PZZA - Earnings call 1 2023 | Papa John's International, Inc.

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Operator

Good day, and thank you for standing by. Welcome to the Papa John's First Quarter 2023 Conference Call and Webcast. [Operator Instructions] I would now like to hand the conference over to Stacy Frole, Vice President of Investor Relations. Please go ahead.

Stacy Frole

Good morning, and welcome to our first quarter earnings conference call. our quarter issued release. we morning, XXXX earnings first This

by obtained release Investor the A Relations or @papajon.com. the underscore be at News our on Investor department tab under copy of ir.papajon.com can our relations Investor at Relations Releases contacting website

On Rob our CEO; morning President Principal Financial are our Chris Collins, Interim this and the and call Lynch, and Accounting Officer.

include laws. of need to risks that made statements. statements call materially will comments the involve remind during meaning from the securities that I forward-looking you begin, and within we could These results Before may cause these federal statements to this uncertainties actual differ

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

earnings non-GAAP reconciliation our call. the In on today's refer release financial discussed addition, of to required measures for please

you and question more Lastly, advance let getting follow-ups. queue me Rob? the back thank only for for asking one in in

Rob Lynch

morning, are sales expectations joining in Thank history. with for our highest you, and thanks our Good which company consistent performance, system-wide global with everyone, quarter the pleased Stacy. was and we in resulted Overall, us. first

and North our by Our sales line ago in our X% results comparable we year a growth were record in restaurants. domestic achieved company-owned with America supported

XX first quarter, we restaurants. In the also new opened

designed new We with ideas. years. for pipeline is over keep and sustainable are built We've growth. amazing accomplishments model to extremely product X.X business sales proud the producing built that last of our infrastructure a unique platforms an new We've

us our built company and have significantly also a proud. business to improved makes moving that have our forward, support We operations culture we all

full yet to be to is there realize and done, know more we we have potential. our But

our Papa better. for our get create the value get franchisees This of challenges why future opportunities excited about opportunities better see is have John's, to we to our to so continue I'm and and that We the shareholders. and customers,

recognize We XXXX. significant and comps are XXXX lapping we from

expectations our is flat was for comps, but first not the for quarter, our outlook the For that year.

we see on In to the half transaction mix the year-over-year optimal expect are focused especially improvement, in and second as environment, finding growth. check comparisons. We inflationary current the between

of long-term track delivering confidence our Our of comp targets. on that straight sales us can we positive deliver X gives record years

several infrastructure years, building relational experiences. instead to industry-leading in CRM operate Over investing through that transactional technology to engagement the and have an we drive been necessary past platform is designed organizational brand of an

Today, loyalty approximately million sales XX% through our member have digital of and nearly channels, come accounts. we XX

by experience significant that enhance utilize customers our have better data that drives brand activation. for platform must we offering to the make our We personalization digital a and

to of continues most X more that Our announced our drive of engagement Chief focus joining happy growing Papa including brands, at Marketing be Shambura decades experience Chipotle say we to will week restaurant and top that on taking MA than our growth. all Officer. among I'm customers recently confident Mark segments. be it's help Pizza that continued care John as driving consumer and growth new to line and this I'm in will

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stated, partnerships As brand and to menu strong raise already we as I've build new attract have evolve innovation continued to strategy we customers. awareness our

fresh and we which December, snacks of end flavors bite-size the new small new bold toll. At launched platform, Bite's our our includes Papa utilizing

our higher our to highly well drive and customers Our helping quarter. dessert incremental Bites were were received Oreo throughout category, the by Papa ticket especially

crust. us large making Crispy Pizza in also sides Parm chain first pizza with launch the on We a to all crust pizza the launched thin February, cheese our of

ranch ranch that collaboration This new Ball only Cool Doritos, seasoning proprietary new offering covered available we're Ranch, with excited Papa inspired Cool Pepsi newest Frito-Lay is John's. forward, Papadia. Doritos, with at sauce and our menu dipping and Looking our includes about offering

thrilled roll today. it beginning We're to nationwide out

current new this great will target consumers. premium as growth expect targeting And of we and it's innovation price drive With We loyal demographic point $X.XX transaction with launch, customers. both a value. a we a Doritos younger ticket and of this are strategically

barbell we As items. and focuses strategy on menu previously introducing discussed, our value core premium both

products side, strength price On continue attractive with the value array we our Papa offering, of $X.XX consumers see an which point. to pairings in provides an great and

Papa the pairings lemon a is at where do. bring everything quarter, item of pepper side to to be the Papa Pairings first hot added our chicken new platform we will Great to we heart In can wings our we operations continue innovation market. platform.

corporate initiative enhancing last the while customer across mitigate fourth operations in further service. to to helping back-to-better helping Our restaurants quarter economics term, improve unit our the the are system. pressures efforts store today These we'll longer over level, our launched is at year deliver and across inflationary improved execution

Our and our back for that built relentless pursuit what was upon better. brand to better initiative team best our members aligns harnessing customers, on of our provide experience organization our KPIs a the

data Our performance drive key types. like out-the-door us in help insights improved areas

corporate significantly basis. to a that quarter, have our improved compared corporate the in #X are hot our say products overall our than delivery of times XX% product by they for when Faster more restaurants is For restaurants with scores and Food on driver teams satisfaction ensures that and first outdoor ago. the pizza, the arrive. our improved have satisfaction temperature a quarter pleased year first I'm in year-over-year

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America years, To this we that translated United we in want John's we with X on general and services, based last within development costs lower partnering providing management. fully over allows the and the expedite not the that and development scale sales process significantly help domestic contractor franchisees is by However, despite have the have leveraging permitting, construction friction the This improved the fact points into construction available. on States, our the unit to space see the expertise throughout franchisees white we designs and architectural to economics Papa our are in-house utilizing of system. including North

new to year on with forward. our out experience. enhance creating great To has customer Early design a we opportunity anticipate program and going of favorable, development, store and a this last response focus franchisees further began rolling this our advantage been taking more employee we

at took hard also construction We look a engineering cost increases. to mitigate value

pleasing, is more more to efficient and footprint Our easier build. newest store aesthetically

all will internationally. builds have forward, we transformational Going this design. have I new opportunity the remain also about excited

is and unit about restaurants sustainably it's new growing globally. opportunity just about of development, all Our profitably our not

set for significant are success. We investments making infrastructure in us our and up organization long-term to international

are investing and e-commerce, loyalty growth technology support in example, IT management. sales to capabilities and through For we revenue areas like

We space have internationally. about a spoken our white lot

a Saudi Jordan. to John's a and Arab into PJP currently and XXX partnership to open XXX development Group. PJP Arabia we restaurants more announced Papa enter They Emirates, a and QX, successful plan for operates seasoned, are John's, than through XXXX global Investments years. new India the restaurant In agreement X,XXX across with United see this supports clearly strategy, achieve over new We the units as XXXX. Papa India our attractive next on India net an XX and in between which of announcement track expansion long-term to development restaurants remains target to market our operator X,XXX

remain we in nearly of track total in X% to units number. midpoint pleased system-wide to and XXX XXX development increase also that current represents say XXXX, meet year units net increase our on the unit new at I'm year's over which net a last a XX% to new expectations

I'm and global world. we the on are forward, successfully pipeline strategies us and space will of investments white advantage and we Looking all the today executing our significant capitalize see confident the around is to enable take robust,

announce innovation most companies named pizza we our country's of am list. their companies to Finally, that I thank inaugural America's just an were in want to most having I among one first ranked for pleased Fortune's teams mindset. and innovative to companies commitment innovative the

to are identified employers a for diverse Papa culture year is teams. continue believe We a best inclusive of John's, truly row. we culture as of a progress ideas diversity Forbes make. proud in We've inclusive for the one our the are diverse and extremely third built We of and full and also of we strength core diverse

this welcome conduct Principal process and Financial At Officer. Chris taking our a of our this We're Chris while to of assumed search I additional Interim identify appreciative want to next CFO. role role Collins, the has time, Accounting we comprehensive on who

model trends, offerings strong. demand Chris, I to and over turn the is resilient that I underlying and near-term remain consumer to the business challenges product changing our despite Before call want emphasize our for

We are new and we have excited and growth ideas making new significant the white and about have. product we challenges that The our we store opportunities the space to pursuing get improvements in better. internationally. about operations We're the we are are for excited domestically

first Now I'd Chris? to like on quarter Chris to to turn provide results. the more color call our over

Christopher Collins

morning, as Good this look you role. forward and Rob, I you and Papa I'm on John's you, working today take speak Thank to team everybody. to excited the with and interim with

gains deliver over top we line our past the few in read years. morning, significant growth you on As earnings to of release top this continue

For franchisees sales system-wide and in primarily restaurant to international announced the the quarter, were higher unit system-wide $X.X year. contributed constant sales. growth up suspended X% currency restaurants the excluding markets first Net global billion, last in

were in North franchised are a X% of first a sales of quarter, quarter America company-owned flat sales, off decrease ago. and restaurants a first record the For a growth X% year with year's who quarter restaurants comp coming result across last strong our a first

color, home markets. were and to staying we Omicron. quarter were respectively. January customers of inflation in closer as On X-year quarter, comps a our stack, first were X% the spending North the For up impact comps to X% America ever in International consumer continued pressure added the lapped X-year largest when XX%, first down and to due across

quarter, the in to impact market challenges International results. we significant U.K. fourth segment faced our the had Similar on a the

East pressures. comps were our in also loosening quarter COVID international these due especially Middle Spain First and markets the in partially New the Asian offset Strength Year to of restrictions. the other impacted markets, and in Chinese

slightly the $XXX up venture of revenues XX first million, joint refranchising period the excluding Total year quarter last XXXX. the same in when restaurant for impact a from were

margins. Now turning to

$XX For inflation not first that fully was and income with compared occurred lapped. the of period decline line last in commodity year. wage impact significant our year-over-year adjusted was quarter, from the has with the expectations XXXX $XX as million operating million same throughout The the

amortization related G&A performance-based driven our restaurants comp a In year-over-year, XX basis. addition, along margins increases operating X.X%, higher but investments was slightly and in higher to Adjusted and support. better expense were decline annual merit depreciation technology on accruals, point with and a sequential basis by

while Our our taking to disciplined maintaining culture approach and initiatives. teams a strategic managing growth are supporting costs our high-performance

a take dive deeper let's our So operating into segments.

the basket company-owned with domestic remained costs company-owned commodities costs our up quarter. prior restaurant points labor In in headwind year-over-year. compared approximately year. domestic margins X% the basis Together, Labor were XXX and the costs restaurant segment, segment food elevated of represented for also

compared Our XXX not these year basis level fully ago. resulting margins in approximate somewhat point strategic with pricing actions decline in costs, but higher offset restaurant an a

costs improvement our in the food operations. to our good control, continue the remain on implement throughout as focused team under to factors are offering customers back restaurant see running company-owned We to continues to which domestic our and value further year. margins great moderate to better initiatives expect operational We and our

higher segment, grew costs. quarter America In revenues driven commissary first by X% by our North year-over-year,

with reminder, through basis. us America As margin arrangement costs cost pass on and fixed North labor franchisees a food, commissary a our to plus fuel enables

dilutive are accretive margins. operating result, but a commissary As higher to slightly income, costs operating to

segment, operating operating the with adjusted in International was year. income first the down quarter our For compared prior

our is commissary. prior market we than discussed calls, Since U.K. this we are only on the growth the unit our more largest new market stream, impact international a As U.K. with X% facing is where challenges royalty and the own on year our the Partially net just market in offsetting have the international was a ago? an a markets when profits. impact more pronounced the compared international in

and on cash to Moving flow sheet. balance

by partially increased an quarter, ample credit of from expenditures. leverage offset flow to approximately X.Xx. under capital ended $X quarter million cash and million a increase activities ratio changes in the We For operating capital, year million, Free reflecting a million of first $XXX up with cash $XX in $XX provided by facility liquidity and cash borrowings in our $XX ago. million million, was gross $X net the available revolving working

to shareholders. to cash continued our also We significant return

and million X.X in approximately million quarter, million authorization. we repurchased for total, remains our we repurchase have $XX repurchased the available current shares shares. In under During $XXX approximately

Based $X.XX per $X.XX paid also balance on positive outlook, in $XX strong during our dividends basis. a second cash business million declared and dividend of has sheet on Board We common the annual quarter. an share or quarter our

Through prudent for shareholders flexibility of the long our our share to value organic of combination investments, our cash able a and and and management maximize we're create through in term repurchases. to financial cash our short flows, ability both dividends growth

X% to annually Overall, Consistent expectations provided long-term with North long-term our the with our growth on between we Now forward. last unchanged our quarter to grow call. outlook remain comps outlook. fourth going we American quarter, guidance and plan our X% our

offerings this evolves, we will the we customers including but better North within execute macroeconomic in each From as at largest America will quarter our as the for each of our our improve anticipate improve U.K., with end menu our being factor environment innovations, new under a quarter We remain international activate XXXX, cadence a consistent most quarter, perspective, lower comps market. sales we international launch guidance targeted anticipate initiatives. range. Also pressure will and last comp value-conscious our believe

level U.K. to to we We are higher tailwinds G&A benefit benefit to XXXX the achieved our in We the as a comp these America expect comparable tailwinds, we up and as the investments from margin become XXrd back XXXX. the slightly positive comps and performance-based making operating week initiatives, expenses North ramps of including better our adjusted to in back several in off-setting up. are

due be expect franchisee return of color, the higher after For X-year a added we our hiatus. our quarter to second expense G&A pandemic to conference

what while term, predict food it over in inflation will the and when extent to to longer we In to XXXX. is expect wage difficult moderate it occur addition, and

our increased we interest Taking perspective. EPS approximately is year into be the consideration The an reduction net first million debt by million, from $XX by repurchases to expense quarter the and interest full increased expect $XXX $XX share between million. expense share now mitigated

opening finally, at CapEx higher the as XX% range. rate technology, XX% innovation million invest and $XX to of million in to to And at company tax the end we Our is remains our new our be $XX anticipated stores. of

innovation, for value through strategic success summary, John's and and productivity, allocation. we In digital unit shareholders for operational enhancements, setting driving capital growth Papa continue our up our menu

And final with for turn over I'll the call that, Rob to some comments. Rob?

Rob Lynch

is friends in Thanks, We casual brings night or Chris. Super uniquely I've food. a believe always said Bowl special almost it together Friday families some before, celebration, the and of Pizza form most X.X it's brand. gathering. we the the It better. for I'm I'm that it, and deserves but proud years, but remain deliver for pizza better hungry that and world last the thankful this of excited whether we future about

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

Operator

of Senatore the America. first from Sara Instructions] line Bank with Our question of [Operator comes

Sara Senatore

then growth. and a question A clarification unit about

changed, but a wondering was years about just PJP the was that for I bit know left positioning Papa or better of India. partner market then if operating in ago. market the agreement it's Rob, little a on was capabilities you predates or you, a I whether John's for And talk the there. could India your just few the evolution and So what's the

you're financial U.S. might in building that help sort might the correct? offering contribution of was that need. understanding new or the clarification giving kind and who be the franchising just no of There's services somebody help sort to And upfront the of just your John's franchisees Papa Is

Rob Lynch

Sara. Yes,

one So first. answer second I'll the

hasn't that for our across levels domestic incentives We development That of changed. we footprint. high have standard offer

other we and development. any incentives to But equipment haven't that of relief have of type increased types spur unique royalty incentives development. to added that spur or or like We anything

we construction What created to standpoint, build to franchisees and we been We've from that. standpoint resources tougher while our great have domestically. It with capabilities. some franchisees a has services some from and permitting never our a help get heard restaurant

to that set happen to with we permitting to them a up construction model help and our needs. So their allows them resources

to that support really incremental added only the we've model. really the the restaurant excited We're about that's design. new So

and kind India, the give last John's last new went definitely to like stores we last facelift that to it into to I've The new once those think than the time we will me. every We sales John's. to on of a lot that regards market. In time. entering And are at impact Our homework model that. diligence forward on time, here rate and Papa a market. our predate in a Papa due last go diligence into like is Every that's my franchisees I go nice we done much about the bring time. prior look all pretty wasn't market this the into that of tried model why you I different to going but said, operate of moving run excited have new way went India, we to India, do same didn't market. does tried

unique India of different different product. cost is is price the consumer different type structure supply different of most with a consumer for different and needs market chain, sensitivity kind and a dynamics, the

the successful, with working needs research the exactly we that East and in done Middle an region building our who out So franchisee to with and market. X.X amazing of support very what have about are in, done they along our job and understand years has a that spent from gone lot

effort. of plan that lower-priced more business meets it's be needs that we've And going we both a that a to so successful. a business the in be built concentrated market. believe And can offering model consumers a the and It's

prior markets. city kind fragmenting of all to each over the the restaurants and build for those resource to city city go and allocation gathering individual to going We're market in scale

went I we different the in a plan So of market than to confidence. go-to-market past what that's very it's us gives India and understand in lot a

Operator

the next our with Long Stephens. please. for moment question, of One it comes from Joshua And line

Joshua Long

we progressing. some was Maybe better if operational initiatives dive early just that underway, are are there. you into back those curious on, but some we're could hopeful to probably understanding could color I that of the share additional how

in early time improving that sales talk might You of at kind idea store other that the could door there's mentioned some getting terms course I maybe was inform this the outlined of level about of by the that the better. guidance you of the year. out imagine the over guidance wins

Rob Lynch

it you been in transformational restaurants. for the Yes, our question. Yes. has corporate Thank

I've think operators, big surprise not I everybody and and but challenges. pandemic, But labor call. during staffing anybody before, it's shared literally a our the standpoint we're in bringing and this from this to the staffing our and restaurants try -- anybody on probably challenging got that so mitigate to a

And restaurant became primary all of focus every really, staffing. the

so to that lost We the And the a the focused kind meet we total of in door had freedom on the in times. of gave not little door of KPIs. times make the and always out on the and in past times ourselves bit discipline to standards we terms

the came So brand excellence. KPIs always have important and brand itself so prided of all brought historically from that because on operational we in this looked at to leadership, at and pandemic we as we the out we of looked this new some been has

we recommitted teams make -- our are And it. are we discipline that to tracking it, sure we that that we to measuring have

we were addressing able rallied out-the-door outages. service team corporate And to and deliver that's XX% great just have increase reinforcing We that. our a commensurately. decrease behavior. why in been are customer times And We around

continue X more gives of handle moving margin does the throughput, to efficiently amount in impact and DNA, operate gives it One, better can But same that it greater the allocate we we're as productivity continue the Well, orders you how productivity our much So you to of labor to time. you become labor better part able ways. to forward? our also it and gives and effectively. you more

service, we going to met are customers' we they're anticipate often frequency from increasing and anticipate as expectations that lastly, us. So order -- better or as we exceeded, more deliver

that's and the continuing year. So in to into model that's improve we moving forward, throughout restaurant margins operating kind have of sequentially what's why confidence our baked our

Operator

our of One the with Stifel. moment from for O'Cull and next it comes question, line Chris

Patrick Johnson

flat since This year. in that you is positive Patrick, come up on for for guidance current we can color I'm the Chris. if And seems comp comps Rob, QX. trends on additional provide any from need see curious obviously to your the

And you're course now ground or And towards so the it's range just if if end gives over you year. up. the have that latter, trending the can of you at get there of curious so, still you I'm that if confidence if least? lower what that Or the to make

Rob Lynch

a when No, highest of we we definitely were negative. quarter. It's Obviously, much it's a for be were to It's is It's reiterated day. positive quarter. And question. But QX positive. in our guidance question all I -- pretty our year great last the my ask teams the flat sales our every was biggest we year QX. comp obviously, competition

And our going toughest we to this so quarter. be knew was

only through But in look ability comps year, not the confidence get that mean, The that's today confident. are ever. of innovation you As change we trajectory. definitely to the our the our have out biggest I launching balance we the the reason easier.

and and of of PR week amazing surrounding that. this we've prepped Doritos, Doritos gotten ton Cool of as launch. a put the food for We've kind We've a last Cool ton We've reviews that support - Cool Papadia. behind Ranch Ranch over got

So But the we're reaction. our weekend just this eagerly see that's to customers' anticipating thing. first

to initiatives got pipeline company innovation So drive better continued operations. We've we're And throughout we to our tap into their excited in think and improvements opportunity franchisees of into corporately we kind great -- a big as have I of have into that this then well some year. build these those on our about. operations our that resources of back a our

of a we all going that's that's sequential deliver fundamentally believe half year, So and improvement. comp the to back upside that continued the

Operator

Alexander Slagle next line our for with moment One the Jefferies. please. And of question, from it comes

Alexander Slagle

kind and I versus and bit. America know are franchise, profit stand not we better wanted too cash I on many on, margins average on and become industry we health across know you gone EBITDA focused costs as initiatives where this through the details for a have additional years. out investment the these on more wanted expecting down to does a franchisee perspective? lot but of in understandably so perspective asked we've rolling back And now and before But North investors it. Any to time. such in unusual franchisees, the are provide of circle to over could or metrics XXXX? the overall the can better on to ask just the But volumes and or returns topic you provide an few circle improvements back want metrics time I these on so just those wanted to I metrics you back if of any last

Rob Lynch

share I situation years last from with corporate X is isn't what situation. over guess you dramatically our that I Yes. franchisee different would the

So but P&L. we don't the disclose obviously, our we of our company franchisee EBITDA, makeup disclose, do

half really after front our inflation take XXXX year-over-year that 'XX And margins $X.X system today, part hold. But good margins down to about significantly. average pushing a XXXX, EBITDA million. was up up of AUV function a And significantly. of pretty XXXX, In amazing to and across an the come our we're upgrade of are and So up is our before to $XXX,XXX. of started obviously, close have our kind are the relative sales

create is, that definitely seen So to the everybody then over has a of costs we've to the some creates of on going normalization pandemic. inflation increased commodity both XX ton and sales that can come and through like next operating to this this we've months, that helped on flow to we've hold and seen margin. which upside -- of some level profitability, last that which ability you pricing a we've on if since what year believe There's year, of coverage improved of the sale, mitigate about the business believe out the overhead the taken, be tell I wages. And there you over that is some we an us do and commodities that definitely fixed

could lot I highs in commodity The we've perpetuity. is supply business fundamentally that is that, for catch the costs. the to believe in record unprecedented of in input that inflation believe seen a to that demand macroeconomic this environment. believe I going And up way I that the the don't markets. efficient and of regardless stay

So XXXX level we look lot of do I expansion and margin the as of there's back into beyond. half a at believe the that operating

that now, XXXX So although a I bit moving higher do compressed forward. think we're to what than see margins right are to going relative

Operator

comes Well for and you. Eric Thank line the please question, our KeyBanc. Gonzalez and next it of with from

Eric Gonzalez

fairly year. slightly quarter for for It believe to a in you're like reiterating convention up a flat expect to op that said uptick outlook in sounds margin large I G&A the And second you step and you large that full due the up the year.

commodity outlook? normalization might be G&A line? much So that into you're And perhaps you other baking from can help us the how offsets that understand where

Rob Lynch

G&A we have stewards restaurant our put The biggest that We run X on good focused cost our didn't thing, sure G&A G&A. targets last been that across on to efficient we've And going to day think year and I about very a year. uptick this Yes. productive. X paid it really we're rate mean, I don't team disproportionately has of this is company. ownership our that think group, the on a significant in were corporate peer that driven our year and relative achieve -- level value. us our we and impact shareholder our our made responsible unforeseen since bonus impacted but the had we coming unprecedented did to and into we of place. Obviously, P&L by been we was an

so last pay we And didn't any year. bonuses

performance to baked return a have in we year, This compensation.

G&A G&A actually So that's really more year, our efficient. become the on has big operating this actual impact

able conference. the and how yes, challenges. in through great even So But going budget we conference, think to QX, to some come were our our these that's first we a of manage we're under Obviously, deliver conference.

stewards I'm confident and So with P&L. to be while the team's kind the structure of how focus, good cost we need our belt I'm that about understanding excited continues, tighten really we'll

Eric Gonzalez

are have you If The is I bonuses that the that P&L, G&A. other parts in really what could jump question understanding of about -- in. the do back the the

maybe other you to offsets op So company that to could back could if you get that margins margin speak the or flat? keep -- that

Rob Lynch

mean, it. I to X% growth part sales Yes. of X% is

it, The improving sequentially think, operating we've margin. other of guided to part I

up kind development. those then our We're net And open system are X drivers. going XXX and new units. the the So of of big XXX between to across

units So this year. over built XXX

the -- X that's of of drivers between drivers, our growth. So kind those are kind those I mean, of earnings

Operator

Thanks.

it line question, next the Lauren Suisse. Silberman with our of And from Credit comes please. For

Lauren Silberman

category Can the behavior slower on to between we've anything view in customer any elsewhere seems helpful. or And and speak whether changes can down? compared delivery you and broadly performance your to Rob, to be seeing of on what you category share signs carryout trade facing pizza some pizza just be QSR. then in the you're would seen trends

Rob Lynch

years question, Yes. been the mean on growth the has I Great pizza average a category XX Lauren. last over slow relatively category.

QSR. During industry obviously, outperformed -- all of category the the pandemic, we pizza

impact. So a were -- kind that of People the people -- ago it this of was forget January the was of again out a last where us, for last challenges and and labor and that residual lot big of there's with a year home February. coming of likely where I that, COVID only we're market the a that, Omicron now staying head kind think in but as still is we quarter kind

where negatively obviously lot positively the impacted fast that a cash sit-down our flow. -- impacted we're of category, of So

lapping with a you of this positive quarter quarter. these on of from industry restaurant everybody coming lot the that what see comps reflect kind continue to as So is last is

to we once rate can that now X% past for mean, believe the of get X%. forward, between that we the look growth grow and that, continue outpace we probably we And will I So all category.

going the of to and efficiencies there's the it structure that. of that really make some XX% They the think the of I scale segment. XX% the That's work. pressure be to XX% larger XX%, to the have higher productivity result them to for drive don't a doing is as prices their that and hard on category. continue groups of The kind are to mom-and-pop cost

itself. sustain can that long how know don't I So

the even that the category invest this players don't infrastructure in on in resources But is puts have capabilities. smaller also IT business and digital the those I think more think that to I -- dependent. dress becoming and

we'll then a think be And value industry. smaller of to to forward to the rest we've proposition some the So share continue that moving got I take think players. relative able I of great from the

pipeline innovation Our with continues fill to great ideas. up

And to X%. so we're category, to the from confident X% to low it, we'll growth deliver single-digit be despite, able continue between that call

Lauren Silberman

share there between Is on and carryout? you're you what can delivery seeing anything

Rob Lynch

question. great Yes,

didn't I Sorry, get there.

shift seeing in are carryout. We some the

a robust. haven't real about as to see we the economic been Our players strong of going on carryout has business challenging business. have other talked more to as maybe times carryout these sensitivity it in you're I carry But know and And a of some little as much the bit a always we increases, industry. price out. push

reduce does delivery staffing That But challenges. the doesn't some -- for It that's that. goes with We're with about us. them of that some extent excited obviously some along the because a the maybe help it purchase. to labor, fee problem not delivery can us ticket with necessarily

to you're challenge delivery out, shifts because going the the side model side are fees. up to you So as on from carry to by have to in able bit of little going a those labor savings to foregoing be see pick delivery a the revenue some

our I third-party with business, -- organic it's delivery continued our but is some of think -- delivery supplemented the aggregators. with growth So

the of in outpacing growth now, rate I know core their that pizza lot but talk there's category. slowing still the about a growth they're

So partnerships we're them with them. that with our our investments through getting the benefit from and

business holistic up the category. delivery our is delivery in some has maybe little bit held other better business probably a than folks So a

Operator

from question, of line comes BTIG. And with it for Saleh our next the moment One Peter please.

Peter Saleh

like the we've year. to know Great. for just moderation some be modestly commodities believe outlook, in I to you first quarter, the around up costs. come to to Rob, back you seen input X%. you conversation about wanted full maybe year anticipated I modestly the when some deflationary? your the commodities. you does guys look be full Are expecting I the gave commodities of ended quarter deflationary It still last

little if that on give Just you could bit helpful. would be more color us that, a

Rob Lynch

improve. mean little mean, I we're more -- it's to I expect I year, been to think very but continued sequentially I deflation this bit see did has it's starting just Yes. mean already a volatile. we

QX XXXX costs have even what of continued you we by hasn't at if of in input we're far that When realized commodity moderation was our So environment costs. fully operated do, those QX cost look forecast lapping the in. highest we

year-over-year. XX% So

was per Average pound cheese price $X.XX.

So are $XX the call it, the dollar, in today markets million.

very we're deflationary. see we volatile, full in the that but the it's been that's a year current change do but being modestly So environment, seeing big

Peter Saleh

in I really it targets just on development Great. meaningful reiterated and up you step know And and does pretty your then in guys a development. imply unit long-term 'XX 'XX.

you curious and laid just And morning? you open targets track other come get -- to how need markets here that start quickly units? can out so think to on building guys guys do those you really what development to So this India

Rob Lynch

X mean, huge incorporate Asia region really that unit agreements growth to of Yes. now. country we I a the up biggest based our mean geographies the is new I in the is place. significant development right current opening probably going current current future. us It's be have a franchisees foreseeable amount for China years. our don't development for next and targets over our on growth

-- coming XXXX. units new in India from I'm the sorry, this anticipating in in half starting year are back of or We

lot on to that's going period. So a we'll a XXX a India development elsewhere. and 'XX But units 'XX ramp in be years and relative have of X development the there. of there'll Obviously, a over units bit XX-year that's of

do can So believe we ramp that quickly. we pretty

optimization long-term called there, Middle sure set franchise Eastern where Asia growth. think a we and seeing, we're up our lot were U.K., continued are Obviously, markets. in of for there's the strength that I on We're making optimization, going system we especially some out in seeing internationally,

So up markets. challenges that's been of X the other in can but a that these we for we those of is right confident that bit or X evolving now, feel development some over years some make us of a source last

Operator

next with comes UBS. question it our for Geiger and moment One from the line of Dennis

Dennis Geiger

in platform talked Rob, of industry-leading then size loyalty CRM the you and about at point. prepared your program remarks, your this the

better of Just related know leverage as to And integrates to relates or party, talk more it which that, that you about separate. wondering it I much is third to there platform. little assume could of opportunity with how part curious I the if don't of kind I'm that loyalty a

that within become that you curious within has that, Just internal CRM to of can it how -- to higher if the And that if the your third-party larger context of kind total think a your continues you business? platform? about mix business, of go -- of loyalty if speak

Rob Lynch

Sure. tied The aggregator to business not is business. our loyalty

members. marketplace into we ideally, and would bring business. fact, XX% folks between data our suggests for business business have mean, new incremental from the convert loyalty In and new the aggregator we XX% in the I is aggregators is that them

is customers. We're something the in those products. that's So bringing we love that new of love that really part They the they ideas They love innovation, bring. new strategy. our our

then come is want organic to John's channels. our through order they it more And back to because economical Papa

business of kind that's the -- model. So that's long -- that's the

yes, a grow aggregators are represent It's this able becoming situation it's amount, a how long-term to business. it's much if of continue deliver they mean, business our healthy business still us our aggregators comps -- our for a objectives. percent our upon year where our then very business, something dependent is the the but to I going that to it's as of terms a still with -- we're flat that of not be growing, to In is and are obviously,

piece here, our captured have It's last we profitable, the the our it's it's that but value not then that record a not to of question invest in. business like around And a broken loyalty continue -- but fully like feel healthy I still of liability. program. so It's platform. substantial sound a we'll growing that we

out not opportunities level the have that built I marketing execute frequency to capabilities aspire for and the achieve. to program one-to-one that yet building of We

that, And get be because excited about to accountability I for it take it but upside. also I continues

is a it passionate that And so work. hired And Shambura, really who we as Mark about well. new about CMO, just I'm passionate obviously

will that so focus big forward. for be moving a And us

over that significantly has changed last of X just the tools or capabilities X years, the huge And and data over leverage last that getting X the we're to years. amount

that So we lot look and into to forward. to value moving create a tap leverage of that

Operator

One comes Markets. And Strelzik next with moment Andrew line of BMO for it from the our Capital question.

Andrew Strelzik

guess comments you proposition, made value wanted tie together try that is strong the to which you and just versus said I industry. some ask I to your about

cost to at traffic on some check same but carry shifts about the out, I've talked to talked increases, of balance. attributed and are You've delivery about be may better price the to time, the the seeing which kind ability hold

you about do? you this more could taking efforts as about going the plays I'm your it about kind as there planning the Is so simple you on how You guess on I not how but price shift to you just one So year, that your of need I hand, reflect think guess, you've that far proposition are had value and forward. just maybe curious talked and to as think value one-to-one marketing think do in. be getting you value there? much messaging?

Rob Lynch

been we're has definitely we're it into great if X years. become is a all going a already more important way not No, to the there question over entering last because it's than the period value or

And so successful it's compelling critical strategy. a value have for us and to

regardless of the I kind are mean innovation. positioning or focus to we've I that's It's done we the our mean, not years. in last what whether on of going over our premium marketplace. X

have don't of to business QSR, the model. pizza, mean whatever. most it's you of compete I If Burger, part strategy, a value compelling whether you're really is value in a tacos, hard big

check value. drive from Stubs our we focused Chacaroni growth we've out the and Style, significant on never to amount and away premium a things walked other York like products that customers continued New through despite all of and to innovation fact trading we've these that So

our app and bundles still still our we offer website. mean, specials our carryout We website. on I app on great offer great our on

ways. of part different it at our necessarily a and get approach of is of big and the our not things. value those promotions haven't of we strategy, of some off we taken as So our competitors XX% That's same part lot strategy types necessarily that a a with big

great to pairings wings profit and for platform side our way is a mean, on I value us items. bring other

carryout. Our carryout the into a lot tapping of towards specials are drive

believe other industry. the get some in different bit little We it value. competitors we fully competitive just have be we on that the to of So at than maybe a

and So invest premium innovation. our some new going to great on focused continue doing to needs we're have our we customer core that. products. -- on we're But meet going of into continue We're know customer, of loyal push the most that to to to premium we

Operator

the of from One Benchmark next our for Brooks Company. comes and Todd question, it the line please moment with

Todd Brooks

reaffirmed growth Quick level, net this openings know new to Rob. have guys discussion year's unit for I year. targets question, taking this your you the

got QX. track? the spread? the I think 'XX in opening level talk XX% about relative on the Can in international U.K. expected you that concentrated more are year Or pace maybe closures, And just year the to those broadly just to how opened of to you in are the early you they

Rob Lynch

geographies and seen that the Netherlands, U.S. that chunk year in this track mean in spread with at terms Yes. a right transformation we're but on represented our closures. for I necessarily actually in year. in the we the did market being were the it a plan have in the not at and rate think had that footprint open in right our new We have are other we openings where didn't I with our we planned And big been to year, of on Net-net, track point we for mitigate forecast concentrated closures us net throughout have those a able to the puts actually that. of restaurants higher on

mean, disclosed mention, As just of I I -- color, the discussions. I we in some though, for and did think

bit of optimization We are outcome going a probably an some less to be there, there working little development be and will that. as on market U.K., and there's there the

our a markets. and And strong I to and able and improve is East. fill lot have that so of the to but mean, -- been with other in really geographies have in Middle performance a continues we other of some lot Asia upside reality we sequentially our gap

is markets, have which the of optimization U.K. doubling So in going we're mitigating that market we're on to the to down those execute some

Operator

Nick line the from of Setyan comes it of And Wedbush.

Nick Setyan

We saw the and margin some commissary strength margin. in international both

whether that margin reason go example, any or there's aware about if the sort of onetime in commissary -- wondering why be then Just even And should the international progresses? the that we international margin margin, shouldn't anything that's level at as year think sort we the and as should progresses. stay how of higher of this for year

Rob Lynch

a you, remind I'll commentary is our fixed margin. margin Well,

are annualized cost the on franchisees So higher have we ingredients. with year-over-year margin on fixed a the we for an were last reason increased prices out is kind basis, some increase the of it's The why there in X% because sometimes of chasing issues commissary. the timing around year, to

weren't year, a able margin QX we last a margin the that little make full the a business. we're for dynamic. going would so we on about expect is And to year. that to full This year deliver in of X% bit different But

right about operate really side, making just it's tightening the On belt that international to that business. operating the the have we model sure and

the to leadership, I necessary hold doing cost put into very cost I things year, last conscientious really some been business think great leadership we structure. over new down. just they've they're on that our performance to their the and their relative about think And

able The as to consistent we needed as this inflation, inflation quickly disclosed is And We with to. year, commentary U.S. last I saw as we to in that the hype- what the other franchisees really U.K. piece on in commissary on we own of the the the weren't kind pass

rate of there this during I doesn't year, that exist. lower margin QX, and was even into think a dynamic QX So

year-over-year in margin higher commissary. a the delivering we're U.K. So

X are, think, the key those drivers... I So

Operator

And pass call our Management final Thank back remarks. Q&A. concludes will to any I for this the you.

Rob Lynch

thanks, So time working unique that obviously all It's through. everyone, the a we're for call today.

history, volume sales to which sales franchisees our thankful the had your of continuing and which highest So on guys our the you because as just our I jobs. QX which and our performance. lack summarize, lapped transparent highest QX deliver business previously to was been say intent industry We is quarter I'm teams XXXX, solid XXXX, on the and as volume do to of be to possible for to in history. want can But

ability of in flat lap the big the positive the for restaurants. labs the sales these us. So strength of is And or are indicative to

our continue So XXXX I'm in and to for excited and team confident thankful to beyond. about also solid I'm these deliver results.

forecasted, decreased point. We and obviously, on. throughout And strong some the continuing environment cost, and system, interest throughout with the rate and the the have challenges forecasted macroeconomic of construction kind industry comps, globe going at developers that's we're with the highlights be of that to in development increased this everyone some despite

proud bullish future. and way very everyone working together. I'm of about I couldn't is team So be the more the the

today. to all And continued for so support. thank your for I you Thank time want your just you

Operator

Thank this today's you. you And and for participating, Thank concludes now may you conference. gentlemen, disconnect. ladies and

Papa John's International (PZZA) 4 May 232023 Q1 Earnings call transcript