Domino's Pizza, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the Domino's Pizza first quarter 2020 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star then 0. I would now like to turn the conference over to your speaker today, Jeff Lawrence, Chief Financial Officer. Please go ahead, sir.

Thanks, Sonia, and hello, everyone. This is Jeff Lawrence, Chief Financial Officer of Domino's Pizza. Thank you for joining the call today about the results of our first quarter of 2020. Given the unique circumstances created by the COVID-19 crisis throughout the world, in addition to discussing our first quarter results, we are also going to share with you some preliminary estimated results We will start with comments from Chief Executive Officer Rich Allison, followed by an update from me, Rich, for closing remarks before taking analyst questions. We ask that our analysts limit themselves to one question during this call. With that, I'd like to turn the call over to Rich.

Thanks, Jeff, and thanks to all of you for joining us this morning. Given the extraordinary circumstances, we are going to take a different approach to the call this morning. I'm going to speak first to share some perspective on the business, and how we're responding to the COVID-19 crisis both here in the U.S. and around the world. I'll then talk about some of the investments that we're making in our team members and in the communities that we serve. I'll then hand it over to Jeff who will walk you through the details around our Q1 performance and Jeff will also share some preliminary estimated results from the first few weeks of our second quarter. I'll then come back to discuss some of the things that we're focused on as we look forward to the remainder of 2020. And then following that, as we always do, we'll be happy to take some of your questions. So with that as a roadmap for our call this morning, let's get started. And I'll begin with some perspectives on the business and how we're responding to this COVID-19 crisis. On the 30th of March, we released a preliminary first quarter business update. We pride ourselves on being transparent with our stakeholders, and we hope that information was helpful to you. So I won't spend much time on Q1 in my comments this morning, as I've already shared some of my perspective on the quarter in that release. The reality is that the world is changing very rapidly, and we are much more focused The restaurant industry is facing an existential crisis and no one knows how many restaurants will survive or what form the industry will take as this crisis eventually abates. We also don't know how consumer behaviors and purchasing patterns may evolve during and then after this COVID-19 crisis. We were fortunate to enter the year in this crisis in what we believe to be a very strong financial position, both at the brand and at the franchisee levels. Our US franchisees averaged an estimated $143,000 in EBITDA per store and over $1 million in average EBITDA at the enterprise level in 2019. Both of those figures are increases over the 2018 levels. Now we know that profit levels vary significantly across the country based on wage levels and a number of other factors, but we're pleased that our franchisees remained healthy and strong throughout 2019. Looking forward here into 2020, we know our business, along with our franchisees and stores, will face new costs as we respond to COVID-19 with new service methods and a number of investments in items such as masks, gloves, and thermometers, both for corporate and franchisee team members. We are well positioned as a brand with a delivery and carry out business model, and this has allowed us to continue serving our customers and employing our team members in the sizable majority Our first two values at Domino's are, number one, do the right thing, and second, put our people first. And for us, that means prioritizing the health and well-being of store team members. and the communities that we serve. During this extraordinary time, we take our responsibility for continuing to provide convenient, reliable delivery and carry out experiences to the communities where those services have been deemed essential. We take it very seriously. Fewer than 20 stores in our U.S. business are currently facing temporary closures. All others remain open and our serving customers. Now with that said, our U.S. business model has adapted to this new environment and our standard operating procedures have changed considerably over the last two months. I say to folks here inside Domino's, we're a 60-year-old brand that has rewritten most of our standard operating procedures in the last six weeks. We've moved to a 100% contactless delivery model across the country. We have made our contactless drive-up carryout technology available to all US stores. We have temporarily banned customers from sitting and eating in our stores. We're asking our customers to practice social distancing when they visit us to pick up their carryout orders. We have implemented social distancing protocols in our store and supply chain for our team members there. And in addition to thermometers, we are supplying them with masks and gloves to protect our teams and our customers. At Domino's, food safety and cleanliness have always been top priorities, but recently we've devoted additional resources toward our efforts and our procedures there. I'm incredibly proud of our U.S. franchisees. Thank you for joining us today. Through the remarkable efforts of our supply chain team, we successfully opened our newest supply chain center in Columbia, South Carolina on March 29. We're working very closely with our suppliers to maintain a safe and stable flow of product into our stores. I'm so proud of our supply chain team. They've done just a tremendous job of continuing our core operations Thank you for joining us. This morning we released our preliminary estimated U.S. sales results for the first four weeks of this second quarter. Sales have improved relative to the last two periods of the first quarter as detailed in our March 30th business update. And Jeff is going to share more details around this later this morning in our call. We continue to observe and analyze the rapidly changing trends in consumer purchasing behavior. Across delivery and carryout service methods, day parts, days of the week, the U.S. will continue to be impacted by many factors, such as shelter-in-place orders, business and school closings, and event cancellations, which vary in magnitude across the cities and towns in the U.S. that we serve. Thank you for joining us. At our peak, we had almost 2,400 international stores closed, and as of April 21st, that number was approximately 1,750. This morning, we also released our preliminary estimated international sales results for the first three weeks of the second quarter. The sales impact stemming from COVID-19 varies quite dramatically across our international markets. Some markets where we have significant service method and operating hour restrictions, we have seen major declines in same-store sales. In other markets, we've seen strong recovery and steady gains in same-store sales over the recent weeks. China was our first market to be significantly impacted by COVID-19, and we are pleased to see our sales there recover and accelerate in the last few weeks of the first quarter and to remain strong early in Q2. I'm very proud of our international master franchisees and their resiliency as they manage through this crisis in their markets around the world. I'm also grateful for the best practice sharing and rapid adoption of new ideas across the globe. Much of what we're doing today right here in the U.S. has been informed and inspired by our international markets Thank you for joining us today. We have committed to pay additional bonuses to our corporate store and supply chain hourly team members over a 10-week period from mid-March through at least the last pay period in May. We're also providing enhanced sick pay benefits to our hourly corporate store and supply chain team members through at least the remainder of the year. At Domino's, we don't want anyone to have to choose between their health and their paycheck. Now most of you probably are not familiar with the Domino's Pizza Partners Foundation. It's a registered 501c3 that was established to help Domino's team members in need during a time of crisis. Its mission is summed up in the phrase, team members helping team members. And its primary source of funding is through payroll deduction from corporate and franchisee employees. I'm very proud to say that our company is making a significant donation to the Partners Foundation to help team members at this particular time of need across the globe. We're grateful as a brand that we're in a position to be able to make these investments, and we are very proud of our independent franchise business owners, many of whom are making similar investments in their team members. Our supply chain centers, corporate stores, and franchisees are also hiring and have been looking to add more than 10,000 employees across the U.S. With so many Americans newly unemployed, we feel privileged to be in a position to offer employment and a career opportunity within the Domino's Pizza system. We're also committed to supporting the communities around the U.S. where we live and work. We recently launched our Feed the Need program This is in partnership with our franchisees to provide 10 million slices of pizza across the U.S. We're making a significant investment as a brand by supplying the food for this program while our franchisees and corporate stores are being generous in providing the labor. We've empowered our franchisees and stores across the country to identify the needs specific in their communities. In some places, it's school children who are no longer receiving free or reduced lunch. In others, it's hospital workers and first responders. In some places, it's essential workers in grocery and retail and many other areas. This isn't new because Domino's has always given back in times of crisis. This isn't an exception. While these are some highlights from the U.S., I would be remiss this morning if I didn't also thank our international master franchisees, many of whom are doing similar things in their markets. From the UK to India to Australia and really all over the world, the Domino's system is stepping up to support our communities. As a system, we are happy to make these investments in both our teams and our communities, and we'll continue to search for ways to invest and to feed the need Thank you for joining us today. and then after that I'll come back and share a few more thoughts with you before we move to Q&A. So Jeff, over to you.