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DPZ Dominos Pizza

Participants
Timothy McIntyre EVP, Communications, IR & Legislative Affairs
Jeffrey Lawrence EVP, CFO & Principal Accounting Officer
Richard Allison CEO & Director
Brian Bittner Oppenheimer & Co.
Karen Holthouse Goldman Sachs Group
Matthew McGinley Evercore ISI
Gregory Francfort Bank of America Merrill Lynch
William Slabaugh Stephens Inc.
John Glass Morgan Stanley
David Tarantino Robert W. Baird & Co.
Peter Saleh BTIG
Christopher O'Cull Stifel, Nicolaus & Company
Jeffrey Bernstein Barclays Bank
Matthew DiFrisco Guggenheim Securities
Alton Stump Longbow Research
John Ivankoe JPMorgan Chase & Co.
Jeremy Scott Mizuho Securities USA
Sara Senatore Sanford C. Bernstein & Co.
Jon Tower Wells Fargo Securities
Stephen Anderson Maxim Group
Call transcript
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Operator

Good morning. My name is Emily, and I will be your conference operator today. At this time, I would like to welcome everyone to the second quarter 2018 earnings call. [Operator Instructions]. Thank you. pleasure President the of my McIntyre, over now Vice Executive Investor is to conference turn Tim It Relations.

You may begin your conference.

Timothy McIntyre

and about be usual, Officer, our CEO officially Emily, the joined, one featuring will as you, hello, July who you first Lawrence. Thank Jeff Thank became Allison, for be call the today Financial quarter. X. the by second of on Chief Ritch results Today's call everyone. joining Ritch will

audience, call the to statements is unlikely kindly primarily find listen-only As so you to this investor the others I any are release all our and mode. know, you can refer be in morning's the of members forward-looking X-K. this I event that the ask harbor for safe you a and made, And media in in statement

it will and by We excuse questions. I Lawrence, CEO with Allison from Lawrence. followed Ritch turn statements to start CFO, that, analysts -- Jeff or prepared over then With CFO, CEO, Jeff from me, will

Jeffrey Lawrence

Thank again you, brand we In as the momentum for continued and positive once everyone. quarter, our second great shareholders. global results our good delivered Tim, morning,

We continue XX comparable quarters of with and restaurant to broader U.S. quarters positive positive the XX consecutive comps. industry sales international of consecutive lead

count continue to increase a We also our at pace. store healthy

the global driven average sales increase sales take grew let's financial the impact EPS, of that, number XX% increase same-store in look an were prior prior of Our prior the year adjusted, grew retail our quarter. QX. lapping for sales This $X.XX, Global stores closer U.S. retail foreign opened franchise excludes a order These business With grew domestic When of results and as Breaking diluted of them. is was X.X%. sales down increases which comp currency, quarter, the excluding up overall quarter. at XX%. was counts X%, impact international in over which stores as for recapitalization was global by offer completed growth during driven sales a favorable XX.X% grew increase comp, year to our consumers higher ticket the division the an retail by Same-store of continue positively X% were our our we a experience the sales also quarter. Same-store brand growth, and our up increase rolling the X.X%. year domestic company-owned to X.X%, for respond the division while by during of X.X%. the

Our our also loyalty meaningfully the Piece contribute to program continues Pie of to comps.

Asia-Pacific in our driven geographic was quarter, higher On the with the international for performance positive our counts. order and by entirely again regions same-store Americas the all X way, quarter of were the front, our and region sales leading

we pleased of second in On closure. store and to consisting the X domestic unit openings are count quarter, we report net the stores XX opened front, that XX

the enjoys broad Our net stores stores basis, XXX international XX and stores clearly closures. our QX, strength new added the and On company net XX division globally. XXX over during demonstrating openings net outstanding months, total last economics opened XXX XXX new we quarter the store new comprised second four-wall a brand and in of

we in X material this structural annual Although or pleased first next growth than years. believe growth, the global the to slower we year, that market-specific expected generally of is continued our not recognized of our half growth X% first store any is our we net there store net to store are we reason internationally the of result for over reiterate X We with year. count and half for the X% the guidance store growth do

quarter. XX% from $XXX.X were prior the up revenues Turning to revenues. or year Total million

new revenue quarter first of XXXX. the accounting reminder, a recognition adopted in As we the standard

the related on contributions franchise As to fund our and required now P&L. to not-for-profit are expenses a the gross report we advertising result, our

funds are our be can purposes. the support they The used million restricted not the our in from result to impact following. second an financial this quarter, only are in million it corporate included Domino's in used available Although increase brand not $XX.X important that consolidated reported did did remaining revenues. income in on our net or in note, these amounts increase resulted general $XX.X to revenues are the an operating to is although statements, for be primarily and have It

sales First, volumes revenues. resulted chain strong chain supply in higher supply food by driven higher retail center U.S.

as higher sales company-owned royalty growth royalties quarter from revenues million in exchange from revenues of against our weakening the year higher at currency the Currency exchange stores. as impacted stores retail count certain to dollar resulted franchise from international well positively royalties foreign due sales changes also royalty $X.X rates versus prior in stores. currencies. as impact higher And fees as Store positive contributed international the revenues to fees the same-store by rates. domestic domestic our in franchise increase finally, and our Second, well increased increased and

the flat $X could impact positive full royalty million we estimate the be to currency revenues year, For year-over-year. continue to on foreign fiscal that of

factors As the to know, that our which that make of you harder a there exchange predict. rate, does business are drive underlying part many uncontrollable

to on operating Moving margin.

for quarter domestic was prior prior recognition positively partially cost, margin was margin operating while as delivery As to resulted on store costs. and entirely our insurance by the of revenues higher and revenues, P&L advertising sales-based offset company-owned pressured food guidance labor chain expenses recognition and the margins negatively percentage was XX.X% fees by quarter. labor franchise a lower and quarter transaction of increase by impacted the Supply year previously. mentioned compared from year consolidated I from new accounting increased the in XX.X% This revenue the from operating to

that prior certain shift the Let's the from of franchisees net compared support reclassification mentioned quarter, primarily them. G&A costs as revenues. technology now are we and Please million franchise $X.X to cost on in QX the G&A. resulted that call. as investments is which expense receives recorded net for increased advertising to technological separately from company year This teams the e-commerce increase note initiatives, our that fees for planned including the

in Domestic advertising were costs quarter. the statement. million $XX.X down the franchise income Moving second

are As amount a in the purposes. net item increased our increased expense offsetting operating recent an debt in quarter, increase of $X.X an by now in interest from Interest reminder, comparability with our most $XX.X revenues our million XXXX related in includes our out driven for been domestic recapitalizations. showing second expense advertising franchise also costs. equal we adjusted which expense to has This as million EPS affecting and recapitalization,

second weighted borrowing X%. decreased the quarter to Our rate average in

XX.X% our lower federal resulting due reduction tax million the This statutory federal tax of reported equity-based impact our the also rate. was at tax benefits income taxes. Our resulted of second tax XX% point in for a in rate provision rate quarter compensation resulted primarily for of effective This in legislation a end from effective enacted quarter. X.X The on $X.X reform XXXX. in was to the decrease percentage

We continue to of be expect excluding that compensation, to impact rate, our XX%. the equity-based XX% tax will

We $XX.X to net compensation. tax XX% When up prior related effective year quarter. see expect quarter up, our was it income volatility in continued you million all or also second over rate the add our to equity-based

versus $X.XX XX% second reported, increase. Our was which as EPS, last was $X.XX quarter diluted year, a

XX% diluted XXXX for quarter last increase. transaction $X.XX as $X.XX EPS was was the recapitalization year, versus adjusted Our a second which

that Here in adjusted breaks diluted down. EPS as increase is how

positively And $X.XX rate as impact negative impact including tax on effective lower and a tax from equity-based positive related resulting lower us reform year-over-year interest us share a impacted by share tax a us $X.XX. $X.XX. compensation. Lower benefited repurchases, negatively primarily expense importantly, most operating $X.XX, to balance diluted $X.XX debt benefit Our counts, by net net by improved by result $X.XX. results primarily us Higher our a higher of from benefited impacted

our of our proceeds of use the cash Now including from recapitalization use turning transaction. to

second price share. million an and shares we approximately retired price per approximately quarter, we Year-to-date, the at of $XXX retired average and for per XXX,XXX X.XX million of million During repurchased share. for purchase approximately purchase $XXX repurchased average shares at an $XXX $XXX

with shareholders million form million $X.XX in in cash recapitalization quarterly our and share a used the XXXX $XXX we of also to We of $XX.X note our repay dividend. to returned connection per our

increased new primarily chain We to open and center scheduled to the heavily of technology for continue our chain year. have capacity, also supply supply this level invest U.S. for later in investment

are work XX will to includes current our U.S. additional forward supply for additional we begin investment months. This be outlook the next we supply project chain business, pulling building U.S. over which chain Given the XX to XXXX. two capacity into building centers, completed

for now our $XX $XXX estimate will pleased our this result turn capital range. million be spending full and with million Ritch. continued to acceleration, gross million to quarter. to As with results that, over And I approximately all, year very of our previously All communicated $XXX from to million, we our XXXX in the up we strong $XXX it a momentum are this

Richard Allison

you be very quarter Jeff, Thanks, first continues am quite reporting our to to and with be as fundamentals earnings proven call a all thanks strategy. pleased remain I steady, and positive, to as momentum CEO to morning. the particularly strong and our good business on good I'm in excited my a

to quarter, digging X the acknowledge. Before into things the I'd around there like specifics are

be farewell around to soon this more his not forgotten. on Patrick, for quarterly and toward but odd First, the one little day and contribution Patrick to my of respectful organization room like It's all will look to a pay earnings predecessor, us not wonderful I'd see Doyle. legacy

personally, to and all well-deserved business one are and I some him. grateful you an mentorship We to am and the we great speak. progression outstanding Thank getting work. my time, me wish honor as Patrick, For more you place did and trust you influence of his well this make for relaxation, rest we a succeeding you and toward for

to express continue franchisees. group and even my Secondly, with gratitude want incredible I of our excitement closer to working

thoughts store to U.S. shared of my It heard whom I many level economics very to franchisees. many have how the energizing from enjoyed trade our our worked commitment we over X franchisees, I industry-leading have really and also last and our more During have to maintain alignment can our international closely know I getting cash-on-cash of to around transition strong with years. continue incredibly is returns.

to as on we of franchisees' for is alignment to and performance my into quarter, our We me international continue was years its be a one be discussion next partner a for business emphasis promise and collaborative industry. leading this solid the to phase. forward you to and to continue remain was top this all going of into success, great in During lead very major we priority as second as areas. seven segue strong across any our the so listen, ensuring placed and will the Strong it a business, that

of our sales of we growth. toward base volumes chain sustained milestone stores focused centers. to serve a another accelerate Industry-leading chain contributed business supply growth rapid record-level momentum. forward. our with support strategy and During worldwide XX% our sales balanced quarter the once growth investments committed our just time tremendous it unit demand U.S. growth The formula business, the franchisee pleased capacity, again around going unit for more last XX,XXX solid volumes performance has X by of U.S. driven supply surpassed the is I its current economics, officially the our to our particularly both and of U.S. in to yet in in quarter, With continued retail plans up than years, a and in and led the am same-store fortressing outstanding growth momentum

this center in later are We track chain New Edison, open on supply Jersey to new year. a

We chain accelerate centers. additional of will half in also second on work supply X year the the

X addition to increasing we projects, in enhance investment new our existing several In these capacity are centers. center to

we'll invest to top provide within of X- the guidance to results being to growth The business regions. from outlook our by continue forward growth for sales a January. performance specific in international and our quarter business with growth. will X and had continue XXXX pleased We CapEx same-store good in X-year line I see to driven comp solely positive all our be order going

importance to the take collection of value growing avoiding trend most we and learn master price traffic best continuing see transactions, of who on from prioritizing emphasizing practices, a ticket throughout and franchisees focusing the over insights that and We taking the industry. global place top-notch are of have

Kosovo family. year to will admittedly opening has norms As Last another record Domino's slower basis. week growth full month, celebrated Domino's in market Domino's welcomed XXXX, my volume. first I our and we mid-June than continue set of new a and the location the stress half but a of grand the new for into its opening European a this front historic that on expectation Jeff touched confidence unit bit on, normalize our international during been

We ago. Domino's to brand nearly by have held and display We full worldwide truly deliver a operators capability and inspiring. with strong on Pristina. than and this our just Las during made-to-order months continents enough to biannual Domino's to X,XXX XX Vegas hosted are truly more people is excited digital hot, interaction was global ordering from the members The event X pizzas countries. our fortunate helped was in rally managers franchisees, X global many general I team was of

to and platform the grow most our Reminding us quarter learned technology much in we connecting, and success. global another and are one another up notably, through front attendees networking got helping officially was reach truly system best-practice sharing. running. Hotspot's our so all a on Our commitment that common, ordering It Domino's with forward-thinking as

and nationwide, hope visiting our most delivery will to the franchisees, new customer in reaching collaborative now this have over continue HotSpots making do reception and of We dominos.com/suggestahotspot. participation potential a team drivers locations store are start I and unique, members very to Domino's suggest can execution out launch and pleased a We platform. XXX,XXX U.S. clever so with and digital by locations and customers the and importantly, successful available

digital the in to inherit is to innovate this Getting keeping dedicated, reason and maintain confidence into the I this momentum history, another. category. continue stand lead I to in business. demands The it addition to was utmost ability smart, in it with and business. a thing, this an group excellent that around aggressive unquestioned for restaurant motivated in to and manner team in quite area. one the have come has now In going has members second position There's the this is and Arbor humble, opportunity potential And quarter. and flexible even with continued Expect invest demonstrate it and best to been that I XX-year to position of never around nimble continue an work We here a a forward. being within investments in brand our franchisees leadership outstanding its the corporate come our an world. mindset that stronger closing, all that, Ann for toward leadership team nearly closer throughout the only

We committed up of for and are incredibly and open our dominant #X. success marching Thanks aligned, again, shared goal and will we'll in focused we their remain to now it unison toward questions.

Operator

[Operator Instructions].

comes question Brian Bittner. from Your line first of the

Brian Bittner

program program First XXXX, understand question, growth contributing September three much about years your to I program continues tailwinds in loyalty launched, just mentioned domestic the I comp. one you you largest be almost this have is to so your so of the later us just to you And This still is can help a trend? think, a follow-up. what

Richard Allison

active did solid program continues those see the again with you we to membership. on Brian, our in as our gain from nice, just tailwind continues Yes. to program customers we We'll and January, to January, membership but resonate it. update continue numbers last

Brian Bittner

just mostly of a it Can my a margin steady you the because Jeff. this was it business, this of did The understand decline international unfold here? pretty quarter maybe looked G&A up here, follow-up, for stretch margins lot. just and after a how unpack help quarter these international see like drivers very the and which from dynamics us maybe went you big And of

Jeffrey Lawrence

top line had bit pressures we revenues started is first bills, during the international the it I their in turn on some on quarter Even we Yes. thing from though paying line and mean, FX for division. us benefited were FX were royalty G&A a people the that to as settlements. the

team franchisees brand. simply, the capabilities continue members in now, is right are field quite to that the our invest the grow one, that other with partnering the to in master we of The

are So a that again, other for quarter. higher, normally this little X variability, to than a that, you those little some get but I'd things lower, point the

Operator

comes Your next question of line Karen from the Holthouse.

Karen Holthouse

that? anything Q, From divergence that in actually to that the which that in costs is certainly it in out from disclosures is insurance sort decrease quarter, is costs level you quick really, in year-over-year A was separate? pick about on the there going margins. the like would nature labor Is store or And trend. looks leveraged one, onetime a of call up are

Jeffrey Lawrence

stores, of you're corporate And the Karen? speaking

Karen Holthouse

Yes.

Jeffrey Lawrence

Yes.

store actually that's labor of primarily corporate and sales, quarter X.X up labor point the for So XX% was to rates.

bit of labor with job Now wage partly to a the we little a are of our paying doing function getting in labor a have but over minimum some better increase. had business the and in increases sales and and humming retain in and up, was year's we're this overcome the efficiency some why team great with to that's year we've this we because the go is attract, basis economy more we're partly that stores store rate it leverage to increase not corporate point quarter the ticket that quarter. store enough you XX some continue And hours see because labor members, last

Karen Holthouse

was came order call And sort on thoughts of is that fully an earliest taking. of sort us test to initial on starting the you any market? to things update give phone of then up on the last have just that how when and test going quarter automated time one do Maybe

Richard Allison

learn you is broader got have any Karen, about ordering rollout, program at a we than very We've expectations. XX automated line stores phone of initial rate. our time a we're at phone moving but Sure. now on that corporate rapid ordering. are update done or testing, I in right we've and along continuing that our for to don't the better for

Operator

the question next line of comes from McGinley. Matt Your

Matthew McGinley

good and reaccelerate slowdown one I factor was that is that confidence bit the in all into I I assume this at you would you're mean region And you know XX unit driven have it's international or a little question countries, growth. slowdown? that but any so on reasonably would have that, would surprising that visibility First there expressed both once. they

Richard Allison

single Yes, the Yes. slowdown. or it's Matt, real region no driving near-term Ritch. it's market interesting,

We was we've number a we opened about net that new record have last had markets. some had, over what the during think I amount the absorbing markets than X-year in frankly, across you it, international And year, more stores course a of of XXXX. mean, some if period. leadership of changes growth XXXX, just X,XXX

a But So we a level and that have fact the is absorb their time across organization. little on store growth did the people grounded impact need take drives still to really sometimes, it strong what markets, markets ultimately forward, and just in we very our the as have confidence these economics look that time. is over unit

So and we pipeline store that the into we visibility things through feel good and that. have signed leases like also about some

So when out very we X% as take global net growth X- it, our a there the in for have look X-year to unit confident still that we horizon. put at X% to guidance the

Matthew McGinley

was side, Okay. deleverage basket the on food chain? of company-owned to And margin what overall the was And the and food inflation up? was price experienced labor supply actual the you on the commodity -- or there more related it

Jeffrey Lawrence

it it up up, up handle cats being and was it down, centers mostly with of And bit was charging of it because -- in up kind for and so the supply with of chain what quarter-over-quarter. up takes the up basket and commodities stores, X% little ton, a stores are puts but was But not -- a sideways. dogs food net, lots So the corporate the -- there's the was for that. basket, because mostly

Operator

Your next line the from comes of Gregory question Francfort.

Gregory Francfort

questions. I two have

years urgency else. step The or just past story several from in go. CapEx. around growth for year, on the unit that first been is And much the where there's know the or X you read other just that recently, read investments from X taken over up directionally you it you more the share category I guys kind guys just Domino's to is everybody forward have the maybe expect next or of not. taking like big then chain the next share we and But from the pizza players. Does new guide how big early to supply want seems pull into has Domino's don't X if any on accelerate should chain to sure need year And I'm supply a material to here? my to has increase that question number add but

Richard Allison

share that we business opportunity, on first Greg, we've leads had an market. has across to we years. within as potential We've X,XXX-store the and see that regionals, a industry forward, opportunity share. communicated success the broadly look to come our growth the an the Domino's for see got the gaining we And expectation next and of opportunity we strong share, take we've an see the locals business, that an potential while in XX confidence U.S. share as lot from in unit

Jeffrey Lawrence

this is Jeff. And then on the --

And again, at more we give the that in build. question, we're Day. CapEx less In to going Investor the show Jersey, give reason you when New just give build good but 'XX the going that. specific But up the we're January. the tell I is around guidance. that third first we're materially our our you'll in to getting 'XX 'XX you we'll and have than anchor January you be going can what going, them numbers that you on to to so details New Jersey we'll to second On after center again, We're cost will that update center

Operator

the Your next question Slabaugh. Will line comes of from

William Slabaugh

a growth Just carryout. strength Last question quarter and actually you the talked comps. rate on quick outpacing about domestic that of delivery

rates U.S. two quarter if growth speak here those that look what this may curious I'm directionally could like you the to So in

Richard Allison

that discussion carryout. We're and were delivery we'll that quarter, don't across had specifically growth not delivery comp around But going, but carryout, having across speak to to composition the growing We aggregators. that going the forward, just both quarter. last down we expect been delivery and Yes. given during emphasize the break of

William Slabaugh

past? you in obviously, for is you've Fair the bit a I enough. about focus as might either strikes in where something more even things, seen international you on And been supply thinking chain the answer given or might could that more opportunity see if Ritch, there business else. we've than much little just while know intently or the anything the now. there be don't focus a an U.S. now And broadly, already be And we

Richard Allison

now is a One actually the international that that we Yes. of been A there. that U.S. pushing some is in couple number something forward strategy things the markets our fortressing of doing around for time. are had

there a the learnings dozens of of out out and the centers, to since to retail A years we're supply from second techniques our that capacity, and production out drive in built about, U.S. we've the as decade with was has chain business a lot it in building chain existing in in area, we of relates that that the number forward supply respond sales So some advanced our market of franchisees. of that chain we growth came carve technology ability taking overall we some a territories stores in out of employing some talking U.S. investments centers. of been master the efforts international international some And it of the center learnings high-performing opened as that move additional and over new supply more we're gained those last the

opportunities businesses. and look and best for between we'll international to So forth transfer practices continue our and learnings to U.S. back our

Operator

Glass. John from comes the of next line Your question

John Glass

a of an novelty kind work Have time? just and make that will HotSpots, ensure -- first First, it immediate how uptake the how speed to or drivers that people do how sure a sort with talk bit the doesn't there on scenario it maybe domestic been that looking get can at about used imagine little You longer. just of that has interfere can takes a Has you where that you somebody of are you is And you acceptance on and occur? to over do it business, doesn't been. of through service? for

Richard Allison

all, think a are give similarly think to on over So on way we to given access contained HotSpots think when a just it areas about how really delivery sense last another the the been HotSpots how about it of John, we to. course so and HotSpots, out already, that it, in customers HotSpots basically inside of general, of -- our really, rolling event. be But we our you We've able our QX platforms. kind can't to for for uptake the service, that to they we question our AnyWare the we franchisees. by want first think just much month. won't of far anywhere is franchisees that us it's of on you many about To are about speed It have of anytime, the those your comment, defined

field many community. are So customers request beach often, park, them, in find select which residential but a within someone's or that areas it cases, to landmarks, that are quite franchisees a deliver to. their the might those well-known baseball be And at areas we address, than can easier at a or at

John Glass

Got domestic helpful. the it. another then on just That's comps. And

domestic franchise element in there be that example, of there? maybe is the talk question, the and for ahead just simplest quarters U.S. in And between in could gap fortressing the continues other generally or is company-operated franchise one accelerated, to in again, may now. right markets? the Or of last where favor company-operated markets couple but So has you markets franchise, comparisons, maybe are you in fortressing the prior answering about any

Richard Allison

Yes.

we corporate splitting all of that a that from been in corporate and basically, yes, business are sales in a in it's household around pressure downward we're within growing when footprint expanding question. the those our U.S., there we've bit comp stores those the so store is consistent really of our the opening each good store retail And is territories, splits. at of John, on talking with But look the more what growth territories. sales for strategy about, the So

sales at broadly at look economics the to So store that openings, also drive a we're only looking new take we're of the market and that when opening, looking but we profitability trying and those level. not sales the at potential across and

Operator

from David question comes Tarantino. line of the next Your

David Tarantino

questions. A couple of

revenue growth, franchise If bit it below the this system retail on look the sales I domestic domestic was growth sales quarter. the First, quite a business. or at

change, had this the know but about sales talk maybe growth it, retail I part you So why that the of you revenues lag accounting franchise was quarter? an can

Jeffrey Lawrence

Yes. is this David, Jeff.

filed I think track a that it's were but of couple a reclassification model revenues morning is we of a might normally the the be item. things domestic that might we And reclassification it, franchise One into little technology fees revenue disclosed there a out the that some of revenues we it. of doing comp technology line international. couple advertising of into flow-through thing That bit. other expect this report your in The a mucking is quarterly things. in we out the would fund be way up the get

things will most difference up taken my two is, those of So there. your guess make together,

David Tarantino

is Jeff, catch-up from that this or reclassification adjustment a was related was prior that quarters all -- that to quarter? And

Jeffrey Lawrence

of It to was it related at this a compare you last to this quarter. time, But there. bit wonkiness year you'll little when get

David Tarantino

that proprietary XXX% Great. barriers -- and are maybe you Okay. so the And I your know your are it's the just been slower can the you to expansion the international could system then give update was U.S. of on outside front, adoption e-commerce hoping just than an some of to I where that outside inside the U.S.? that? What talk get of on the you about on U.S.,

Richard Allison

our our fronts. investment of Sure. that is with on really David, in continuing international leverage a platforms, and to franchisees global we technology continue work couple to master

the into new blocks we really side, continue several with into which markets more our our And really and markets and report platform system, roll out international but layer core this e-commerce the that those system, just the and out ongoing respect take conversations first can investment are stores PULSE more than now additional new e-commerce we're and is leverage with putting the have franchisees international additional specifically the more bring e-commerce the is of markets in to those is help on to so to that, fold. to really You've also then that continue, that the but no mentioned we master year about which in have globally, and conversations continue we within we that and point-of-sale know platforms. scale rolling to e-commerce to that XX,XXX wave over markets some that time, the of building of the are platform that how platforms, on that upon foundation because we with

Operator

line of question comes Peter from next Saleh. the Your

Peter Saleh

to what's to more a January guys the your being to guys chain for What's changed minute. are this a pulling on in -- on little forward be bit since wanted come you you're supply Investor year? Jeff, aggressive the more the in you investment want the thinking Just Day investment back aggressive the supply that makes changed chain that more investment? in

Jeffrey Lawrence

for footed, prepared X to we XX that going this over growth. we thing in that to get as did up probably first high-quality I U.S. of amazing investments. what time. retail These our also volume long investment, need again when problem over a again most XX% is the kind have our technology are quarter out a going up and things count get for great, we and to to XX to We're time, But keep sure open the do is and business CapEx the view to that just mean accelerates to but we're hopefully the the in we're going. we're we acceleration X traffic-driven, up making centers dough front second Again, it I -- That's to But important fresh, growth, continue are and They lead to to the and as with excited really stores of to we put today, Yes. marketing can but And what were importantly, the U.S. unit stores that operators in these remarks. capacity what XX%, to simply next going almost U.S. at teams knew continue our said to had XX% and in we is capacity business. and years. get just field months to going make our investments make growth have good we the we're sales growth smart excited we what we build, these also a more already. we have these a franchisees look knew the us. the

Richard Allison

to Jeff you Peter, just what bit in more well little just I'll give as addition color a said.

over existing is supply look you up through If center back running chain is in years, the XX%. last than volume our U.S. that network the more the X

diseconomies of centers there some certain team in phenomenal the a past you So point. a where great to of within capacity demand what has job the existing is a get now get start scale at absorbing done when increase you these of we inefficiencies in footprint, but a up and are point

the a year it's point it in return So to our driven, preparing the some on last so forward. said, investments, we've we're both business create absorb after-tax It's at this bit that invest. going year, of time, this another trying ourselves, growth us for demand little than opportunity also, better Jeff gives as the to to it of model already future with in continue was our

Peter Saleh

focusing Great. the guys for question you And have lot I more one a carryout been on then just me, business. know more

on from had creative what there occasion separate for you've carryout versus and that tell carryout the in still seeing coming the carryout year, unique into the customers? front more this lot half guests more very seeing the business? focus -- are or data Given about Is the the delivery than any delivery you still more the is delivery you of businesses? crossover does or carryout the you customer Are business a a

Richard Allison

occasions. consistently those very occasions different that's two you've why both with market as them across, seeing us overlap seen still We're to literal and of

we the one weeks And segment to back we are things that is around messages the to a of to year, delivery carryout -- that TV are XX carryout we insight will ads that to key allow of pick given directly as will them we drive targeted are certain you that new we carryout and our So stores a in to access has segment. running our mentioned fortressing we as one. as the customer running able far January, as not to targeted drive deliver certain that on messages directly open customer the and see the because weren't before us the us that will access confidence strategy pizza up a

Operator

from question Your O'Cull. line next the of Chris comes

Christopher O'Cull

follow-ups. had targeting that where this opening domestic the on was strategy. geographic fortressing where the strategy region strategy and One many would a of there a were of Ritch, sense. stores country weaker seem couple part just would make markets how the like year It is of competitors I are is focused?

Richard Allison

Yes.

continue that number opening. of We those increase to units are the

but side, our me may I units were it opened we on just you a across last shy territories. U.S. basis the -- of the Our geographies believe trailing was Jeff, correct just split were in in U.S. XXX of splits the years, here, the over shy X of

So new sometimes sometimes, up. carving territory it and territory new opening stores taking store and some taking several a one create to that's for trading store's it's that's half, from in area a

So we market-by-market this our be. basis the across can gain the the that look existing at models what on and to understand the geographies impact what we from and store a on sales incremental will run be stores new

Christopher O'Cull

last this the the well? to that that Jeff, domestic that line, line, or impacted then, as the reclassification quarter franchise happen quarter did revenue was And new Okay.

Jeffrey Lawrence

It did QX was last it. in year, we

a at versus year. looking QX QX you're last now So

bit of there. you're a So kind that, again, of wonkiness little getting

QX of QX, a bit. So QX with little sales all -- definitely when will into -- your mess we there. But start then, the normalize retail and to it way until to get they'll percentages

Christopher O'Cull

year is, a and about little And the I'm growth this but quarter, the the first quarter, this in lower growth if comp comp. you you similar grew thing at struggling had unit a second with year-over-year And maybe XX% quarter, this by similar franchise you rate. look it then domestic or had One revenue quarter, X%.

that first the difference help from that? caused what line the to item in understand the what's you quarter quarter, the can second me So in growth rate

Jeffrey Lawrence

not puts takes what the and flow-through modeling the sure, pretty also biggest thing obviously, the change, all I'm has is programs and the expect. royalty can we I incentive what steady the there. been you would you're Again, contractual tell in But haven't Yes. technology been rate has

and is the is else we everything business. it of else economics as think basically really, changing So because, reclassifications fundamentally about nothing accounting the

Operator

question the line next Your comes Jeffrey from Bernstein. of

Jeffrey Bernstein

Two questions.

markets or wondering, guidance of most changing kind it? the you things know and a are new of long-term there appropriate that's going we above this X% key mature I'm is from, at are long-term mentioned Or the you're the below, in where that are X certain is coming last now positive, looking your mean international steady more of you've been structural business, the to thoughts consistent we -- any state more First had geographies, there what it that all now or the are whether within outsized but whereas slightly looks XX are where, looking the X% where comp over you're mentioned and sustained strong flow versus your X% a obviously bearing been just no very to that every has just growth. when look high just kind markets consistently guidance. comp one, few wondering years of forward you or be Ritch, maybe growth. likely been really like I I end quarters the long-term what X is your meaningfully to back as clearly, quarters, But past from X prior guidance X% perspective, range quarter all

Richard Allison

overall growth. think we X should that a And growth pressure I as in again you same-store to the outs the existing those downward the retail a little in in comp, bit been been of because we've that openings of business stores the that carved range That or sales forward, objective about that the have as sales store look from had we about. be X% Jeff, We've we X% market, of is Yes. unit particular do you splits acceleration the on driving range store -- last territories. look on the the have thinking had, but puts significant in international mature that if over that U.S. just back business, course spoke the in is many years. the

even look And in excluding international a at retail retail so quarter, we in of sales of growth were growth, upper still range. we impact the second business, foreign when sales our long-term currency, which XX.X% is the end take the --

then is openings store there, markets It in coming a balance open the the where wide about outs. think that's still it. countries think how mature you territory relatively underpenetrated, growth of I businesses where from mix some be of will carve we're more should the So of the out more but some

Jeffrey Bernstein

lot is how the Got seat, considered your in rate any wondering, just you differently in international it. the Obviously, to royalty as front. rate new just it And know I well, doing an up you wondering, and businesses, country there's should then also, doing kind reviewed which of about how assume or think taking the steady options there often anything that just determine the often consider equity a international. whether my past franchisees I'm as so international we came stake follow-up, in these on she of are ever I'm by just negotiation? country. or or is for goes? about

Richard Allison

that franchise have plans is that way any is make Yes. model strategy it business. today. believe Pizza We is we near-term business. to the master right don't business a we still the way in for about model Jeff, grow Domino's change feel The to the structured good

Operator

Your from of DiFrisco. the comes Matthew line next question

Matthew DiFrisco

questions. of With follow-up a couple

to as to as more getting understand I'm that capacity going trying there bit that front, ramp you that are to of is utilization be margins, supply years? a the supply guess to -- the to now on Or come you this and away? might right far I to get margin then in the plans up saying far as the better investments, a chain a margin be chain so improvement benefit time will those the With efficient be little capacity answered as out better

Jeffrey Lawrence

Matt. question, Great Yes.

the CapEx capacity, today, New than money, not, Jersey right? giving guidance And Jersey to Center new tell of some technologies, it the do, advantage they'll And the we're margins the of on center. Center, of without being you the as of including are can of it, guidance by closer dollars. in take we're centers, we a some customers the third is building centers what any on chain. we're And specifically the cost businesses new the in transportation centers, see also new catching that obviously, you can, I pretty But overcome up lot can and materially of spots. haven't New less just big than actually and with any We cost these and supply to looking then, second what X capture capacity or the the the try opening, to, is, best around these although, X giving

long So an term I operating about the thought running I'd this give you way at about think we're is of the percentage-or-so XX margin.

think think is quarter particular it's going it's to XX.X% yes, this -- XX%. I XX.X% quarter. was X%. going don't I it particular think I to down don't

end some we we're the to and got grow it to to a the a future. stores have will ones the kind think of in within fresh dough be generally build that the industry. don't range of And support at listen, makes day, I the So the that going sense have choice. this and We we for capacity get

Matthew DiFrisco

problem though. to good That's a have,

guess to facilities? abilities at new and potentially margins from capacity you're on some I are capabilities that that get perspective, if or your franchise So new bringing you're at looking better these are going the doing their

Jeffrey Lawrence

where a listen, structure and all investment, we the the chain have great things mean, franchise of Canada. is Yes. centers of of in I all one relationships about -- share the profitability in in supply we U.S. the also nice having the the

an got What and We're been U.S., guys. that. that matter really supporting potential as these a the the a to to is all-time not we're of as franchisees a that And is partnership and very period rent, Ritch we along we successfully, number sure obviously, in franchisee for would to benefit true whether one grow we've out is, extended that's us. of what time. When the grow accomplish, XXXX -- industry, grow out it's you more right I sauce at this know remarks, We've think the way our it of I food, kind anything able growth what tell both for franchisees of So we're that of in headwinds. player mentioned with will around to And been us. our labor, an to opening P&L secret need we it is, any a doesn't do our do it with It insurance, on lose going about it's opportunity and his units. high it focus level from together, able there profitability U.S. greatly. big making small so opportunity was we've going pizza we mentioned, these we're together lot capacity, in

Matthew DiFrisco

business happen How with it question we on as How then or the sort And of World so? year, look if the impact as Cup. it side international sales far Okay. that at did, that any just potentially of as have, as have impact development? did last didn't an same-store it's should a --

Richard Allison

from for us, QX was comment event, this that on we on World impact a won't sales So Cup, call. so any

Matthew DiFrisco

be it it's correct assume positive, historically? to Would a

Richard Allison

not on to touch We're it. going

Operator

Your next line question of Stump. comes Alton the from

Alton Stump

it of have you much just there I color, of very of touch it's of my have Or to kind platform. think versus though are Are But seen, most mentioned, you early, a early, so been incremental? as far, think is of and HotSpots. understanding even back XQ of very incremental? all cannibalizing that questions just read is orders want kind asked. course, And on is I from provide. you, any you that what of on Ritch, still I those they any -- can kind how more

Richard Allison

it's already, franchisees quantitative speaks it. those seen QX And also as any we've I the to a spoke that of of early, consumer having measures. our have these fact Yes. interest But set about, for really that Still up XXX,XXX think too and the really, predominantly embraced we event.

we mentioned forward we're to anytime, provider to be to they be overall AnyWare want want really it trying for So customers, want I as And that that we us. the bring there excited about as it message -- earlier, these about access our think we we're pizza fitting into, platforms. to is anywhere

Alton Stump

that opportunity franchisee, HotSpots just delivery I Makes do covered a territory? the move outside of ability into HotSpots, mean, to by obviously, sense. the is that expand actual set area? franchisee, can there their one quick Domino's follow-up isn't delivery another If on up And to is then there an out a territory

Richard Allison

that us And we've business so talked new we delivery talk customers often it orders, reduces cost we, about more those delivery is access more it tighter, areas about. fortressing, with back food about to further get the store I'll actually sound can in delivery delivery focused that cost because inside in you think sometimes and the of start of we're territories these why. it may the incremental HotSpots may on is really areas, venture it's it to fact, but it getting And orders those in our to brings associated those you the the quickly really existing each delivery by profitable. over area, and away a which order, from outside making When moving But delivery the enticing opposite those We're shrinking areas delivery allows direction tightening challenge. an -- having also that those pizza describe of time. the a, carryout more them locations existing of

Operator

line the Ivankoe. comes question John next from Your of

John Ivankoe

I couple this point, At think a ones. short

Firstly, better modernization of closures? I system? there U.S. well. there slight is think international markets? anything uptick or elsewhere need that you the a is quarter just in rate quarter locations I the international in was mean in like as You to in in and there second was about of the the X see closures first think Is specific saw happening ago the it decade a you or

Richard Allison

when major structural, Yes. from we've bit seen while look XX-month or There's rate trailing run we're a Over highlight. at unique look an nothing not locations, John, about individual that any it how close, a we market it think upticked a historically change that really we anything about we but -- on what take in and when forward, structural or would I if quarter, concerned at any up market elsewhere, as we trading open any areas we specific issues. time, close don't trend going to see some specific

John Ivankoe

in And availability, been secondly, current But market acute any seeing for or to question other the where market the market cost. you do feel constraining kind mean, specifically up employment execute delivery extent? U.S. like demand In around your touched driving may think of you around Okay. pockets labor drivers the has you execution then, on actually words, a whether drivers. you your U.K., your I was rates the of some are affected? ability to own be

Richard Allison

market the in open of or constrained growth -- has with any our John, level world, the -- major the have service just been competitive the that deficiencies. business, across with the a international U.S. positions The that is well. of competitive as got and not and at the our markets, customer for it U.S. has a labor, markets unemployment it some but a at growth we've it we caused many around is is certainly the market in level that level very at as

Operator

Your question from of next comes Jeremy the Scott. line

Jeremy Scott

from seeing much most side. seeing share come of or value-driven from and we year the years on consolidation in theme independent It big asked promotional X this question bit I a transactions? the about competitor that branded we're seems really prices in of this your we context contrast you X. more has seeing delivery at markets. Just Can seen your last players. the change seemed It Are the top price-driven your talk value least from the menu or Domino's with like and proposition? of market on that rising other the levels fortressing the are that you pizza context haven't the the the market, a

Richard Allison

very now value stayed Xth on think that's And many year $X.XX stayed in of at directly we've we're about when We've So on over focused they customers, our I time. in associated think the minds Domino's. -- our I that. consistently $X.XX. with mean

-- on X we've consistently well, large, the that to now side $X.XX business. then which competitive a focused the has carryout continuing a side the as there got tops. from And value been stay on delivery we're also while very out offering So that's on of for

$X.XX what both business we largely around were carryout And going think when aggressively So of continue talking value cost-effective in be on these bringing more by it about of opened to business stay tightening down fortressing, we've delivery more and even really delivery customers. at great got to after those new both and fortressing efficient us back for while a it, over is incremental And And in model, share we The to is fortressing about important allows businesses. to our operate efficient. to stores. these those. we're as to territories, and we very order competitive time,

Jeremy Scott

it. Got

core expect We've Do cost. to in spot margins the you commodity bit Just chain a intend drop-off that restaurant do of a seen run into to your -- quick or here is you a follow-up. that reinvest?

Richard Allison

the For the basket, up store actually we in level food quarter. were

the stores, the For not and we is worse. to X% given savings But better, procurement our that's guidance X% the supply food And have, our benefiting that up not bit. a down result little getting as scale a and of this franchise going the corporate-owned #X we've for chain, just from player, we're that. basket as year certainly, a of changing

Operator

of Senatore. line Your next Sara the question from comes

Sara Senatore

about if you being and -- upon just very One, touch value something follow-ups, Two may. mentioned competitive. I on

be really your competitor major now. -- the seems of struggling to One

even to see impressive, might little you X% there granted thought acceleration have of an would maybe thought more take actually is I share. was So bit I a bit room but a comps

So are shift players are and there advantage -- the pressing on also their that maybe other sort splitting value other evenly. on are traffic and you're of more

then So another supply follow-up I and that was have one question the on chain.

Richard Allison

comment marketplace. Sara, in are doing other I on the what won't competitors

for our the from to across over we be control, we'll share maintain simply, I can to and we're focus for -- it level on think making we share take time. those able going job on delivering focus great that our that industry. value Just where economics our our great sure franchisees. on on will falls unit to If and do we're things then customers And fall the continue a

Sara Senatore

on just then the chain, I in But dampening it's guess, and And franchise it sacrosanct. chain a fact, like of minority on supply owns and seems supply impact have business the philosophically, their of does returns. more supply not every it operating margins is Okay. owning sort the chain,

was ever to seem control quality have chain. Other able across it. to or it big and considered if wondering owning system base from without opportunity be there's I guess you So outsourcing franchise supply I if an the necessarily consistency the

Richard Allison

that our of distribute out dough it, fresh proprietary implications our we core Yes. ourselves really, doing product the offering And our Sara, we capital stores. and when about think are, certainly, to formula that. is that we produce that there with to

of We that that are going to I'll but have that in feel of our product of product network, And to quality dough invest about to they controlling also very and products going they continue the to expand fresh a quality bring the from an so level where we that high and and that other we times the elements most stores dough need produce their ourselves. chain week value the that one proposition X strongly think to you our to the I for increasingly the that tell we're of key is franchisees get materials of that service supply them. to of integrated

deliver in for finally, key the customer part then, of value it it of level thing of service a a it's a being business. the about the And course, significant to to our proposition. franchisees So does addition great is profitability great

Operator

next comes of Jon question Your the from Tower. line

Jon Tower

within just growth. and guidance are order The you sales. outside looking earlier I'm to Meaning, relative driven your of growth now you believe know comp past. was composition back, X% same-store trending long-term perhaps, X% just first growth to and by ticket versus been, has range. said how that's Just curious the it number historically, I now of growth international long-term order I'm on that to the more the what evolved.

Richard Allison

the short exclusively, year time, the are works long to our of only but There brands ebb through over same-store some growth In business, count than to would over transaction count through count in quarters through growth XX grow rarely is time. we business, same-store in time transaction to This it time. in can was increases ticket we sometimes that Over not by do over terms grow year, and the and been we're way last by very look was international work U.S. same-store being growth. the term That you able without back it we half will order sales the pricing what it sales and our look can to order flow to term, of driven is business more significant John, the driven, for growth. order When orders. that their gains, in at the in this time, in driving gains first business, the times say is the sustain consecutive happy over of over able drive of no business. positive when have or sales sustained different look majority growth. the

Jon Tower

the come shift but with And under I ticket? with in of in returns know a away store level from that you're traffic the international towards that comp and pleased perhaps a growth markets, more bit has pressure the

Richard Allison

you feel across pretty still we've but the We very No. flow time returns in markets, and the at at it store when level over on in our about been where cash-on-cash steady and are take good ebb board. strong international things Again, we markets. will there individual look a

Jon Tower

Okay. you interest the I quarter? last expense And is question. for the The then a last modeling million about talked $XXX think one $XXX still year, million just the to expectation

Jeffrey Lawrence

is. the reported it And number. as that's Yes,

Operator

today queue Stephen is in Anderson. question line last from the of And the

Stephen Anderson

maybe if don't the much piece new is concerns third-party maybe beat of there Group. you it were you been those flesh year the as there's lapping ago, me into can want about some markets. much in and talk Can the death, But anything international to momentum since hasn't of about but as There a that? we business recall gaining as competitor there's competitors hasn't From the tell I you're or suggested, been one been aggregators. maybe that outside had lap U.S. seeing Maxim the about rise these as I insight X to that some of were that, now. been

Richard Allison

players we any market. haven't Steve, that beyond anything add in talked to there got new seen we've into -- come We've past. don't the really have we about what significant

any the significant seen business that leads economics have haven't that evidence changed. We to us new believe of that

Operator

the There back are presenters. call I'd turn no further to queue. questions to left the like in

Richard Allison

look XX. We October third forward Tuesday, on everyone. you thanks, results XXXX discussing our Well, quarter to with

Operator

conference this today's concludes call. And

disconnect. You may now