Domino's Pizza, Inc.

Thank you for standing by and welcome to Domino's Pizza's first quarter 2024 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. If your question has been answered and you'd like 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. Greg Lemicek, Vice President of Investor Relations. Please go ahead, sir.

Good morning, everyone. Thank you for joining us today for our first quarter conference call. Today's call will begin with our Chief Executive Officer, Russell Wiener, followed by our Chief Financial Officer, Sandeep Reddy. The call will conclude with a Q&A session. The forward-looking statements in this morning's earnings release and 10-Q, both of which are available on our IR website, also apply to our comments on the call today. 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 8K earnings release to find disclosures and reconciliations of non-GAAP financial measures that may be referenced on today's call. This morning's conference call is being webcast and is also being recorded for replay via our website. 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 one question only. With that, I'd like to turn the call over to Russell.

Thanks, Greg, and good morning, everybody. Our Q1 results demonstrated that our Hungry for More strategy is delivering on its promise, driving more sales, more stores, and more profits. We drove strong comp performance in the U.S. that flowed through to the bottom line with double-digit profit growth. And our growth in the U.S. came through positive order counts across all income cohorts in both our carryout and delivery segments. We saw the largest growth in our lower income cohorts that are undoubtedly benefiting from the renowned value that we're offering. I'd like to highlight our first quarter results through the lens of our M-O-R-E, hungry for more pillars. As you know, M stands for most delicious food. We know we have the most delicious food in the industry and are focused on showcasing that with more mouthwatering food photography in all of our marketing and sales channels. We also ran a campaign that highlighted our pan pizza, a premium product that brought news to this crust type for the first time since 2014. And I'm excited to announce that our first product innovation of the year, New York Style Pizza, launches on air today. The idea for New York style came from customers who prefer a thinner, more foldable crust than our traditional hand tossed. And we believe that this new crust style will drive incremental occasions. It will also drive deliciousness as the foldable crust lets us focus more on our incredible toppings, including a really unique blend of provolone cheese that comes on every New York style pizza. Additionally, this crust option will be available as part of our mix and match offer. And Domino's Rewards members can redeem 60 points for a free medium two-topping New York-style pizza as well. This is another example of how innovation is designed to drive value and more customers into our loyalty platform. The O in Hungry for More stands for operational excellence. This is how we'll deliver on our promise to have the most delicious food, by consistently driving a great experience with our product. As I shared on our last earnings call, in 2024, we're rolling out a new service program we're calling More Delicious Operations, a series of three product training sprints that focused on our dough, how we build and make our products, and how we cook them. In Q1, we embarked on our first sprint, which focused on our dough, and rolled this out across all 6,800-plus stores in the U.S. We continue to see benefits from our service initiatives and In Q1, we actually delivered more pizzas than we did in Q1 of last year at improved delivery times. I am just so proud of our operators. Our third hungry for war pillar is R for renowned value. I want to expand on what renowned value means to us at Domino's. It's not about just having the lowest price in the market. It's about providing value that's innovative and that's memorable. Renowned value breaks through the sea of seamless discounts that you see in the marketplace. Value is a buy one, get one free. Renowned value reinvents this mechanic and creates emergency pizza. Emergency pizza performed better than any buy one, get one free I've done in my career. It was a meaningful driver to our comps in both Q4 of 23 and in Q1. And it not only drove increased orders, but also the acquisitions of members into our loyalty program. Domino's Rewards continues to perform extremely well and was the key driver of our strong U.S. comp performance. The program is delivering on our objectives. Active member growth rates are up significantly since the launch of our new program. From a percentage standpoint, our biggest increases are coming from new, lapsed, and late customers. So we're bringing these new customers into the fold. I'm particularly pleased with the increase in carryout customers made possible in part by our reduced $5 minimum spend for earning points. Once customers become members, they're redeeming more than ever before, and increases are being seen across all of our channels, delivery and carryout. Our new 20- and 40-point redemption tiers are doing exactly what we hoped. They're engaging more customers. These two tiers now combine for the majority of the redemptions in Domino's rewards. And the program has driven incremental profit dollars for franchisees. So customers are getting more and our franchisees have earned more profits. Truly a win-win. We believe Domino's rewards will continue to be a meaningful sales driver for us in 2024 and beyond. National promotions are another way we're driving renowned value. In Q1, we brought back our carryout special boost week for the first time since January 2020, and its performance exceeded our expectations. Clearly, customers want value, and we are driving it profitably for our franchisees. Now, as it relates to our promotional cadence in 2024, you can expect it to be consistent with what we did in 2019. As part of that, you can expect around six boost weeks. As a reminder, these boost weeks are a proven customer acquisition tool that drives both short and long-term benefits for our brand. And we're seeing the same commitment to providing renowned value internationally. Some of our best-performing markets are getting this right. As an example, our master franchisee in Mexico has run very successful boost week campaigns that have driven outstanding order and sales growth. While providing renowned value through our own channels is one part of our barbell strategy, tapping into the aggregator marketplace as the other. Our launch into the aggregator space remains on track to exit the year at 3% or more of sales coming through Uber Eats. Now that we're a quarter into our full launch, I want to share a few insights on what we're seeing. Incrementality has been in line with our expectations. In addition, we're seeing a higher percentage of single user transactions on Uber than we've seen on our own channels. Further, this channel is becoming more promotional. Customer responses to deals are stronger than to everyday low prices. As a result, we are continuing to work to fine-tune our marketing spend and our offers to ensure that we are effectively driving this channel. We remain focused on driving profitable transactions through Uber Eats while ensuring that the best values for our customers remain on our own channels. Everything we do at Domino's is enhanced by our best-in-class franchisees, the E in our Hungry for More strategy. We'll be hosting thousands of franchisees for our worldwide rally in May, where we plan to bring our Hungry for More strategy to life across our global system. I can't wait for that gathering as our franchisees are what makes Domino's so special. They were the inspiration behind Hungry for More. So to close, I couldn't be more excited about 2024 and beyond for Domino's Pizza. Our first quarter results clearly show that our strategy is resonating with customers. This gives me great confidence that we can deliver against our short and long-term hungry for more goals and drive significant value creation for our shareholders. With that, I'll turn things over to Sandeep.