PZZA - Earnings call transcript Q3 2017 | Papa John's International, Inc.

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Operator

Good day, ladies and gentlemen, and welcome to Papa John's Third Quarter 2017 Conference Call and Webcast. At this time all participants are in a listen-only mode. [Operator Instructions] Later, we will conduct a question-and-answer session and instructions will follow at that time.

As a reminder, today's conference is being recorded. I'd now like to introduce your host for today's conference, Mr. Officer. Financial Chief Tucker, Lance Sir, please ahead. go

Lance Tucker

All Thank you, Liz. morning. Good right.

on the team be about financial Joining John are will our and Schnatter; have then call Founder, today business, President Steve our management me After of COO, comments other update, John the will Q&A. and and Chairman available members Ritchie, Steve for team. senior our our and and CEO, the management

materially cause will today involving forward-looking these actual results contain differ could discussion Our risks to statements, from statements. that

Forward-looking in statements statements risk on discussed with in of section SEC our conjunction our in Relations call. our the this Investor to filings. of included reconciliation be non-GAAP and earnings website should financial considered the a the release Please refer measures earnings cautionary press factors in our release, for

would we is this an Finally, in be any to mode ask a since listen-only investor call. primarily media

quarter the X% Now, prior our a Diluted third of up $X.XX, results. was in on discussion over quarter operating EPS year. to the third

Third was compensation the of accounting rules. by new impacted quarter the not stock-based EPS adoption materially

X% third margins center control which primarily operating in start-up Georgia, of higher the and and higher driven corporate opened margins revenues automobile margins increased the costs. comp by in These to quarter were to were sales new commissary insurance quarter. the units. primarily higher sales year-over-year opening XXXX, X.X%, restaurant which the down Domestic revenues million. other primarily by increased Phoenix due negatively units. due sales X.X% volume non-owned by comp sale rather, to primarily well up and to were fourth from the QCC and higher higher due QCC X.X%, global of North margins, our offset partially increases from restaurant company-owned increases, expenses, or International delivery related higher impacted including as Third XXXX, reduced costs decreased due sales America in market quarter of over to quality $X.X as

lease addition, revenues, and million, In expenses of year. were lower charge this head versus were a arrangements. G&A a of management of to costs UK at drivers lower and $X.X incentive improvement primary lower restaurant X% included results prior other the X.X% over XXXX The bonuses. one-time improvement coming in $XXX,XXX supervisory related by

Our primarily effective tax to was third in year, quarter, from was required resolved. prior rate state due matter XX.X% reduction X.X% reserves, local the a in and the the tax favorably as down

we new facility. billion closed the During a $X on debt quarter,

of $XXX As but of revolver. quarter proceeds the end, loan, on new million the had entire no term balance we the outstanding million had drawn $XXX

As of for repurchase expects part share quarter. its implement authorization $XX.X over quarter, program XXth, later entire reaffirms an authorization and we to in quarter, share million And of the remaining of stock of repurchased a expectation the no company million. The mid-XXXX. during will be $XXX portion share remaining authorization repurchase the we as fourth early to of than repurchased authorization accelerated the that October last announced had remaining the third repurchase expanded

was changes. non-GAAP from and capital to increased due million a cash XXXX $XX and measure flow, we cash expenditures as from working operations million less free approximately approximately Our expenditures, define unfavorable capital flow XXXX, capital in year-to-date $XX

from XX%. range this and a revised to some revised growth I've EPS As X% X%; last of X% night a from morning confusion the to to noted been to There's outlook. notes with XXXX in some of diluted X% of X% range of are America X.X% previously our of North prior up seen. press a issued to following our range positive release, prior revising sales the we aspects comp to

per from impact at EPS has guidance. X.X times a price All X conference to our what from the X% revised cheese the of the to late at Block compensation are implementation EPS. prior times Through the of impact $X.XX range in quarter, said authorization increased the X.X To mid-$X.XXs. to significant low increased outlook approximately the year. $X.XXs on times favorable full-year the the program's clarify, tax to been new rate to the that share of of on year-end stock-based a revised times impact prior X% items given reaffirmed. not do to we on range pound So Debt-to-EBITDA other year-end. a X.X the we call, repurchase reiterate earnings the outlook XXXX expect so from diluted excludes ratio third of

we've to will XXXX outlook. when several Finally, we inquiries our announce received as

some will has As February. make fourth when we at late color number we of immediate. we be of growth. long-term the quarter To a anticipate currently not level, from company's investments some will to results and efforts support give behind technology detailed that outlook future, We benefits more these our our high our in foreseeable the operations, been give in expect the of investments in our historical marketing a seeing benefits however, practice, release

I'd numbers and So the XXXX ranges than a call the to rather be to investing EPS at are Founder, future focus. or prepared turn should to while year be the growth John? CEO, for time, Schnatter. not will of Chairman viewed this over And our with provide like we as John year a that, where

John Schnatter

we morning, good today us our and discuss everyone. XXXX Thanks Lance as for quarter joining third Thanks, results. Hey.

into the saw of Northern business Hurricanes unpredictable speak Mexico, during move to including discussion, like and devastating impact unprecedented Harvey the briefly weather wildfires Irma, in I I'd to in we and California. a quarter, earthquake the and Before

who all a recovery. them with are speedy prayers impacted, wish were and of we and those thoughts Our

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up year finish XX our International America with positive XXXX profitability to to history. consecutive on its our North of years business highest comp have track in expect We is sales, and

[ph] center did commissaries. board at Really the (XX:XX) new a This center happened the Billy biggest We new disaster Georgia. region, state-of-the-art Hutchins The and last the our Alpharetta, week provides four in quarter. southeast, of in were third in needed also with capabilities efficient those operations QCC redundancy simply and our more spectacular proud just for a meeting, We new much job. will and opened make of a Shane our outstanding and recovery just just guys.

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Steve Ritchie

to in morning, Thank like continued world start commitment challenging operators promise our to around by this executing for right. and everyone. thanking and All John, our ever-evolving on brand the industry. you, and I'd good their franchisees

many America, XXth us of even segments. statement our new will success both more get all of International. expect of for come our ways to fully consecutive sales continued growth We Our our years growth mission for success, find growth our better. inspires to North from business consecutive of sales year XXth Despite soon constantly to produce annual year consecutive and

have be into These evolving foundation on initiatives well future. After update of to specifics. on will platform we strong will and results, the strategic on brand series provide sustainable Our growth founding a QX investments business will that I implement. principles the the a started create trends, for capitalize commentary and significant consumer just our transformational

solid enhancements, comp for with model, of with the across aggregators, our China, integration optimization very quarter improved Let's International restaurant X.X%. from consecutive driven significant growth. our from International results improved Sales most broadening primarily of XXth markets our team. with strong of our I in quarter marked design comps launch growth channels. distribution positive of our pan increased by our entire growth by prior The the brand of our QX is and for sales also in were quarter very proud of sales very and further the experienced start experienced the branding the Overall, business. messaging from believe pizza. International efforts enhanced In national Swaysland bright UK, firmly future accessibility media with we quarter, of the driven and support Jack the I'm third-party

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has technology always Papa digital John's innovative a very to front, proactive the approach engagement. On taken customer and

the with affinity, customer the increases we continue and providing Our that that guiding leadership in relationships, have technology and offers recognize on brand customer investment position, established experience accelerate a them And and order cycles while digital strong John's lifetime innovations a advantage. Papa focus remains to a drive unlocks delight to sustained, better to need we customer. competitive

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the channels to will to all other of are of and and number both complete effective our and ensure be will leveraging digital And solutions John's platform insights a restaurant to come. We for experience existing entire capabilities, to customers. non-native enhanced many platforms take digital years industry-leading efficient of sustainable, analytics and this data redesign engage potential Papa a behind investment our

to of better pizza future. deserve customers have our the investment plan, a our branding. is and get Our else, deliver three-legged anywhere we The can model than experience leg resources final near the stool in they and

the strategy brand overall solidify Rhoten, team brand His by his personality working to define the Our and in been value has are our differentiation, working our approach. CMO, perception and diligently Brandon investment articulation our brand our of enhancing team growth to voice.

am We enable capabilities. provide the we customers. in To most messaging and regardless like excited in an world. agency reach of from e-commerce. that and ranked Service channel. that critical about for Laundry which investments tool the and progressive customers Lance agency Age us but act of for upon it's yesterday I client will record we digital in the Service. digital-first voices I future what digital and release handle and Nike business, XXXX invested will both press our chosen We time has to help even our With personalized better have on to internal a will transition conclude, that is includes a Apple, Ad soon perspective. evolve be financial benefits, and turn John's. over the works All A-List, at digital will Papa recently us end, investments via creative of for I the marketers we will To that, Laundry announced external There outlined a getting also it attribution very our list an to upcoming help to marketing T-Mobile, the is that us brighter marketing, is am increasingly initiatives full I marketing and future some be technology questions. invest that all understand one-to-one new know clearly that That pleased a just

Lance Tucker

Liz, questions. for we're ready All right.

Operator

comes Our from Slabaugh question with Will line Instructions] [Operator of the first Stephens.

now line open. Your is

Will Slabaugh

what the softening there otherwise in say seeing through league now going little might bit? dragging NFL else made been minute kind talk hurricanes, that the mainly around guys. association you've bit numbers. down were Thanks, it that give around on I the terms to follow that Yes. you more softness your you wanted if something or and of you competitively into sales sales of of, XQ. curious know would up of there you a the be quarter-to-date or a I some ago is that you persistence is out I'm But the exact don't little guys comments with you

Steve Ritchie

upped year, our that. investment that Steve. situation pressure start as fourth yes. that upped in Sure, say the I would Will. has sizable comply It's we we make sales The solutions has a our and our it's just persisted NFL in creative were the to also predominantly, of to upped NFL NFL, last that the Clearly, we quarter. applying with the partnership into the investment our to levels, bled we

the more significant we've we coming NFL, and fourth headwinds. the into So tailwinds what expected is experienced coming quarter, from

fourth what competitive and basically guidance is launched actually we into we increasingly on contribute an So over on it pan rolling we've environment, the are that of that quarter. the in still launch Clearly, XXth October year. a provided are strong last

to So from the unless it's place. a perspective pressure last things some I expect would predominantly, that year, from solution strong we of but put is say, challenging, a sales a from persist NFL in

Will Slabaugh

that tech might customer we up out how customer, both I ask should a can the if numbers? And same-store that from be you gets standpoint rolled redesigned, also quickly benefit we what to benefit that how should redesign, how platform as should this all see could benefit and the where guess, about the and that show expect Understood. I sales, in

Mike Nettles

want is of This And kind vest. Nettles. Will. strategic Hi, close question. the Mike to Great to a our plan lot innovation of keep we

be from won't understanding the and mix, can are browser-based much they've are features. you well mobile mobile consumer impacted versus But much very specific technology how about and technology. much talking differences embraced web technology, maybe digital how we we tell So more what traditional that's I our actually in perspective, a

ordering In really it of to we've because jump to insights Instant to ordering about seen consumer other where actually a able of on accordingly. simpler, channels and out of to to going future, in far the and way, the order really year That's of one to the they pizza product, quality the are game. you significant leave and choices, several and right promise something in accuracy Edmond modernized and of the more food, you'll the so we excited that easier so without our to that, our team to gain other makes quality systems, are more and to makes investments that speed We're coming We're system technologies big that, performance that our ability engage meal into want and ecosystem. constantly environments as overall systems been else's making and better, for many we're teams because for them to see brand might about tools our driving all our that harder thinking Papa also the right having what see about the you've part Facebook thinking able the about that the them operation solutions. John's is improving with channels to our we're of the and down those somebody as technology have connecting aware actually have So of empower come. jump Today, to able faster, effective up be way and to the be with on accordingly. it the of be that us of deliver a from to operations to into well

Steve Ritchie

it's Will, Steve. And

more Just of comments. a couple

clearly, is remarks some an from standpoint. investment So I outlined things the in prepared this my of

initial get but latter started benefit sum predominantly in stages, of is So of we've the and to amount the the part and some of predominant to investment the pushed XXXX XXXX, just benefit be throughout expect hope comes in that We going clearly beyond. of XXXX. kind this

Will Slabaugh

Understood. Thank you.

Steve Ritchie

of from Our Alex question Jefferies. line Slagle Operator with comes next you. the Thank

open. now is line Your

Alex Slagle

what on could follow-up you the you on A guys. of to the balance question if sort NFL, do it year. the Thanks. end any the of your of commentary Will make Hey, provide from best for on could

Steve Ritchie

turn outline kind it of things and Sure, Alex. of then over I I'll It's doing. the start to some Brandon we're to Steve.

overall us had we've and terms the the We're NFL, years in well actually of served NFL with number awareness. partner with a the the brand longstanding running. clearly, just recognized quite one So X relationship it's

are we well. that the get aren't Clearly, get to implications So things going benefit well. when the going we're when things downside going

able We're things not we've get number to some going So the the make NFL. to to be a changes. full done of leverage of

are the investments there. of some However,

So are those dollars locked.

him So on it kind turn of of been outline to working a here. and number over Brandon to has things, I'll

Brandon Rhoten

stage I the up XX Yeah. shows. here, NFL the primetime Xth was the of to mean, of issue just kind Top

So create decline, it's preference investments brand. experiencing reach a to us and to is to that significant to leading consumer which create at other have look our

with an So digital we Laundry are that. is excellent for example, Service example initiatives, experimenting of

of that's that media to we move way going landscape, we adapt, lot We because have a and the meeting find have doing we're have to around built moving and we're like this partners decided to going been digital, that compete. know Service, learning couple Laundry months, to in agency forward we forward, over a creative to changing last

Alex Slagle

the Got does it. comp Thanks. Domestic same-store of include it X% impact quarter third like And hurricanes. the then, sounds on sales, the that

on you provide any color of could If impact. the that magnitude

Lance Tucker

XX impacted basis Yeah. Hi, Hurricanes less points. Alex. It's Lance. by us than

was certainly, So And impact point. really want but an down narrow that. was there I it to beyond than don't there, less X.X it

Alex Slagle

That's fine.

full Okay. mean, I quarter fourth fourth or positive year can your as And be Domestic it the any keep to take wide end positive, positive? to it's range guide, from But up it's going color – then, does that just the for pretty that X.X%. outcomes on to what of a written, quarter imply just

Steve Ritchie

this that's there's now, been not implemented we what Sure, have kind that is visibility a NFL. said And had before. Alex. It's Right solution for the of goes only I back Steve. the to

to some those flat. investment are partnership us changes side So changed the management down continue a the of that the and solution from built that's in standpoint. to get to if we've quickly all give tailwind issues quickly Clearly, benefit implemented, persist, will Brandon trying bottom guidance all to way from addition if why that can implement that in team NFL the his a we

to us if get we not to things clearly of to the the end some the are closer successful. of the But some bottom potential in those there's built So have end to guidance. top potential upside go

Alex Slagle

you. Thank it. Got

Operator

of line Our next the from comes Stump question with Alton Longbow Research.

Your now line open. is

Alton Stump

morning. you thank and good Yes,

Steve Ritchie

morning. Good

Alton Stump

a date past season good of one. is when of an this really even you to But probably the much rating you difficult the out, to or there had at NFL the any to to bad a quantify you've quarter? versus sure issues on way that either slice the back NFL guys viewership course, in is comps for XQ had fourth of I'm impact think your how end

Lance Tucker

and to give Lance. We're not it's be. let an and can going amount. Steve or the in quantify start exact Obviously, Brandon I'll Alton, need with jump that tell from if you fact in little that our bit quarter has changed it's there and reduced an having on to but guidance an the we're put going exact that number fourth not a impact, been it.

Steve Ritchie

had it when Alton, visibility we say off quarter the the fair is tailwind that coming very X% – fourth the we the a I again, in start year, think, XXXX X%, that clearly, to of results. that that guidance had benefit we from going expectations reaffirmed is to last get rough that the NFL reiterated to was we which, significant a the and were

So we increased the experiencing expected and expected, ratings, and so opposite. frankly, did to and, the increased NFL, we're viewership get

exactly things to but slowdown. the impact, It's those some of quantify factors. difficult predominant is of the think some it sales are we our amount So of

Alton Stump

Thanks. and/or year, And year? or the top the a margins maybe offset on front? down to either or on, not operating higher there's standpoint whether for again an be that spending be do thanks you able Of then, that saving to operating metrics out-year, course, a year, sort there. of to line might can next if standpoint, being next the Lance, mentioned offset the early you costing at things means to provide looking that from it margin the of course, you'd color insight investment Any

Lance Tucker

to full-year I from our mean, stay we'll in give February, so away I'm numbers. outlook going

this CapEx think couple I what significantly than unlikely be I see year. a a different can color you, of give to little things, we is

the going investments a at on not are have ready into going through be going in you other But P&L a that's the rather it all and resources, So get of margin that operating kind of once tech working are numbers, certainly, everything an tell through side. the lot from right things to than we be investments that I'm CapEx to a these operating still to people, something standpoint, of great lot platforms, the to end We're February go. to running now, are side. than deal give we'll of the

Alton Stump

assume That's year could one would the helpful. back in then either as XX% or potentially does your I'll the difficulty] tax any last include ask benefit Lance, and I far not year-to-date just that the housekeeping, but rule. from rate And that also, Thanks. hop guidance, queue, accounting full new fourth [technical just to if in as XX% I quarter

Lance Tucker

That's accurate, Alton.

this. we think rate So again, for XX%. XX% kind some Overall, I prepared quarter, the look fourth been confusion spoke my this to in will remarks. the tax there's like on of to

For year XX%. the XX% to though, will be full it

it's the with higher, to be directionally benefit without be comp, and So of the X.X% going it, stock going it's to obviously lower.

in So quarter. XX% I think the that than higher full year, to XX%, little fourth bit

Alton Stump

much. so Thanks Great.

Operator

Saleh with comes of BTIG. Our question Peter from next line

is Your now open. line

Peter Saleh

want the same? more is over seeing the what what maybe of on the Steve, changed environment. anything on I the changed competitive the Thanks. couple And Hey, come are or has of just to competitive guys to comments environment Great. back it past Has months? or you

Steve Ritchie

Steve. are we consistent environment. I competitive tracking in promotional the investment just I say standpoint. increased remained that it's of relatively terms will It's Peter. think from Yeah, a mean, I

two Our program of marketing them, the by both other increased efforts largest their introduction the loyalty on program competitors have a down the of then the doubling from of one. and investment, one loyalty

I So that's consistent. relatively think remained

changing, find soon come from got evolving And I we are our where growth consumers' absorbing XXth that feel it balance. to sales as We don't year as to to right able things said, media. the Brandon a consecutive We been standpoint. has just to, that, always like stopping through navigate anticipate alluded behaviors So they're are in XXXX.

on a Clearly, skew So think very an with good that that focus. agency-like digital space. have understands made digital selection we Laundry and a that of Service CMO brought has heavy with the we got have understands we decision a a strategic that that consumer

market way in than marketed So have that historically. be the we the in future different way the will we

what that's we changes be a couldn't I marketing transformational future, is of be spoken to and tech some more had So going to a from some make these There to. excited the but transition standpoint. about

Peter Saleh

least Great. commentary, NFL just of NFL, ad away can the with to how of much And shift spend the NFL you that time versus to areas other back the you from how dollars being? that on much locked that then the much is and your how at the NFL, in of or partnership for

Steve Ritchie

reallocations quantify media is significant a of on. I but amount Peter, to in specific of do television. do a investment our that we want things Yeah. can don't numbers, portion some there some We spend

already were So predominantly the focused and with that those from assets of usage our association were stopped that created on promoting assets there standpoint, creative were league. we a

So more dollars. those lost were

make alluded So that digital we've working some and declines experiencing, Brandon help recognized to had with to to us been offset like had the some But buys. additional response we have and offsetting to to with social with investments this they've spaces, NFL. investments buys try incremental we're made They direct in the some of the try media into partners other offset. to

get based kind to really of incremental benefits the it's had some a the make offset a to reduction. wash from we've on So we investment of

Peter Saleh

Got it.

on environment terms on in and all does change of you're seeing the value? proposition, aggressive the your to then, in this what with of what terms value at be competitive NFL, Okay. you're posture you're And seeing the how willing

Steve Ritchie

been category Sure, has Steve. category. always value-centric a I And Peter. think It's this

quality you're research, striking going Papa the do We product. are and highest of provider equation, a is the the research. the Each perception John's we've quality we overall we speaking value lot and the the value done identified always provider it's year, right on as brand around the of if still highest think that I look clearly, and balance to price. at be

we're to lean on So that. to going in continue

the we to why will be how do we're That's of to we in the leveraging use the We be that able our balance more price layer marketing attract of different these into, personalized is customers versus a transitional how right equity leverage approach. assets period going this manner.

the largest sure portion consumer for seeking investments, some we're ways the quality. think which our consumer of will So there as consumer, is a but introduced also we value make continue to of which is be base, looking to the we these seeking that that hitting

of actions implement will So think different tactically as future. move certainly we the how the we into necessarily it's be perception I don't value, and the strategically but changed that

Peter Saleh

But are acceleration should Great. on guys recognize in unit more then thinking same? it for just about of I the be my year, investments And or an XXXX? maybe into be franchise should unit the side this versus growth predominantly Lance. how you last XXXX. we we making question, the expect growth Should in

Lance Tucker

more certainly at end I we'll think February. to of Peter, something guidance that's give the

a lot into be of So that want don't bit in improve It numbers. to XX-unit little of if it India. kind given I had would didn't surprising a closure get a we

expect going net up, to number, the at give we So February. expect everything be I numbers you guys would and work end we're of would but the global to through

So I do different that reserve come expectation something not we the as today right sit. but out to then, the with a bit of where looks that's little

Steve Ritchie

continue the have we've to units as optimistic ops know lines, closure challenges, global to team got in a be in but rest new potential American drive those sure experiencing order International standpoint. new we XXXX very are Sure, have and to profitable Peter. of make openings, to results. O'Hern But open units, is unit on I'll and just it the that some driving to we a to number potential bottom that to, is top and future We track, for openings. of that Lance ops from that compete has year open continue the North line record and we the a alluded to a on of And add Tim

about of development. side good overall long-term feel the So

Peter Saleh

All you right. very much. Thank

Steve Ritchie

Thank you.

Operator

with question comes of the next Citigroup. Greg Badishkanian from Our line

open. line now is Your

Greg Badishkanian

receptivity follow on that question, Great. any noticed last front? the franchisee the you opening that stores, have change to to just to up last in XX Thanks. the from months And over X

Steve Ritchie

Sure Greg. new continue really be I mean, healthy. It's haven't. to units Steve. We very

of by our pipeline We're in units the be the about the pipeline. franchisees. year new end existing X,XXX will of U.S. back about from a XX% this at Our still opening units right seeing in

the profitability of very and countries, on good internationally a usually of for future. seven came the going the and that's go long-term the it's development being indications backs into And much we of our record are off the potential success infancy as new year those in good acceleration we're softer, front years in or a units new look So but of much a And those. is certainly countries, XXXX new very outset seeing to of well. in but we early of to indication, where see franchisees, the barometer International

Lance Tucker

number some Steve to fact that think, to, XXX for XXX And could referred that out, the there's missed is something quick. been India. The that I to pull This Steve, folks real had we add I if units pipeline Lance.

and at we the where Read than several has it that India, pipeline, look to into before, been temporary pull it a out units lowered into that has read folks when don't which aren't for it opening that had interested time. for fact So hundred units. looks in that, you artificially lower the number

Greg Badishkanian

And competitors. your two you the Okay. higher by then, Thanks. mentioned main investment

more is mean in beyond aggressively dynamics for quarter, so you on do net fourth just three the having that How positive is compete a with? the third So And players have you to those smaller big some versus that an investments? continue that maybe of XXXX that work? those impact for investing, it's of impact operators that like and for does quarter, potential you

Steve Ritchie

Sure, if Greg. It's on in want one. and this to I'll Brandon, and Steve you jump start,

the brands first in and So early in we've competitors smaller their the XXXXs all and XXXX, always the larger been XXXXs. We opened in opened unit competitor category. the our late

dollar we had we've always is so working for invest or been that we've that So to harder sure make smaller, smarter, smarter us. and every working

is late and really of results really Greg. terms quarter, us equal. NFL the done in impact I several would cadence successful the it's investment, primarily last the the our be to is change with the quarters well predominate pretty the back of up incremental in years going significant overall so quarter from way our impact in challenge the to you're NFL a third declining, has by from here. been to for that's got to been Continue fourth Brandon to our to how team which able frankly, partnership way timing us. start to national we've local spending effort, the investments, is deals, creative figure see an partnership like on the be challenge when out the you if But amount coming impacted of investment or say, all that, all But been reallocate we've just the the good, that, the and board. with with a So the

So if that. let to would I comments Brandon I'll don't you've add – other any you got know

Brandon Rhoten

just tools, try and when a competitor media in effort, Yeah. the doing the to in play you ups We're partners. we're in their spend tonnage is obviously, game, I investing game. mean, we're you. a investing it's we're affects if investing it What agency infrastructure, changing

be spend moving we instead have the and achieve tonnage of can smarter game. play media more. forward So to don't We more

is So a standpoint when we place, to tools from in and to for learn, that as the dollar-for-dollar TV. bright future compete need we're not these are going

Greg Badishkanian

number there to it it Okay. not sales kind I the you to we should talk give know I contributor of may would or XXXX XXXX, just, to lead primary normalized anything the XXXX, And not You that in to performance you NFL if level? more give is the through, to want you're qualitatively I weakness can want. was know guidance. But ready mean, specific guidance. soft thinking same-store if in to return

Steve Ritchie

I I quickly Greg, the mean, had with obviously the we've react think to very start. to situation I'll NFL.

NFL. had to leverage plans place So we in the in locked already

a kind media a times, looks our from a marketing to top want how any XXXX another our to leverage year for what expect work different different line positive of the roadmap, XXXX. Domestic agency, investments, got and in like, tech of we've at both our and of here as Now, way. we the calendar in around usage we'll our position But multiple in allocations, of standpoint, new a investments guidance for not business. some least we give We're time certainly our kind where specifics sales sales International I said through

GregBadishkanian

you. All Thank right.

Steve Ritchie

Thank you.

Operator

[Operator with Instructions] from Our the Stifel. next of line O'Cull Chris question comes

now Your open. line is

Chris O'Cull

Thanks. Good guys. morning,

Steve Ritchie

Chris. morning, Good

Chris O'Cull

down up comps year last Steve, bit, but quite a X% X%. Papa to NFL were was viewership John's

So much is decline viewership to issue. bigger understand this year a I'm why trying a in

Steve Ritchie

It's good question, Chris.

pan we launch, – I and So we just level. in our it that to last had quarter. bit little the the actually local had planned last early markets test at year In kicked off started and this year a even October, multiple third a spoke bit, early

were the NFL. from we getting experiencing we that that everything So the masked launch the put benefit – we overall behind were pan some from of from the that of big and declines the headwind

a we games, down the being many So rolled quarter see weeks fourth year those in clearly, games obviously, we upwards benefit. as XX% many expected XX%, to over to with and we'd last

expect pan So and this NFL that And we that what's the is get put we even we benefit, NFL the things other did to would and causing had certainly. the this that headwind, rolling into year more we and issue. spoken investment over to,

John Schnatter

this is John. Chris,

look the went controversy. the ratings to of going need year, are because the of ratings elections. backwards. You at This exactly backwards for NFL ratings backwards because have the the Last the gone how year,

polarizing is here. controversy that's And the difference so polarizing the big customer, the country, the and

Steve Ritchie

a big the a we money last great to year, and It's negative declining our were think of more because with impact. by some a double-down great is I having consumer we point, to business, less continue the sentiment it's think do I that negative put our is on negative impact able reallocate great That's investments John. No, biggest viewership that's But point, sentiment John. ratings, consumer effect having a point as digital. into because the

Chris O'Cull

Do you have in that any third-party you has do an evidence growth think, or issue? become the aggregators

Steve Ritchie

those approach base predominantly which the on additional business their aggregators, through them penetrated. sales a we've We've specifically have leveraging driver those potential small are at No. impact of that's track whether potential leveraging looking they major through not markets. There's And fleet. markets fleet these where country, of the impact, and Chris, our driver more and for or opportunities, opportunities most also a an any to in in taken partnership channel our with seen we across that the significant

of share tailwind think challenges mitigate and there's opportunity we opportunity. a brand, those some stomach and as of behaviors can that for creative this consumer evolving, we So the is some into potential of are shifting opportunity our industry turn

Chris O'Cull

direct more the with you partnership direct segment? John's impacted overall think though, NFL maybe, that than, company's the partnership, it's Do think you the the do Papa

Steve Ritchie

to more the you're X other NFL clearly, the recognized partners. I significant running, have partner than if think, from you're a of impact number going association any the with partnership one years a

partners value-centric many direct-response category. of Papa the a other In are a not like addition, John's, business in

business So yes, it's driving term. Chris, here in I a why would our had such that's on probably on think the factor short impact an that

Chris O'Cull

cost year? quarter? the Okay. And do And it'll maybe and you'll the have question impact impact next start-up is, in the fourth you was of what last new or expect, inefficiency even what and QCC then, Lance, any, the have if the my during at

Lance Tucker

startup get I So probably I'm Atlanta you it to next good but year, dissipated. not as not think, and – will see commissaries the persist quite and to bit the or it [indiscernible] of big from takes a (XX:XX) would rather. largely, expect I then fully, the if quarter margin the of fourth restaurants some and be decline, into when margin not bad, headwind giving was of decline while costs, from a numbers, costs transition majority transition other into the exact the the because

Chris O'Cull

Okay. Great. Thanks.

Steve Ritchie

Chris. you, Thank

Operator

follow-up a have Alton the from line Stump. question of We

line now open. is Your

Alton Stump

Yes. getting the call. back me on Thanks, for

and/or about Just a to be. may of question How markets some McDonald's Panera delivery impact those off-premise asked out Is what or that the aggregators, increased about players type not or you having Chris like on from any see and follow various more what head-to-head can general. service where or up quick rolling [indiscernible] other competitors? impact (XX:XX) the compete in in you may with

Steve Ritchie

the I the the reiterate. And perception, it aggregators. differentiation the to sure just deriving continue the we our that and to all make impact as partnering drive kind aggregators continues we're customer and right to accessibility broaden. great or of right sure is space experience. brand impact improve with make we've intact say in experience to messaging, got those those that shouts no the within making seen importance marketing material No. side markets. performance to than we're the product that customer No, our providing need overall is, we from make investments on seen that will ever in that more to And sure that brands I'll right sure overall making in are again, we've not of important operations upon we've What great investments the service, Steve any But sales the

there's consumer efforts we're Papa again, same these also at behaviors the of John's that with supplement some However, some aggregators kind have. an that looking a of delivery There's but clearly of to the that we driver, the partnership have to opportunity experience as opportunities you continue to to leverage unique expand evolve.

Alton Stump

Great. Makes Steve. sense. Thank you,

Steve Ritchie

Alton. you, Thank

Operator

not any to like time. back remarks. closing at Tucker questions I'd this further the Mr. I'm to turn showing for call any

Lance Tucker

in the Thank be Thank results you, Liz. Thanks our February you. full everybody and of we again time, to announcing year call end will on the at for your XXXX.

Operator

This concludes thank conference. have your gentlemen, today's great. in now and Everyone, a program, participation and you disconnect. you the Ladies for may

Lance Tucker	Chief Financial Officer
John Schnatter	Founder, Chairman and Chief Executive Officer
Steve Ritchie	President and Chief Operating Officer
Brandon Rhoten	Global Chief Marketing Officer
Mike Nettles	Chief Information and Digital Officer and Senior Vice President
Will Slabaugh	Stephens, Inc.
Alexander Russell Slagle	Jefferies LLC
Alton K. Stump	Longbow Research LLC
Peter Saleh	BTIG LLC
Gregory Robert Badishkanian	Citigroup Global Markets, Inc.
Christopher T. O'Cull	Stifel Financial Corp.

Papa John's International (PZZA) 5 Nov 172017 Q3 Earnings call transcript