DPZ - Earnings call transcript Q2 2019

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Operator

Good day, ladies and gentlemen. And welcome to the Second Quarter 2019 Domino’s Pizza Incorporated Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time. [Operator Instructions]

conference recorded. this reminder, a is being As I to of Tim like to Communication. conference over turn the McIntyre, would now Executive Vice President

You may begin.

Tim McIntyre

us Officer, quarter XXXX. and you call Jeff will regarding Sonia, Lawrence. everyone. from The and results for Chief Chief commentary joining Officer, Executive the second you, today Allison; our our Thank of feature conversation Ritch hello, for Thank Financial

in ask listen-only is primarily others for all I members call audience, and of this As to investor be mode. media the our

event you the looking release, are in In XX-Q. any that statements the morning’s the made, forward to you Safe I the this can refer X-K and Harbor statement find

In of today’s please disclosures call. to financial find used to and non on addition, reconciliations the measures refer X-K GAAP that maybe

our this we our -- would to if request encourage want of today, do on we to please. best to so analysts, question call, do you one you we all accommodate you only to ask Our

to it to And with turn over Officer, that, Chief Jeff Lawrence. like I’d Financial

Jeff Lawrence

you, second brand quarter, everyone. we our In our Tim, the delivered shareholders. global continued as momentum morning, positive and Thank results solid for good

to and international continue consecutive comparable quarters U.S. of of lead sales XX restaurant the positive with We industry positive comps. straight quarters XXX broader

global We new we opened a stores store also XXX in increase continued healthy to our net at count pace as QX.

of as Our diluted impact EPS transaction XXXX. the recapitalization in adjusted EPS year XX% an prior which increase diluted was the our $X.XX, completed over quarter, excluded of in

pressured sales year stronger When by X.X%, look over during both impact retail sales grew global This to increases sales With prior negative year year the sales quarter. a division X%, grew increase compared was Same-store of at of our same-store the the financial Global opened by global number and dollar. X.X%. by retail stores take X%. QX. rolling lapping U.S. X.X% that, the a let’s retail average of a grew sales in the for increase X.X% FX, a growth quarter, international results excluding closer grew as for for driven of and the sales same-store prior prior

the quarter Breaking up stores this by was comp, X.X%, ticket was comp were our while company-owned driven X.X%. up business The growth. down our U.S. franchise

experience U.S. successful strategy, as the comp marketing to pressure aggressive continue as third-party We from on our aggregators. fortressing from well of

by On the driven international front quarter also ticket comp the was our for growth.

unit store opened the XX closures. XX in U.S. second three openings we count front, net stores the consisting quarter and On of

XXX stores closures. of QX added division and international new XX during net comprised Our store openings XXX

and globally store same we very with XX% at first pace rate net opened more We and the of then growth XXXX are our the last point the that happy during of units half have note year.

net XXX enduring the believe of combined franchise in units four-wall approximately the partners restaurant and opened the economics with which the our XX broad per last months, demonstrates we month of have We over efforts strength best industry. the

X.X% total Turning to the following. second or for primarily resulting revenues, the from were $XX.X the from million prior up quarter year, revenues

chain supply resulting the retail count impact increased increased international negative of sales in in First, revenues. retail from higher revenues, resulted and both royalty sales growth U.S. changes were and franchise currency store sales, same-store drove exchange by offset but franchise rates. foreign partially U.S. Higher international

York company-owned increases market of royalty the sale disclosed from by existing international strengthening dollar impacted negatively our to certain New lower million quarter. the during quarter against FX offset prior XX store corporate the were revenues due stores resulting partially to revenues, franchisees $X versus These the by in year the currencies. previously

New focused As allows markets. market our York accelerate us will I during us mentioned remain further transaction to store remaining QX the help call, fortressing the on this corporate and fortressing

in XX.X% year the for percentage to consolidated as XX% sale. margin, by quarter York on of revenues, margin from was operating positively quarter prior operating increased the New the and impacted a Moving to

percentage operating chain savings and by positively was was and lower procurement costs. margin insurance by impacted X.X points negatively year-over-year was labor pressured up higher Supply costs, but

was by margin percentage the X.X operating sales. store year-over-year York driven points New up Company-owned

to our rate labor pressures We in experience remaining continue markets. owned company of many store

the cost million year decreased the Interest as the our New G&A increased related part XXXX of interest in $X.X compared quarter, second prior prior incremental million by million the York by million loss to sales. recorded in driven to a $X.X expense quarter, $X.X recapitalization. expense driven on in year $X.X

Our X.X-percentage-point tax the year effective quarter. rate reported impact down prior included points the tax was on XX.X% equity-based for tax from effective compensation. a positive rate from reported The quarter, X.X benefits percentage

for expect it up volatility year related add rate the quarter see foreseeable up, $XX you or net to was our continued quarter. to compensation equity-based When future. all tax XX.X% income our in We over second prior effective the million

diluted Our quarter a second increase. $X.XX the EPS prior versus was was XX% in year, which $X.XX

EPS diluted our for the $X.XX increased year prior XXXX quarter EPS recapitalization of our diluted second XX%. to adjusted compared as As

Here that is $X.XX breaks down. how increase

Our from positively Lower over lower on to tax XX months past $X.XX. the diluted share tax compensation. us rate repurchases effective benefits higher count by us share benefited related by primarily $X.XX, equity-based impacted resulting primarily

by resulting Higher net interest interest $X.XX. higher from rates expense negatively slightly us primarily impacted

$X.XX sale. that by improved And include It operating York results important to our negatively $X.XX. New do impact $X.XX. on the royalty operating Foreign note currency impacted benefited us most loss the negative recorded a results from revenues importantly, by is

to a would moment of like generation. to in to Now our model, strength take Domino’s financial the highlight flow the I continuing cash particular turning cash,

operating for activities free the first than generated cash for flow more than During more $XXX After cash CapEx, the year half first was of the half provided million. we deducting net of $XXX million. of XXXX, by generated

we cash generated months have than $XXX XX past the free in Over million more flow.

outstanding not to cash long-term performance, I to financial flow commitment to our also model of shareholders. highlight our folks remind returning and but demonstrate story to only our cash

to our an total bringing average shares price $XX.X $XXX purchase million. During the of over share per the at repurchases and and second repurchases to more months year-to-date retired quarter, worth $X.X million total share $XXX past we XX repurchased of than million our

of the $X.XX regular to form returned dividend. shareholders also share our a We $XX.X in per million quarterly

continue As well always best of cash efficient the as to benefit shareholders. as for to our we structure to capital way the and the evaluate our excess effective most deploy our will business,

Overall, consistent momentum pleased and our this results quarter. continued solid we are with our

We franchisees, will our and to the value driving and our stakeholders, relentlessly shareholders. team remain on focused great including brand providing all forward customers, of members

and today for I joining to call over will you Thank the Ritch. it turn now

Ritch Allison

Jeff, morning, good pleased am Thanks, performance. I Overall, and everyone. quarter our second with

journey our try and context the into the drive discussed will put of long things growth for brand to franchisees. profitable I game to As we our Domino’s quarter, matters what on

lead in around talk We continue and continue the there we to quarter. but the context, a be we With work-in-progress to pizza will always that gain plenty globe, been improve. areas let’s have are brand, of where about category can share and we the

with Starting unit U.S. business, was sales same-store once a the and by performance solid our again net driven of growth. retail sales balance

activity near-term. I this the sales our in activity navigate aggressive delivery toward as in to quarter same-store the to three-year to do headwinds of performance to came Our end lower through not the third-party related for outlook, expect aggregator’s. we from ease five-year continue

own also fortressing to our on We continue comps some put through strategy. pressure our

an in the and the business. have make for and the profitability long-term we we that of is are to past, this our discussed growth As investment happy franchisees

charge, During driven, delivery away menu does it in counts, to the shift signal level at the from having related comp of impact. being utilized franchisee order mostly which does and ticket driving price was an not quarter but a our, reflect store flexibility strategy the more

the franchisees our us Make that coupled strategy sustainable growth we data and here, with It will drive mistake, strategy through no remain got on is the with that that ticket where to is us opportunities utilizing the smart challenges future. focused the in help navigate possible. strategy transaction

was Our and the Points progress additional the tied solid downloads, most driver, extended quarter awareness program. objectives am to the Pies I to it pleased Loyalty into reengagement second by our sales app a toward for and promotion related while

openings business, once only the industry demonstrated quarter I in economics. unit and be with U.S. closures, three continue of to leading our solid again pleased of a pace XX unit growth our

the strategy support the Fortressing continues long-term system. brand to I the pleased answer this franchise strong for our with and be for within right am

This this initiative the approach driven meaningful conversation educated is around remain proximity grow positive remainder we creating franchisees. assessment service driving households, to data shrinking territory impact its best for retail growth franchisees improving the beyond. and on per a approach can and win delivery of for to and their about has our unit XXXX long opportunities carryout, profitability. to establishing for areas, closer continue delivery created and how enterprise to sales Our by cost excited lowering game also We meaningful

to our service efforts Fortressing only not critical component our but is of to component. is improve a it customers, the

tasting to to push Our service, door on improve getting with day must to operators great consistently pizza. continue every harder time

it to brand of we launched and shortly. help step will in the and experience off will our franchisees the that that to very a an will getting ground even tracking be to operators. This end order am by our we today to pleased As innovation GPS of be announce the be I continue an transparency XXXX. bring will also that technology tracking technology will I further pleased invest am

technology bring the pilot as quarter, with every in expand During to new announced to learnings delivery revolutionize the the closer partnership we way that could us the do truly that Nuro, day program continue our we we driving self business.

will fall. area the this this testing We be Houston in

and of will continue XX we also Across these company DOM assured voice in other owned slow down. multimarket now taking, testing initiatives, rest stores. will over that We not our order

innovate of We the stay our and will at continue industry. to invest to forefront aggressively

balanced as what driven strong in, U.S. and thank unique will recently approach franchisees U.S. franchisee a sales, I via environment. want to operating forward, focused the and game to for volume dig continuing long remain during to help. on business growth we been For competitive economics our we unit our retail has look

your XXXX. things, the all growth on other profitability, what long-term into and top of head we half my aligned as remain staying potential your back matters, Beyond priorities

another solid growth. to it international, on was Moving for unit very quarter

market are to but economics share, getting performance we there While near-term retail a to long comps and showed comps so challenges healthy levels, our unit remain a This leading is in related I as model. of may coupled over continue our fundamentals confident our proven blend in sales shift with and to, balance time, strong blend used international to units result. back

improvement across net XXXX, demonstrating quarter, unit of our our stores was regions. of all Unit growth were the the openings commitment terrific unit and QX strong of economics franchisees. strength XXX a of During strong master the over international

insights continue to related decisions franchisees, pricing master sales were and Same-store driven to ticket of promotional importance make and and and stress data smart to the our with we analytics helping strategy.

of our week is learning. During international the our the example practice and franchisees from many gathered master sharing and in world. our discussed international have the a and world our we strategies around various one of the of are leading developed in how engaging successful excellence tools for with best of around It supporting centers that quarter, been Amsterdam partners. markets We

model and strong. partners very our international Our are

comp me the quarters lost outlook. our short not on has is that it However, three our up to five-year come performance of over three-year last

may XX% the While over time, to global of meaningfully business our of time. period X% be and low outlook contribute poised healthy sales near our to a toward we remains end our international for retail target

our focus I pleased as where encouraged by I of successes many look can I by business, our am the as am global I our first the across XXXX. passion areas as improve. we all, addressing in Domino’s am on the half and All with

to will stop never better. get striving We

are And with some take happy that, we questions. to

Operator

[Operator Credit you. Lauren of our And Silberman Instructions] Thank question comes from Suisse. first

open. now is line Your

Lauren Silberman

the be for ticket orders greatest the Is sales? see same-store or drive new your question. to customers talk base, Thanks. about platform? higher opportunity you Can incremental existing Hi. that where would customer that the Thanks from attracting whether to you

Ritch Allison

which for Ritch. the things. continuing those those the continued both of the quarter, was We across honestly opportunity during Points brand incremental Pies Yeah. with customers. about for we Lauren, of question. attracting existing customers both both in new all Thanks and those, terms of driving our do program second to And into sales see it’s also

Pie driving back but coming program to more in royalty January, the members increased that as Piece we one, expand first continuing the our additional Number got time, number than enrolments, to resulting customer our active base, brand of discussed and in engagement program. in purchasing in we million also customers the existing $XX have with of for rewards

we on look we of as both forward, those fronts. So see opportunity

Operator

of Thank comes Brian And next you. our Co. question from Oppenheimer Bittner &

line open. Your is now

Mike Tamas

Hi. Tamas Thanks. for It’s Mike Brian. on

from wondering, same-store what just sales are we quarter. last of kind trajectory of changed think I in sort the all

You keep see this kind and you you last let mentioned quarter third-party delivery there. headwind going probably is and any up said don’t peaked then quarter of

or fortressing your -- overall changed do do the traffic how headwind change So think that your in your we or about with traffic there something then did how trajectory that? about of is sales reaccelerating that And going Thanks. just sort trends? you the of forward think

Ritch Allison

Sure.

as same-store we take QX, the sales in business. look material differences U.S. on our pressures - Mike So no at no a in the

comp to working strategy on we quarter-to-quarter progress our downward we with fortressing the doesn’t been That that. on forward with continued while have honestly much from pressure We for that a range shared have basis. on the and you fluctuate of a

in market as out to part And aggregators. during see in of QX is drive a so of share. really substantial puts third-party to same of on did story lot there gain advertising a discounting we marketplace, share significant in similar the pressure then some comp. of continued spending a There voice, the And pressure -- on a in downward terms of they the which our pressures the of second QX very amount amount on

lot, things matter competitive every several landscape. product this look comps the drive there we in even gotten bring to and I forward are are be got to story the fairly how going over new is has a We is some going similar that to customers past think reaccelerate, the and -- what our here day. each to to do us As about, and years. There still future great still in

that. are on heavily focused We

our We still offer got be there pressures $X.XX our and intensely carry that’s steadfast -- franchisees match, focused to our cost see remain on out and value going same into and our been the we while business, delivery to have offer, we certainly $X.XX important. have mix hero with and

our every day service, to provide We customers. have and drive to consistent delivery great got to service

prepared we even the in the on call. of those of order, manage their as which lot their the in particularly the some excited day some technology working I a into about operations. give ways, to efficiency information rollout but excited am every only more better in also once customers GPS hands fantastic to remarks in our invest later pizza that that in transparency get am are not around again they of We delivery continue the my and mentioned our I coming it of will technology. will our about I year, operators put on additional restaurant will

Mike Tamas

Great. Thanks.

Operator

Thank question you. And Chris from our next comes O’Cull with Stifel.

now open. Your line is

Chris O’Cull

several Yeah. know you later lot about initiatives technology but and this menu messaging I transaction it. in I the Thanks. the any like you follow-up? considering value considering tests understand or then Ritch, terms year to changes. the are on tracking, elaborate of declines and there I to talked a GPS might want Is you else you’re the address business have anything a

Ritch Allison

So, we to without are on Chris, going consistently, question. value stay focused

use the analytical right tools make research long-term. we talked our offering about over to the marketplace growth the and As transaction very understand drive that value we to fully the sure regularly what in past, have we is in our

answer We to in will out we do that there and competitive continue very and and have the to back the $X.XX now the platforms marketplace. platforms are that value the strong continues still $X.XX the and come that

LTOs brands innovation the business basis. economics the relates on doing the just of important lot operational other long-term. it recognize we we the like We don’t -- like a do that. a that we in of and is out we to That restaurant As over menu complexity roll menu, are food said, don’t regular and

items at forward bring So we to are we menu customers. that and platforms our might looking new constantly

ongoing basis. on an those testing are We

In about different looking fact personally kitchen in ago a half test was week just at the and number the of I items.

launch And test as prove arise. items we’ll so them and we with those opportunities as develop out and customers the then

the very a profitability menu, mindful to For are incremental, got onto come of also items transactions, our P&L. product incremental it’s we our to but those franchisees to of only drive not

just profitability. want franchisees contributors our to any not the are comp, will short-term over items to drive sure launch items we to that we long-term So make new

Chris O’Cull

historically, by declines has because you transaction for category to power Thanks. then, transactions. more pricing of the without fees pizza being And company or is aggregators to now raise affecting Do Domino’s charged critical soon? it think prices the delivery struggled reverse

Ritch Allison

or in in in A category. So the I have is of over think years price see been paying the and same changing. pizza customer. and see success last that the years very that pricing get the category part signs decade our hands are were ago big There that of QSRs the a the still you of Domino’s the nine power we of XX the that lot don’t pricing you don’t power near-term pizza few has fact for I a any can

having quite relative around the kind been aggregators product It’s notifications mails are setting for of to time that so to to you order. you underlying of these impact cost third-party e the the marketplace. what even entice all the and the from on aggregators significant I delivery has get food the of in really with stated probably same tell fees to some of early though push high kind are pricing of to discounting these much get try discounting There

and growth experience way new eye value has third-party an eye only on their long-term of business. see shown So as the our over always is an transaction pricing competitors in on traditional competitors, to the we these have focused keeping our also we we but remaining on are will not certainly practices we aggregators with are that time, drive but set respect these keeping to

Chris O’Cull

you. Thank Great.

Operator

comes Baird. question David next out Tarantino Thank you. [Operator from Instructions] And of

open. now line Your is

David Tarantino

Hi. a question. last on Good Ritch, the follow-up just morning.

this of these talked you and maybe offers have And expecting are secondly, am further have kind still comment not on wondering would doing. then, is be trial near you end I in your lot view, I the to see guess, do X% maintaining are I are given sustainable. I you trend. with to change a environment? this doing think of in Do guess that X% they that potentially you not confidence get the the what aggregators about of the And related low just past creating much as you mentioned Thanks. might if third-party a degree temporary discounting and near-term into comps they that your above to phenomenon target, you or the of in the you the think environment

Ritch Allison

it. Got

bit David, driving discounting of a food trial still still well. in as significant of fairly the advertising There heavy taken So, delivery. it’s has third-party tell share of early landscape the activities around group a sustainable in by the advertising the are. to heavy out degree also how That remains and aggregators of terms a marketplace voice aggregators spend degree of there

continue So that we period expect for behavior to of time. some

of these the while of in open businesses. business a to The indicates activity certainly near-term those think near-term still lose and economics trial that the very lot players I are money investors question to long-term. to in willing to think for the are share the drive I market try

our So watchful in everything slow down to short-term. over signs the own our remain and going going analyzing to data don’t understand time. we out see any But that what of that’s certainly attentive and behavior activity is is customer’s better

to our growth. business, for to in our to transaction outlook, five-year sales, solid us, business I no see a X% the to take at same-store to still drive significant look changes opportunities outlook I continue our three-year When X%

advertising budget brand. of advertising advertising fueled industry. largest the and We question to -- the in the powerful have industry-leading continue most terrific pizza advertising that without is produce awareness That drives by we got

getting and because importantly, to our technologies critical hard to into where time. cost have lowest system, put only element, We stores you of on we get I we be and anything hands on are can forward best, provider, continue our very door fantastic develop to most very well, not drive we have also economical into the service the better the this into to but we as our delivered, pushing, operations and to to world look delivery the customers every got think time within be new a

so, performance service terms aggressive push a And how around world the can next to take be down the really us improve we delivery time operators the the we and standards and continuing really service, of each we is helping great areas to our have level well that within are the deliveries. have and the us these strategy for in that setting fabulous over on underlying to internally those delivery as to economics U.S. great also of of allow got pretty new got long-term, to tighten fortressing get drive we but as

Operator

from you. our question next comes Securities. of And Thank Matthew Guggenheim DiFrisco

Your line open. is now

Matthew DiFrisco

you. Thank

a something I question. wanted Just clarified then have do

charges, there is food mention was not sort early a for that and up on to regional as third-party the if driven is the hearing guys. but by quarter then, anatomy the Thank of is it What hear goes maybe the temporary are just they competitive their level delivery that sales your I you. so are that just in you want discounting the bit intrusion the goes some the or the change is it change it Domino’s same-store when better charges, to that’s fast the the changed, doing, brands just impacting in of more now we about their there of that a by expansion, of as those effect want platforms, additions within check I context far curious now away understand on more new away, how traffic it on brand? was taking tone that think franchisees you a little being could delivery speak about about aggregate traffic? on if respect the an know, had And in

Ritch Allison

Sure, Matt.

also the have the some increase of question, first some quarter. price both some it of that So, up on and a quarter, was combination increases in the taken menu second franchises in ticket the delivery during your going charges

charges, of are minimum menu of the in a increases driven are lot wages, primarily more more and in to and in significant the in we up delivery which pronounced areas pronounced those they price as across increases, continue increases, -- seen is go wage where have the a states country. that municipalities On by

around, always the second your -- and customer have viability into aggregators. that second the the spend. about we amount tone Certainly, discounting third-party heavy and questions had is around there The into our of is a question going economic the the still -- to We of subsidy have the model. investor that to the same still the incremental advertising

also business that We using have from the significant the about of still the questions or standpoint model of the third-party viability that restaurants are franchisees delivery.

has If aggregators. been growth even you a industry look change with the of the in in take at delivery restaurant transactions and the industry restaurant sales significant rate the there and the growth a entry in of overall, rates these not

up an is restaurants there no is certainly it going receiving But to customers in are the getting themselves. some in their picking So is real shift or there how there overall are indication as food, opposed into growth more that delivery demand.

We also to hold those that these on restaurant this out the profitability extracting the industry for players of third-party still to belief ultimately are platforms. that going is continue

more on the look viability royalties they the money about because or with question brands those But these for brands to on, fact less the contribute with making the think at platforms. can take you that Board of Now growth, which sales topline going and ultimate gone are will they are have the lay franchises will a in brands. I

pressure or the fact that When lot in by a investment any we talk still about questions the hold aggregators seen the I these the So is to pace the that model. same of slowdown marketing of overall in fact from their pace of subside expect the in the and around discounting don’t driven we we really business advertising. the haven’t near-term that in third-party

business the these each share while you spend become future, in These hypothesis I survivors desire some may there around it be of ultimately to be on emerge of quite is watch that be to behavior behavior to to suspect in is would are behavior some their this near-term part. as aggregators it, the at think the will when rational not -- to players will And these irrational, the my about to seem tries going drive and the actually that be one those in irrational try and first of

Matthew DiFrisco

Thank you answer. you. Thank that for very much

Operator

from of America. you. of our Thank next Bank question And comes Francfort Gregory

Your now line open. is

Gregory Francfort

Hey. means am or Can what to help maybe New next shift EBITDA in means York performance you quarters. the and what for for lost store bit. going margin to quarter a Thanks little -- either address benefiting few basis to question. frame OpEx the I maybe the the margin benefit a up for for City that the level that on go-forward

very up I However, sort any and change multiple then you of I’d that for maybe a want than help pay less that stores business guess on to proceeds that be forward the the frame or expected, it helpful? were were And up? low going framing the lot does mean that profitability would profitability these of

Jeff Lawrence

Jeff. It’s Greg. Hey,

run those not have On I really of to market. those those who franchisees to also the that market am fortress assets. for price those continue New to stores sale, only but York into we get got the committed to hands excited

those the to at the corporate markets are are definitely includes we continue take We markets going compete but best are. remaining to for what and opportunities fortressing that we look all-in and store and money where that, on that

some was New margin When profitably percentages the a basis in York even that market. as of you other the New year-over-year, while we good XXX better about reported, as there our stores points high almost corporate that operating the change think margin and market, operating all a we up were certainly York, for quite quarter-over-quarter weren’t performing

a of problem there. math bit little a So

Ritch continue mandated. government where whether you U.S. as forward, economically the West are move versus in East to franchise continue or versus mandated we Coast just to versus As earlier, of persist pressures Heartland, corporate regardless operating mentioned Coast the labor

so. to really just more for paying in members team great material to share business USP or who as ‘XX this continue attract we are to continue of the have and not We retain decade in and missed take we be

look better money to our operator, getting right competitors. both operators, forward, traditional will And report we we early allow we do the they we make XXXX. the their have business upstart you them into are to how As to partners, the right the and technology with have hands we will for in XXXX, compete

It’s tell is, they opportunity six hopefully year economic would we best in put have to as profitability. in going. have up operators the That’s last I and and what we all already months up our where months model go about the execute. dollar But you and the just is to out brand had good every of bag there there year is the the feel the to in another the world. six record and us opportunity But

Operator

And you. our Incorporated. Will Slabaugh Stephens Thank from next of comes question

now is line Your open.

Niall Pratt

is actually for questions. on Niall the This you Will. taking for guys. Hey, Thank

growth us point regarding more in bit give mentioned little terms a you market So, markets internationally, if little seem unit to year-over-year. could a me opening Could to or nicely attention? a growth be this of more there accelerating any stolen be what as you at detail that there

Ritch Allison

Yeah. Ritch. it’s Niall,

four-quarter business are quarter we in very in units very pleased growth are the our with with net net nice We over was really year a that. the and international business. last at growth trailing XXX pleased XXX international unit store second The increase

there. unit a world growth the in BRIC spoke we we in to our really had see terrific the our January. about accelerate Investor around potential to unit had Day, in growth markets. see which with of strong across, pleased continued BRIC the When that take in business all you in we markets, growth strong We look across some the we particular regions and have At back

well. very But then growth and in markets strong more we our as some established of some mature saw also

markets those the as well. a working of we fortressing some are also strategies that As in U.S. similar have on business implementing been number

am Domino’s incredibly in is business world in have and store the boxes has four-wall economics. all in When we So, very U.S. closures in that these all, take same the remains U.S. U.S. growth, The what at the unit I a it’s our both is I pleased. growth and that around look international that low the economics terrific has Pizza in the driven that strong. the and business remarkably driven what thing of number in drives and

and am sales which really gave was the with X.X% healthy the growth to our X.X% for quarter, very the in that ex-FX the retail international global pleased us business. unit I So, contribution growth,

very with X.X%. that So pleased

Niall Pratt

you. Thank Perfect.

Operator

comes Ivankoe next you. of from question Thank JPMorgan. John our And

open. now is line Your

John Ivankoe

Thank you. Hi.

We completely drivers have customers competitive lot markets the about a there that impeded kind if on are for see for acquiring from whether now I in felt could it’s because right of but competition anyway but some this, so separate competition think execution if opportunity service that the that’s the particularly competition be this whether your -- to I franchisees about delivery are that think to some or customers call, talked begun any there and fees drivers, has of you to felt an themselves? economics maybe third-party potentially levels and fees, and related your how for you wanted you for and enhancements is they do drivers

Ritch Allison

competition in not the the areas restaurant of lot heated competition business there the for one. Record Absolutely, drivers. only that John. delivery marketplace. low a in will I unemployment is drivers U.S. there of and Thanks grocery in up out but in of other the definitively third-party rise delivery the and is levels for take

working our staffing And critically are the to improve everyday right we And scheduling to our with service. having continue is and franchisees important.

about those aren’t that on the we don’t technologies in technologies facing, a are lot talk working customer So that stores. the we

nice that store scheduling the working success really couple in started days, that at But in been sure are business very we because have us right also we we are hard they some the our on and well. working as driver to simply are the available challenge. this better algorithms, really we example, making our for corporate have labor other some on have working service, to and with franchisees are There store our around that the hard times on area and clock help right a of try of are to the mitigate things see

the world. the context the the all globally automobile. U.S. out in we the in send market of most that the pizzas we U.S. not market in in how go The other and do fairly around actually out Domino’s the places of almost business of they go is passenger That’s unique

of that we stores. some looking we take cities, E-bikes in other of at delivering number -- including as delivery got the methods on alternative in are we some we corporate in So well we are a have and then some have U.S. also and deployed our not markets, bicycles

that an is have interesting them people to some workforce to up because not seem thing and not opens those to kind way deliver cars. about cost us, XX-year-old of young increasingly the Now everyone only XX-year and the is automobile fewer of range lower but has it food, additional to also

as we are of at looking types So methods well. those

do delivery another the get we reduce labor our delivery. lower as us with that testing Nuro, place the autonomous of The to also and on in round we a going market to step try another forward October to where dependency to can are to cost testing yet

asked from When the you service delivery and et -- separating your their third question fees, the cetera. second about fees parties part of

marketplace charge a pizza as our are like a on where think delivery just in fees taking inform should that competitors look country. charge. be look fees at take data market-by-market We around that use the our of a to they the the fees regularly all and that basis delivery We the that we take we

that the the constantly and eye make always So or over are balance we growth strike. that adjusting with we expense that the not that an transaction sure keeping that’s mindset short-term are of to long-term taking time, to on we the at just want try price profit we dials

John Ivankoe

you. Thank

Operator

Bernstein. comes question Thank you. next Senatore And from Sara of our of

now is open. Your line

Sara Senatore

ask to continue. I to for near-term wanted challenges international about Thanks. markets comps there the that use were

it’s Domino’s pervasive whether Do what the about proposition aggregators more any something I and you value source with past might fortressing. regarding of be I challenges in the licensees disagreed respect has the may have with the to color if pretty push that because made, lever or quickly. could could any thought some it have you that time value or show like I is would on the it taking and update they feels your be that changes are thinking there those or be think being guess

could little is improve? and to a talk if do risk growth So unit whether what the not bit those about Thanks. there if comps sources you any

Ritch Allison

is the we quarters have is had short-term international question. -- issues is -- the challenges thanks there around over so are no real the one There no different There comps. or market-by-market. the last for Sarah, with to three respect The answer

and that take things markets What the products a been do to it trying time of efforts sure those et with do we making some takes are and times pricing, have just working to cetera, we the help in around to driving decision to good get ultimately through like lot results our is fact-based there hand-in-hand make business. flow

of to significant where of all the markets had a we terrific tools the globe other franchisees our we international week IP taking we Amsterdam about gathered sure of from best as and business. master just our think around practice and are and U.S. sharing best how grow an Domino’s experts leading over world meet matter leadership the franchisees to around we last team brought portion are using make the that of We we the Ann Arbor subject from master month, our from where with our a our

last unit come that retail international in of in four-wall you the to the closures, yes, comps the to the saw overall XXX three during at been share the still we continue Now, the the quarters, growth in gain X.X% has with globe improve The the healthy all business. pizza those. once category need openings that market to quite the X again demonstrates strength international in X which the we range for sales quarter absolutely below have around XX significant strength growth economics said, against and the of quarter, and

still of strong, markets some world. the comp four-wall our I master economics, in previous big the business over that we the have our franchise our So quarters, have the reiterate got want had amount have do pizza of challenges attractive market majority confidence the and positions while we to in share three with partners, I leading an incredible around

will And our business had we that so have through is health strong. franchisees, the that we with together work the but still master incredibly of challenges

Sara Senatore

Okay.

Operator

And from next Fargo. Tower comes Thank you. Jon question of our Wells

Your now open. line is

Jon Tower

mentioned back wanted the go program just on a are think to I the how pleased period. aggregate Great. and But that growth Points in comments you for Thanks. had in during the having to you reengagement the order the I the to U.S. with didn’t loyalty counts Pies program. on impact comp the contribute in business. Ritch it’s positive the the earlier

launched Pies the they using and are program what when discuss seeing program program year? brand in coming you back So in can -- earlier the this for are those Points you. with loyalty platform you you members into through as for Pies the Points you Thank the expected the

Ritch Allison

Yes. Jon. Thanks, Yeah.

XXXX once start to we iterations just So went through for build purpose the again I program. we will my your of we how question, kind of might program, a in different answer when that Pies, established to as Points it to reinforce back lot late of that

look spend, drive and designed to you at to designed brands, if programs some engagement. And drive transactions some are are loyalty across

if Ours free drive you simple X very going to to a it’s get why order pizza. is transaction over designed you time. from is that absolutely are It times growth us basically

member order users. for over loyalty Pies, and with know the XX then we members that entered often more customer. Points year We base the of program that than average taking those to active So, active an million

goal of of So a Pies do things. really the Points couple for

again that right, oh, Domino’s buying one, if Number of, a they program, kind a do we that. raise for of once from because yes, points it competitor, nobody did awareness do things manner, of would in kind only gives

So it out advertising the there that message awareness. great in great was a marketplace, raised

that valuable we that app opportunity incredibly more real once get estate Then in is know app, download gave we which us customer’s engage and our give an to to going on the forward. come and phone customers

across getting enrolments then program, across ultimately then orders and the and in the and metrics, customers the nice after ones all in and awareness, ultimately we enrolment those of first seen twice folks time forward. coming program movement across have downloads, going for then across the and Then ordering that across

program like that And to feed loyalty over time. do ours something have you a is

need a have to enrolments is news those of interesting and time. kind there So something the periodically to refuel in marketplace over

Jon Tower

Okay. Thank you.

Operator

question Geiger UBS. next our comes from Dennis And you. of Thank

open. Your is line now

Dennis Geiger

better the increased about U.S. it a recent it bit and the wondering maybe could more term? question. trended at could there has a at you least if the the business about given just perhaps, from Ritch, business I quarters talk carryout longer aggregate in then Thanks. assume given Can insulated performance focus be how least for and Thanks carryout, the to fortressing, that near- over at level. beyond of high talk opportunities risk, you any support the

Ritch Allison

the businesses over and inside time Thanks it we talked as The a is effectively box. still of strategy operate our we component business two Yes. same carryout have Dennis. critical about

as We them, designed and each at those for have got of a pricing, look individual a delivery businesses. promotion, we we and advertising business, business carryout

healthy seen carryout in our have growth business. We

open incremental of Fortressing important that, that we the majority part its an weren’t play when new and vast before. of getting that carryout units business does business is we

about of carryout So to how on when TV. to be will it, we but drive going that continue also advertising you continue component know think a carryout forward I see, will our you

piece at the look on marketplace. platform is basis. a We an in some insulated are the to of that evergreen business to going new as to continue that we support competition And the do relative of it more

carryout going the slowdown let forward. no up or business focus in So, on

Dennis Geiger

you. Thank

Operator

question Jeffrey Barclays. And our you. comes from next Bernstein Thank of

is line now open. Your

Jeffrey Bernstein

Great. Thank you.

difficult global have is to numbers growth, annual. basis more a I know know, question on focus you the but encouraged unit these maybe first growth, on Ritch, been you quarterly I and a about on it the Just strong therefore broader half read that

I unit you on X% U.S. guess, question so your growth plan, I except to unit I the they great? broader are to the whether more your any franchise year long-term, maybe keeps does franchisees by be will be by versus motivated long-term bullish guidance mom-and-pop focused be comps more just wondering comment seem suppose asked that international guess think increasing to and the comp the up So growth indicate smaller year will I directional cautious U.S. profit that I full for color you on short-term both more that the your every trends, and below X% am

Ritch Allison

the and feel three-year global our positive outlook X% back level based foremost, to attractive opened, $XXX,XXX we a economics XXXX, timeframe, a and but still -- for outlook X% that over year we have growth that there. the the low of first it cost don’t full store in really we a our place you the unit guidance unit things, in we with the at is U.S. incentives Jeff, on the combine EBITDA of unit give Pizza growth, per unit franchisees, for comes very to in Domino’s this couple investment in to underlying or On five-year different And getting franchisees

as countries therefore on was in lot the want -- healthy we to of remains last we And in I over you at as our markets, to couple very I month, strong. tell the of have can said around over so of the really economics. franchisees and international we majority look forward the same dynamics when around business. last seen master world, invest of our And portfolio nice ebb the optimism across we growth that things and about brand years performance the optimism franchisees the them I front, And with and vast the flow look XX hold incredibly unit international true continuing really may while individual

Jeffrey Bernstein

you. Thank

Operator

comes our of Stump And next Alton Longbow from you. Thank question Research.

now is line Your open

Alton Stump

up with doing you i.e. what prior done has just months us half pace what Actually the versus over question had of you. for you slowed of months Thank XX move your are thoughts that use kind obviously, Could front, first your buyback buyback on not just I to in as here, period. of Yes. just an course XX guys and that? had but bolster and a like the remind how Jeff to just maybe so what theory you program buyback would of behind the course, just are move program today much today’s are you opportunity as to downward opportunistic

Jeff Lawrence

Yeah. Thanks, Alton.

So current we have on the $XXX left million authorization buyback of program. Board

after buybacks we as business. do free of in course in dividends we of getting consistent our flow long history shareholders You and well guys both fantastic cash through know to just the back invest our and as

months. $XX sheet off pace our things million -- you had other wouldn’t billion balance around. and -- have bucks much read things of balance sheet, $X year-to-date. had paid into than around. balance rate for we too that the I the sheet bouncing We We The first revolver more move six

you back and best So of we so. read our the too flow buybacks committed to a we Again, of year and folks -- we about will can. just this the cash remind processed, which do from that way and into recap recap free generating I getting place, wouldn’t rate didn’t last we you year-to-date to I million best-in-class course, $XXX much also had year remain it

Alton Stump

Jeff. Thanks, Okay.

Operator

you. And BTIG. Saleh next question comes Peter Thank of our from

Your open. now is line

Peter Saleh

really ask $X.XX driving been past driven Thanks. commitment only recognize I the to by to growth like positive the committed works this Great. still transaction you your it platform $X.XX the in are if to you ticket. value. quarter seems are wanted and really that just the I price But said you comp about a point. has

and price that back start So are expect pushing past you for that level on you change that do you been the seeing or given hearing from decade? same the the pushback may franchisees point they at that it price price point if has

Ritch Allison

quarter the a strong $X.XX traffic on and than a would the point Ritch. Pete. Hey, read single I We commitment got flat not it still more quarter. system in any is price is It’s as to which

transaction there commitment of performance growth no in sustained significant launched drive platform to that our any at relative we transactions. since to have our we part look continuing a and and business time take slowdown driven is to on you over the If period $X.XX the

long-term to profitability. to their Our and way franchisees grow businesses is a that their grow that understand healthy

that time are over the long-term so at looked remains. again time and the have transaction profits with and growth sales We proven commitment related and co

Peter Saleh

Thank very much. All right. you

Operator

our Mizuho. question comes And Jeremy from Thank next Scott you. of

line Your open. is now

Jeremy Scott

and Hey. mails follow e we way. push it could different the third-party same hopefully, just discounts the I up you mentioned on all a I Thank will notifications, ask you. the see Ritch, that If question, all thing.

resets e-mail this still how time when how I or quickly marginally or they level same unclear out, don’t dry become third impactful, it expect is just you the at XXX think is what is response two. not the the but one campaigns mail customer up soon, customers e likely mentioned less those as know that you that Ritch anytime revert. market party number I or

have share those if trade areas battling years wonder against been on So or those in trends areas promotions higher insight I that for in been have two some could restaurants maybe more convince versus trade and you parties cycle permanently months, comp about of in you that can third the would about one life more you battling what for and six you playing customer response if see talk worked? the is the field delivery that

Ritch Allison

to try there Yeah. kind unfolds I of question. is to-date Jeremy around going little it about talk good forward. a then some also we uncertainty but Sure. what how a bit see will

So describe. let try me and

there market from where a cycle I level where time off the around think see third have I the these we it for an parties the tend is in least in a bit. period at of places think penetration what been extended does third-party

you get the that effective one a less is I XXX probably coupon think valid than your is second. point the

certainly customer has the many for the of there once the we dynamic don’t still we we ultimate So what in across the pay and will is some in know we that track But demand observe DMAs a though is service that be that price operate the to yet that U.S. cost little we a be. a will while of unknown, and that the customer continuing it way be still we demand heavy fairly long the discounting and in learn, providing are where before but is to watch as an the know this continues will suspect what as service I exceeds true

yet their of the sign is big been as going using small and we well, -- going on don’t from what to to are there with supply brands the to certainly aggregators. I these have has is But there marketplace incrementality rush to third-party those be are secondly, ultimately profitability that ultimately see then, and a have some in services. see think franchisees because And there brands going know to large to or

higher incremental truly think a there questions out how or among margin for trading transaction they lot are of are operators restaurant to lower is I a this margin there a just as transaction. And

still there some is in are uncertain. demand questions we had how much I shakes and both the supply, third-party see around until the business mind through So think it’s actually to of there true how around those equilibrium the out be and apps my this still

Jeremy Scott

you. Thank

Operator

question next you. Anderson Maxim Group. comes And of from our Stephen Thank

line Your is open. now

Stephen Anderson

Yes.

possible a something you been your system. this under still update wanted I go different to implementation and track point been test next so has as an has new ask little of discuss Just take see date? on and sale that and a to know whether wanted this for year I test

Ritch Allison

Yeah. take is here, Stephen, rollout point-of-sale take we still point-of-sale end of hard And by stores will to next-generation are the some than today, rollout on we the year. our then -- running -- or a are having system will going goal of it our -- with XX,XXX Ritch got the up system time. the and working -- see have we our on more and common test is the but

that unfolds on an have something brief to periodically as don’t that’s you for yet sure the be but update that, project I all So will on. you

Stephen Anderson

you. Thank right. All

Operator

turn over would does question-and-answer Thank conclude to Allison back you. remarks. for session. the I And Ritch closing this ladies our like call and now gentleman, to

Ritch Allison

everybody. you our to thanks Listen, results forward October on third to We Tuesday, with quarter discussing certainly XXXX look Xth.

Operator

and thank This you in gentlemen, concludes today’s program. participating for today’s conference. Ladies

disconnect. Everyone all day. great may have You a

Domino's Pizza (DPZ) 16 Jul 192019 Q2 Earnings call transcript