PZZA - Earnings call transcript Q1 2022 | Papa John's International, Inc.

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Operator

Hello. Thank you for standing by and welcome to Papa John's First Quarter 2022 Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. now today, hand of Chris Tax. would to conference Treasury I speaker your Collins, Instructions] like the to over and [Operator Vice President go Please ahead.

Chris Collins

Thank Good you. morning.

Rob call Ann available and comment for will after on provide President on the Gugino. and will today business Q&A. financial me CFO Ann the and Joining be CEO a Lynch our prepared and Rob both are update remarks,

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

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

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

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

Robert Lynch

grateful great quarter QX I'm serving quarter quarter. pizza record that Thank our to a unpredictable and in to welcome everyone members their the team pizza creating company outperforming millions challenge continued and went be to to operating for industry amazed the first results our commitment brand work, XXth and world. environment pizza outstanding last our The of John's I lapping call. XXXX customers spite for and sales the consecutive by year's Papa to unprecedented next. building John's QX that dedication I'm best worldwide. continue and Papa in hard you, this of franchisees of earnings to global one grow, in system an say to delivered Chris, from proud the another

fuel innovation, our testament QX execution, Papa results I'd John's power growth culture, This discuss sustainable to these morning, are key like differentiated and me, values-based the trajectory. three strengths incredible to continue to topics. Together, our impressive For a of brand. winning

we're environment results the navigating. extraordinary QX and business our that First,

for leaning we're execution and sustained based outlook, strategic on strategy a plan. the our further and we'll provide environment. performance margins John's in changing Papa bottom results into remainder line. continued how constantly on trends our outlook and drive financial year it Second, [Indiscernible] especially then and of differentiated the our of to and macro third, the current And beyond And

Chris Collins

Beginning our the our were this momentum we already started results. strong off year, record restaurants accelerating QX tight and the back with labor fiscal continued across January In at labor QX a coming half. And were of shortages when inflation Omicron with economy. in market navigating commodity the a lowest to XXXX, Then levels great on and declined top levels, Epic up X.X% commodities fuel to global staffing beginning introduced Global XX.X% X.X% new year lapping faced were system, to challenging North staffing recover in Omicron prior end-of-year continue sales we Stuffed up building a February, quarter including and gains programs. their done gains the businesses quarter innovation another rose in also when Comparable By March, and internationally, industry since inflation. and record normal. the consistently levels Despite acceleration across stimulus of in Ukraine John's, began globe, last benefited shocked ever, to pandemic. as our backdrop. and yet grow outperformed the against these conflict ago. constant delivered of billion solid triggering Papa sales an Papa year, government the John's since and we've the in of X.X% exacerbated the year Crust, QX, system-wide biggest respectively. $X.X last and an and currency a pandemic, In first XX.X%, on before in from America XX.X% as we growth, challenges,

Robert Lynch

this on challenging staffing the I'll elaborate drivers in other and results achieved We moment. despite in restaurants. key these a environment our

Our I'm strategic in economics. pricing past fueled that our a unit proud that EPS over opened momentum, action quarter, AUVs disciplined by chain development grow the half thanks approximately line able and and in XX improve brand's we we supply sales we gains. part are growth and management, year system-wide critical contributed our strong margins its sequentially to growth of Accelerating operating our to unit also the and Last of continued also net agile view financial shared with February. engine program, units worldwide.

in another world. yet shareholders sustainable John's our members strategy, franchisees customers, driving team constantly for franchisees, quarter, our For our Papa differentiated and great changing in value executing how we a growth and demonstrated delivering

components Now I'd the to opportunities and addressing and the we're to how speak in strategy environment. current key like of growth our challenges

strategy innovation our year's driver record be sales. brands sales menu position. key And differentiated, quarter's of last continued cornerstone the premium to continues comp against multifaceted Our last of the backdrop gains a of

Style York New our product in crust was QX exceeded big expectations. launch and it our

Chris Collins

and as be to terms ticket larger distinct popular thinner, of appreciate crust. appeals a proven who and transactions it lovers to of and a pizza stretched segment both in has incremental, slices It

from Pepperoni members. big as hand into Crust, our addition cheese the over results extremely never being we our pepperoni stuff's Epic This a to says, Pepperoni for crust. The our Stuffed how date is strategy frozen demonstrates business. strength we Pepperoni national quarter, exciting a of to building topping. on name sales layers our especially Crust, in the an be launched continued our summer. Epic Two Stuffed create fresh, which our weeks consecutive Stuffed incremental Epic menu LTO, promotion. with and saw Crust popular also platform loyalty sustainable, are most Epic new original to fifth We ago, despite platforms not And promising, expect

leaned we the we personalized significant into long-term lever our lifetime in and value innovation leverage our transaction we capabilities year, have loyalty and LTO drive customers, a another of driving with create and lined platform our engage up for of and other remainder targeting frequency both to long-term are to launches the value menu sustainable drive our and have year, number Rewards, This is growth. For program, to ticket loyal customers. comp we are Papa investing significantly innovation pulling as Digital sales.

Robert Lynch

We the expand exclusive successfully access during launched, We program. nearly early it access stuff new pepperoni a continue adding before one-week crust promoted period. members Epic to XXX,XXX members-only to actively

of to last $XX.X have over profitable we As aggregator week, digital members. million incremental Rewards and the deep continue Papa transactions. and our side, on integrations Also partnerships drive

not channel have discover additional consumers provide brands. previously we've Aggregator to mention to also customers they venues to another capacity As where at for delivery are, peak aggregators marketplaces times. our important meet become discussed,

execute segments. Papa John's be to brand reach the customer on on to We growing two-and-a-half continue positioning these new opportunities our bullish out as and out a to additional constantly been years, brand's less critical premium today strategy over consumers has past performance partnerships we It's adapted as as seeking we've environment been important changing with we adjust increasingly to rising nimble uncertain no inflationary, to environment. value. more costs a and new the

As consumer pizza that dining relative sentiment fast casual -- QSRs, I'd continues tremendous casual other out offers and soften, point to dining to value concepts.

the ingredients, John's, with dough, Papa four a target Papa been high-value into of under a economic in time, family For At is this better more very our price-sensitive John's premium pizza has fresh will also meal recognized value you and resilient we delicious priced a customers, sensitive Because pizza At to Rewards tool cycles. who side using customers our with reason, self-select in the strategy for consumers those innovation. successful segment promotions. person. our Papa we through important same are already. less of per $X price letting premium past especially continue feed a invest toppings, can on superior to a historically the

said, of and costs food, take our labor, All has and fuel some inflation, in restaurants. supply this that to This offset helped to with unprecedented we chain begun being have higher pricing.

I've value largely afforded flexibility in past John's pricing industry come of approximately like unique ticket, said has products offset This before, As growth - the us to in our and has on basket. new This come Papa prices New York premium predominantly on pricing, contributed environment. has inflation food on over more did to value, Papa years growth John's price hitting given quarter, room low the strategically benefits to inflationary Crust. the couple continued we're innovation delivering able not ticket proposition as is Furthermore, X% add ticket most from points. this raise has Last higher to through corporate premium stores our successfully ons. average by Style prices of our focused premium of unlike specific raised where QSR mix

base we're over transaction have weighing in past margin short-term higher long feel against last success. is significant built pricing balanced a while the of the transactions sustainably two that marginally well-positioned the using continue to approach, and impacted our long-term years, pricing spot quarter, key pursue innovation brand's momentum to the will retention While ticket Overall, grow optimization and we over I to customer and power which today manage margins through good our term. to we

to like I'd and staffing comment Now, operations. on

to without is achieved and and franchisees. work Of and in members so. solid tremendous quarter's results our continues we the never course, staffing of industry could team be said, have hard commitment challenge our last always That a

our the key to with and they orders our our deliveries slightly during unfulfilled. that of these great margin to taking incremental, service have times. our allowing is profitable making continue gone a service providers versus example marketplaces, Papa and of to investment transactions another are otherwise make a Though integrations us members the drivers, serve delivering productive center, and addition our aggregator In focus using have to nationwide own long-term customer our lower Call, customers order integrations peak on centralized with tool pizza. may team delivery-as-a-service them help are our been

innovations that to make invest capital teams We and will continue our productive. technology more can

reducing on Looking providing benefits, great a and great remain focused environment and compelling employees paths. continuing competitive and we working by turnover hire to compensation, ahead, career

strong corporate our pizza, our our industry. we've that people, long Our of to released Earlier employer choice progress a success. a us this responsibility against and culture outlining impact support actions on priorities and taken up sets report be the the planet goal many is week term positive create in people. for XXXX our create And our to to

Chris Collins

say to plan compensation that to proud that includes is metrics. I'm pizza John's publicly chain Papa executive traded the announce our first now this ESG year major

staffing QSR himself join Sieve to team to Joe with operational and well leadership. to executive, Joe's with our operator as corporate Joe industry also our an We development new Restaurant as progress great senior brand to looking talent forward continue already making a excited excellence restaurants and leader. as franchise We're we're a in the as our week experienced as Chief in accelerating the this experience brings our deep We're team. pizza have Officer. add

John's Now, turning growth. accelerating to Papa strong results and unit development

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moving and for this discussed the as industry pricing that is commodity out morning, continued confident economy to In I've realize many higher and Papa in actions our volatile potential As ever performance well-positioned operating full the I'm goals customers. our strategic industries, long and forward to is environment continue John's currently while engage global for and growth term. value as and given costs to challenging deliver the the innovation short-term, offset own to short-term to sustain our

to XXXX. be in expect QX North in We sales second to comparable continue to and be America slightly of half positive positive the

Robert Lynch

XXXX. the a with last our macroeconomic record outlook full year, in ability to positive we that for circumstances. view resilience a under that very our and different this strategy our a outlook the of is execute out comp For on of of sign consistent laid confidence sales our is November There's top

Our give us accelerating for strong development results our unit even growth confidence QX more outlook. in

raising the to strong acceleration increase also at we worldwide units goal goal. XXXX XXX restaurants fiscal new John's X% saw the X,XXX raise units, new net As And from our pipeline the unit a a XXXX. to development in beginning. Combined of to XXX outlook, midpoint. we is the provide actively Even we're XXXX through current expect just and this net continuing growth as net grow in X,XXX we XXXX X% in where by discussions, our result, for deals, XXXX is X% with previously. on as in this of our a are of XXX the is XXX outlook This more to a well end multiyear XXXX Based for new new XXXX. equates markets annually global Papa to by to to goal significant, excited to are

as still whitespace this I'll goal, turn financial now well discuss fast Beyond some color to the more outlook. provide to our us. development over call remains our Ann? as for Ann on results,

Ann Gugino

John's Thanks, XXXX, Papa good and Rob, everyone. solidly. began morning,

significant While headwinds. navigating

We quarter. on record year's outperformance continued last top grew first of our and

Latin the our commissary. in as and to largest higher AMARCON partially headwinds. performance. The own was is North related across growth unit supply this for and by FX, both comp the Consolidated economy contributed of also million, to our sales well to discuss top-line strongest differences sustaining as face up Beginning commodity and accelerating $XXX.X Comp in growth half rose solid solid tied saw market localized offset with in reflects regional the systems and we've and decisive quarter, X.X%, in Asia UK, and operate by restaurants, more revenues exacerbated softer In company-owned to growth, the and X.X% addition international sales sustained X% during In in in our this in up global brand's protect steps X.X% the were where up market company-owned and growth The in our largely of we to X.X% strong to margins with results reflecting impact I'll driven momentum, revenue approximately which costs. net our positive and short-term earnings commissary addition similar comp America. franchisee higher the sales difference were wave taken inflation, performance Europe stores, and detail system-wide morning. This chain unit inflation excluding increasing America. as down also sales. P&L, we markets International were labor the January. In franchised and was restaurants. quarter comps

on income special in of Sun basis million to margins, our QX of pretax the net These non-cash GAAP a million strategic $XX.X $XX.X was with a operating one-time interest associated JP to Papa the first, star million items. Holdings. included, in charge Turning $X.X refranchising XXXX of

X.X sanctions. Ukraine related $XX.X and to subsequent Second, a results of items impairment legal operating non-cash conflicts year These strategic reorganization. million And compare million company's in of income $XX.X million a million settlement. which $X GAAP ago, in the related charge third, to special for the included international to one-time a expenses

a quarter. including those these transaction On saw third-party given year-over-year. successfully made Excluding inflation mitigated for factors in by The adjusted ago. inflation the point but outlook to to to Strategic which was earlier. year March. compared a points comes company-owned the X.X% restaurant were basis, associated in results February, year-over-year on record usage, in factors represented reiterate coverage decline in Rob's segment, were QX we in line challenging approach. reduced was the we taking a these XXX ago. saw income we our impact sequentially X.X%, provided food quarter impacted drag per in with pricing the QX in modest But uptick we primarily $XX.X environment cost a I consolidated in operating balanced change operating am QX from for pricing, with year items, the approximately year-over-year. transactions. approximate are a costs corporate were I basket of margins. adjusted When the a by actions headwind before were margins committed basis million less on basis delivery margins Labor below margins driven also XX% want up increased in point to million also a an up proud these fixed that increase commodity $XX.X XXX Together, the these operating margins costs, domestic of level. are it to segment

higher we the retaining XX% strong by to revenues while use and impact past Commissary rose two customer mindful margin commodity higher base of costs. the We the labor over will surgically short-term manage QX momentum in and of built years. being pricing costs driven commodity

with commissary reminder, American franchisees, costs slightly generally passes plus North margin cost are through accretive This percentage that arrangement margins. in means rise our speaking, on income operating fuel, but and food, operating to fixed commodity labor consolidated costs As dilutive commissary a a basis. to

adjusted Continuing year earnings versus including earnings, impacted prior-year to margins in factor a for This $X.XX this $X.XX special approximately period, points. quarter, by diluted this in and $X.XX the were quarter items operating last. negatively basis, XX basis share per versus consolidated $X.XX the on GAAP

reflecting per ago. Series items, of excess special as the last of these repurchase benefit shares, $X.XX a and lower expense operating impact the to to diluted $X.XX by adjusted convert QX earnings as Primarily offset vesting positive partially B convertible this preferred share higher Excluding well from interest rose year's investment quarter. from tax year equity and awards, income the

flow the to primarily million from QX Reflecting Now, sheet. to year cash franchise unfavorable Cash to due million flow turning in prior balance was period. in timing payments compared interest capital $XX.X $XX.X and operations working of royalties. changes in the

to was continue As facility discussed, have our flow from timing-related announced growth and $XX.X year million quarter, $XXX compared quarter line cash ago. credit liquidity just million we free ratio We under Reflecting cash over leverage up cash million and strong quarter continue expenditures growth our the we as scale conservative revolving $$X.X to our in outlook, of ended borrowing for to operations X.X lower times. available with the a strong $XX.X million in from a XXXX. with in million investments return last flow I opportunities capital high $XX.X in were

in return since with shares million to as of additional significant continue April repurchased we year. repurchased repurchased shares after $XX.X an XXth. over to the the also $XX total, have our the We beginning cash quarter million million $X.X of a We In shareholders.

to $XX.X Papa so results. constantly paid operational dividends quarter. a continues team. I'm changing environment, financial solid common our million the proud deliver of also and John's in We out in during In

about outlook. we to comps, Coming performance of Rob's have positive in positive continue Now, comments remainder expand to Rob as against top-line a for on our outlined. the QX off XXXX, prior-year record outlook

increases, Epic value and delivering and a With focus continued the on innovation modest launch Crust, price to of customers. our Pepperoni-Stuffed

to sales slightly of America be expect to year. the We the half be QX and in comp positive second positive North continue

related comp in expect we continued which accelerate full to international, reflect are regional the impact As expected for saw quarter. softness to sales UK the we the headwinds QX to in March,

to Our in year. is to costs current outlook the modestly higher rise XX% of inflation reflecting impact for QX, the be full XX% and of March's, for acceleration full for food the basket QX sequentially this food for operating anticipated to we sequentially half with in higher the on and line Based outlook, expect in recover adjusted the decline year. quarter in of costs the margins second

we currently year, line in expect the QX. For margins operating full with

target higher cash development $XX $XX and interest We $XX of as in and to company innovation fiscal moderately expense million million invest Full-year laid stores. of net to to million last growth we new CapEx technology invest continue on $XX to between XXXX, the based shareholders and between is expected quarter. and we be in out as return million borrowings

expect earnings for out my tax is global remaining like year that to for quarters John's reiterate drive the beyond range rate attractive We to XX% full the outperforming and wrap by comments. expansion XX%. opportunity, I'd headwinds and and to to long-term significant To offers between the XX% whitespace. steady XX% between market up an zoom short-term in and Papa sustainably which be

on compelling positioning, has new been value growth. as winning proposition long-term for outlook model pipeline, strong very never exciting. by a this Papa continue through to on differentiated call outlook new our Rob net I'll our XXX growth John's and potential for over and XXX raised now stronger With the has our our back multi-year to that comments. comp XXXX innovation, X% confirmed robust units outlook Rob. As AUVs for some demonstrate turn final Papa X% call sales to XXXX. discussed is John's based development and for built previous ones, to a and we sustainable we've

Robert Lynch

culture, Today, sparked are John's still Since our different ingredients, and Two priorities, ago, founding, and-a-half outlook. has purpose, and focused innovation our long-term has outperformance the company. secret out John's Papa better and sauce laid years we our a driving values, Papa been world, strategy company. Ann. in differentiated of its positioning, the which pizza Thanks, better incredible an very strategic transformation

for have brand's future. confident we challenges opportunities As done to and eye the about I and two than always system am is potential. short-term manage Today, an will carefully healthy and-a-half strong, past years, long-term and the ever toward we more continue our the with

call As their and our always, the turn for their this shareholders that, thank in I'd Q&A. interest on for company support. for the to like to our continued and Operator over everyone With I'll call

Operator

Thank you. first Our [Operator KeyBanc. Eric Instructions] from with comes question Gonzalez

You may proceed question. with your

Eric Gonzalez

Hey, to question. thanks it talk labor about hearing availability shortages your for Robert, of companies I one a in for and think want rideshare the aggregators. party competitors we're second. out third from In than the driver more called has delivery the also

it's being Your only touch And gotten to John's third channels last Clearly, first-party worse the or in satisfy advantage you as-a-service weeks? that how embrace the But the there several opinion, has and network. orders. the ability Thanks. a that solution. maybe even third-party mix, had pride its workers could How I'm demand. to wondering whether becoming aren't trended if mix over time. if team to competitive order enough Papa less gig really If has issue supplement has large on delivery fulfillment the the third-party reliable marketplace the

Robert Lynch

we year I for all well for particular, question, both right tools January now employees, and been our drivers you Eric. Thanks us productivity exacerbated challenge as about to meet so Omicron investments us laid we would a for we think pretty a ever our going like tell as over result challenge comps Do of more our have our good need Absolutely. to even our staffing for in staffing would think that Do staffing? could on we inside both as that you staffing. the the has staffing? in side needs now. than we're had tell be our I feel to be employees out We here well more our feel as the But experienced it. deliver don't. of that a our and what we marketplace the drivers, unable aggregators, with had our we No, as higher customers. afforded service, on a we have as driver what partnerships of that if we a

care that our tell notes is in our model I've little the the thought a is we to week I one of take competitors and you ability confident this, lot of last customers, a are can We things read our or different. about so, as

about are impacted price, a staffing is Their challenges challenges we're quite different such exacerbated staffing a many positioning the model folks seeing. the talking more that because premium low transactions premium and we their With as than challenge. all less model don't we're staffing transactions. are is by Our need who therefore, price,

continue that ability you our our hope confidence customers. I continue our gives of So meet in the to needs to staff and restaurants to

Eric Gonzalez

really Thanks. a good It's point. Thanks.

Robert Lynch

Thanks, Eric.

Operator

Brian Next Bittner question comes from Oppenheimer. with

proceed question. with your may You

Brian Bittner

full-year confirm still comments, the strong and results in just commentary for Thanks. maybe your that. lower wanted suggested pretty on was, impressive Good your to operating morning. you maybe basis what than outlook if given margins your obviously the Congratulations this outlook difficult XX environment. inflation, I points Ann, back but margin could to previous go

believe to high-single-digit company the still growth laid More the tools this have range out importantly, the last in you the of inflation to mid you question despite you is, that quarter? drive that EPS do the

Ann Gugino

Sure.

you've the as we the that were March. that recapped them and to with for the Certainly with outlook deliver before in the February our fact you're line the in pleased So in me. environment right, margin commodity getting increase saw in we're those results we we numbers the in very able performance quarter, provided

pressure of right that seeing. the getting the we're are in you terms So numbers

are year neighborhood. in incremental forward the calling Looking prior headwind, down is right points the that so slightly margins we versus basis that XX

current little full more because have of down flexibility the the us in of rate slightly for the growth, bit But great do refinancing, because year unwinding which so I the we look of interest interest EPS prior swaps, gives do particularly terms of and rate, think environment. be EPS step-up rate year. interest as a the optionality there's it's at a the in versus the our In pressure out at year, we expense will and great

Brian Bittner

color. the for you Thank Okay.

Operator

you. Thank

from O'Cull comes with Chris question next Stifel. Our

You may question. proceed your with

Chris O'Cull

expect encouraging talk slightly Thanks. many Rob, start quarter about positive. second to to comps you to be peers it's We've heard a quarter. week that hear second the

second wondering So is today? just through I the this improve your kind comps or of was quarter, will guidance level if assumes running the at system

Robert Lynch

ability So that in our you challenging in cost has Crust terms to the QX. Pepperoni-Stuffed general, of But it is confidence the I in launch our in to business comps highlighted a both us well. that And Epic side. gone gives the in of ton was environment the and a notes what side I tell of April on would extremely guide comp positive month

Chris O'Cull

Great. haven't the drivers And meet guess this it's a much they're several quarter? been How service, up utilizing kind then helped struggling when John's I demand to keep XP a of Papa that valve, has release as with competitors demand.

Robert Lynch

It's the the us seen members, business. January challenge industry. time, I've helped real We a helped every most for the that members demand I've to the was to which difficult out same created it's operating first team lot, for be since significantly. time, multiple had was been this we almost able the at -- a environment had meet in restaurant in on

Style. York I recall, If launched New mean, when you that's we

lot have really demand it We was challenging. a of and

it on into particularly DoorDash, saved the the heavily And partnership so of leaned side. -- we was service And our it delivery us. with

so, make a capability. the DoorDash back the as in team, as investment delivery to decision a integrating with ago years the in fully on And we service look three

over that were has decisions the foresaw the team. or we that going made it no outperform. That of decision have a to absolutely, one next three years. very expected helped we've pivotal as challenges definitely staffing And one where As us to

Chris O'Cull

Great. Thanks.

Robert Lynch

Thank you.

Operator

Thank you.

from with comes Peter next question Saleh BTIG. Our

your You question. may proceed with

Peter Saleh

guys stated call. picked international development? XX, to Great. Rob, and up all guidance the color and breaks you out a development sense the X X%. appreciate how in years a Thanks terms you bit development Can a for between the for year to this XX and bit the give on of in on little us out of domestic especially I that little

Robert Lynch

rates ratio international. more targeting And changing most I two-thirds the little out-years. right that two-thirds hi of domestically the is, and that, mean, our will XXX midpoint the Pet the absolute don't we are we're projecting. in about to what that be of be number is year, domestic dramatically as we're a going but we is is XX% the both that opening call of it units where going businesses International total, to always of this momentum on in building but well so of than at as of XX whitespace obviously those are see be to horrible, growth

Peter Saleh

have I And Call? seen mentioned on stand And give that you Great. you update from where you that then stores? Can you with call us in many quarter? an How benefit the think the may Papa Call. center guys Papa

Robert Lynch

Yeah.

And that Papa all up. restaurants our Call. restaurants are Call. company go to little So anticipate than a on of as Papa of on are half we And our total are system, continuing the domestic more number

become tools and last expensive, more the this to tools on as over invest increase week. those restaurants. competitors and highlighted productivity in call As the challenge continue to labor to valuable. call be becomes a in as more Staffing And continues we our

at system point. So our Call to be on entire our Papa goal is for some

So it's at of that's our restaurants tool productivity. higher definitely a level operate helping a

Peter Saleh

very Great. much. Thank you

Robert Lynch

you. Thank

Operator

Thank you.

Lauren with from Suisse. Silberman comes question Credit next Our

with your proceed question. may You

Lauren Silberman

Thank you much. very wanted I about price. ask to

the And contextualize took Can you price you did during seen When think you just you running? transactions. think the quarter. corporate I elasticity had how you to what franchisees price price? historically? then marginally impacted compare the stores to that the compares you've increased are And to mentioned what said how take I does X% in

Robert Lynch

as part we faster little last bit are Franchisees But a think your comparable to disparity our impart the in increases about in got year the at we I comps even relative half question. the with explanation price the the seeing back pretty part franchisees Lauren. That's QX. your question? to in out of me their are. We're some and same comps where same And rate point growth of second remind then our saw you Sure, why of of the Can of this did. rate there. pricing second in for front than

Lauren Silberman

Yeah, sure.

Robert Lynch

[Indiscernible]

Lauren Silberman

exactly. Yes,

Robert Lynch

over We year out our seen time capability. building little We've a in of revenue spent management curves. have change the the of a recently a lot bit last

of So know, have e-commerce we a as our you data given model. ton

we at little data They're bit other And in -- in market bit consistent very high-level build every dynamics. are XXXX level, elasticity the in our a the in get over XXXX. to track than curve little curve down a pretty that store that have consumer we to the of seen level. was get steeper to changes really it understand capability macroeconomic seeing the with and sentiment some analytical transaction and we leverage a to management So even all able tool revenue the we're

Lauren Silberman

you much. Thank very

Robert Lynch

Got it.

Operator

you. Thank

Alexander question next comes Jefferies. with Our Slagle from

with question. You may proceed your

Alexander Slagle

Hey, Congrats. good morning.

get follow to your and any sentiment consumer on potential up and wanted views changes. Just

you consumer maybe data check at if much stimulus by past. and you impacted a revisit frequency consumer the how and trends have the lot lower ways to habits slice seeing your dice and and and even been of dynamics transaction the look income it, You're in have have --

Robert Lynch

obviously over Yeah, an Alex, XX% We're one year one. I year. have last impact an last think in the have up in stimulus did

we our lot, Epic all that there. launched with definitely that, So there some some innovation was of when crossfit, obviously tailwinds Stuffed

into we at look innovations premium innovations. quarter and both been we've I this tell this our that launched have of QX, As though year will priced you

style business. York pie Those our $XX are is in points epic average and higher New both per than pepperoni $XX. our at price was at price

those and great So on seeing we're products. pickup

as a loyalty So value we are primarily our have still what sensitive we to most being We're value of strong seen seeing premium our propositions value have a identified through of to the into not our our we segment targeted menu. adoption innovation. concerted never effort making said, That programs priced customers. transfer

price making to price often. more sensitivity. incentive we surgical customers and And we that their based that giving to being are we're on for still segment pretty customers So more back conscious come do the sure our data use

Alexander Slagle

you. It's helpful. Thank

Robert Lynch

Got it.

Operator

Thank you.

comes Geiger Our UBS. next Dennis with question from

question. You with your may proceed

Dennis Geiger

I you. if just the back, but category more over folks from done the that or -- the the months consumer you category lineup about work given last And have, Thank curious in you're you few pipeline you about you favorably. a seems share the the even let's I'm already I Great. from you what months importantly, you year share wanted with think around Thank guess curious and context we're the on pretty over given this if -- think you've how perspective? third-party rolls six see category see to we've the view back seen that. some that you stand now versus say. ask all like gain, years today here. it that ahead. -- Can category, we as any provide sounds gains could change continue multi-year a several in aggregator brand, category how you seen new we've the positive things as spending the category if value you're looking like product to given from Rob the the Just gains gains that working and you. about It

Robert Lynch

the demand that for there the John's the lot Great Papa doom or feel happening, great well and like Dennis. there's as for economy just at but, the last Obviously, years. category. in We geopolitical We We what, here a there's products feel bullish. like over there's lot of lot our optimists built about there model of questions, as the now. out of out we've and environment. But, gloom are right a perennial we both are changes a couple

continuing we're than invest. ever to we've invested to continuing We've capital before. last double-down on six months so We're invested And the over more our innovation.

the year. call, products coming balance the the big in highlighted got more throughout I we've As of

do all this we're and, challenges left operating we bottom inflationary But operated. lot with the most the environment we've So obviously, naive. that upside see of category one -- dealing X just The environments that in with we lapped we're line. a challenging definitely in XX not positively ever a of

the bullish So we are category. on

with XX We last continue. that's not of reason why any we've quarters going straight some taken to share, of terms outperformance. see In XX don't share over quarters the

We have like take these as innovate cyclical built flexibility a into situations more going competitors, us do respect and feel the economic it's and of differentiates well but afford pricing a share. model lot some us to go more take as our that continue we for of we as more to to we

And thinking you, it. we're tell unit So Dennis, I our that's lastly, then how about growth is accelerating. would

driven just this development. by the category, as development in as And of accelerating obviously comp our much but well is sales we development. part driven our as share domestic by both international the of So share are

we share think garner. a us for there's of to So lot

Dennis Geiger

compensation as good ask the where you driver That's turn drivers, there down, a from upside quite to you don't of, you and place model if Rob. bit bigger operations anything just much. a address Thank otherwise as to to, I just hiring specific follow-up, or a staffing to be need folks just that feel, maybe total great. look if a you you quick how as of spoke And have perspective, Are But far here you do. sort kind Thanks, could the in you any a very it there? needed enough staffing on thoughts that system already. are wages, changes have from or the or at challenge, you

Robert Lynch

You're welcome.

we a place. were last That place not in staffing are ideal and said, we from still than better were we're an being months four than a today We ago better standpoint. month a much in place

will everything So is to I that upside employees, both we're drivers investing we result turning primarily in retain money become We've efficient applications lot a more efficiency. and are that recruit are more and down, invested you not technology, in necessarily tell drivers. help to but a help going of make as what our

we come them. drivers retain rate can will more on path, more get which but leverage to So that is plan which to the further we money, the help make our increase at to down technology as then our

Dennis Geiger

you. Thank

Operator

Thanks.

Brian comes Your from next with Mullan Deutsche question Bank.

with proceed may You question. your

Brian Mullan

large in pizza your to aggregators curious your could be how I'd on forward other thoughts Rob, business a the competitors at partnering going you. with bigger weight potentially Thank all. impact if

your country, source thoughts that success you're seems firing the clearly. of dynamic could are marketplaces placement like a if in there just from do all any don't those insinuate curious Specifically, your you mean But these I that in the situation cylinders could way And large to and just response. in competitors be competition for brand stealing in that be anything changing. your because would to curious to

Robert Lynch

I John's obviously, think decisions we understood the about moved were a some to the launch and three-year to ordering. just customer work with head these stay front. There we lot effectively we've we change to perfect learned a on everybody And that I delivered how most made we regular why were a We've in got and focused a productively relationship. in years make Brian, of It's decision had not aggregators. gotten, brand bumps We've it to a over what doing. their work strategy, to it's online iron start. about we've why got on has out, do. mean, question, part basis. XX I along first staying great that ordering in level brands pride of out never that to the the continue outperformance. weren't that That's we've big to ago. think to move we doing scale operating we to a online collaboratively some way they in have model leverage the was allows Papa these to to service at ourselves get that we with them If now the an direction why us

we've So I got start. think a head

partnership aggregators all the to with out we invest in to those of competition. great a stay and got in to partnerships of need continue the front we've think I

Brian Mullan

Thank you.

Operator

And please you. one your limit telephone. as reminder, Thank you And [Operators ask question. a yourself a if on want to Instructions] to

next Levy Partners. question with MKM comes from Brett Our

question. your with proceed may You

is Your open, Brett. line

Brett Levy

hit It would help if mute. I didn't

a back percentage to from and transactions and John's the then one. Would aggregators terms you tick willing little with your are your strategic be what Just coming partnership share the of Papa drivers. of in non couple color any of

of over and And you into per expect kind you terms up just any kind and tick productivity just add with check, share rest anymore to Thanks. and technology, incrementality a 'XX, kick you're tick up, transaction. you or that - from numbers 'XX on do we your seeing basis. could then of the up health think in of of generate? ons, of that, to of What a addition should In enhancements down what the in color items little tick what can incrementality respect consumer

Robert Lynch

be So, of unfortunately, like data we competitor. revealing disclosure to some feel would those points our some the of Brett, of our business

of and our are of we're disclosing our how business percentage what details. the check aggregators So, not transactions the or in composition

and I not in pricing we're is we to challenging apologize will us those, to you forward, looking through that. investing tell drive these What balance So, get need we're to productivity frankly. And I that of the right hyperinflationary to that share times. technology find of going both

continues franchisees macro capability or to to just can level, better, with DMA allowing not smarter, We're the that the pricing at get help us surgical their pricing decisions get the to revenue working not the Our capabilities we more just to level, management to at decisions. at with our level. but our build be such regional store but out and

efficient standpoint, they more in are, from more investing drivers more make, to the they then more the savings going more we think they they labor of productivity set of the and skill lot get there's the they Not productive efficient side, we're we're better we're on mentioned, had And the few years, at lot there. over are, I productive. a a help deliveries be the as So and haven't more to last to kind necessarily we so just on and like that make. road, deliveries, technology from the but the value of better can the more pricing, more speak money time as our be we sharpening pricing taken a spend

us into make that help allowing drivers So more more of we retain a by are capital going significant are to money. technology to them amount solutions investing to

So strategy. that's our

Brett Levy

the granular question. try to had on I Thanks.

Robert Lynch

knows No, The advantage think to continued that meet these through just teams blown challenging three of business respect take that corner years. interesting model are these the last right to -- these proven has the teams us away Who going and so challenges our the persevere we we're faced continue capability by continue times. and be the over evolve fly It's the I do. they really I days or for our to proven can it. to And around and adjust to to on times. I'm flexible. I we've what's opportunities

Operator

from comes you. Securities. And Setyan Wedbush next Nick question our Thank with

your question. with proceed may You

Nick Setyan

to the commentary. revisit of Thank I want just some Internet you.

Is you terms you said coming acceleration conflict softness then, some just quantify to -- to any unit of about to market think and And where there see growth when from with strength? continue. in that I way, is you international where the do America? what think continue -- did you acceleration expect from the side, North you that

Robert Lynch

strong per of build a a is to XXX, we internationally of as business our solid part bigger year. holistic continues them we've what will markets, strategy. the we on. And plus dynamics different continue XXX that America, That's I us. But now foundation for now, right business Our -- part international markets to restaurants really have of that right east, it's great Latin growth markets to as have out got going different are going we some become middle have XX our mean as, all call have for to

UK. Our off plus biggest UK market coming internationally is year. XX the is last

our we've the businesses, the U.S. we globe. bring here types our And between I of of which a international one we those rest And the business, things capabilities the challenges to lot reasons right a U.S. -- tools to that rest the US affect so so benefit their with markets. there retiring make is made could challenged but Jack And so that we real US to probably think seeing same in the triggered we're tools announced going being now this us the change can of it, over those across really of kind is. and of for that obviously, really haven't international creating here probably good as like globe, economy some the for that And some sharing Amanda there. been some the team, feel we of all and taking this, lot the the international I accountability doing got of we're we of of of collaboration the the in changes things UK the with and obviously about we in changes that by our more think -- we we've the week and is developed productivity and

here of the focused the strength So really that depressed on international lot markets, I by comp we're the in facing that rectifying do they're in kind one very market a situation that and we're future. near which our and challenges is of there see is UK

Ann Gugino

Yeah.

double-digits. only U.S. for growth on the we about the quantitatively do out with the the pressure I positive, unit that color slightly year some the in similar to and will comments high feel sales to be the low you called international then like for single-digits, year, sales. while QX, add have full growth And like do comp think Rob business expect we talked my in our we system-wide in

Nick Setyan

Thank it. very Got much. you

Operator

you. Thank

Our next with BMO. question Andrew comes from Strelzik

question. You may your with proceed

Andrew Strelzik

something cadence, UK do relative Thanks in to do recoveries, or in for inflation the expectation that wanted year something that in but trajectory? margin of just you for or food how pricing, the in outlook have has just taking on half question. the what maybe back the I'm internationally, little of drivers a on in quarter. the dig touched there. much I else? just visibility recovery with confidence some margin bit And the you on interested to to Is second or the it And Thanks.

Ann Gugino

of by the lot as saw. confidence start you we I'll days in a Sure. saying XX change when talk about level just can --

intelligence the where So based today given it's bit you little all three mentioned. things the outlook that of a that have, we on we are and

inflation So full QX but XX% we to cost XX% the food year. -- in XX% for we out do expect called

the So half the year, we are expecting in some of back release particularly in cheese.

costs. food release some is there in So

our I about is talked about think innovation. Rob just script that excitement the continued thing other his menu in

to drive sales. So we expect to that the comp continue

improvement the year. that to reasons those that the So optimistic half we in point about the of had we're just drivers well I main international commentary would two margin as second as sequentially is the

Robert Lynch

There's of potentially a pricing. little bit

our to right good about three so of without impacting mentioned, those things. ability significantly I really As amount price take we transaction, the feel

Andrew Strelzik

Great. much. Thank very you

Robert Lynch

you. Thank

Operator

you. Thank

Benchmark question Todd with next Brooks comes the Company. from Our

with may You your proceed question.

Todd Brooks

of on to Lauren's the morning. good quarter? you following X% you the One for increase up question, in question did questions. price took answer the on Thanks when timing Hey, the

Robert Lynch

really came QX accelerated first inflationary seeing year pressure, So started of in that has weeks we we as QX. pricing began taking QX, been the in in of really most last six that of it and the we

impact up XX in flow haven't we've P&L. and really taken the weeks, as continued lot last to business see we the pick So of see here a the and of the pricing pricing the through

Todd Brooks

attachment then deal, it And some which order? manifesting helpful. just elasticity. how to it's a just works orders elasticity? see talked Or Do is wondering as so on That's about more like Thanks. really those you Rob, Papa dropping out kind things of Is of it an you of frequency signs an itself. of well I'm purely is tax order? assigned

Robert Lynch

just Yeah, it's transactions.

all our order Our -- ticket per items and been have order strong. very our

of as this most some line. transaction So valuable has called dramatically a driving don't just bit softness increased like it's and already little we're been transaction so softness. actually it's We loyalty our haven't It in losing our some -- it that program really is year, we've just out, frequency pretty we customers. we've frequency not

Todd Brooks

fairly more And working trying Is reactivate you - you personalization the Thanks. somebody to as quickly? value elasticity. or effective do that then You about frequency loyalty through talk are finally, offers to way these up that's more a personalized customer. to Can to tool how to pick early the point reactivate about maybe centric. program Just talked talked you've success? value-oriented the offers identifying

Chris Collins

Yeah, you there. that out response happy loyalty got it. the program We've to been the we put offers with very

continue engaging think I As holistic ordering think about really they about of not them when offers it's a It's Papa as of are it to sending part coupons, making and that is mentioned, just it, strategy. they pizza. John's although sure

members. as then like And and in up offering pepperoni bring really loyalty that new we members exclusively just leverage our customers loyalty we Things XXX,XXX their so, from helping new mentioned, to are picked epic to get like every it real of a a to time of out months. good purchased sense data. what gate, happen little of cycles takes and the doesn't bit going once it purchase few purchase right And they're we to

bring and to at refine as continue in are we'll we customers get purchase the model are, those with and habits it. learn behaviors So and that continue to better their

Todd Brooks

great. Thanks. Okay,

Operator

from Our James next with question Sanderson Research. Northcoast comes

You may question. proceed your with

James Sanderson

Thanks question. for the

commentary overhead spending to item about you driving see on Just up bit the that little long-term. how to a if to be Wanted about earnings follow G&A talk a wanted a steady little or line that unit support is managed bit acceleration to if you is slowly item step in really foresee investment going having forward. really growth to expansion to the revenue that growth, line Thanks. if margin contribute going to to lag going or up the

Ann Gugino

be We will a contributor believe margin expansion to going that the Yeah. absolutely forward.

things development at But years in So last is the time, it's the sales that been one technology of for we've investing couple over really doing same capabilities, growth. driving investing areas of the our the in different in growth.

points was top-line the create So year-over-year got we relative are basis system-wide we sales. flat out able in G&A about to did grow of the we improvement leverage. you and it see slower current items, Even XX than to take if quarter, the special and our

find be margin continue to ways ourselves per productive future. expect and driver and to in expansion that to to So we more efficient to are challenge the a going be would

James Sanderson

Okay.

follow Just improvement, we little that grow that if that at continue basis-point overtime? Is a the right Should to expect up to bit. to should way look it?

Ann Gugino

Yes.

James Sanderson

right. you. Thank All

Robert Lynch

Jim. Thanks,

Operator

you. sure for I like Thank time. Rob now this any questions I'm turn further would marks. not back over And call further to Lynch any to at the

Robert Lynch

we for solid results members everyone team this that about future to outperformance. We for John's our your and you're the our and Well, Thanks questions us industry morning. again as we Papa continue as deliver joining hope to to excited of terrific are. franchisees, thanks and

that to and reporting continued to our outlook. We potential excited I'm forward we're about as back excited you As momentum long-term about the for Thank on even am look I building XXXX, you. this more company.

Operator

you. today's for concludes Thank call. conference This participating. Thank you

may You now disconnect.

Papa John's International (PZZA) 5 May 222022 Q1 Earnings call transcript