PZZA - Earnings call 3 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 Third Quarter 2023 Conference Call and Webcast.At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded.I would now like to introduce your host for today's call, Stacy Frole, Vice President of Investor Relations. Please go ahead.

Stacy Frole

to our quarter release. XXXX welcome morning, conference and issued we third morning, our earnings third call.This Good quarter earnings copy forward-looking our this under you can Relations release Investor Relations or of on investor_relations@papajohns.com.On our President call our Rob statement to A Investor the Lynch, at we remind our call by that be contacting begin, website are News the laws. the made Officer.Before obtained the ir.papajohns.com department Releases morning federal tab at will and CEO within include Chief and of meaning I Financial Ravi this comments Thanawala, during securities need the These that from could statements differ uncertainties materially and these to involve may cause statements. actual risks results

our SEC on and more getting in let required earnings factors the you included follow-up.Rob? Forward-looking for addition, earnings financial filings.In and risk measures release, discussed in today's only one with statement should be in in the our for considered refer of queue question non-GAAP back the conjunction in release asking call.Lastly, to please reconciliation advance our for thank statements the me cautionary

Rob Lynch

higher purchasing the Thank delivering to out consumer execution work North their sales transactions, America second positive drive value of and quarter and thanking strong Together, quarter that reaffirming the changing continued everyone, matters our third transaction release and growth for and for team what at by to our and you, continued you of in customers. our was and our X% North will their our we are discussed comp the this restaurants. are America our the comp as earnings growth excellence, strength they value solid adjust for customers: and proposition operational sales the the throughout sales for pleased transaction with The speak result brand of by read start Innovation, and best proposition.We to direct morning, today driven business focused in agility at members our behaviors.As demand quarter, our a products. franchisees experience delivered and remaining by in franchised on product for the company-owned would us.I particularly dedication Stacy. our hard Good increase both end joining morning, we that the like growth thanks and the

the UK.Today, our then model restaurants. updates focus including the to drivers on our acquisition UK will update operating North pass key results in may financial business, detail and any update have. to Ravi, questions XXXX our to on more opening answer fiscal lines you Despite before quarter through year commissary acquired an I on provide I recently company's winning dilutive line Our remains and lower in restaurant great a driven company third with to strong margins a income restaurants providing which in the quarter was in company-owned comp transaction resulted combined This America, products, value, our led customer growth due team quality growth sales quarter. growth the North an on guidance our with you America to improving the committed and will along sales it our X% impact will of in the to restaurants. in walk costs the the level of adjusted food third US experience, of last recent that who operating with just our an long-term our

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I'd turn over call. Ravi? portion long-term confident be market.Now, cover like to Ravi today's continue to potential the to to UK financial of call the the of We in

Ravi Thanawala

Rob, in team understanding you, of working to many has get the the of community conviction been you alongside executive past our finance John's the long-term within Furthermore, gain able Company better our chance into grown from I've you. and deeper leaders everyone.Over morning, and know few and Papa all listening to potential. dive financial and I've only a to to learning I've our aspects had Thank stronger. months, good of business, My to enjoyed the

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Rob Lynch

Thank despite continue closing, remains macroeconomic America wide and some our grow we you, Ravi.In our business to North challenges strong that near-term system global environment. sales face in this

Our menu aggregator the revenue healthy performance continued in and quarter our driven in enhancements innovation, management was by growth channel. third-party

report are track pressure long as to a also that North and quarter place in recognize structural we have We comps achieve year to temporarily, the pleased on terms runway and UK our international will today this will we long-term are market improvement ahead our but under our see announced turn in right of commissary changes to success.We We strategies this positive company's to significantly forward. sequential our straight see improve looking our that expect profitability. markets we see in in I'm the fourth development reposition business positive and of confident we comps remain that America

our across operational labor and will initiatives on our as business to optimization and innovation, to enable through improve excellence enhancements. profitability investments Our better we digital us our targeted focus sales back product

North ahead.At so John's of like business.Finally, to opportunities in culture in resulted been the am continue I'd as efforts top- I performance externally the Best This for better strong great remain recognized be our questions. has and it open the proud of for to our recently bottom-line potential I named created to the and a Papa how and we've quarter our row. excited on World's John's second about within a Employers Forbes America of point, year growth Papa initiatives example for one earnings this up a back

Operator

our And Chris Instructions] from comes Stifel. O'Cull first [Operator question from

Christopher O'Cull

the quarter start a been the question program out offers business how with on you respond? new current a and just And so, on The has think with promotional in has very with need near-term you aggressive largest the wondering the to I what's launch you in player whether, or need to loyalty if category. with going guess, things. this some I'll I'm and Rob, think other you the just of whether impacted

Rob Lynch

has necessarily We strategy been results is this of plan off gotten running think strategy The have that's Company comps comps couple chosen but that right not sales like largest I been more competitor quarter's the XX% the restaurants. they've and evidenced That aggressive, years. by delivering top-line for even we've to last discounts hasn't the in place. a the X% right North in that America, the category. we growth now feel in X% at employ

continue offer of needs to on the strategy. the our through premium while delivering We barbell innovation, customer value

and of LTO delivering driving growth. every that's segment our our we're it's aggregators, So business, core really value whether at the our promotions, our menu what's in or

that forward. strategy moving to leverage and about So, feel that great continue we

Operator

Oppenheimer Bittner question Brian our And and next comes from from Company.

is open. line now Your

Brian Bittner

maybe where but also And last big slightly one down a basis, to of anywhere narrowed on mathematically X% range on little I America what to obviously meaningfully you a just year improved imply as X% were comps XX improved up drove Can to a this because year basis. the have this follow-up kind it verse you XQ. wide both guidance talk pretty comps. a from you to a from X%. for mean, in for for that, It North the pretty improvement specifically North in America about more trending quarter does

for of the narrow if want you quarter kind So, be fourth helpful. sure not to us, that'd I'm

Ravi Thanawala

Yeah.

So, focused Brian, have innovation. been on we our making are sure we nailing that

Epic success We was core, us. those for Crust a Our Stuffed incrementally to big our lot Garlic sold a Epic Stuffed Crust of formed.

big been impact the a system, going of our also drive part a big platforms. a aggregators this commitment long-term. was digital aggregator there's partners the business of of part to across to continued to our I Organically, story. and were all delivering we know innovation our are lot able growth excellence the across transactions just how have about but our of a it's So quarter, talk

see take Pizza to continue aggregator segment and channel the continue to within We share. grow the

I little but I kind think bit to, folks it about are a joked for built script, in of So, delivery. the is starting pizza

quality through you is pizza order to the delivery being you a other the a that lot so are And things at the for channel be points. of get that going greater when than QSR offered significantly

to going last competitive are grow that like continue seen and of some well is that couple continue growth challenges years. we the entries to Pizza that positioned we've of feel the despite over So category.We in to to lead

and the innovation organic in the comps driver leverage. that's the aggregator terms Yeah, channel piece. that to in I'm second the growth the So and your value of in QX, we we're of our business now, right offering sorry, that the continue

In the of the in half, to in in comps going be mean QX positive QX, we've and that well. we're as our I positive back belief terms is guided yeah,

Operator

question Instructions] next comes Sara from from [Operator America. And our of Senatore Bank

Sara Senatore

underpinnings unit about overtime that next just the to of in of some accelerating or X% perhaps getting trying improved talk franchisee of just I there's you particular? our you range. growth know headwinds of Could year, and end understand economics low in economics unit mentioned economics the kind terms franchisees? I in at kind the and understand restaurants and that But not macro perhaps to of back X% unit to stood that whether has or up. or confidence sort the being

Rob Lynch

the our mean, across improved. have system, I unit economics

have quarter every for company improved sequentially the year. restaurants Our

built system. to operations our in that sales, leverage, some back to of both the So, we the we but have the initiative also efficiencies have across continued better

about talked have revenue management our capability. We

compete, in offering the sure the standpoint. operate.So, investments we different that making it not restaurant lower mix even that, are there are guided of channels to to to make from the on takes big in of further, all optimizing into we XXXX which that, across business a account in we We the ensure which we margin channels have value our right level optimize trying

which So all right make development. We guided we Asia. the East Middle parts growth and And we We we of anyone compete. to bit misleading trajectory. is lower a because that the in really, the that uncertainty frankly, now are on partners some the in just of have sure just in great of on in still that we see regions want

the agreements. place have We continue in and sign agreements to new

commitments. lots there of is about So of lots growth. excitement is There

thing using tell focused initiative big growing macroeconomic we that they giving in we America. of strong. would in environment want I development to they the that, to make you, North they to of we see sure the them that way markets think is successful to in that other they It one make putting chain really long-term.The America are our to continues North give And grow. in concerning are and This that is to are equipped our tool restaurants on to want economically And they be the some that for opening just do Sara invest place franchisees. sure incentive. is some open, is, we I need these that supply are to franchisees are in incentive

development. deliver We have other now. on North global incentives this laser-focused that we in America I on sure volatile deliver discussing are with laser-focused environment, right we over contemplating franchisees that, and making and am But

a making are investments there. we lot So of

franchisees make improved place to We on our takes unit a in have model of sure we these are that that economics. advantage working

Operator

comes from Strelzik Markets. BMO Capital our Andrew next question Instructions] from [Operator And

Andrew Strelzik

to ask the X% achieve opportunity incentives? the and do Why the with over up? thought is years. balancing you and franchise franchisees? the economics I a realized unit wanted the feedback you growth right dynamics about for land to the of And commissary about several perspective. the it so guess, what's I been that versus kind maybe decision And expect far margin end increase what to how Why, from the intend where you to margins place or to next

Rob Lynch

a study we exactly are there's is X% ours. really one ours exactly only But, same the as similar the necessarily models. Not like we manufacturing for vertically of or business function distribution. two both benchmarking because did a So really and integrated

looked of of the benchmarking we as well study. QSR it that a the And rates to we land partners end the on actually So, result on from manufacturing, at are partners distribution for chose margins what that as average QSR. for as margin low

has basis the XXX think place rebates. cost food cost this reductions approximately on cost XX% restaurant somewhere in points P&L. and of we it's you the of points incentive represents If impact every about those to between because of XXX points about, we're put food basis rebates. a program XXX on about P&L.So, talking It business, in basis the that XXX basis points to But of in franchisees this earn really XX the equates average part based of allows

at that cost. franchisees certain in growing mitigate to the are opportunity for So levels, have they the of increase impact this

that structures mentioned, the different and the actually that reduce at the of looking components are model will fee also business cost to addition other across for franchisees. In I we enhancements as business

these compile you level. opportunities, of at margin see actually the all improvement when we restaurant So

incentives transactions franchisees. we're the structure We're that cost operations modeling as growth through well to So, drive volume we're as development. also these, with some doing decreasing fee both of giving through of overall

Operator

from Peter from And BTIG. Saleh our comes question next

Peter Saleh

Rob, focus as this wanted more kind of bit just a chain it's meaningful. on to little I change supply pretty

past XXXX a smaller do of want people development maybe store you that's the the is context may this higher over guys franchisees? that peers get here just or know you this? think year come as Do the higher franchisees your the and next impact a anticipate chain this, think I the this some larger before to have think Do and the XXXX? some we just digest I down at the think in of sell slower and we of about How initial and curious, development, you digest had the two. into franchisees to the XXXX impact base supply many have time how in you margin least I'm in of margin.

Rob Lynch

programs the a I want and with very, are there putting into other not to supply will change will place profitability. material make XXXX, when profitability. And very restaurant be coupled improvement This be heading increase net impact that in to it in restaurant a chain clear. we

also make our other at piece to supply want I The productivity. always own our are we chain, in looking

think productivity this an restaurants. becomes volume a mitigate less again, this points once goal even impact restaurants of call the the basis, a in to XXX will the material restaurants. the lot I P&L based of be own supply we're of chain, with incentive our so And will impact offering, it we this entire mean, XX across not be you about that on change annual when from material. basis that to the So that through

restaurant model is for goal as all system well in our restaurants. this Our as franchisees create company of to our most the profitable

do having all not once anticipate forward so, or And components development P&L. implemented any this are moving program the the we across impact on franchisees closing

Operator

And comes from Stephens our Long next Inc. from question Joshua

Joshua Long

system did little then morning. great better initiatives this they've that results about of learnings to initiatives like same any and from of across on basis? curious better a as have while, you kind secondarily to And forward note, talk terms back could imagine up the early that think the now does them, been the if innovation I or especially go put what I operations was unlock those to and you tailwinds a for at that optimizing least to about your that. in some as approach menu you on support back then you simplifying that

Rob Lynch

environment. evolving a very Sure. Yeah. in I are quickly operating mean, right now, we

manage proportion how as incorporate business, schedule, our evolves a deploy, aggregator optimize So all as across those aggregator evolves to the of to carryout it the higher we channels. of really to we need and labor business channel in partners

you business is optimization as about our big think labor So, opportunity leveraging labor. a external model

back dramatically. So way in better our those which metrics, is about the other have door just not by more improved the becoming efficient to and terms out our times

have improve restaurants highlighted, also at in going minutes and company is door in I drive P&Ls at the franchisee from our to customer more our more the point, the time transformational leveraging and below technology restaurants productive, As markets labor XX the make we've our about to the this make right it's right and that minutes XX times also profitability. service throughput sure right from a that's we standpoint, which to efficient, but around moved out more

Operator

And our comes from Gonzalez question next from KeyBanc. Eric

Eric Gonzalez

My store margin. question is North level about the America

I XXX points. and that points think basis about XX better you said by labor you food costs basis were levered

And in driving I'm of that basis quarter? does the could channel? mix really So say if bridge And of increase terms of was? third-party much that the the about that increase you mix XXX help drag how in what's of And a points improvement? what that in this profitability curious to gap third-party

Ravi Thanawala

Couple of there. thoughts

as The consumer and is it XXX is, to first impact about on, party quarter. both where important get want that's we to delivery across our are What's well Papa their the think mentioned, in those dinner. making The those night part. opportunity like, parts purchasing just of have part And we as one, Rob it the different but the is transactions positive us; there and at the does day a yielding; shape on the incremental, a in the When of was like, on aggregators they serving as focus part what our two, across the points that's sales of ticket. further digital John's late than sure organic in we into in compression are note change for channels. mix day leaning some aggregators, basis aggregators, the day about third-party of carryout and compression and the is are consumer lunch

Rob Lynch

day drive composition. day parts is court It not have of a adding to new our dinner that smaller It's going necessarily are cannibalization They orders, ticket. ticket lower part. just which is different

Eric Gonzalez

of by of driven it, much was way Is the can a part terms business? how you in the maybe there comp like, frame of that

Rob Lynch

know that are it necessarily I this at we that breaking out don't point, way Eric.

Operator

from [Operator Jefferies. Instructions] Slagle Alex

Alexander Slagle

you have to Wanted to get board you see to to? optimization sort how if improvements to could you talk want get just it the management the path there? and How the with you gotten work revenue to on where think far of long everyone franchisees and from takes

Rob Lynch

because, why management more complex we prices. of say revenue that models I is menu the have the is, the reason in This regular And industry. one

promoted our have specials we And and We across all have that of aggregator discounts the are channels. pricing.

the when is at into looking you deals. the go but whatever through right. in you through, our have drive you is, not pay, a pieces. look not looking you We a of are platforms, you moving menu are for the And price digital you are to When board, lot at When going drive at you our what promotions. different, are special our just looking price, regular menu channels

there deals, individual store's and consideration can stores of from is really to market, to and the specials those profitability. think even all You within into looking about vary number revenue different different as things by at every we take market.So huge are a unique a optimize management, also

so, we on years. have that the couple working last And been for really of

management for a more into about our some really really be internal infrastructure. which even local big that a are external hard to partners revenue at store do restaurants us to our digest with of all basis, X,XXX give us data. enter with able optimized franchisees And to a project, We is model our to and with data

do productively. So, that's in to more us even, that partner we're a bringing help going

taking that it's really project just off. so, And

in So, a that of here XXXX. I lot can that dividends pay think

Operator

next Piper our Sandler. question comes from from Mullan Brian And

Brian Mullan

In could you you just program plan great. use the the this Are prepared have? is on in remarks, enhancing year. changes to you the you there little loyalty make facing having consumer developing elaborate internal be capabilities even you the program program Could performance spoke to to that already a maybe bit? with would next or potentially Just just about the current any better data color add better

Rob Lynch

platform I for the most as view make a we hold to tool I strategic all us I above. to Yeah, customers. of would valuable our on say mean, that loyalty Brian, sure our

loyalty most are Our our and highest ticket frequent customers. members

through And so, to and our we don't them the way same get reach channel. market to in aggregator them

have all we platform order So, sure work underway from from to them as to that standpoint, that an when that leverage the both from we data as we get shored of us up well realized and to externally right the and now offerings is a make so provide, for channels, to standpoint. continue also other we an transactions. benefit incentive internally all that that our The we impact so is the loyalty both those but that our from versus value be have we incentives need give intent

come XXXX. fruition here to going in that's So, to

Operator

comes Silberman question Lauren next from our from Deutsche And Bank.

Lauren Silberman

just that even comps if to I I or around And is a commentary ask for you're then for credit I do how that the John's your Rob, you strong it and in there about better XXXX follow value can communicate wanted North proposition Papa up family, America to general between think the getting about value? can that? price. the on the composition the expectations and mean Is traffic deserves you do more pizza category thinking

Rob Lynch

Yeah.

communicating pretty we the I drove most why quarter last highest growth doing That's it. of think last transaction job a segment. good quarter, the in transactions we're almost

strategy all So, focused from of growth. we're we our learn continuing be years store we're that same through on can But always get that we to of sales to get data delivered and the better of going all the fourth channels. same has consecutive

national only think one I to pizza do the and category the that.

offer we're and going So, continue to we're going to deliver to values. premium innovation

get a John's still carryout all at topping of one restaurants. can in You special large pizza under $XX Papa company our

customers So, sales that delivering it. focused premium that I we're top-line delivers we That's just what guided. in place because think is great we not of the innovation do offer need advertise for growth.So we and on value that a strategy lot

we what still We this we long-term. for That guide feel don't lower to X% end delivered year, we've year. materially X% towards composition next see our guided year. about versus the great changing Next

to pricing incorporate We the to a have over we is some any XX that XX cost to Ideally, into of momentum to see. significant we'd to now, drive of anticipating seen mitigate a transaction able departure there which inflation be from growth. lot continuing similar inflation we've not levels last Right months. we're what

a sales be to that positive balanced will growth. think approach deliver going that same-store it's So, I

Operator

would no turn And to I I like remarks. for over to closing you. am call Lynch questions. the Rob further now showing Thank

Rob Lynch

the to I'd interest the unbelievable of continued continue brand. to and North during also call. was volatility everyone resiliency quarter, thank the these for it I continue particularly franchisees. participating all show agree thank members the international see that John's. us. unique like markets, about agility we our your our for strong for team for growth a really in despite talking to And for times positive business. ahead I'd everyone and in is to Papa like hope America you on thanks Well, everyone They

again and to you. I in you connecting look Thank February. with results forward So, sharing our XXXX

Operator

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

disconnect. may You now

Papa John's International (PZZA) 2 Nov 232023 Q3 Earnings call transcript