Domino's Pizza, Inc.

Thank you for standing by and welcome to Domino's Pizza's third quarter 2024 earnings conference call. At this time, all participants are in a 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 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, Greg Lemicek, Vice President, Investor Relations. Please go ahead, sir.

Good morning, everyone. Thank you for joining us today for our third 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 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. What I'd like to do is begin today's call by giving an overview on the restaurant space as I see it across the globe. When we introduced our Hungry for More strategy back in December, we knew consumer spending would be pressured in 2024 and that the QSRs that offered the strongest value would win. That proved to be right and at Domino's leaning into our strategic pillar of renowned value has been key to our success in 2024, especially in the US. As the year has progressed, competitors have followed our lead and we've seen increased intensity around value within QSR Pizza. I believe value will continue to be in demand from customers around the world and know that you're hearing the same thing from my peers as macroeconomic and geopolitical issues continue to pressure the industry. In these times, I believe the best measure of a company's current and future success are the share gains that it achieves. In Domino's U.S. business, we are doing just that, gaining share. Our team and franchisees are delivering incredible results despite a more challenging environment. Through the first three quarters of the year, our retail sales are up 6.6%. and a QSR pizza category that's growing at less than 2%. Hungry for More is driving the critical metric to long-term success in this business, more market share. This was our fourth consecutive quarter of same-store sales growth since launching Hungry for More, proof that our strategy is working. Importantly, and something I think continues to be unique in the industry right now, it was also our fourth straight quarter of positive order count growth. Profitable order count growth is the key to improving what are already best-in-class economics for our U.S. franchisees. These economics have been a proven driver of store growth as well, which, of course, is another way we drive market share. For example, from 2015 to 23, Domino's opened approximately 1,750 stores. If you look at our top QSR pizza competitors in aggregate, they closed almost as many stores as we opened during that same time period. Today's order count growth drives tomorrow's order count growth as well because the strength of Domino's Rewards brings members back for repeat purchases in the future. Domino's Rewards continues to perform well with a key driver of our U.S. comp performance in Q3. We've officially passed the one-year anniversary of the program. Happy anniversary, Sadiq. and I expect it to continue to play a critical role driving the business for the next several years. That's because Domino's Rewards is achieving our goals of driving more light users and carryout customers. In addition, we have grown our overall active members significantly in 2024, allowing us to engage more customers and drive frequency with targeted marketing efforts. Looking to Q4, Domino's will give customers what they are demanding from their QSR brands, more. We opened the quarter with our more inflation deal. At a time where consumers are feeling that they're getting less and paying more, more inflation showed them that Domino's was in their corner, giving them more for less. We followed this up with a 50% off boost week. And next week, one of our biggest renowned value promotions ever will go back on air, emergency pizza. While providing value through our own channels is one part of our renowned value barbell strategy, tapping into the aggregator marketplace is the other. In Q3, we saw a nice acceleration as we grew our percentage of US sales coming through Uber to 2.7%. Importantly, incrementality in this channel has continued as expected since these customers have been less sensitive to the economic pressures that I discussed earlier. As you know, hungry for more drives more, though, than just renowned value. New products are an important way that we can bring to life the most delicious food pillar of our strategy. We launched our new mac and cheese in late September. This offering in our pasta lineup is available in five cheese and spicy buffalo, and for those who care, I add a little bacon to mine. We originally launched our pasta platform in 2009. And this is the first time we brought product news to the line since then. I'm excited at what this can mean for mac and cheese and, frankly, the entire pasta portfolio. A year into Hungry for More, I hope our innovation with intent approach to new products is becoming clearer to all of you. With mac and cheese and last year's pepperoni stuffed cheesy bread, we're bringing news to reignite our existing non-pizza platforms. And with New York-style pizza, we brought in customers who preferred a pizza offering we didn't have in our portfolio. In summary, we're delivering against our hungry for more goals for both sales and stores in the U.S. With the slate of initiatives we've got out in front of us, I continue to believe that we will deliver U.S. same-store sales growth of 3% or more annually. And that's why I expect Domino's to continue to drive additional market share gain. Now I'd like to talk about our international business. Retail sales were up 6.5% through the first three quarters of this year. While that growth is in line with the global pizza category, it is not in line with our expectations nor our historical performance. Recall Domino's International has averaged more than 10% global retail sales growth over the past decade through 2023. And while we remain on track for a remarkable 31st straight year of international same-store sales growth, The combined impact of macroeconomic pressures, geopolitical issues, and the underperformance we are experiencing is creating a drag on our international sales. Given this performance, we believe planning for approximately 1% to 2% same-store sales growth for 2024 and 2025 is a more realistic expectation before we return the business to a more normalized level in 2026. As you know, our international business, which is approximately half our global retail sales, represents less than a third of our profits due to our asset light master franchising model. As a result of this dynamic, shifts in international sales have less impact on company profits. Therefore, I don't expect the softness in our international business to significantly impact our operating profit goals. And Sandeep will go more into this during his remarks. You should know our team is hard at work with our international master franchisees to create momentum in their markets, even in the face of headwinds. We know what works in today's challenging environments. It's evident in the results that we're achieving in the US. So we're engaging with our master franchisees to implement the strategies and tactics we know will drive incremental sales and profits. In some cases, they've simply been a little bit too slow to react to shifting consumer behaviors. So we're focusing on three key areas. All of them are centered around renowned value. First, more aggressive promotional pricing that drives a consistent value message to customers. Second, maximizing orders from aggregators where many of our markets have opportunities remaining to gain their fair share on these platforms. These orders continue to be incremental due to the higher income customer that uses them. And finally, taking a page out of the US playbook diversifying beyond delivery to drive another growth lever and carry out, or in some places, guidance. Our international business has so much potential, and by implementing the plans and strategies I've outlined, we expect to continue to create sales momentum that will produce the same kind of market share gains and net store growth we've achieved in the past. In closing, what I want to do is reinforce with you the same message that I repeatedly share with our team. In the 16 years I've been at Domino's Pizza, we have always been in the business of creating our own tailwind and driving share growth. That has been, and through our Hungry for More strategy, will continue to be how we drive best-in-class results and long-term value creation for our shareholders. With that, I'd like to hand it over to Sandeep.