PZZA - Earnings call transcript Q2 2020 | Papa John's International, Inc.

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Operator

Welcome to Papa John's Second Quarter 2020 Conference Call and Webcast. My name is Sylvia, and I'll be operator for today's call. [Operator Instructions]. I will now turn the call over to Steve Coke, Vice President of Investor Relations and Strategy. Steve, you may begin.

Steven Coke

morning. good and you, Thank

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

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

filings. earnings included in our Forward-looking with of the Relations SEC our be in discussed details in and factors risk considered Investor conjunction financial temporary refer non-GAAP earnings release should website our the on franchise statements statements and the Instructions]. reconciliation to release support Please our call. cautionary this about measures for in a of section [Operator

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

Robert Lynch

morning, you, And of I'd this on healthy on so our front those and and Thank begin I to globe the food. pandemic, had that by situation. hope and all like us good thanking QX, get extremely are In everyone. staying the ones by everyone pandemic Steve, working saying are safe. their loved call who by this to to through high-quality to have unprecedented persevere worked do circumstances. have this Throughout we we through challenging delivering the safe, part committed to across lines hard

have efforts, their Papa we of in have our need. team members able John's our We and customers support and the the all safety of of put at forefront to time and communities been help

efforts culture as and core neighbors. values that more change how for values, and We our trying the of have first, company, our statements ever. these right change and creating do months have purpose process States, now Those a to colleagues all. lived for many rapidly begun delivering core lead inclusion are of that to force we a ago XX pursue and John's social We've by mean company and sweeping towards United our pizza. people committed equity the belongs over are including positive our a times the called everyone bringing diversity, better for being than we change As at together advanced our thing. in within worked Papa We recognize world for

While in unprecedented, these challenging second times are and John's Papa outstanding certainly delivered performance quarter. the

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added the over digital channels we've customers X During new million over quarter, second alone.

result approximately mostly Latin Europe support closed by franchise their communities to of closures and as saw of this temporarily saw X.X%, sales XXX John's, at in where other Papa segment, that are and comparable where are rose dynamics to We rates of they result gains strong COVID-XX, markets Of Korea, double-digit higher like offset delivery-based temporary businesses repeat markets. a in stores government-mandated international end, our also only the similar new coming among the retention America. We customers approximately and which continue X,XXX not U.K. quarter internationally, in parts suggests returning. were

Excluding generated the over from to adjusted comp those operating per compared that the same from have in quarter. temporary million $X.XX, and QX our to $X.XX in accelerated have share up year-to-date almost earnings and million $XX debt impact earnings international sales would have Strong over $X flow, line XX% of cash free second just tripled driven year, been we ago. net closures, by by top growth $XX period leverage. year a reduced million by last

comparable we sales our in International comp in record an XX%, this for in international up strong acceleration over into XX% sales third quarter. reported that July sales momentum indicate July business. North were to growth morning, were As America, continues the a our June. up our compared Domestic

Excluding temporary closures, XX%. international comp up sales would have been

of we QX from markets. temporarily XXX drivers Clearly, strong approximately in have stores have sales international closed As today, intact. remained our

leveraging one-to-one we capabilities platform are that marketing after subsides. our loyalty to We customers these long the and keep ensure pandemic

As things. X strong I said, are these outcome results of an

that and second, benefit the driven that the progress QX the impact we are in changing made our XXXX. the by pandemic; against first, we positive The the strategic the established dynamics industry restaurant have of deriving priorities of from in

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during surging robust We the pandemic external further aggregators Papa customer the X are enabled delivery place could full meet have companies the capacity. times already at teams in especially of built meet us to us delivery relationships working more top X strong that our customers partnerships of demand, have than John's needs when to technology we allow before peak with alone. with

our percentage are of in was aggregators These by up business. highly incremental XXX% than QX. the transactions delivered fact, and our QX versus to profitable transactions In more

Papa strategy our have repeatedly, they we is wherever and they providing better with to John's choose win order. As customers are said by pizza however to

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sit-down environment set first, and The apprehensive in be our dining. communities to an about succeed are model -- e-commerce where delivery is our up

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We comments. I'd now unit Steve? moving over growth forward. I like on Steve QX more color are turn focused on deliver Coke significant to call delivering results the provide our closing to to our before

Steven Coke

GAAP a of Thank $X.XX ago. highlights quarter, today by from operating the basis reported second through per our our year start compared a by year-over-year second we to you, followed share some I'm Rob. to In you $X.XX going earnings walking on quarter diluted results. earnings,

earnings less in no special ago total Series earnings this these percentage prior $X.XX preferred participating positive $X.XX as these to outstanding year, of year-over-year was record on adjusted the is impact Excluding the defined negative primarily undistributed allocation of sales. Undistributed the a that a impact $X.XX diluted income results, shareholders. slightly rose are a In by $X.XX were securities. an represent allocation year of determined year. shares prior earnings operating improved $X.XX by there B increase $X.XX driven the to basis. primarily This securities, allocate America converted comparable paid. participating participating the from earnings benefit from per from from earnings would our offset The as North securities charges by reflects The quarters, undistributed net to to dividends share

available earnings company's earnings quarter-to-date and on the were share However, calculations. based the performance year-to-date the undistributed in quarter, second for per

compares support formal Win also royalty per franchise We approximately which Together $X or $X.XX the per the temporary formal approximately fund We third relief share both relief. This million, scheduled of share provided provided comprised provided $X.X quarter, to in $XX a to the quarter not also in as royalty relief. marketing This $X.XX was in lesser Win of next the million last $XX in After year. and marketing will under the second We support franchise the release This quarter Together million temporary incremental extent, quarter Together third fourth royalty spent of and program incremental provide We under much XXXX, anticipated support temporary spending in do Win franchise with investments expect to compares we we in additional the in or quarters concludes XXXX. million under conclude investments the to X the program.

$XX to Moving for in quarter $XX.X basis pretax now income compared of more to results. quarter the In XXXX, a was on detailed GAAP million corresponding XXXX. million second the operating

$XX As revenues consolidated or million. Rob described, quarter rose second XX.X%

North sales America domestic which commissary $XX.X America, XXXX, North positive restaurants Excluding due control royalties refranchising company-owned or XX the North Mexico impact and in XX.X% of franchise in sales for in revenues. to restaurants, and increase approximately comparable domestic quality largely America higher was revenues million. a center increased The consolidated drove

franchising for costs travel pretax These Domestic Operators COVID-XX as sales increased provided cost. comparable projected royalty to prior-year comparable included company-owned These million online expenses revenues higher the Now royalty in business partially primarily higher to Unallocated and the consulting strong to higher, relief decreased the from results quarter. from partially a of higher $X.X Income and income of reduced fees were sales of offset revenues pretax by in costs. income primarily leverage, unit an $X.X targeted and cancellation $XXX,XXX, and result XX.X% lower decreases and All quarter profits for volumes. savings America North XXXX, million partially franchise support tax expense income offset and driven and our were the was higher commissary income others positive lower COVID-XX primarily commissaries rates. partially management tax a due investment professional restaurants as higher travel North operating incremental from income program. for a of due higher Annual impact increased franchisees $X.X Conference as and pretax $X.X to quarter by our sales. by XX.X% marketing second from related million, increased labor million, and due and was restrictions lower $XXX,XXX comparable America the driven of pretax the XX.X%. temporary corporate $X.X higher temporary decreases fund well foreign comparable to bonuses. America pretax under royalty primarily by due exchange incentive offset $X decreased primarily in for income million by interest support, sales. to increase of offset certain unfavorable International increased support second North U.K. franchise by higher units rate million effective

turning Now to cash.

non-GAAP in The appropriate. our With ratio including at favorable with secured of a outstanding leverage balance is The we term to and company maintaining believe facility the Our fixed marketing cash rate debt changes during a free EBITDA, capital as that as ago. from half million approximately favorable operations as year expenditures million the shareholders, to first capital items, higher The is measure flow $XX cash increase continue associated we has environment is preferred dividends flow, $X X.Xx an low income was which fixed in our timing XXX% loan interest define XXXX of of uncertain paid this primarily payments as million with net and with was fund. to a $XX outstanding less $XXX working well a of balance to due rates. compared cash million. swaps current

preferred August an dividend of third of of $XX.X during available cash Subsequent $XX.X quarter, paid declared should second need dividends we cash facility million second We a July paid of Both a to XXXX. credit Board in on the be under quarter XX, to quarter our $XXX secured up approximately and are additional shareholders. to shareholders million facilities mature our the common and it. preferred of revolving XXXX. common borrowings to Directors to XXXX, million Additionally,

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

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

have the for openings decade. which while pandemic, North XX traditional Internationally, the majority quarter's associated Rob restaurants included have rate As lowest new XX we last been restaurant realignment was a X a in slow America closures noted, closed of only and closures during restaurants. restaurants, net The of international opened a market. XX reduction we franchise were strategic a with single restaurants, seen in

a of expect under reopen pandemic. any the Rob most to now result franchisee. closures final call We I'll back the to unit over These restaurants as our these turn changes a count in exclude comments. for new of temporary Rob? some COVID-XX

Robert Lynch

Steve. Thanks,

environment difficult summarize the especially up. as quarter. to John's Finally, July. very continued has in industry, In has tremendous showed this and many businesses, into Papa for disclosed, And wrap strength in a second restaurant we the

Our unprecedented to continuing doors communities. an us the transformation it protecting situation, our respond members have team and open to upon based, of and and enabled to customers which our purpose serve while and keeping values is the our safety

to perform products new very marketing and Our continue strongly.

great continues pipeline ideas and our innovation customers, in engage new produce results. deliver that customers to current bring Our

we But well. all, be it Our proud to an are them of can realizing of the and speedy a end organization for of. COVID we the all continue businesses a challenges everybody, all both distancing, consumers carry will unprecedented and profitability delivery voluntary as future. social small related that for allow wish uncertainty economic enforced, like growth to And franchisees, the pandemic, Like businesses we in we the and ongoing for to us. that recovery owners base invest ours will of foreseeable and through to out local that are given building drive toward -XX, return expect normal

We the health serve our members our forefront at we to as safety and continue will and the continue to team of put communities. customers

to for everyone With interest Q&A. which creating stay to focused We continued we are will brand ever-evolving on the in and the we needs, have confident foundation company pandemic the uncertain today our the in values as have like in will operator our I'd true always and support. actions that growth purpose our a a this to response strong and conditions optimize been after our our our changes and I'll call their goals, these our their but for the business that, thank navigated subsides. also and continue long long-term call shareholders workstreams times. guidepost you. to turn over profitable to customer remain for Thank We in on

Operator

our from Saleh And Instructions]. comes first from BTIG. question [Operator Peter

Peter Saleh

I Congrats little on efforts. ramped on the the up Rob, continue rate said the the up on I you elaborate just quarter. any call, low closure Can you're that? you And quarter and closure results. ask, was bit going forward? think the development know to you can't -- on I rate rather the -- wanted guys ramping that a in reason

Robert Lynch

ourselves on To my a going in is America. development feel yes, company strong #X again. business we've up on marketing our ramped very The a infrastructure from next new of into development turnaround and year Development brought priority now. her got built we've earlier support. Chief forward, this innovation, not like hired We've great heading a of some foundation aggressive is getting North commercial place Peter, the in for development in next get great phase probably moving our to and right I a that year, -- built had had beyond. Officer. goals to and Officer. put previously Chief facilitate We really this we We end, Development best-in-class very

the building to be infrastructure we're that. able now, support to right So

the X North both ton as a which about operate our America as us. have terms as We've for So XX there's how that got internationally. and competitors than We well internationally. we countries we our territories, domestically we're internationally, half top less competitors. And of as white way many restaurants about in is in of half that, in capabilities building space best-in-class frankly, didn't of before think

huge opportunity like a here. we development feel So is there

at of as lot excitement, And growth from internationally, part point pizza both with many to that is a in franchisees this cash of current build both this other an times. challenging contacted who of reinvest model, being a already that by out believe they during significant e a want We flow the our have proven the to also of capital people that domestically We're successful is unique these amount -- large who model it's marketplace owners want to and and sophisticated commerce, something be they business and of want very that have concepts be is the to our built which e-commerce delivery in into their business. platforms.

So development huge is for We amount a a opportunity. focus us. of huge see

Papa don't of the terms which great. In John's The to foreseeable team the the I point close members. anyone finally We're takes our future. We're great. where off a getting restaurants, burden our The structure hiring why is the see operators. of are for margin revenues closures, would staff,

being future. very the rate for foreseeable foresee So closure low our I

Peter Saleh

talk year, just budget? really the you these advertising coming comps. types can this then expected know And nobody into about I of

to plan And some don't that this need is seem incremental roll I'm year? into of spend, guess, if opportunity pocket And budget have initial you in there your therefore, so, your to to plan? do has I the ad it ballooned. you any How now of versus the kind in you ad sure 'XX that dollars

Robert Lynch

out concerns the question. we That's this Win my Together is which into came business, program, had this of that I had a was one I When We marketing, background -- great obviously, in about through the challenging franchisees facing. was situation helping our XXXX. great XXXX support they spread in the of a that half over marketing program, form of And that were and

we was at relatively my support, would our budget concern ending we given issue. decline sales level as of that that that precipitously, these have if so And mitigated look marketing XXXX, that were

sales function sales. are net Our comp our this sales marketing our a you growth, of year, our know, as budgets

the And up, year yes, X from marketing gone move capability funds we sales still the funding marketing the to it's us. bucket as have our to And so have flexibility of next. and for

-- to what currently a are the it is strategy the Had call exploring that. yesterday. So we best about do

to we to So looking continue close off absolutely, make make to that absolutely leveraging get that a dollars will start sure at productively. But we fast strong. we're momentum opportunity sure our most the marketing that we in XXXX XXXX

Operator

Your from comes Alex Jefferies. question Slagle next from

Alexander Slagle

well business and guys I so see the doing you an making impact.

-- On the the next raise next the the call platform point? level? And the brand there's opportunity at to that technology, about and the do the and digital this thinking consumer-facing bar the out for you see where any fruit to analytics if and you'd data low-hanging

Robert Lynch

Great question.

possible. working sure best we are functional most and an they best the in, channels. digital platforms And our timely You mentioned, customers manner. the want customers a that making that know service to our new easiest sure possible make to of in and we X digital that one priorities take our give as care and we've the But the from platforms make products order over X last stick. can that months, provide make also We top million over hard products of we we're from standpoint is sure very brought operating that sure we're them and those best serving experience them that in to the our them customers

coming keep people So will back.

customers. XXXX. program, in leveraging that are off. able to target we marketing programs in XXXX take we more really we loyalty as right loyalty Our appropriately data the We're And better revamped of are to our the quarter, starting ticket mentioned all dividends one-to-one it with to to our averages starting and last incentives see higher as capabilities,

lot we them. one-to-one our that growth around right driving loyalty can make so going big transaction and that and -- in of marketing coming this care stick capabilities of to we're take investments into sure these we that now making we're are So are seeing a customers and that then

become how with business a our from addition over to point. work and we -- -- our big the From a standpoint, commercial in little They've those of investments. we're that, optimizing aggregators. this So also a X% that are at

that I because their with think delivery them. suppliers you during we of create We're And all the their business the are one we've for pandemic. growth we're platforms largest probably on them. trips aware of grown a

we're platforms deliver both businesses both through sure great create of working to where can and customer model service a our continue them can profitable make our we of customers. So to we that that supports their we be that care take with to continue long-term and

that's loyalty is our So up between technology focus the and aggregators, a program of where lot against. our

Alexander Slagle

helpful. That's

fewer couple If restaurants core to growth, the fast G&A And today, but in you same special XXXX prepare $XXX in last as rebuild us investing million. an the excluding through to look back or U.S. at was so, some But years, commissaries. own all can it you forward help the million, time, think to the -- closer $XXX acceleration you growth. charges sold business, you're international, for and of

balance as how we you forward? you about going Perhaps could if and on view us these of set level should have sales? So if a G&A a think G&A just target help system thoughts on percentage

Robert Lynch

build this mean, first XXXX, in years. year, we plan that was the into going it I last actually year a X had G&A Yes. where decreased the

G&A. are So on very we focused

will being profits terms to This a last We a of we going from sales management relatively G&A where minimal of management payout. to continue incentive absolute unique is because this in our a as significant are year change where have will be we as incentives to a bit we hyper-focused rise, very program had see on little and possible. productive year as year

dynamics to this are out. reduce a and making our that, G&A were year. G&A year our progress By focus continue change going to unique These this will year. And in to bit little that year little that. be a of towards lot we are bit and our a skewed targets So

Operator

Stifel. question comes O'Cull following from Our from Chris

Christopher O'Cull

performance pandemic has and comp Rob, between the can on initiatives? disaggregate company the able to elaborate the you how company-specific been

Robert Lynch

go I about onset the in to actually we were as first we -- know, X.X% and And the the kind of and weeks. mean, for and dipped of prior you quarter Then we tracking we people down locked first saw, we dramatically. Chris, out Yes. and at then our sales, of coming X pandemic obviously, the we as in saw pantry increase that, an comps themselves up loaded down. started

track So continued we have progress. to that

products. the what like at drivers business, what can products of continue also on to we look our at be looks mix believe those pipeline, those attributed We environment. the like, consistent to competitive the We're our looking incrementality, innovation the

look And the delivery piece delivery -- tracking they're other on of the XX% both competitors kind our were pizza spot. the in in growth prior some national of the you pandemic, to at of range X% larger to If releases of companies, business. flat of their large the at

how grown look much pretty they've at much we as of then at looking the pandemic, how consistent, we've is we're a result and grown. which So

of that lot a opportunity so us. at are the things lot we've And uniquely of look that for a contributing for we growth done

So we with partner is we're decision aggregators, major to that. from We benefiting large made which the a think our the partnership unique with aggregators.

industry the that remains as from We to the benefit will intact. of rest versus continue as strategy the long

we launched That we able the assess a dramatically has unique up sell that and how purchase have nothing don't is repeat pizza can to and to anticipated with our is Shaq-a-Roni, we This that lot to mixing innovation we of and of of order is than an we're with That donating charity, us. per higher lot we're is. business to a understand the go typically that for incrementality based all now selling $X a channels. that We're Our our generating since Papadias. extra-large do incremental We extra-large pandemic. on, strategy. size data across innovation do our pizzas. all has the seeing digital

different the general track discern are our than we kind types specific those growth and is of priorities. the things explicit of actions have we how So impact strategic versus the of pandemic where that the can between impact marketplace we that measure of taken

Christopher O'Cull

be company a helpful. And fund? to in making national the without contribution you 'XX year-over-year marketing ad the do up expect to fund then That's the

Robert Lynch

Yes. We do.

Christopher O'Cull

once then do the going the see you And what order to are challenges greatest Great. company have infrastructure to in be franchise development the restart to accelerate? or place, in overcome needs think you

Robert Lynch

of own that's Part destiny. it's us, and because on exciting Chris, control we our

some best-in-class for development had new up We areas the are around drawing the haven't and of of that mapping technologies critical capabilities. some capabilities trade around

really or our years over last franchisees with lot the of X We support have X some of franchisees X or been to haven't units. franchisees. had infrastructure the A individual X

and to own proposition the in have larger, go build franchisees an operate our place out really had not that other for better We concepts. already and sophisticated, capitalized more infrastructure in

We interest. there's have a lot huge it, a on opportunity there, and of and we're focused

something capital the $XXX,XXX we you that's on told And as to really the now people. make told on invested sustaining open is mean we Restaurant, that to right haven't we because anyone the it plan a in right control as unbelievable I when that cost our haven't it and good within of is industry. AUVs at moving story. And delivering that economics the So sense. Pizza are the look return John's Papa eight we forward, the kind

any opened, place come a we have in don't geographies We so restaurants in we huge of our support have want capital don't half have to situation out and have even the brand, China, in And restaurants. Internationally, of are like been and and we're XXX domestically, competitors. in invest ready have countries have have are Africa. have not that to any Australia, countries in market. this place and that their are making restaurants don't in resources to we that QSR And we're the the our partners We in, going in pizza -- we in that we huge any that. to we sure

competitors Our thousands. have

accelerate of now, really investments So huge us advantage come when right growth. in we amount thing those to we're are prepared space. about place and of we white that making of It's out the take this putting that, resources so to

Operator

next from Our question Brian comes Oppenheimer. from Bittner

Brian Bittner

you, really on the timeline the is important to timing color openings do theme this question. to theme? Papa other positively Is this of just is the on insights growth touched on at Rob and start side new definitely around the going a Chris' improving year? of it going be unit and growth John's bit the of a to the But you with unit see have you of a be I outlook expect some end really from Just business? right perspective, new Steve. when virus? by it mean, it to growth for This unit this impact new

Robert Lynch

in unforeseen completely relevant. Barring significant be days good used targeting XXXX. to and these circumstances, is growth in circumstances, that hear unforeseen a that pop a units Barring from you. we Brian, to out are

So now. building we the are infrastructure right

up there's to big we for opportunity. working a losing given lost challenging are now make the ground we're think restaurants to We build. going right that dynamics But around getting be

estate We haven't the real the the pandemic necessarily from on yet seen shakeout market.

estate available be There shakeout. that be continues this want becomes that in will linger as able the think opportunity -- wasn't before. a And be take we real leverage that will thing term. available to I to and that want near there we to to of think advantage

like I right we building now. So are said,

preparing right now. are We

to how How to long running, We it individual than is are continues up take the going development ramping really it's and up plan. more now. dependent probably our impact that gets pandemic right so before more action upon

Brian Bittner

obviously my just same-store from And follow-up accelerating July June. sales

pandemic you've for traditional time improve seeing So You I time guess, in positive July for know impacts becoming the happening improved meaning becoming guess, I a where, at more the say drag a it's pandemic at from been to the when a restaurants? less of business. traditional would sales restaurants, we're your are the logic actually for momentum able less

core that drivers would you of So And accelerating. up? Or as move actually kind does impact frame of you're underlying your the the we of that lessen really pandemics July? how mean some seeing business are into

Robert Lynch

Yes.

right. over have keep now maintain you're coming to goal mean, those to we folks last as picked Papa I I up John's. to our the X think months back the customers is right I that mentioned, that

far, good. so So

our repeat As I mentioned, are improving. rates

I seen operating handled both customer are increase restaurants service actually double-digit in roof. I business. in company not mean, transactions metrics. well give through I Our have as We've customer our that the credit a to seamlessly, they to service our scores And guess only the our teams, as improved franchisees.

So and there's everyone what to don't increases. what the don't And of needs locked can't go are to customers modeled, handle then and this in to we're But that those we -- maintain be modeling they're these -- come impact our a lot of And vision hey, of for is one-and-done that's a we the be going to because I keep is be able of kind is we them, think coming back. in, forward-looking didn't down business them. keeping it's that, baked needs what other built then thing. They Corona, has these are into and if customers, to restaurants. but coronavirus, if the

they And is And a than companies. other think with had some taking our care than there's here. I quality think of drove better that the may expected. them for they I then food tail the have behavior we're pizza better of them

they're while hey, this starting that, so This ongoing. I want is buy is that And not a company in kind brand. to see a of just quarantine, I'm from, to but

untapped loyalty and back and the opportunity. there so it, had in our and back mentioned program exacerbate we loyalty -- We then. increase think at I end QX platform. in be that marketing on So million that that had weren't much And QX one-to-one names we XX.X work of about call we're it we our the our will can stickiness. program I doing with that

XX have million -- approaching We today. X we're

all great And leveraging hasn't leveraged. There's increased fully so loyalty them, purchase of to that and that's people We're we with getting just around started. and with understanding now, that -- ongoing and been into We I program. kind maintain tapped a drive talked tapping that yet. these customers that into huge hadn't about frequency we're behavior had these just opportunity

I see us quite we're think So this some time. on to continue going for tail for

Operator

Our following question Suisse. Crédit comes from from Lauren Silberman

Lauren Silberman

great a quarter. on Congratulations

both appetite from new existing franchisees. new You about and growth unit talking were for

growth, accelerating a new growth unit you particularly And role could to So franchisees? with what America? that, do in in to to come new extent what new play existing unit expect North extent versus refranchising from

Robert Lynch

does We an which zero. know, a They across this don't great come and in to own can of base they start want with that. building. in new spread us that then to players a industry, come want restaurants base in big operations their and and start overheads have from almost to asset unit growth. of new the you domestically, Well, as we give with Lauren, franchisees situation in are XX% seed

about right So large we talks with active in are opportunity. that franchisees now

I an thinking also unit also right these could the growth definitely as would ROIC for it's we there advantage tell being having you that great as many that on is be That so we're us. So have. now, said, things from us restaurants

right are levels the of now. cash we're low invested want a to leverage that building with markets going in it's sure be to We these lots flow thing may Exploring that We're worst We capital necessarily restaurants of debt, now, not in And make better maximizes flow. very situation how either. cash a to shareholder right some return. in some that of way do

into some see So significant but which we refranchising. refranchising development, investing potentially even own in both appealing growth them ongoing will exploring unit some our potentially capital opportunities, to of and of more also make all out markets, are build these for markets these

low levels balance so of you last the current between years the one franchisees, X outages been with franchisees. franchisees new development about the And of talk in current and this very when has system with

is for motivators biggest the new develop franchisees. of to One franchisees current

that franchisees. from as I we good our as So both see will think moving a pretty current well forward franchisees new balance

Lauren Silberman

growth over even the unit year and between we America international? North can next the how next composition then over and think about And years X Great. of

Robert Lynch

going for to outpace probably is future left. so is the much foreseeable because there domestic space just International white

we of The And set development, sure other that current franchisees set have build. capitalized up, franchisees and areas opportunities master do to that you part making have and to concepts, out we and develop. trade we some are have a set We the to kind about, there. where of the with we And we mapping have on work underdeveloped. still that so model appropriate to base are go work are the have domestic need domestic is and we our many geographies internationally well I up -- do that have that talked franchisee

development will our driver. total to will contributor be bigger our a ongoing, a the international ratios still So see international I change to that but will the part, would domestic development, just continue become and is that bigger

Lauren Silberman

maybe and through July? through relates we then own the parity? delivery the each carryout you quarter all your about Are think And in then they delivery profitability color as to that give can any at it relative do And relative business, on carryout? Great. reasonably your into system, just performance aggregators versus of and how channel, then

Robert Lynch

in as It's of haven't may we interesting pickup much business delivery thought. we the have seen a as

changed not have much. ratios that Our

it I contact-delivery, speaks getting people own home, of house think of coming despite their it onset car, contact to that putting it's their their food feel, car still taking believe want. it people own no and in customers -- in not, still out the or the something and that

So as business bit much. But our more ratios talked in to more think, I changed profitable. because -- have have is our carryout a on our much hand. you've Obviously, is business, drivers deliver to not it's got have profitable, about that not to you as have

fee. cost delivery it the coming there whether up, the is is from covered delivery to associated labor the with variable the and pick someone's So

delivery And don't our how at aggregator the delivery look that from frankly, negotiated and against with either we a that them terms structure the we stacks from that differently So model look because carryout channel a of we've at channel. really standpoint. don't with up differently profitability cost profitability the and standpoint that

right you very QSR, as These are a them solves of productive, all illness. models, efficient. So now very know, lot of the volume

there And We to have now, drivers demand right potential demand. through. to support coming the have delivery is

use the making labor we're investment. most So of that

we've that expansion margin the with happy very we're So seen.

Operator

Alton from Longbow Our Research. following question Stump from comes

Alton Stump

Congrats Rob Steve, results. mean and I great

ask to just I So X questions. wanted

And the of much that to the which kind accelerating, First versus that Shaq-a-Roni, was of point, about to comp think how was do due market to new a surprise, average of July ticket dynamics, back due big uptick going product that was is to in much in the question certainly you given Brian's July how that traffic? July. obviously kind incremental off, of

Robert Lynch

we the it pandemic part had didn't media. What heading to don't really support no plan media national that question. much as That great -- business of in So the us growth. to we and efficient hit. April, spot for is We buy about into wasn't had that was media. the haven't June, no year our -- talked we we go out

at -- part, that in have rate of by QX. are sales media June the least turned has So national off in is for so we sales change the driven felt and fact that in successful we us been the the

the leveraging back charitable a -- a very and excitement of we And with lot launch a media we product relevant relevancy of hit lot we the tailored it, program. went great support so amount current component with of with as situation July, national the Shaq with a to of the had Shaq-a-Roni, added force fully where component supported large full Shaq that the PR of a into -- of by to

coming it's innovation I around Shaq-a-Roni It's can the all -- than new incarnation we mindset side on think innovation. showing a things things really of commercial and when the do what our together technology, of marketing, is So we more of the those do product just product, smart business.

turned yes, not the it yes, leveraged it. because timely with is, of and was relevant very Shaq So it answer the piece We media. just machine but the on Shaq-a-Roni, and because PR It's were it's the giving a pizza. national charitable we around

So your I hope that question. answers

Alton Stump

very it for color No, does. interesting. Yes. it's Thanks

had to it on options company that your given between -- back any all as following to and bad, about, that, good are stores that you sell them explored build there choose starting company company franchisees? But you the and/or you're equally or of Secondly, want franchisees. stores are on Or more franchise, owned of build want preference currently? kind kind versus time's is when back to either all the to to being you question the front owned a selling adding is more

Robert Lynch

I optionality tell create balance restaurants shareholder with is that value. Yes. the absolutely to new since bias opportunity. we've great our to will restaurants leveraging here like about refranchise franchisees our sheet I development and of owning talked got mean I really and that you see I

So every part exploring that opportunity that, we of it's see our that it very where as we are we something diligently, can do future.

probably restaurants. a any over see to So priority development refranchising build-out is of company

Operator

Brett following question MKM Partners. from comes Our Levy from

Brett Levy

A questions. of couple

Second, you've think digital most what core? integration campaigns, your Rob, of excluding attract think and of learned about should you And of year. First, and back really contactless acquire of frequency when plan on really robust had then think campaigns, of you've loyalty given this shift X customer? you, menu all XXXX, up about approach just from on experience, you the newness of if of from the has data have to your over level been about your your to half tranches earlier what just what a consumers, you could question you're about do coming able we in you're a and Brian's your into different build the for changed all that stop time off year programs, I'll the society? and how frame, and you And there. Obviously, learning

Robert Lynch

building with much than pandemic face, to how really incredibly X all challenges and the a months. last and are treat we're X-year this anniversary. something over of you for and doing act in questions. may we're just our all the sound Those a tell around didn't our been going and Nothing has that everything it's the working company work have Thank not could really QX the And were we're The restaurant absolutely challenges improving foreseen. has happen. from and other how to expecting industry really is team but other we each interesting that you, country, year. it's and remotely. our accelerated. face and society our going was today, and that that has we been changed been been I I my accelerated would other for it today, crazy, consistent Pretty we're because the cake recognizing that But QX been what us These interesting culture has true.

Our has accelerated. innovation been pipeline

the to improvements to Our accelerated demand. been have increased work -- be operational able deal with our

also development technology Our focus And now infrastructure accelerated. accelerated. this investment been all of on has been coming has our out

changed all changed We the just out most? some up changed. key the against has the We leadership what's on of right and it, None We more rate most those the right initiatives. of and focused change. got team resources So is the accelerating We thing. in changed members just priorities. team. instituted that we're What's our got came strategic of the of we

our In the one about frequency kind year campaigns, of the has saw about changed, and X terms of the sure about during transactions, needs months of our were innovations. of we this the each increase looking X with periods. And wanted demand. in looking We X handle has operations we into make of our that next while came increase the lasting that year probably evolved at or LTOs We at business. pandemic, to in could that this

focused core as we've new so And bringing of launched on innovation business working lot on opposed we stopped with that only the our mean innovation, we innovation. Papadias, to the since a new but Shaq-a-Roni doesn't

customer, customers And and where program. repeat because complexity we're our increase your terms we customer, to can new that And operations. new make seeing are amongst keep ability we platforms. ability I that ideas where prior of We been closet it in we'll see not roll those lastly, great they we then have sure as digital that get and what full fit execute of way our out. And fixed seen when continued doing to we improved learning is one our in as a coming market loyalty new test hit repeat of repeat have of rates them. amongst what a this the see to about last ready launches. fixed significantly the for build and our we and we're go the essentially we was And those in the each does to has part we our ideas out question our And great rate have versus compromise -- mean environment. whole can punch but that to around customers we most

service service we're experience, And they when better getting busy, so maintaining going labor. We're afford not, in, great or believe above -- and time. we're we there. we more No-contact is can beyond like them. because more drivers putting they our it a so and have come customer out had looks for We're because delivery

change the we in weren't we're the of that to pieces Amongst our has customers the big sure ratio our there. the of opportunity stickiness change of things is So one biggest about learning, new current that been a there is size. customers,

relatively have are order pieces our per pieces order up dramatically. stayed stayed our size have So flat, about -- our per

driving to already And lot year, for growth an us. -- a taken that's they So make. orders -- that's that's pizza to were this function We've and adding a up Popper almost Rolls order our significantly. and no of going yet Papadias ticket of that ticket Jalapeno is pricing

to healthy people a of orders. pizza that's adding growth. things That's very So a to desire function add ticket their their

to I going into answered hope We're innovation our So your all that to X build advantage continue of of that that. questions. to continue leverage pipeline take we're that. to to going

Operator

And morning. last Research. We have from question comes from Badishkanian time for more one your question Greg Wolfe this

Frederick Wightman

It's actually Wightman Fred on Greg. for

are if reopening are states geographies. infections? break along that you in if farther in uptick of seeing Are across ones subsequently wondering Just seeing that of divergence or could a you terms down the terms in bit any July performance little an

Robert Lynch

call, are terms think in how regionality the were a expectations. And York be all more about City, even impacted and hasn't New They we dynamic the Now changed. of still there York urban from been of our in thought have to outpacing other but markets that I in greater and were geographies. has where that and -- we New not. come seeing our which we change in down growth, these to our our we're some rates last I are, would like in growth. real initially, sales There way talked continue were, where growth across our exceed of markets as dramatically, they far not mean, a exceed sales

we're a lot gives dynamics of impacting absolutely that these that doing to differently. it not is So what are of beholding us the confidence each markets

Frederick Wightman

those Great. growth quarter we'll positive And see the something as one A commentary on that bit or Is development increase? as final then do be that front. of little into down unit to start will road? just lot the think year. a statistics next next development you But longer that when pipeline X far

Robert Lynch

if -- I can X you be thing, we would leave just mean, started. I Yes. with it getting are

very this stock the I be pandemic because of business solid that realize year, very performance. to had we've we be. So you kind of I that think Papa where and to that going in would a But -- ill-served the the solid performance last believe is would of be peak John's is

have a would development. the is both much tank. the And sales I of that opportunity, development of We so function in is even and function a comp upside argue, upside left And few hasn't restaurants. years. sales happened existed that years. And support the the than now closures could it Those last bigger comp opportunity last the in really because the sites few for

we not overnight. are story, the happen started just getting on going it's to but So

we have development amount foresee. growth capability a to build of the that that support We can

planning So you tell lying growth we on -- rate I focused that -- a are a development told are and to I'd I you XXXX. in XXXX, tell QX that now in big right for a large wouldn't going will have if large all was in we be sudden spike of I development.

Operator

call the for Lynch time, I closing remarks. over Rob this will to At turn

Robert Lynch

choices are. of Papa Q&A. -- joining Well, about the all call hope hope thank you this John's I and you're continue into Papa current We end strategic you our John's both positioned of term. in and and The for XXXX, long investments realized that that XXXX environment have from made as and QX for as investments the the the to of we excited thrive, future to The at we us.

just year The strong. huge getting As I in. runway. mentioned, amount a a with of started story. is we're see We We're this brand

a and customers of our our at new keeping repeating rate highly are they're right than rate, a the at We're gaining customers accelerated to. used in moving core that. higher All we're metrics direction. And

a bright of are all future. very So those that metrics for bode well

be continued stay to you. reporting and you and So Thank we all soon. back well look we'll to talk forward to wish you again on our you and I momentum, safe,

Operator

and today's Thank ladies This for gentlemen. Thank you, participating. conference. you concludes

disconnect. now may You

Papa John's International (PZZA) 6 Aug 202020 Q2 Earnings call transcript