,669 Restructuring costs (a) 4,110 2,180 Gain on refranchising transaction, net (b) (853) — Other costs (c) 1,610 1,467 Adjusted EBITDA $ 47,763 $ 49,624 Segment adjusted EBITDA - Domestic Company-owned restaurants $ 7,885 $ 5,032 General & Administrative - Domestic Company-owned restaurants 8,690 10,750 Cost Allocation Change - Domestic Company-owned restaurants (e) — 2,095 4-wall EBITDA (f) $ 16,575 $ 17,877 Segment revenue - Domestic Company-owned restaurants $ 139,671 $ 170,795 4-wall EBITDA margin (f) 11.9% 10.5% Net income attributable to common shareholders $ 6,959 $ 9,028 Restructuring costs (a) 4,290 2,135 Gain on refranchising transaction, net (b) (1,288) — Other costs (c) 1,610 1,467 Tax effect of adjustments (d) (1,070) (818) Adjusted net income attributable to common shareholders $ 10,501 $ 11,812 Diluted earnings per common share $ 0.21 $ 0.27 Restructuring costs (a) 0.13 0.06 Gain on refranchising transaction, net (b) (0.04) — Other costs (c) 0.05 0.05 Tax effect of adjustments (d) (0.03) (0.02) Adjusted diluted earnings per common share $ 0.32 $ 0.36 ` 32 ___________________________________ (a) For the three months ended March 29, 2026, represents costs associated with the Company’s Enterprise Transformation Plan, inclusive of $0.2 million of non-cash stock-based compensation expense and depreciation expense. For the three months ended March 30, 2025, represents costs associated with the Company’s International Transformation Plan. Refer to “Note 9. Restructuring” for additional details. (b) Represents additional pre-tax gain on sale, net of transaction costs, associated with the 2025 refranchising transaction related to the assignment of certain remaining leases to the Buyer. Net loss attributable to noncontrolling interest for the three months ended March 29, 2026 was approximately $0.4 million. See “Note 11. Divestitures ” for additional details. (c) For the three months ended March 29, 2026, represents costs associated with project-based strategic initiatives that are not related to our ongoing operations. For the three months ended March 30, 2025 other costs is comprised of costs incurred, net of anticipated insurance recoveries, arising from a tornado that damaged the Texas QC Center; and costs associated with project-based strategic initiatives that are not related to our ongoing operations. (d) The tax effect on non-GAAP adjustments was calculated by applying the marginal tax rates of 23.2% for the three months ended March 29, 2026 and 22.7% for the three months ended March 30, 2025. (e) During the current year, the Company updated its internal cost allocation methodology for certain centrally incurred costs. As a result, a portion of costs previously allocated to the Domestic Company‑owned restaurants segment is now reflected within Unallocated corporate expenses and the North America commissaries segment. The change is prospective and does not affect total reported expenses. We have included a conforming adjustment in the historical period when reconciling segment adjusted EBITDA to 4-wall EBITDA to ensure comparability. (f) 4-wall EBITDA is defined as Domestic Company-owned restaurants segment revenue less total Domestic Company-owned restaurants segment cost of sales. Domestic Company-owned restaurants cost of sales include expenses incurred by our Domestic Company-owned restaurants in generating revenue, including cost of food, paper, and cleaning products (‘COS – Product Costs’), cost of restaurant-level labor (‘COS – Salaries & Benefits’), and costs of delivery expenses, Company-owned restaurant advertising costs, insurance, rent, aggregator fees, and other costs (‘COS – Other’). 4-wall EBITDA margin is defined as 4-wall EBITDA divided by segment revenue for our Domestic Company-owned restaurants segment. We use 4-wall EBITDA for the purposes of internally evaluating the performance of our Domestic Company-owned restaurants, and we believe 4-wall EBITDA provides additional information to investors as to the unit economics and restaurant-level profitability of our Domestic Company-owned restaurants. The most directly comparable U.S. GAAP measure to 4-wall EBITDA is segment adjusted EBITDA, which is our segment performance measure as presented in the segment footnote to our Consolidated Financial Statements in accordance with Accounting Standards Codification 280. See “Note 12. Segment Information” of “Notes to Condensed Consolidated Financial Statements,” for further information regarding the Company’s segments. 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. 33 Liquidity and Capital Resources Our primary sources of liquidity and capital resources are cash flows from operations and borrowings under the revolving credit facility (the “PJI Revolving Facility”) that forms a part of our Second Amended and Restated Credit Agreement dated as of March 26, 2025 ( the “Credit Agreement”). The Credit Agreement provides for a senior secured term loan in a principal amount of $200 million (the “Term Loan”) and a principal amount of $600 million available for borrowing under 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 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 and from asset sales, 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 three months ended March 29, 2026 and March 30, 2025 (in thousands): Three Months Ended March 29, 2026 March 30, 2025 Total cash provided by (used in): Operating activities $ 7,224 $ 31,336 Investing activities (5,162) (7,083) Financing activities 181 (18,567) Effect of exchange rate changes on cash and cash equivalents (157) 371 Change in cash and cash equivalents $ 2,086 $ 6,057 Operating Activities Total cash provided by operating activities was $7.2 million for the three months ended March 29, 2026 compared to $31.3 million for the corresponding period of 2025. The decrease of $24.1 million primarily reflects lower net income and higher compensation payments within the period, inclusive of the Company’s Enterprise Transformation Plan. Investing Activities Total cash used in investing activities was $5.2 million for the three months ended March 29, 2026 compared to $7.1 million for the same period in 2025. Net cash used in investing activities during the three months ended March 29, 2026 primarily reflects $13.5 million in capital expenditures, which includes $0.1 million of additional capital expenditures related to natural disasters, partially offset by proceeds of $3.5 million from the sale of the building occupied by our former print and promotions business in Louisville, Kentucky, and distributions of $3.2 million related to our deferred compensation plan. Net cash provided by investing activities for the three months ended March 30, 2025 primarily reflects $12.2 million in capital expenditures partially offset by distributions of $4.7 million related to our deferred compensation plan. We estimate that our capital expenditures during 2026 will be approximately $70 million to $80 million. This estimate includes capital outlays for development for existing Company-owned restaurants and for development of new restaurants as well as investments in technology platforms and our supply chain. We intend to fund our capital expenditures with cash generated by operations and borrowings under our PJI Revolving Facility, as necessary. 34 Financing Activities Total cash provided by financing activities was $0.2 million for the three months ended March 29, 2026 compared to total cash used in financing activities of $18.6 million for the same period in 2025. In the first quarter of 2026, the primary source of cash from financing activities was net proceeds of $19.4 million under the PJI Revolving Facility. The primary uses of cash in financing activities in the first quarter of 2026 were dividend payments of $15.3 million, payments related to finance leases of $2.6 million, and $1.4 million in tax payments on equity award issuances. In the first quarter of 2025, the primary uses of cash for financing activities were $15.2 million in dividend payments, payments related to finance leases of $2.4 million, and $1.1 million in tax payments on equity award issuances. Cash used in financing activities also reflects the impact of the refinancing of our PJI Revolving Facility, which resulted in borrowings of $200.0 million under the Term Loan, from which the proceeds were used to repay $196.8 million under the PJI Revolving Facility during the quarter and $3.0 million in related issuance costs. There were no share repurchases in the first three months of 2026 or 2025. Debt Our outstanding debt as of March 29, 2026 was $741.6 million, which was comprised of $400.0 million principal amount of our 3.875% senior notes (the “Notes”), $200.0 million of Term Loan borrowings, and $141.6 million outstanding under the PJI Revolving Facility. Remaining availability under the PJI Revolving Facility was approximately $458.7 million as of March 29, 2026. The Credit Agreement contains customary 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 March 29, 2026 Leverage ratio Not to exceed 5.25 to 1.0 3.3 to 1.0 Interest coverage ratio Not less than 2.00 to 1.0 3.3 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 March 29, 2026. 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. PJMF has a $30.0 million revolving line of credit (the “PJMF Revolving Facility”) pursuant to a Revolving Loan Agreement, dated September 30, 2015 and most recently amended on September 30, 2025. As of March 29, 2026, the principal amount of debt outstanding under the PJMF Revolving Facility was approximately $0.3 million. The PJMF Revolving Facility is secured by substantially all assets of PJMF. The PJMF Revolving F acility matures on September 30, 2026, but is subject to annual renewals. The borrowings under the PJMF Revolving Facility accrue interest at a variable rate of a one month SOFR plus 1.975%. The PJMF operating results and the related debt outstanding do not impact the financial covenants under the Credit Agreement. 35 Refer to Note 12 of the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 28, 2025 for additional information. Share Repurchases Share repurchases are part of our long-term growth and capital allocation strategy. 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. There was no share repurchase activity during the three months ended March 29, 2026 or March 30, 2025. Approximately $90.2 million remained available under the Company’s share repurchase program as of March 29, 2026. 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 $15.3 million ($0.46 per share) and $15.2 million ($0.46 per share) for the three months ended March 29, 2026 and March 30, 2025, respectively. On May 5, 2026, our Board of Directors declared a second quarter dividend of $0.46 per common share (approximately $15.6 million in the aggregate), which will be paid on May 29, 2026 to stockholders of record as of the close of business on May 18, 2026. 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, excluding purchases of property and equipment related to damages from natural disasters. 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. The Company’s free cash flow was as follows for the three month periods of 2026 and 2025 (in thousands): Three Months Ended March 29, 2026 March 30, 2025 Net cash provided by operating activities $ 7,224 $ 31,336 Purchases of property and equipment (13,451) (12,231) Free cash flow $ (6,227) $ 19,105 Cash Requirements In the first quarter of 2026, the Company entered into a multi-year agreement for point‑of‑sale and restaurant operations software services which will expire on December 23, 2034, with a one year extension option. The agreement includes deployment requirements that specify a minimum number of Company‑owned and franchised restaurants to be installed and activated on the software platform by November 30, 2026 and by November 30, 2027. The total estimated contractual commitment for software services is approximately $125 million to $140 million over the term of the agreement, contingent upon variable components such as the timing of the deployment schedule and associated contractual credits. These amounts are expected to be largely recovered through technology fees charged to our franchisees over the term of the agreement. As of March 29, 2026, the Company had not incurred any amounts related to these provisions. Other than the contractual commitment discussed above, there have been no material changes in our cash requirements other than those incurred in the ordinary course of business since the end of 2025. 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 28, 2025 for additional information regarding our cash requirements. 36 Impact of Inflation and Macroeconomic Trends Inflationary pressures affect our profitability both directly, in our Company-owned restaurants and delivery mechanisms and through gross margins experienced by sales of food and supply items via our QC Centers, as well as indirectly, through higher food ingredient and paper and supply costs, rising fees from delivery aggregators driven by higher wage demands and increases in delivery costs that, once reflected in upward price adjustments on their fees, can exert downward pressure on unit sales, reducing royalty fees we realize from our Domestic and International franchisees. Compensating menu price increases are subject to competitive pressure in the markets in which we operate. Expense control measures are also deployed to offset higher costs when possible. Food costs, in particular the cost of cheese, are managed to an extent by pricing agreements with suppliers and forward purchase contracts we enter into, as discussed in “Item 3. Quantitative and Qualitative Disclosures About Market Risk.” While we continue to monitor the impact any tariffs and assess our ability to manage any impacts, we currently do not believe that tariffs imposed by the United States government would have a significant negative impact to our Domestic business, as a substantial proportion of our ingredients and supply items are sourced domestically. However, the extent to which tariffs may increase the price of other goods and services and how they may alter discretionary spending patterns by our customers or impact our franchisees’ profitability is currently unknown. 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, depreciation and amortization, interest expenses, tax rates, system-wide sales, transformation plans, supply chain and other cost savings initiatives, adjusted EBITDA, 4-wall adjusted EBITDA, the current economic environment, industry trends, consumer behavior and preferences, commodity and labor costs, currency fluctuations, profit margins, supply chain operating margin, net unit growth, unit level performance, capital expenditures, restaurant and franchise development, franchisee profitability, 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, investments in digital and technology 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, capital allocation, dividends, effective tax rates, regulatory changes and impacts, impacts of tariffs, insurance recoveries for damages related to natural disasters, restructuring plans, including timing of completion, expected benefits and costs, 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: • economic conditions in the United States and international markets; • changes in pricing or other marketing or promotional strategies by competitors, which has adversely affected, and may continue to 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; • 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, regulatory changes, increased tariffs and other trade barriers, and new restaurant growth; • 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 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; 37 • increases in labor costs, food costs, fuel costs or sustained higher other operating costs, including as a result of supply chain disruption, inflation and related impacts, increased tariffs or other trade barriers, immigration policies, geopolitical conflicts 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 geopolitical conflicts in areas in which we or our franchisees operate, including those in Ukraine and the Middle East; • 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 or that our franchisees will not execute them properly or be aligned with such initiatives; • risks related to US government shutdowns or possible economic slowdowns 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; • 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; • 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 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 28, 2025. 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.