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1/23/2018 Activist Insight

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Lemelson: Domino's has the worst corporate governance QUICK SEARCH
23rd January 2018

Reverend Emmanuel Lemelson has issued another shot at Domino's Pizza,

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saying in a statement to Activist Insight that CEO Patrick Doyle "is exiting
before the chickens come home to roost."

Doyle, who is largely credited with a remarkable turnaround of the company
focused on dramatically improving delivery times, announced two weeks ago ALERTS - keep updated o
that he will leave the helm after eight years in the role. During his tenure, the news stories for this activ
stock price has advanced a staggering 1465% thanks to aggressive or company by creating a
expansion nanced with debt. alert

"You can't keep borrowing to increase a shareholder de cit - Doyle and the
board of directors of Domino's represent just about the worst there is in
corporate governance," Lemelson told Activist Insight. In the past ve years,
the company's revenue has increased by 32% to $2.47 billion, while its long-
term debt shot up by 29% to $2.15 billion. Such a business model is
unsustainable, according to Lemelson.

"Doyle has turned Domino's into a nancial house of cards, eeced
shareholders by dramatically increasing the shareholder de cit and
borrowed recklessly to 'juice' the stock price which in turn enriches him," the
activist said. Doyle's salary nearly doubled during his tenure, while his total
compensation rose from around $5.6 million in 2010 to $8.6 million in 2016.

The U.S. tax cuts should provide some respite for the company, although
rising interests will have a negative impact on the bottom line. Lemelson
believes that the U.S. tax reform will bene t Domino's "better-capitalized
competitors" more.

"Domino's is essentially owned by its creditors, when they eventually get
skittish it's going to end badly for shareholders," Lemelson said. "Doyle took a
bad nancial situation and made it far worse for owners of the common
stock."

An incessantly rising stock price did not scare Lemelson away. In fact, he
says the bull market has provided the fund with an opportunity to short the
stock at "ever higher, irrational, prices." The activist thinks the stock has at
least 64% downside and is worth just $78, "and only then to the brashest of
speculators."

The investor said the stock will inevitably collapse given the product's poor
quality and management's failure to shift into gourmet and healthy choices.

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1/23/2018 Activist Insight

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Timeline

Date Summary

25-Jul-17 Shares in Domino's Pizza decline 8.3% after reporting disappointing international sales

18-Apr-17 Reverend Emmanuel Lemelson claims that the company could get into trouble as interest rates rise

The Australian franchisee of Domino's Pizza announces it will release con dential gures on its stores' pro tability after a newspaper investigation
13-Feb-17
accused it of questionable business practices

Lemelson Capital, according to a Benzinga article, states that Domino’s Pizza relies on franchises to raise debt to feed payments to corporate as well as
18-Jan-17
low cost energy, labor, loans and cheddar and states that any changes in these factors will have a material impact on growth

Lemelson Capital discloses that as of 9-9-2016, management had sold short a total of 35,570 shares (valued at $5,007,590) at an average price per shar
09-Sep-16
of $140.78

Lemelson Capital discloses that between 2-25-2016 and 7-11-2016 its management shorted 14,370 shares of Domino’s shares at an average price of
13-Jul-16
$132.42 and a total value of $1,902,926

24-May-16 The state's attorney general sues Domino's Pizza Inc, a liates and three franchisees alleging they underpaid workers

18-May-16 GeoInvesting publishes a short report against Domino's Pizza, with the company facing wage increases and volatility in commodities

Shareholders of Domino's vote to approve the proposal regarding executive compensation at the company's AGM despite CtW Investment's
21-Apr-15
recommendations. Shareholders also vote to reject a proposal from Marco Consulting regarding proxy access

CtW Investment Group writes to shareholders of Domino's Pizza and request they vote against a proposal to approve executive compensation at the
23-Mar-15
company's AGM

Domino's includes, in its de nitive proxy statement, a shareholder proposal from Marco Consulting Group who requests the board take the necessary
12-Mar-15
steps to adopt a proxy access bylaw

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