PZZA - Earnings call transcript Q1 2020 | Papa John's International, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Ladies and gentlemen, thank you for standing by, and welcome to Papa John's First Quarter 2020 Conference Call and Webcast. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. [Operator Instructions]

to conference like speaker, to now Mr. would hand over the your I Principal Officer. and Coke, Financial Steve Interim Accounting Please go ahead, sir.

Steve Coke

Thank you. Good morning.

Joining President and us will I call After the today Lynch. financial available both provide the about and of remarks, and comments will me Rob have for update. business a be prepared CEO, on Rob our is Q&A.

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

in conjunction filings. Forward-looking release our statements statements considered the included earnings SEC in the our with should factors risk and cautionary be in

the Please a refer to Investor measures our Relations non-GAAP of of earnings discussed for release website this call. and our financial on section reconciliation

ask media of the any a to we listen-only members in Finally, be mode.

over comments. Now, Rob to I'd like for Rob? to call the his turn

Rob Lynch

and morning, Steve, you, good everyone. Thank

like the who to working and also are this healthy. We're extends our so to I loved us by to impacted hope the to safe deepest Papa family hard also that keep directly healthy their and COVID-XX. profoundly say and frontlines everyone John's world everyone grateful sympathy call have around First, been on or ones indirectly safe. on entire The I'd those

pandemic. morning's priorities. we Both some transformation of which provides strategic call begin on accelerated the headway detail that the progress the and I to context on want with making made long-term our this It QX. company-wide in with important our we during are have

true conclude expect closing QX discuss how then remainder in executing beyond. and purpose. the strategy for on results, to has year comments on to franchisees, provide are staying about our customers our new will I we our before environment, this more our detail how Steve go we our COVID-XX impacted on will brand, values and and team, of our the what our with I and

comparable store before our Let’s overall sales North our and in have outlook, began rising strong, line original business. material with In start very in our to pandemic X.X% progress impact XXXX with America the internationally. QX a on X.X% were

particularly sales in America, and were successful and February comp new North and X.X%, North America with innovation. X.X% January marketing strong respectively, driven product by up

on our that add products. to We cannibalistic our premium brand, signature incremental to minimal menu on our build innovating our of create fresh our items premium stores high-quality complexity delicious, continue and dough versus core

In February, pizza transactions and holistic price point, fresh sandwiches, quickly new becoming they customers made a dough Including to are handheld a high-quality Papadias on successfully we desserts. consist doesn't toppings. launched strategic Papadias, sides with are $X delivering that a increased alternative our and Papa of tickets. favorite John's with objectives. lunchtime At or toasted first platform our higher and

we not these in our order, our team's dell innovation poppers same cost lines, or is adding fresh introduced driving our Spicy complexity new first again, also with our in Along nationally. wrapped Rolls stores. customer And higher without fried. to Jalapeños tickets material the satisfaction Papa and to baked and as Jalapeños quarter, high Papadias,

becoming are Papa much John's more communications also impactful. marketing

high quality and we've part from to spend our that food, of pizza working. marketing focuses new to on a approach In shifted addition our creative large non-working

sports working in moving our able sports we're broader more markets national media, return. a into range out high-cost local reach We're of often. to activate and By partners dollars sponsorships to working still consumers with of local closely when our

rapidly. our well the of with technology as and partnerships Our aggregators, Rewards top loyalty program three investments are integrations in platform, growing ongoing our four Popper especially strategic as our

investments return on has been as discuss substantial pandemic the these during I'll the fact, in moment. In a

to of culture drive results. these that Taken proof more innovation business are together, beginning accomplishments companywide a is

off brand, differentiated having without to offerings, premium John's our Papa on competitors discount deeply. focused build we we're As fending value

restaurants for In highest in and the growth defined our and improve turn, QX helping was unit its fees in pre our profits over median level economics, quarters, commodity mileage food, company-owned our after aggregator is of labor, costs. franchisees. both eight unit In spite benefit pandemic profitability higher our of

growing franchisees to benefit reduce working and the very sales, to company comp quality. costs stores with of closely of management we're complexity heightening while addition In and

We continue Papa to customer and our our our across centralized order roll taking system. service Call, center

Papa Call the not pizza, focus allows stores on our to making phone. answering great

incremental mention to efficiencies. a As transactions Not result, seeing customer experiences. we're labor better and

managing discuss context, pandemic. unprecedented all that to situation like now today find ourselves the I'd we the With in COVID-XX

known has restaurant had the industry. pandemic a global the devastating impact well As on

has John's Papa fortunate. However, very been

serving throughout remain continue around Our delivery open America and world. our communities carry the in out enabled business and and countries to for North us and customers has model many

I'll America, to a people's North homes delivering significant we begin food responding shelter-in-place. they to need where as with are

perform business historically service, this at levels. high our we is As critical performing

and The In sports. canceled. events were groups coronavirus John's Tournament, business us. in very family to America together our impacting gatherings for particular, negatively a sporting North Papa as is mid-March large NCAA friends and typically began march in a watch favorite get when major food drives Basketball of strong pizza

of home and during stocking was a a factor at time. pantry surge families this addition, cooking sales also In suppressing

shelter-in-place the month we closed, delivery our food America. directives carry-out and businesses services. of April, second North first in essential saw With most the quarter, growth of of country and dine-in in a Then, wave became under restaurants

XX%, members and John's was challenge an Papa team month sales the our April. successfully delivering rose as America comparable this for North to of organization, prepared growth

strongest month sales fact, and history. of April terms XX-year in system-wide John's in AVs Papa was company's the In

and both was huge This a opportunity. responsibility

size, rewards also customers, in April new is loyal on more this demand Papa in and new But Papa by customers digital lapsed existing in alone. our evidenced surge X the John's million dependent channels more than as brand introducing customers' Our than including us on customers. transaction ever, increase XX% among

since in Strong both the coronavirus, team members, that of business and and without serve our customers for ensure us preparation to January. China remain and of and planning and open the teams and have to quickly, experience would safety and around America Korea, the possible we have from This especially not other communities. to to we our act managing health markets been continue execution the been enabled impact protect where have learnings world, our and North

Under have market that truly precedent. no conditions

relied have and act guide enabled decisions, quickly, our nimble our We structure Last values John's fall, a more to on streamlined Innovate the has values. have People in Everyone articulated Do environment. dynamic belongs. thing. us right five a organizational to core to company we fun. Papa win, first.

and doing values safety. focus in of to people putting the the customers' the central the beginning Guided we since protect our today. leadership winning been imperatives health and have been we're our right waters of thing, pandemic proven team building has culture by compass, along be and navigating the These that have with of the our first to and uncertain members

we We've their visits and our nearly employees time health our wellness for in reinvested In bonuses restaurants. supply profit and paid half increase and back corporate additional growth, our all to benefits, throughout into and incentives families virtual chain QX, expanded of members, helping employees team and benefits for off our doctor free include policies.

mental proactively existing and their access options, expand This, them to and in plan when Emergency John's cost with Fund, addition member member Papa team of also needed. care if support, affordable health worked to We've benefits. health to Relief team franchisees benefits help no

we health a delivery our no applying two complete conceived contact in learned enhanced in already executed and weeks. we less across than our processes ordering delivery, rigorous We've technology Asia, measures, system. of reengineering safety and launched In and what and mid-March,

a to a We company a testament success satisfaction in channels, huge ordering were seamless the delivery Contact into experience, driving been for our contact pizza first delivery customers, Net customer of Promoter integrate No culture substantial metrics no our and fully to innovation. our scores. has with digital delivery gains growing

in quality drivers especially our has focus control centers team the began. safety another since members Securing the supply been our QC and and our chain, pandemic intense of health our

and to team to the supplies. worked Our safety diligently has protective difficult source find

put we were no suppliers ingredient place, and They've any also sure chain, our not have we restaurants business. in our anticipate our demand. have contingency impacted supply plans the increasing to so other Disruptions up or meat that made to that key don't based could our keep with with stores disruptions disruptions, on there

We've also provide a been jobs fortunate during to be in position to this pandemic.

campaign resulted hiring workers hiring by of has in COVID-XX. the already national displaced thousands of Our

partnerships three already the delivery in of have delivery scale national times. which us peak with were enabled aggregators, In to during place, addition, to our more customers

fulfilled of more highly incremental aggregators by year-over-year, than data shows our has In deliveries our percentage transactions these fact, doubled business. to and and our are that profitable

our of to as up the to communities need, well Papa our onset of the and support free team the our workers, crisis. have families frontlines stepped first on serving members responders customers. as John's healthcare this commitment to and meals to Since neighbors includes deliver franchisees in and organizations our pandemic,

are members to a couldn't than X more Papa family Papa and of our living has since I values team be of free The provided team. franchisees March. proud more John's pizza already amazing John's million this slices and part be

I’ll business, is of how story our complicated countries given Now the more impacted discuss COVID-XX. variability a international responded have bit and to been which

year began original solidly our of ahead the International comp sales plan.

began Then impact and to pandemic as of end other see toward an the January, the COVID-XX, spread we China from markets. from

close restrictions or malls, government were our to put closed restaurants many restaurants the were shopping curfews China, in impacted temporarily government. place. are In surprisingly, which most Not where all located forced strict temporarily in sales by where of were

government Latin in markets heavy and America Some face closures the Middle or trade. also on restrictions East

United the out Korea well. like and Kingdom markets markets carry international of exceedingly delivery performed other saw recognize those and as and also we importance businesses essential services, However, the

or for an were by Overall, across of approximately XXX of our April. continued international part seven XXX basis some varying out temporarily markets comp has of points. one QX, impacting sales in estimated This closed dynamic stores

comp month. closed overall the temporarily were stores in at said, I As including X.X% sales

would our have are have Korea. gains strong U.K. offset These in now XX%. international close stores and that the our stores temporarily XX by in that comps approximately temporarily of were Also, markets Excluding other were double-digit like in number, China, April XXX albeit markets and Behind trends closed. stores, reopened. been

sales reflect have on Korea the otherwise international the gained coherent team. decisive Well and closures our have temporary successful helped and and outside in China actions markets like the measurably leadership pandemic strong of global drive government comp insights leading edge our of strategy. a of quick are control, to they The mandated strong them global

COVID-XX has the to Steve? beyond. QX to like to I Steve affected more for of our discuss the before provide turn how now on and over XXXX color outlook our I'd remainder results, Coke call

Steve Coke

operating to begin Rob. change in franchise we reflecting items; first, presentation. a providing are details our and you, like before GAAP in second, earnings; This third, year-over-year temporary change I'd three are discussing this support; on Thank morning, presenting our by results, adjusted earnings, how

in increase the the a per to charges a compared GAAP of Starboard associated start a per $X.XX, GAAP let's reflects ago. of factors; special share The diluted a XX% year we first on year-over-year $X.XX $X.XX four a ago, per first, basis. In investment. share from earnings positive our quarter, primarily So with loss reported diluted earnings share diluted year benefit

issued higher due primarily driven to XXXX, And XXXX, a partial franchise preferred only in positive preferred the first payment. the stock, by Second, strong part stock third, a of $X.XX comparable as of $X.XX we finally, of when North franchisees. of, the the compared benefit impact $X.X quarter our first impact dividends together agreement, negative quarter sales support, dividend planned, we quarter first a higher America win in with temporary and of to incurred negative XXXX,

I'd presenting it, this quarter. support are we franchise discuss temporary to and Next, beginning how like

to last together commitment summer incremental As have royalty significant relief. were north our, contraction five and we marketing America our sales, made quarters franchisees, with a reminder, program, in support a under temporary scheduled, a and who win facing we

challenges temporary the a support had had as past years. categorized the to the company franchise two unique special charge, we manage Previously, has over reflecting

its temporary continued SEC, the from longer However, economics, as or significant XXXX. franchise will as input consistent well made sales of current with John's with as charge first either transformation, and no support has quarter in of improvements in the be progress, categorized, considering as Papa unit prior including special a the periods,

adjusted that, let's franchise the of will earnings temporary turn per be longer to share. support that earnings. now means With adjusted from excluded, no This calculation

by first down XXXX, of described. franchise a earnings higher as preferred $X.XX share Adjusted just reflecting temporary ago, I on from higher benefit of per higher offset dividends, the year and sales, the comparable quarter than support slightly diluted was $X.X more

or first quarter incremental of in approximately million temporary quarter support, franchise the per diluted share $X.X increased adjusted XX%, franchise diluted would special prior $X.XX temporary include way per compared in of we share, represents instead we earnings the Based to year-over-year. reported continue a The XXXX, charges, had $X.XX first per earnings to support adjusted share and on impact have the XXXX.

During franchise million, million million the and royalty consisting $XX of the we investments, anticipate in incremental amounts remaining third in second and quarters support, of temporary $XX marketing $XX spending XXXX, between on relief. and

million of year, This $XX together quarters fourth of temporary next this positive quarter franchise sales compares third our in to the year, in growth. under further be upon or especially comparable three of spent return support, win not in approximately do program, the we XXXX, last given quarter to we to the expect needed program, the conclusion the the we any

to investors On this Investor previous temporary of temporary amount XXXX. provided our table presentation ensure our and have franchise since quarter, website, support to by adjusted franchise reconcile exclude provided Alongside GAAP Relations under presentation. our by quarter of that a reconciling provided quarter support the we can the earnings, have quarter, supplemental also third does new we each not

the now $XX.X to in Moving million, on $XXX,XXX gap basis pretax XXXX, corresponding quarter of income operating first In a more compared for quarter of XXXX. result. was to a the loss detailed

Looking increased $XX.X or at quarter consolidated first sales, million, X.X%. revenues

Excluding Mexico the consolidated X%. in impact domestic XXXX million, of center and restaurants increased $XX.X re-franchising a approximately or revenues in quality XX control

and to was our positive North passed are by in commodity costs, increased sales, largely due driven increase commissary which sales to higher The through comparable franchisees. America,

sales. higher increase Now, $X.X from pretax for X.X%, franchising X.X% million, restaurants positive the for increased comparable results primarily company-owned in by income quarter. primarily higher was of partially commodity North $X.X income unit first by sales costs, our cheese. offset comparable business America pretax million Domestic driven for

reflecting of higher International $XXX,XXX, impact and fee by pretax were lower factors higher revenues decreased and revenue, from partially comparable and costs, the foreign administrative exchange development higher rates. unfavorable These increased sales. general royalty units income offset

were incentive debt to a $X.X lower increased in $X fees. in expenses included corporate variable temporary offset anticipated higher rates interest legal the These cost due support, as due by higher lower the and franchise fund in Unallocated average in a somewhat increases million million interest investment marketing to decrease quarter. incremental expense, balance

for Income the rate XXXX an effective million for tax was expense $X.X of quarter tax XX.X%. first of

Our is first expenditures non-GAAP approximately defined to free as was preferred flow, of to million operations, dividends $X million flow ago. XXXX, measure as which less paid a the and that compared cash from cash a shareholders quarter capital we year $XX in

fund. capital our with items, income the The and favorable increase in was payments higher to timing changes primarily of net due including associated working national marketing

paid dividend preferred $XX.X declared We Directors common to and to shareholders be of $XX.X to of XXXX, and million to during XX paid our approximately a our April cash of first shareholders. common quarter second the preferred the cash dividends Subsequent XXXX. first of quarter, quarter Board million on

stock The common will be second quarter per common share. dividends $X.XXX cash

cash $XX to to in hand evidenced continues John's cash free operations, first Papa support our on our by have current as million in flow sufficient generated quarter. the

we need approximately to access facility, have should credit also through We it. $XXX million our

net reduction Lastly, for a closed opened and restaurants during three in the of America first quarter, North XX we XX restaurants restaurants.

restaurants restaurants. close our of changes a count XX exclude closures These XX restaurants international a XX as opened pandemic. any in net result reduction also for of COVID-XX temporary We unit and

Rob. now final I'll for call the back Rob turn some to over comments.

Rob Lynch

Thanks, Steve.

to with and up, has Papa momentum, XXXX started Finally, continued great April. summarize John's wrap into which

Our new have very products marketing and strong. performed

Our continues pipeline that deliver results. produce ideas innovation great to

a Our and local franchisees, growth businesses foundation for strong are future of success. re-establishing small owners

communities team Stay quality, deliver members it to to and globe. pandemic many in food. and also our values has and to we true delicious and has heroism the continue our harm kept sadness deep And through response. high But across COVID-XX all, it have from customers caused The safe. inspired individuals safe,

we today's stronger acknowledge of pizza their members are Further because the communities, Papa to our of our all our becoming benefit path serve our to and of meeting the much emerge franchisees, to a for best want John's I will and effort, challenges, commitment from company delivery team tremendous stakeholders. Again, along world's organization.

what for to thank this their call interest we're like for in on and I'd their doing, continued shareholders everyone and support. our

call Q&A. turn the to With the operator that, for over I'll

Operator

Thank Please first Our BTIG. question go Peter come from you. ahead. with Instructions] will [Operator Saleh

Peter Saleh

April quarter. is much orders, I'm of when of that any much was that feel way think pretty as the how the almost how there so to parse out, coming curious and really impressive, impressive you comp to Rob, at that, is far. from Thanks you coming congrats just XX%, Great. may be on Papadias. about stay-at-home from

Just a underlying really sense of rate of get trying and like. what number figure a how to looks that sustainable the of much is more run

Rob Lynch

We've question. would attention QX the actually where initial seeing March X% a to, lot in about slowdown at we prior and in week started of that some behavior. the third we great time That's question, Peter. just comps your Hi, shelter-in-place thinking were spent about call I to tracking exact from

People were able were have to pantry loading. things. types The of shut sports birthday down. weren't parties. Those People had People adjusting.

an we cost saw about us and XXX basis in sales feel we So one. points initial quarter slow in down like that

So, of without impacting momentum, our lots business. domestic COVID-XX even

the very at trajectory is have growth. consistent that believe right XX% open. of It's other probably XX% way looked seen the we've around has restaurants delivery represents at stayed we April, been a in COVID and what sales with Obviously, different that it, we've that

to they didn't we what continue. They've and growth from seen we're prior COVID so seeing similar type of that's to have trends of April, that would types where expect and that

open believe conducive behavior We folks bit little be then demand will backup, business. states is think delivery consumer on we to tail when than the even expect, communities thing be still going longer this might the a for to large maybe and

We're positive huge XX% on know adding really compilation of It's call. not be talked you we innovation. lot a We're other things People it pizzas. pizza. of to replacing are to very the impact XX% Papadias incremental. top from a a of finding The is our seeing about

check lot seeing from that. to very We're seeing X% growth business at be our incremental in our aggregators. of that from And a also now those And business are has aggregator price of continues doubled. tickets. It's So full us. we're stands coming for

So as in coming check new there transactions. well both as customers growth coming those from are

in a amount we to lot big that was of had being cleaning the were There year amount lastly, and relaunch drag program. then And discounts to business the on the a do points our of up loyalty of last from of the used. regards

the from XX over We've At this asset point, growth huge is transactions. those for loyalty healthy check program in a very our is And got customers million our us. program.

of compilation it's all those things. of So a

But overstate much I has at really operating efficiently. understate the or can't come together more team how we're just our restaurant. really And

Our customer the on better. created, and service new able jobs, never with been we're to has staff And hired that to able we're we've appropriately. staff all

And so, improving in throughput as the is our well. restaurants

the the So the kind that when true have that we're products true over of, month. of kind restaurants our we output we seeing are the demand capable last drive benefit for of our or

Peter Saleh

Great. to Good hear.

level permanently the that margins, talk work there level On the like maybe some more the margins and putting to restaurant discussion some other guys you those the expanding. Can restaurant initiatives of initiatives quarter centers, margins call the because another, cut it had are about you their to to good margins permanently. guys around improve with of turnaround insurance, in looks some the place you

Rob Lynch

center both processes, more our and some a to Yes, allows implementation for new a been our sure. labor. our new able we've we've some restaurants. utilize lot lot more have introduced of efficiently our of through and to equipment, effectively company then, in call labor, the restaurants, our utilize I us that And Papa mean, we

the just of efficiently We're some also cleaned pickup RNM insurances more things us. a been We've items. effectively, middle the has more labor doing P&L. up We've the of and So, our improving. on worked for line

last we've our throughout call over rates, the improved on really would side, as I of what really particularly seen insurance culture a company We've instituted, six months, the safety restaurants.

now driving have drivers technology us have which and allows assist We safely. to our more

the we're claims And forward. that, that claims in really And And that we down. premium to for should some that, we're we've rewarded And on us see reduction starting able just savings. come side help And to result the seen moving they're would track anticipate as behavior. of a to behavior.

future but in So And for growth. as know, is businesses in margin. a as revenue we at as items we, along see I you our benefit insurance QX, mentioned line sales all flywheel X% we're on well, as tracking comp almost restaurant

That across is help going to our margins Board. the

into restaurants April get QX we this and sales continue are our XX% productively. operate growth, comp know, you where as we so, as efficiently very see And to going -- to and

Peter Saleh

last a just off. hop question then And I'll and Great.

On margins we sense talk you margins. see the are? mean mirror and seeing terms franchisee your open the just side, you how franchisee margins have that they their in quarters where franchisee maybe margins about franchisee I and are company to the of in margins, on of restaurants health a may their the give us coming can company the appetite relate guys to of that more been and maybe improvement to trying the years? in overall terms health understand Do

Rob Lynch

other forward out agreements them win we now. know, are three health the the incentive were it's working of to on development. you to you plans the that incredibly Steve now and and moving right and on is right years, we restaurants, -- with franchisees their accelerate -- in called with partnerships call the the actively you as The the been are release in Our together. we happy build structures We best last know and know,

and benefits we Franchisee support support in is for great feel an standpoint of in lot which of that out innovation communities teams the people doing take work shelter-in-place of commitment care great to during now our we have marketing both about, as majority the like the because challenges. news The talk to well us the from are a as QX, made. right the that's really a we that QX fund

QX end that. great of but to are in come so, the shape at we And out of

subsidization support shape that's any great our better shape, And planning many years. moving are franchisees not in are or because forward. We than in they've on been

Operator

you. Thank

with Slagle go Alex Jefferies. from comes question next Please Our ahead.

Alex Slagle

delivery ops fun on and and and been sort to delivery the limit how manage to turnaround able discuss, you've Thanks. carry Everyone times both is It's in doing of, guys. your get out times. thoughts delays Hey, okay.

all with growth Just any surprising, the we’ve seen given volatility, the obviously issues here. demand management inventory strong, strong

Rob Lynch

sure know of opposite. kind the I so are thousands to to this it's in we're mean handle just six because are last And demand we our or just We're operating we're doing able hired get to restaurants able it's thousands with better, a as jobs the and that and you business staff, more over and staffed to Actually you demand Alex. actually, of goes we've weeks. a make operating we increase your better. you that's created Hi, able restaurant, to and people the and in staff restaurants. factory any whether up get demand, able that appropriately and handle productive you're of

so well-received our customer basis we've the satisfaction from improvement of a institution and the beyond customers. been for in you our no has we're above of platform just implementation the points of know, delivery to I power scores, seeing, that. the XXXX take of our of implementation contact And going And And customers. mean, really seen care

And we're important. way the seeing our delivery all the pride drivers doing to down work that's and flow through

morale our been to our has really never work. you really been important community. that needs they the in their helping Jim making got they their higher And we're It's they're grindstone, that we're if meeting restaurants doing and sure supporting the Operating we've feel feel making will, and like their sure back like with them, nose teams, and out the so kept Chief there in the Norberg, Officer his has he's restaurants.

high, morale incredibly go is you When morale So, up. high. see see very productivity you

to chain seen in model I had to we be On able out the we Korea. knew mean, were similar side, in that continue would to that to front going operate of it. once we supply our got be what we

loading so refrigerated incremental in that teams we with the secure we had got because lot in see Korea dip that and our our March, point not weeks went we could we that bought we put pantry could quickly a where in of very to the more that were we we in U.K. that and two and that out trucks and And very saw first so DCs spike moved scared -- concerned hold inventory of we the in demand went seen may the inventory to

to And have we and chain bought April not only prepared. a suppliers make of a what and team supply time. redundancies to it anticipated we be handle our and more we bit then be -- came inventory, this in were able to And has our more we these environment unprecedented we've sure saw challenging secured that supply through

So, operating level. chain is high our supply at a

place We continuity ability business and feel forward. -- about great have our redundancies in moving our we

Alex Slagle

more and customers you And if of in that's helpful. loyal the guests traffic on could mix Great, rewards first some looks with provide new a texture and check trends April like? first lapse

Rob Lynch

is to up that the is new is and about but new the Yes, bit, little is great frequency The It's XX/XX, feel the And we growth mix. about mix majority are transactions -- attributable a really more trans. of customers. actually check and customers. the trans

of over lost We time. haven't even We've that XXXX back a and seen we in our in It April million customers brand come customers into XXXX. lot opposite. XXXX, a just was new actually long the seen had into a in

winning We're great. it's back so customers. And

and of say QX we'd really better a back always out I or this it's adversity And call in lot that it a you the helped we development XXXX. adversity makes choice, and cultural has of our accelerate worse, team -- lot us may I customers think doing really that a helping the have back we win the our of pride we -- that past. that lost showing we're team, work are is a in the and have employees to as that

seeing a are incremental and almost really at all two to a have base of from in On flow through XXXX. no growth. mix We've the that's pricing added side, seeing orders check check and check. and Papadias We're being very Jalapeño items it lot Those Popper. healthy additional taking its been standpoint. really initiatives We're driving

as then million program, those I And up increasing And customers our we're to are well. point. checks loyalty as this mentioned, about XX at

the haven't that trying discounting know, lot QX to a of have we some used problems XXXX, where solve you year. brand last So, was that this of to the done facing in year, we of

we and which of and you back delivering stayed the we're as innovation our on healthy of as on quality are again, hurt chasing we the know, QX lot category customers consistent are brand, commoditizing in our economics kind driving seeing brand, really all transaction make the things are a with growth, positioning investments and it We, discounts, ourselves quality focused those such the of marketplace so unit and and new into check in better the focused driving we and versus growth. really

Operator

Thank you.

next question from comes ahead. Our Please O'Cull Stifel. go from Chris

Chris O'Cull

Thanks. the new still year, plans necessary, later Good but earlier this for product can of even. or I call some news that on believe in you the is until mentioned morning, guys. this year some you news -- know product Rob do year save year product do you believe last launched, you and you next introductions several

Rob Lynch

that's don't on innovation Chris, already what listening you're a some executive Every or exactly the if put I actually to team we're of hold have our we but know not you calls here. know about. talking day

do another and the we already chosen were it year have that. to we've the of new not know item, planning to at You outset have launched

products do that our make of are supporting sure them demand the We've to types business, you having chosen on we're to to distract new increased that sure train on operations we've not, and up those them, things. making with core focus seeing, to our chosen we we're know,

doing wonderful can new where situation business that, the core we as and it's of we're testing, we validating we're have making executing we're still developing, we've our been really a perfectly ideas. as luxury So, sure -- while

great is we innovation it, You it be so position in. see the ready know to a when to to really of have we a pipeline opportunity strategic go launch

Chris O'Cull

I where I'm there's know stay-at-home a mandates their couple that been Tennessee lifted of including have Rob states based.

you been may those have describe So can changed have how sales as mandates lifted?

Rob Lynch

We've it track consistent of, tracked I we continues and understand not closely, dates dine know, not and in a a be to of and have particularly but that function haven't business. they're as lot the of yet, that seen our we really, lot seen Tennessee that. drop continue closely, change right like And they're evolve, fact we'll restaurants, sales in and to of the have restaurants a some Texas, may in of in although now states that know trends that to Georgia, continues reopened situation those off as you wanted we open very a

Chris O'Cull

great. seeing capital lastly, from is that That's outside growth. any then could system fuel interest help just unit the And

Rob Lynch

I Yes. interested of but brand that's Papa can I a part conversations mean that know, the expound people with, around answer, on the and of lot right having active the that excitement family. we're are in now there's short John's you becoming actually

Operator

Thank you.

Longbow Research. Our next Alton from go ahead. with question Please Stump comes

Alton Stump

Yes. Thank Rob. far the morning, so the in start and first on Good great quarter April, you. guys here Steve and

if big or up I implies percent just to pretty any we're a still of high-teens, Rob kind you want do ask, months business X% to much better of from innovation. how your is sort lift, that, obviously marketing COVID think you piece of mentioned like that XX out, based you from the that coming or that is they of think, to there's core much so in step-up in do cut the in about from to mid you saw how as think here upside versus first April, growth product two new

Rob Lynch

is really a symphony great great on restaurant cylinders, really a foundation. of company that's Alton. operations the all question are it's -- those things. all When When takes beautiful hitting It upgrade

really operations, execute running to If with excellence. you're hard not innovation, it's great

way, more nobody if the nobody knows if cares know you habits but have engaging influence change about -- behavior have and it great communicate in all people compelling And innovation, that it. anybody and in you it their in it the when often, world, about innovation have you don't or can come then great you about can let a and help

And say right and last a in model. he Jim for was have that restaurants. I that really would come new me in now months, the in we've Chief And a has spent eight that about and the blessing transformed we're I did building a a month our CEO Officer, before be here. great way such Operating operating as to that came was

company. you happen. is efficiently that or our you have great operating unleash that, franchise now And and we're franchisees we pipeline. seeing innovation a can the And operate so that are we really And great helping are when more

Officer Chief on means the back that marketing, Commercial really that food. that's customers, we've transformed to just in what's our Chief strategy, our or our that And Operating a then, And on idea is our of ingredients getting our focused new not marketing, and rebuilt, but better really what to pizza, our innovation.

And those together. it coming so and leveraging things all all all productive, those so ingredients is more of it efficient our making innovation is really and

but on marketing is other. much out, really and this and you as other can parse they it this each so as say, much build you they innovation support each can't because And

Alton Stump

that then to was quickly Excellent. it out. people do Thanks the are about that turn about, in could just Rob your think the you question system. sure investing How I'm speaking on growth, asking last back and

Obviously, at sure this about kind new you're of this the you year moment. everybody's huge to we that use short-term. we're yet not back half U.S. in story demand add, thinking system that on they'll of the either probably to XXXX this pickup potentially But our of I'm focusing is or existing And is how increase or use your seeing see in start kind more do money people and here think is just

Rob Lynch

protect government they And to through on they're back get community appropriately, of their Yes, are upon, mean is can this when is pandemic. citizens normal everything get dependent a sure that doing lot operating right absolutely that to that in sure they going making their now I be and to safe. a the focus that to way. keeping and the making

get buy standstill, kind and And you to as development need can't of because you to at a estate estate. the you it's real get you develop can't real things do that now right so, permits, know, -- all a is they're

that we operating to through well when move return this procedure, we back normal and be incredibly situation forward. when, will So returns, think positioned to get I

had where Bell Development the a last As She ton they've, activate to Taco we building years. Amanda us know, ready able right do Development from we past. hired plan so. Officer the the Chief who's our be And, to to she's Chief just to Officer came when in a new haven't five we're now Clark, you over of restaurants

to hopeful developing are do but be upon, to to dependent it's going really able restaurants us I'm up XXXX, back, when the get set that So, so. we're governments to in allow

Operator

Thank you.

MKM Levy Please Our next Brett question from go Partners. with comes ahead.

Brett Levy

Thanks over information. thanks for all questions. my hope taking Thanks for the is well Great. Three for there. call I and everyone again unrelated

just obviously Park. the franchise regionally Then could ecstatic on the on he about seen a you've bit little parse if of levels. anything side, week the First, day comp they're day the more comps out

are have what either percentage precautionary gone that's But, out or need look you and what of the standpoint terms heard bucket debt levels of like? in their PPP of of after a out just

given on And there's thinking side, about operational then tremendous how that, the you corporate of amount are a dysfunction there. just cycle while investment the out

running certain menu? cash You the are all seem that stop well to innovative the off on had pretty down there. and And to really be technology I’ll and double things

Rob Lynch

Okay, great. Thanks, Brett.

strength, than see day, double-digits seeing little do a over variability. much every On we're pretty pretty the numbers, the the little we more during I we cost we Monday, much, bit were are but a of Wednesday, double-digits Thursday mean, we weekend. April Tuesday, bit

we mean, as when haven't social XX% I that that have we we is, see no have about birthday We gatherings. -- and no much no we and talked thing the have comps sports, do parties

are So, impacting those a lot of weekend. the things

comps weekends still the the extremely So, to aren't as are great. the weekdays, strong, but relative

bit gives of texture. you that hope I little So a

started sales in our America, were On taking given the I the a declining PPP franchise and government PPP, when North March. you as what the announced program, hold have spoke pantry the as loading system late and federal in COVID first

made programs to as a looking it, and decline. law, we that it company didn't And challenges we in help in business is so we the should this a company, that at like it that plan of as the decided our they're the And survive as actually be we not around was was if going advantage of exploring do was spirit dynamic. be feel and were because intent in owners we at, didn't this to that small the PPP a we feel looked decision we taken to business facing is of

owners business independent each and of whether they they're to Our making are they or individual franchisees not owners, are advantage small so decision their situation. going business and program given the small are that take on

economics As to they around the where QX couple you were franchisees challenged our needed comps the and years has get lot the of things system the just starting and a know, level be. turn see over last in been to and unit

been opportunity PPP an So have otherwise. as program a lot of at get to them help than them they the have healthier would looked probably

that's And own. a through so, that, decision, help to on to to their going them need but continuing we're they're all make

and restaurants their know you extremely talking happy. our years, In our sustainability. as debt The healthiness stated and as their to many in I terms they better Economics of as about are opposed actively franchisees growth, we're earlier, than have them franchise are levels, been of to

away. in point. there funding some that happen so, that what's We're we around this QX, we concern dynamic talked went together still where was going at goes And the when about not to concerned about

allocation on taking a performing. than and We around take responsibility other so our we investment that question different opportunities. situation in our of now, restaurant focused last and employees your Yes, taking then are are of We're we customers. lot right and capital corporate And our our of care a seriously care companies.

in And that are we they're need. in as of our and our we for half supporting back bonuses growth time a communities profit make QX our make to care in our they the them up sure and know invested and take that of mentioned, sure of we've we and into set to restaurants that are customers of types employees -- invested incentives other half benefits

to looks our like we're by unique and right that situation So, that to from we're communities evaluating that But profits help ability the customers forward. with that our communities make we're sure making we're where moving the trying our this thing that. have we're right now, what we the in doing

Operator

you. Thank

James Our next with Sanderson ahead. from Please comes go Northcoast. question

Jim Sanderson

to on the Thank a I congratulations second little great you quarter. a a health. more franchise bit start question focusing and on had

forward. statements royalty hoping the quarter more Just income you how relief in will in flow outline franchisee through bit ending could the a third little

trying out have what to franchisees through, is come think XXXX. better how these impacted this I'm of of starting understand and how flow been percentage we have funds What they'll

Rob Lynch

Hi let, doing? -- are can how Jim, I you

Jim Sanderson

great. I'm

Rob Lynch

P&L. XX% I through it their general, -- this the together. we funding the of is I to mean, that could about particulars investment. About let went Steve But how talk that in marketing flows subsidization that

So driving we on really growth. are focused

the subsidies. is funding lot XX% than of The Less is growth. increased going increase sales continue it marketing franchise to of comp into

type once of a franchisees a is now and commitment. any we're lot not are to point open because royalty giving. this staying system there made at we the who our have again, So nice that are of in It of right relief

away, our we're positive that together continuing funding commitment, that growth is system we place. know, than went we that to but impact P&L seeing deliver you the and revenue have to far So, in and on way impact more their

question. So answers your I hope that

Brett Levy

does. It

their stronger position following now up to -- going little new on your being will into even and of own start growth these royalty be a to Just growth the programs unit in a finance more to year the bit end operators subside? able

Rob Lynch

Yes, I absolutely. you're thought I'm done. -- sorry

Brett Levy

No, you very Thank much. that's great.

Rob Lynch

Yes.

Operator

you. Thank

with will Suisse. Please Silberman Our Credit from come go Lauren next question ahead.

Lauren Silberman

you landscape, are greater category consolidation. pizza the do are the and So the independent mom-and-pops? you the what you environment how seeing as thinking probably fragmented portion in competitive largest is about broader expect of Thanks. then Rob,

Rob Lynch

well. been I key of you're -- businesses even on delivering able shop hope I delivery Lauren, pizza continue mom-and-pops and hi a pizza. to are -- Yes, lot have

doing, I delivering the general great. industry doing pizza is think So in especially, pizza is

that has think these And from are models kind unprecedented -- pizza food is away I for our up that delivery this, persevere challenging set home. as through -- the for what business of can situation business of that challenges. is types shown the this business

whole having our as well that -- as not get behavior and continues that food, to to mom-and-pops more as we the as get industry delivery people their calls. benefit used to out that evolve as go will both and delivery -- as more players well national And from

dine-in pizza lot the the the for other dine-in of a On same -- and casual as side dine-in challenges think they're the dine-in facing restaurants. I

to I see the shakeout there is there discernment kind between industry if that players pizza from this focus national a players. oppose of is and the -- as it on with in if would consolidation more So mom-and-pops consistent dine-in being

Lauren Silberman

transition Great. of opportunities what presence system platform? And aggregators to customers to the has Papa covered and John's by are then directly benefited portion the aggregator third-party extent there And then what is comp? the

Rob Lynch

Yes, that I of that's they're in to I they first. will part answer last don't come be I mean, it's of terms kind necessary. a they and profitable know obviously because transaction loyalty that one is to that. economics, if want of an is in with the derive a able great our our benefits -- aggregator there's associated But we the -- our from see organic economics transaction. program

we continue by growing on very aggregator So can to do well platforms. the

to opportunity the that. have we And do

of You know about we're those of of with United the system. three three four they in cover States, our the and the XX% largest aggregators

platforms. think, those have, about and system we of our integrated with and I running So up XX%

leverage with the partner also aggregators. We some and of local

are and always of franchisees in other are New in a of the lot other company do in a well. the talk on three areas you our lot aggregators partnering regionals we our -- operations with have you players Those and City west or players cities, that York those in But about. as that business and have national specific coast, them

right less now, In that amount that X% we being about significant terms of amount incremental. business of are the last than time X% comps comps to the of year, amount attributable attribute of of the and from -- see aggregators same are our aggregators, up

So as our growth, growth grow, equates and comp that coming opportunity. but from aggregator that to what to of to as continues -- comp as being X% incremental improve to continues -- growth it, that you we that X% is, -- that see that call

Operator

Rob showing I'm over you. back call Thank remarks. Lynch questions further at now I the would to turn like further Mr. this no any time. to for

Rob Lynch

all with you again that span you your speaking our John's. all and earnings I today building, and calling and in of participation just in I forward business for with engaging continued -- to the we're you want Papa time understand that continuing next hope to and our I found the connect understand with have Well, and story fruitful I that and that hope thank the on first to building foremost, you look we're you to great call. story for

until and stay you very So much. stay wishes, best healthy thank then, safe,

Operator

call. you Ladies Thank and for your concludes this today's participation. gentlemen, conference

You may now disconnect.

Papa John's International (PZZA) 6 May 202020 Q1 Earnings call transcript