Financials

Figures converted from AUD at historical FX rates — see data/company.json.fx_rates. Ratios, margins, and multiples are unitless and unchanged.

Financials — What the Numbers Say

Domino's Pizza Enterprises (DMP) is a $1.5B revenue master franchisee whose financial story has flipped from "growth compounder" to "operational turnaround in a heavily levered package." Reported revenue is essentially flat over five years ($1.67B → $1.51B in USD terms, with the decline mostly driven by AUD weakness; in native AUD revenue is up 4.8% cumulatively, a 1.2% CAGR), but EBITDA has collapsed 47% from $244M to $129M (USD) and operating margin has halved from 12.3% to 6.3%. FY2025 closed with a small net loss after $49M of asset writedowns tied to closing 205 loss-making Japan and France stores, plus $24M of restructuring. The balance sheet is the binding constraint: $969M total debt against $129M EBITDA puts gross leverage at 7.5x (Net Debt/EBITDA 6.7x reported, of which roughly $401M is capitalised leases — even ex-leases the funded-debt picture is ~$568M, ~4.4x EBITDA). Free cash flow has been the saving grace — $90M generated in FY2025 despite the loss, equating to a 7.7% FCF yield on a $1.28B market cap. Valuation has collapsed from 35.4x EV/EBITDA (FY21) to 15.8x (FY25) and forward P/E of 13.5x. The single financial metric that matters most right now is whether operating margin stabilises above 8% and net leverage falls below 5x within 18 months — H1 FY2026 already showed margin expanding to 8.3% from 6.7% a year earlier, the first credible inflection in three years.

2. Revenue, Margins, and Earnings Power

What this section asks: Is DMP still earning money the way it used to, or has something structural changed?

DMP earns money two ways: (1) royalties and franchise service fees from ~3,500 stores (high-margin, recurring), and (2) corporate-store revenue plus commissary/supply-chain sales to franchisees (lower-margin, scale-driven). Five years of data show a clear pattern — revenue has flatlined and the gross-margin structure has held up at ~32%, but the operating margin has compressed by nearly half because operating expenses (rents on idled stores, restructuring, marketing) have grown faster than gross profit.

Annual revenue and earnings — five-year arc

The shape is the entire problem. Revenue did not grow — it never recovered the COVID-era delivery lift. Meanwhile EBITDA fell from $244M to $129M (-47%), operating income from $205M to $95M (-54%), and net income went from $140M to a $2M loss. Three forces drove this: (1) inflation in food, energy and labour costs that DMP could not fully pass through to franchisees without hurting franchisee profitability; (2) a deliberate decision to support franchisees with rebates and marketing rather than maximise headline royalty rate; and (3) closure costs from culling 205 unprofitable stores in FY2025 (mainly Japan, also France).

Margin trajectory — what compressed and what held

Gross margin (~32%) tells you the unit economics still work — pizzas are still made and sold profitably at the store level. The drop happens below gross profit, in operating expenses. This is the textbook signature of a fixed-cost business losing operating leverage: revenue stays flat while corporate overhead, marketing, IT, and write-downs keep growing.

Recent half-year inflection (the most important chart in this report)

H1 FY2026 (six months to 28 Dec 2025) is the single most decision-relevant data point on this page. Revenue fell another 5.5%, but operating income rose 17% ($61M vs $48M), operating margin expanded ~160bps to 8.3%, EBITDA grew to $108M, and net income returned to positive $27M. This is what the bull case calls "the closures are working" — by amputating loss-making stores, DMP shrinks the top line on purpose to enlarge the operating margin. Whether this continues in H2 FY26 is the entire near-term question.

3. Cash Flow and Earnings Quality

What this section asks: Are reported earnings backed by cash, or are they accounting?

Free cash flow defined: the cash a company generates after running the business (operating cash flow) and after the capital it must spend just to stay open (capital expenditure). A company that earns $100M of accounting profit but burns $50M of cash has low-quality earnings. A company that loses $2M on paper but generates $90M of cash is doing the opposite — the GAAP loss is dominated by non-cash writedowns and restructuring accruals.

Net income vs operating cash flow vs free cash flow

Earnings quality is high in two specific ways: (a) operating cash flow has stayed above net income every year by a wide margin (D&A and non-cash writedowns add back); (b) FCF held positive even in FY25's loss year. The $49M asset writedown and $24M restructuring charge in FY25 are real economic losses (Japan stores actually closed), but they had already been spent as cash in prior years on store fit-outs. The lesson: don't read the GAAP loss as cash distress.

FCF margin and FCF/Net Income coverage

FCF margin (6.0%) is below the long-run aspiration (8-12%) but still positive in a loss year. The big swings — 12.5% (FY21) crashing to 3.1% (FY22), then climbing back — were driven primarily by working-capital movements and capex timing, not by the underlying business deteriorating.

Major cash flow distortions (FY2025)

Line item	FY25 ($M)	What it means for cash quality
Net income	-2	Headline loss
D&A added back	72	Non-cash; pizza ovens depreciate but cash leaves on day 1 of purchase
Asset writedowns (Japan/France)	49	Non-cash; restoring economic reality but no cash outflow now
SBC	1	Negligible — unusually low for a listed company
Working capital change	-41	Receivables grew faster than payables — modest drag
Cash taxes paid	33	Real, vs $1M in FY24 — large normalisation
Capex	-19	Cut from $72M (FY23) — major reduction, see capital allocation
Acquisitions	-7	Almost nil after $250M Asia push in FY23
Cash interest paid	22	Up from $13M (FY21) — leverage cost is real

Two takeaways: capex has been slashed (which boosts current FCF but starves future growth) and cash interest is now ~$22M per year (1.5% of revenue), a permanent drag from the post-2022 borrowing build-up.

4. Balance Sheet and Financial Resilience

What this section asks: What does the balance sheet allow the company to do, and what could it force the company to do?

DMP carries $969M of total debt, of which roughly $568M is interest-bearing borrowings (revolver, term loans, USPP notes) and $401M is capitalised property leases (mostly long-tail store rents now sitting on-balance-sheet under AASB 16). The two are economically different — store rents are part of operating costs, not balance-sheet borrowing — but lenders and rating agencies look at both. After fiscal year-end, DMP refinanced its facility (Jefferies cited 7 Nov 2025: "Refinancing Mitigates Balance Sheet Concerns"), which removes the most immediate covenant fear but does nothing to reduce the absolute leverage.

Cash, debt, and net debt trend

Leverage — the most stretched part of the story

Two warnings from this picture. First, both numerator and denominator moved against shareholders — EBITDA fell $115M (in USD) while gross debt rose modestly. Second, an interest coverage of 5.6x sounds comfortable but is materially worse than FY21's 17x — and most of the deterioration was driven by rising rates on existing debt, not new borrowing. A second interest-rate shock or another EBITDA leg-down would push coverage uncomfortably close to typical bank covenant levels of ~3x.

Liquidity and working capital

Metric	FY2021	FY2025	Read
Current ratio	0.84	1.00	Improved but tight
Quick ratio	0.60	0.61	Restaurants run on suppliers' credit — normal
Working capital ($M)	-64	-1	Slightly negative throughout — typical QSR
Cash on hand ($M)	133	100	Adequate vs $22M annual interest
Tangible book value ($M)	-269	-311	Goodwill ($380M) larger than equity ($433M)

Tangible book is negative — equity is roughly all goodwill from years of acquisitions (Japan 2013, Europe 2015-2019, Asia 2023). This isn't a Z-score-1 distress signal because the goodwill represents real franchise rights generating cash, but it does mean any major impairment would crystallise an accounting equity hit.

5. Returns, Reinvestment, and Capital Allocation

What this section asks: Is management compounding per-share value, or merely keeping the company going?

Returns on capital — the picture has darkened

ROIC (return on invested capital — net operating profit after tax divided by debt-plus-equity) collapsed from 12.3% in FY21 to -3.5% in FY25. That is the clearest indictment of the FY23 Asia acquisition ($250M for the Malaysia/Singapore/Cambodia master franchise) — capital was deployed at a moment of peak valuation into markets where unit economics have not yet recovered. ROE looks artificially high in FY21-22 only because equity was small relative to debt; the FY25 figure is below zero.

Capital allocation history ($M, FY2021-FY2025)

The pattern is informative:

• FY21: discipline year — $214M of debt repaid (post-COVID windfall), modest $19M acquisition.
• FY22-23: empire-building — capex stayed at $72-82M, intangibles spending ~$33-48M annually, $250M acquisition in FY23 and $78M in FY22, dividends kept high.
• FY24-25: emergency contraction — capex slashed by ~75% ($82M → $19M), acquisitions essentially halted, dividend cut by ~50% ($1.32 → $0.50 per share over the cycle), focus on debt repayment.

There are no buybacks in the data — share count has grown every year. The "buyback" line is negative on a yield basis (-3.0% in FY25), meaning DMP is issuing equity. Combined dilution from FY21 to FY25 is ~7% (86.8M → 92.7M diluted shares), much of it from the FY23 Asia financing equity placement and ongoing employee share schemes.

Share count and per-share value

The dividend has been progressively cut from $1.32 in FY21 to $0.50 in FY25 — a 62% reduction (the larger cut in USD reflects AUD weakness on top of the native cut) — but FY25 still paid out $45M in dividends against a net loss. This is the kind of distribution policy that signals the board prioritising income-fund holders over balance-sheet repair, and is one reason analysts (e.g. Citi sell rating Dec 2025, target $14.2) have flagged the capital-allocation framework as still too generous.

6. Segment and Unit Economics

DMP does not publish segment financials at the standard reporting level (the granular ANZ/Europe/Asia P&Ls live only in investor presentations, not the quarterly JSON feed). What is observable from disclosures and the closure announcements:

• ANZ (Australia + NZ): ~700 stores, the most profitable region by EBITDA per store, mid-single-digit same-store-sales growth in recent prints. Functions as the cash engine that funds the rest.
• Europe (France, Germany, Belgium, NL, Lux): ~1,400 stores, lower margin than ANZ, recovering from COVID-era weakness. Germany has been a multi-year underperformer.
• Asia (Japan, Malaysia, Singapore, Taiwan, Cambodia): ~1,400 stores including ~750 Japan stores after the 233-store Japan closure in FY25. Japan has been the structural drag — DMP over-opened during COVID delivery boom, then needed to shutter.

The FY2025 closures by themselves (312 stores closed; 233 Japan and 79 non-Japan, largely France) tell you which markets carry the negative economics: a region that requires closing a meaningful share of its store base is a region where management could not raise unit-level returns to acceptable thresholds. Conversely, ANZ has not closed stores — confirming that geography is the profit anchor.

A useful proxy for unit economics is corporate-store revenue per store, which has been pressured in Asia and Europe but stable in ANZ. Until segment disclosure improves, investors should weight commentary in the FY25 results presentation (Aug 2025) heavily — that document gives ANZ same-store sales, Japan trajectory, and Europe segment EBITDA.

7. Valuation and Market Expectations

What this section asks: What is the current price implying, and is that fair given the financials?

Historical valuation — multiples have re-rated lower

The historical multiple compression is enormous. In FY2021, the market paid 35x EBITDA, 25x book, 37x FCF — pricing a perfect compounder. In FY2025, the market pays 16x EBITDA, 2.7x book, 13x FCF — pricing an over-levered turnaround. This is not a "cheap stock" story; this is a "the multiple is paying for what the business has actually become" story.

Current setup vs analyst expectations

At the $12.02 USD-equivalent close (21 May 2026, $1.28B market cap), the stock trades at:

• Forward P/E ~13.5x (per the latest data), versus a 5-year historical median in the high-30s and consensus EPS recovering as closures lap.
• EV/EBITDA 15.8x trailing, falling toward ~10-12x on consensus EBITDA recovery to ~$200-215M.
• FCF yield 7.7% — at current capex levels — vs ~2-3% during the 2018-2022 bull phase.
• Dividend yield 4.1%, though that is at risk of further cuts if EBITDA recovery slips.

Sell-side targets cluster around $15.7-22.8 (15 analysts; average $22.8; range $14.2 sell to $41.4 high; Morningstar fair value $13.5), with a Neutral / Hold consensus (5 Buy / 8 Hold / 2 Sell). Morgan Stanley's recent move and Citi's December 2025 sell call signal that even on the bear side, the disagreement is now about pace of recovery, not whether the stock is structurally broken.

Simple bear / base / bull frame

Scenario	FY27e EBITDA	EV/EBITDA	Implied EV ($M)	Less Net Debt	Implied equity	Per share	vs $12.02
Bear	164	11x	1,800	925	875	$9.3	-22%
Base	200	13x	2,600	855	1,745	$18.5	+54%
Bull	228	15x	3,420	785	2,635	$28.1	+134%

The asymmetry favours patience: the bear case requires EBITDA to stay below FY23 levels essentially forever, while the base case only requires a return to FY24 EBITDA plus modest leverage reduction. The market is currently pricing somewhere between bear and base.

8. Peer Financial Comparison

Per-peer financials below are USD-converted for cross-currency comparability (all peers report in their home currency: DMP A$, DOM £, JUBLFOOD ₹, DPZ US$, CKF A$, RFG A$, YUM US$). Ratios and margins are unitless and unchanged.

The peer table makes the gap visible. DMP's operating margin (6.3%) is the second-lowest among Domino's franchisees globally — Jubilant in India runs ~10%, Domino's Group UK runs ~14%, and DPZ the global franchisor (asset-light royalty model) runs ~19%. ROIC at -3.5% is the worst of any directly comparable peer. The mitigating factor is valuation: at 15.8x EV/EBITDA DMP trades roughly in line with DOM (15.1x) and below JUBLFOOD (27.2x) despite lower returns, so the market has already discounted the operational gap. The question is whether the gap closes (margin recovery toward DOM's 14%) or persists (DMP stays a perpetual high-teens-multiple over-levered franchisee).

9. What to Watch in the Financials

Metric	Why it matters	Latest value	Better	Worse	Where to check
Operating margin (half-year)	Single best indicator of closure programme working	8.3% (H1 FY26)	above 9%	under 7%	H2 FY26 results, Aug 2026
Net Debt / EBITDA	Covenant proximity; capacity to invest	6.7x	under 5x	over 7x	FY26 full-year results
Same-store sales — ANZ	Cash engine health	LSD growth	above 3%	under 0%	Quarterly trading updates
Japan EBITDA recovery	Largest single market drag	improving	turn positive	further losses	Half-year segment reporting
Cash interest paid	Leverage cost	$22M	under $20M	over $26M	Cash flow statement
Free cash flow	Capacity to deleverage	$90M	above $105M	under $65M	Annual cash flow
Dividend per share	Capital allocation signal	$0.50	held flat	further cut	Interim and final declarations
Net store count	Closure programme completion	~3,500	flat or up	further closures	Half-year operational data

The financials confirm three things: (1) the business is not insolvent, FCF remains positive, and the franchise economics still work where they work; (2) the FY23 Asia acquisition together with COVID-era Japan overexpansion broke the previously elite ROIC profile; (3) H1 FY2026 is the first half in three years where operating margin meaningfully expanded year on year. They contradict the bull narrative that this is "still a compounder bought at a discount" — the FY25 ROIC of -3.5% shows that capital is currently being destroyed, not compounded.

The first financial metric to watch is operating margin in H2 FY2026 (results August 2026). If half-year operating margin holds at or above 8.3%, the closure programme is working and EBITDA recovery toward $200M+ becomes credible — that single data point is the precondition the bull case requires. If it slips back below 7%, FY25 was not a trough and the leverage problem moves from a re-rating debate toward a solvency conversation.