Domino's Pizza, Inc.

Thank you for standing by and welcome to Domino's Pizza's second 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 this session, you'll need to press star 11 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 11 again. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Greg Lemenchek, Vice President of Investor Relations. Please go ahead, sir.

Good morning, everyone. Thank you for joining us today for our second 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 8 earnings release to find disclosures and reconciliations of our 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. And with that, I'd like to turn the call over to Russell.

Thank you, Gray. And good morning, everybody. Our second quarter performance demonstrated once again that our Hungry for More strategy is delivering positive results. For the second straight quarter, we drove U.S. comp performance in the healthiest way possible through profitable order count growth, positive order counts in our delivery business, positive order counts in our carryout business, positive order counts across all income cohorts. We also continued to see improvement in our international comps and generated earnings that were in line with our expectations. As a result of our strong results year to date, and expectations for the back half of the year, we remain on track to achieve our guidance for annual global retail sales growth of 7% or more and operating profit growth of 8% or more. I want to provide an update on our net store growth guidance, which we temporarily suspended this morning. First, I want to reiterate that our U.S. pipeline is strong and it continues to grow. We continue to expect 175 or more net new stores annually in 2024 through 2028 in the US. We now expect to fall below our net store growth target for international in 2024 by approximately 175 to 275 stores, primarily as a result of challenges in both openings and closures faced by Domino's Pizza Enterprises, DPE, one of our master franchisees. We're partnering closely with DPE as they work through this process. Now it's important to note that our largest expected growth markets of China and India remain on track to deliver on their growth potential. In China, DPC Dash announced they'll open store number 1,000 by the end of this year, and then they'll increase their net openings per year to between 300 and 350, starting in 2025. Back in May, Jubilant, our master franchisee based out of India, increased its total store count potential to 5,500 over the medium term in the six global markets in which it operates. When you think that it took Domino's over 60 years to open 5,500 stores in the United States, Jubilant's goal exemplifies the hungry for more mentality our global system is taking on. Now let's look at our second quarter results through the lens of our M-O-R-E, hungry for more pillars, which continue to drive our business. As you know, M stands for the most delicious food. We know we've got the most delicious food in the industry and are focused on showcasing that with more mouthwatering food photography in all of our marketing and our sales channels. We launched our New York-style pizza in Q2, and it's what we call innovation with intent. When we launch a new product, it's got a specific role, and it's intended to stay on the menu permanently. New York-style pizza is another example of that. It's got a crust that's thinner and more foldable than our traditional crust. It was designed to appeal to pizza lovers whose idea of deliciousness is a little bit different than Domino's pizza offerings in the past. The result has been a high mix of sales within our pizza offerings. In addition to being a product that showcases deliciousness in a different way, New York-style pizza is available as part of our mix-and-match offer. Domino's Rewards members can also redeem 60 points for a free medium two-topping New York-style pizza. This new offering drives more than just deliciousness. It drives value, and it drives more customers into our loyalty platform, and that's why we call it Innovation with Intent. 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. This is a series of three product training sprints focused on our dough, how we build and make our products, and then how we cook them. In Q1, we embarked on our first sprint, which focused on our dough, and are now rolling out our second sprint around ingredients and product builds. These product sprints and last year's Summer of Service are working together with our DomOS technology to drive improvements in our delivery times. In fact, estimated average delivery times were nearly 10% better in Q2 of 2024 than they were in Q2 of 2022. And we're doing all of this while our stores are handling more orders. So I wanted to congratulate our franchisees and operators whose commitment to service allows us to deliver on the promise we're striving to make in our marketing that Domino's has the most delicious food. Our third hungry for more pillar is R for renowned value. And as I've said before, it's not just about having the lowest price in the market. It's about providing value that's innovative and memorable. Renowned value breaks through the sea of seeing this discounts you see in the marketplace. Now, Domino's Rewards is an example of that renowned value. It continues to perform well and was the key driver of our strong U.S. comp performance in Q2. If you recall, our objectives for the program were to drive new users, particularly carryout customers, and increase the frequency of light users. I'm happy to report that Domino's Rewards continues to deliver on those objectives. Our active members are up significantly year-to-date through Q2, showing that the program is continuing to build. Redemptions across both the delivery and carryout channels are also increasing, which is contributing to the transaction growth you're seeing in each of our businesses. For example, in our carryout business, orders with a loyalty redemption in the first half of 2024 are twice as high, 2x, as they were in the first half of 2023 under our old loyalty program. So as Americans continue to look for value, Domino's is providing renowned value and doing it profitably for our franchisees. National promotions are another way we're driving renowned value. In Q2, we had two boost weeks, both of which were very successful in driving transactions and customer acquisition. As it relates to our promotional cadence in 2024, you can continue to expect around six boost weeks. While providing renowned value through our own channels is one part of our barbell strategy, tapping into the aggregator marketplace is the other. And our launch into this space remains on track to exit the year at 3% or more of sales coming through Uber Eats. Everything we do at Domino's is enhanced by our best-in-class franchisees. They're the E in our Hungry for More strategy. In early May, we hosted our largest worldwide rally with almost 9,000 franchisees and team members in attendance. This year's event was appropriately themed, hungry for more. We brought the strategy to life across our global system and the results showed. This was our most highly rated rally of all time. To close, I couldn't be more energized by the future of Domino's Pizza and seeing the excitement of franchisees at our rally really brought that to life for me and the leadership team. Our results show that our strategy is resonating with customers and our system All of this gives me great confidence that we can continue to drive significant long-term value creation for our shareholders. And with that, I'll turn things over to Sandeep.