Domino's Pizza, Inc.

Thank you for standing by and welcome to Domino's Pizza's fourth quarter 2022 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1-1 on your telephone. To remove yourself from the queue, simply press star 1-1 again. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Mr. Ryan Goers, Vice President, Finance and Investor Relations. Please go ahead, sir.

Thank you, and good morning, everyone. Thank you for joining us today for our conversation regarding the results of the fourth quarter and full year 2022. Today's call will feature commentary from Chief Executive Officer Russell Wiener and Chief Financial Officer Sandeep Reddy. As this call is primarily for our investor audience, I ask all members of the media and others to be in a listen-only mode. I want to remind everyone that the forward-looking statements in this morning's earnings release and 10-K also apply to our comments on the call today. Both of those documents are available on our website. Actual results or trends could differ materially from our forecast. For more information, please refer to the risk factors discussed in our filings with the SEC. In addition, please refer to the 8 earnings release to find disclosures and reconciliations of non-GAAP financial measures that may be referenced on today's call. I request to our coverage analyst, we want to do our best this morning to accommodate as many of your questions as time permits. As such, we encourage you to ask only one one-part question on this call. Today's conference call is being webcast and is also being recorded for replay via our website. With that, I'd like to turn the call over to our Chief Executive Officer, Russell Wiener.

Thank you, Ryan, and thanks to all of you for joining us this morning. As we end 2022 and look back to the beginning of the pandemic, I'm encouraged by the incredible work done by Domino's team members and franchisees. Since the beginning of 2020, we and our franchisees have grown by 2,860 new stores around the world, when many restaurant brands closed doors. or struggle to grow through an extremely difficult time for store development. Domino's is in over 90 markets and should hit 20,000 stores as a system in 2023. In the U.S., the QSR pizza category grew over the last three years, with sales up almost 10% versus pre-pandemic levels. Domino's service deck rose, resulting in a gain of approximately three share points in the QSR pizza category since 2019, according to NPD. We continue to grow our carryout business. Carryout now comprises approximately half of the orders and about 40% of sales in the U.S. Carryout remains highly incremental to delivery for us. And in cases where it's not incremental, customers are moving to a service method with significantly lower costs for our system. Our delivery business experienced both headwinds and tailwinds over the past three years. our team focused efforts on finding solutions at every turn. Now to the fourth quarter. In the fourth quarter, our results were mixed, particularly with the challenges in the U.S. delivery business that we previewed during our Q3 call. During that call, I pointed to a couple of dynamics we were watching in the broader restaurant category that have since played out. First, as consumers return to many of their pre-COVID eating habits, some of the sit-down business that was a source of volume for restaurant delivery orders returned to that channel. Second, inflation impacted delivery due to the added expenses of fees and tips in that channel. Our research shows that a relatively higher delivery cost during inflationary times leads some customers to prepare meals at home instead of getting them delivered. We believe this dynamic will continue to pressure the delivery category in the short term as long as consumers' disposable income remains pressured by macroeconomic factors. Despite these pressures, U.S. delivery sales for Domino's in 2022 were more than half a billion dollars higher than the pre-COVID baseline in 2019. Domino's delivery business was not alone in facing these challenges. According to NPD data, the entire QSR delivery category was down high single digits for fiscal year 2022. Not surprisingly, according to NPD, pizza delivery was down as well. Given these industry-wide headwinds, we're encouraged that while our delivery business was challenged in 2022, Domino's saw a moderate increase in QSR pizza delivery share. On the topic of delivery, while there's more work to do on staffing that part of the business, we feel like answers to this challenge exist within the Domino's system. Staffing has improved at all positions in our corporate restaurants, including drivers. Continuing to leverage internal best practices around delivery service, as well as innovations in this area like our new electric delivery fleet, should help continue to improve this critical measure. I am proud of the work that we and our franchisees have done to address labor constraints in the delivery business and know we have more to do. A consistent positive throughout 2022 has been the continued evolution of the Domino's business. This helped offset some of the macro challenges on the delivery side. In the U.S., we are a more complete restaurant company than ever, running two businesses out of our stores. We are number one in the U.S. in both the delivery and carryout pizza segments of QSR. The carryout business continues to be a strength with tremendous momentum. In fact, U.S. carryout retail sales for full year 2022 were more than $1 billion higher than pre-COVID levels. More importantly, we still have a long runway for growth in this important segment of the business. To give you a sense of the current scale of our U.S. carryout business, if it were a company of its own, Domino's carryout would be counted amongst the top 20 QSR brands in America based on consumer spending, obtained by NPD for the year ending December 2022. To support the growth of the business, we opened a new supply chain center in Merrillville, Indiana in September. As you know, we have invested significantly in our supply chain, opening four new centers since 2018. During the fourth quarter, I visited our new center in Indiana. It has the latest in technology, automation, and new operational procedures. Merrillville represents an incredible testing ground for the future of Domino's supply chain. And we look forward to bringing the best parts of what we learned in Indiana to other centers around the country over time. 2022 was a strong year for global store growth. We and our franchisees had nearly 1,300 gross openings around the world in 2022. For context, that's about 3.5 new store openings per day on average while operating in a difficult environment for development. This is a testament to the strength of the Domino's brand around the world. Our team members and franchisees have continued to show the agility and perseverance required to operate and grow Domino's footprint in a volatile macroeconomic environment. Looking specifically at our international business, the 1,135 gross openings outside of the US were the highest organic openings in our history. meaning they were achieved without any of our master franchisees conducting a large-scale conversion of another pizza chain. One of my personal highlights during the quarter was the opportunity to be in market with one of our largest master franchisees, Jubilant Foodworks. In December, I met with their team in New Delhi, where they reiterated their goal to grow to over 3,000 stores in India over the next five years, which would further cement Domino's position as the leading QSR brand in this critical global market. Additionally, Jubilant is inspiring our global system to raise the bar on service with their new 20-minute delivery zones. I was able to see these in action when I was touring stores. Service has always been a key differentiator for the Domino's brand, and Jubilant is extending its delivery service advantage in India. How are they able to do this? With incredible operations enhanced by a global fortressing strategy. When we and our franchisees build more stores, we can get closer to customers and improve delivery and carry out service. Now for more detail on our Q4 results, I'd like to turn it over to our CFO, Sandeep Reddy. Sandeep.