Papa John's International, Inc.

Thank you for standing by and welcome to Papa John's fourth quarter 2021 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 one on your telephone. Please be advised that today's conference may be recorded. Should you require any further assistance, please press star zero. I would now like to hand the call over to Chris Collins. VP of Treasury and Tax.

Thank you, Operator. Good morning. Joining me on the call today are President and CEO Rob Lynch and CFO Ann Gugino. Rob and Ann will comment on our business and provide a financial update. After the prepared remarks, both will be available for Q&A. Our discussion today will contain forward-looking statements involving risks that could cause actual results to differ materially from these statements. Forward-looking statements should be considered in conjunction with the cautionary statements in our earnings release and the risk factors included in our SEC filings. Please refer to our earnings release in the investor relations section of our website for a reconciliation of non-GAAP financial measures discussed on this call. Finally, we ask members of the media to be in a listen-only mode. Now I'd like to turn the call over to Rob Lynch for his comments.

Rob? Thank you, Chris, and welcome, everyone, to our 2021 year-end earnings call. I'm so excited to be here this morning and share our results for the fourth quarter and for 2021. The Papa John's team and franchisees delivered another fantastic year. We sustained our double-digit growth in share gains for a second consecutive year. Papa John's system-wide sales reached $4.9 billion, up 15.4% in constant currency. Comparable sales increased by 11.8% in North America and 13% internationally, on top of 2020's double-digit gains. On a two-year basis, comps rose a remarkable 29.4% in North America and 25.6% internationally. AUVs in North America grew 12% year-over-year and now exceed 1.1 million. I'm proud to say that our restaurants are highly profitable and that our franchisees are well-positioned to invest in growth. Our favorable unit economics drove a resurgence in new store openings last year and led to multiple historic development deals for the brand that will significantly expand our presence across the U.S., Europe, Latin America, and China. We also achieved impressive bottom-line results last year. Operating income rose over 85% versus 2020, and adjusted EPS reached an all-time high of $3.51 per diluted share, a 150% increase year over year. These results demonstrate Papa John's ability to sustainably grow and deliver great value for our customers, franchisees, and shareholders year after year. even during the most uncertain and difficult business environment that any of us have ever experienced. Papa John's is well positioned for another great year in 2022. This morning, I'd like to dive into the foundation's underlying Papa John's sustained comp growth and development momentum. They are a differentiated strategy, the innovation and hard work of our team members, and the commitment of our franchisees. I also want to address the current macro environment both the high consumer demand that we are experiencing as well as the impact of labor shortages, which Omicron has exacerbated in Q1. I'll finish with some comments on our outlook for 2022 and for the long term, and will then provide additional color on our financial results and outlook. I'll begin with our innovation across menu, technology, customer experience, and delivery channels, which is driving Papa John's sustainable comp sales growth. For Q4, North America comp sales rose 11.1%, building on 13.5% comps a year ago. International comp sales were also positive at 2.4%, lapping 21.4% comp growth a year ago. We achieved these results despite a very challenging staffing environment for our restaurant and supply chain throughout Q4 and into 2022. I want to emphasize, however, that we continue to see very robust demand in Q4, which has also continued into Q1, as I'll address in a moment. Papa John's is successfully meeting this strong demand and driving system-wide comp sales growth and improving unit economics by focusing on new product platforms, ticket add-ons, and premium limited-time offers. In late December 2020, we launched our biggest new product platform in the company's history, Epic Stuff Crust, which maintained a strong order mix throughout 2021 and continued to drive ticket and customer traffic in Q4. At the onset of 2022, we launched New York Style Pizza. New York Style is a new way for pizza lovers to experience Papa John's fresh, never-frozen, six-ingredient original dough, featuring eight oversized slices on a thin, foldable crust. New York Style crust has proven to be popular with customers and highly incremental. The combination of Epic Stuff crust, and New York-style pizza is a key element of our positive outlook for Q1, as we lap last year's record Q1 sales, our highest in the history of the company. Turning to our digital innovation, in 2021, digital sales through our app, website, and aggregator partners represented over 75% of our domestic sales, up more than 300 basis points from 2020 and 1,000 basis points from 2019. The success of Popper Rewards, our loyalty program, has helped drive this expansion. Popper Rewards allows us to directly engage our customers with targeted, personalized offers that drive higher frequency, higher ticket, and higher satisfaction. As I've said before, Popper Rewards members are our most valuable customers. Continued investment in one-to-one marketing capabilities is a big part of our plan for 2022 and beyond. We now have nearly 23 million Popper Rewards loyalty members as of the end of 2021, up from 17 million at the end of 2020 and 12 million in 2019. Third-party delivery aggregators have been another focus of our digital innovation and strategy, contributing materially to our strong comp sales and industry outperformance in the fourth quarter and throughout 2021. Our partnerships with aggregators bring additional customers to the brand, driving incremental and profitable transactions, benefiting us, our customers, and our aggregator partners. Aggregators also have helped us manage the intensified labor shortage that the restaurant industry has experienced, exacerbated in January by Omicron, by providing us supplemental delivery drivers, especially during peak times. Now turning to Papa John's Accelerating Development Programs. In 2020, we talked to you a lot about the steps we were taking, including improving unit economics and rebuilding our development team and capabilities so that we would be prepared to fully implement our strategy in 2021 and take advantage of the tremendous white space available to Papa John's. As I've said in previous calls, Papa John's development opportunity is very robust given our underpenetration relative to other global brands. In 2021, we had one of our best years ever in terms of the number of net new stores we opened. All of this great work by our development team resulted in 250 net new restaurants in 2021, which represents 4.5% unit growth. We opened nearly 400 restaurants in total last year. Our team also delivered a record year in terms of the long-term development deals that we signed with highly experienced, well-capitalized franchisees. We are growing with both our existing franchisees who are enjoying more attractive returns than ever before, as well as new franchisees. In August, we signed a new deal with Drake Food Service International, already our largest international franchisee, to open 220 restaurants by 2025 across Latin America, Spain, Portugal, and the UK. In September, we signed our largest domestic development deal ever, Welcoming Sun Holdings, a highly experienced multi-brand franchisee to the Papa John's brand. Sun Holdings will open 100 new stores across Texas and the South by 2029. We're very excited about the long-term potential of this partnership. Last month, we announced an agreement with FountainVest Partners to open over 1,350 new stores across South China by 2040. We believe this is the largest development deal ever announced in the pizza industry. This partnership alone stands to grow Papa John's global unit count by 25%. FountainVest is a great partner. a long-term oriented private equity firm with strong operational focus. I should also point out that this deal only covers southern China, which underscores our excitement about Papa John's vast remaining development white space in other areas of China. Now turning to the current market environment. As I've said on past calls, the restaurant industry has faced and managed staffing challenges since long before the pandemic. These intensified with the increased demand for employees in the service industry as the economy recovered last year. In early 2022, Omicron further exacerbated the situation, given the spike in infection rates and number of people out sick or quarantined at home. Throughout Q1, our restaurants have been at their lowest staffing levels since the beginning of the pandemic. This has impacted customer service and, in limited cases, our ability to deliver or take orders. We continue to proactively communicate to our loyal customers, providing updates and conveying our gratitude for their patience. I couldn't be more proud of our franchisees, our operators, and our team members. They have all been working harder than ever to continue to safely serve their customers and communities. Every day we benefit from their dedication to manage through staffing constraints. The good news is that Omicron infections seem to have peaked in early January and are rapidly declining. Throughout these challenging times, we have seen consumer demand for Papa John's Pizza as strong as ever. As we look beyond Omicron, we anticipate the labor market will improve, but will continue to be tight as it has been for the past two years. We will continue to strive to be employer of choice in our industry and have taken many actions to create a strong culture and support our people. We have invested in wages and continue to offer our team members hiring and referral bonuses, as well as expanded health wellness, paid time off, and access to college education. More and more employees are taking advantage of Doan Degrees, our college tuition program, which provides access to an online degree free of charge to corporate team members. We are also creating an environment where everyone belongs, which is one of Papa John's core values. Last year we received multiple workplace recognitions. For example, we were included in Forbes' list of the world's best employers in and America's Best Employers for Diversity. Last month, we were honored again to receive a top score from the Human Rights Campaign on its 2022 Corporate Equality Index, which recognizes the top companies for LGBTQ plus workplace inclusion. These are a few of many examples of how we continue to build a culture of leaders at Papa John's who believe in diversity, inclusivity, and winning. Now to address commodities. Supply chain challenges and inflation continue to impact businesses across the globe, affecting the cost and availability of ingredients, supplies, and equipment. As we've done throughout the pandemic, in Q4, we were able to protect margins and offset those costs, thanks in part to our world-class supply chain and procurement teams, as well as the operating leverage created from our comp sales growth. As I said earlier, Papa John's ticket growth over the past couple of years has predominantly come through new premium products, and add-ons that have allowed customers to self-select and do our higher-priced innovation. This gives us more room today to manage and offset external cost pressures through pricing actions while continuing to deliver quality and value to our customers. Also, since our value proposition is focused on delivering premium value, not around specific low price points, we have more flexibility around our pricing. I'd like to conclude with a few comments on Papa John's outlook for 2022 and the long term. As I just discussed, the global pandemic continues to present near-term uncertainty for our industry and for Papa John's. However, we continue to expect Q1 comp sales to be slightly positive in North America, based on performance so far this quarter and despite staffing challenges related to Omicron, which were not contemplated in the outlook we provided on our Q3 2021 call. That said, given the consistent strength of our strategy, our team, and our results over the past two years, our outlook for the balance of 2022 is for sustained positive comparable sales growth as we lap our biggest first quarter and fiscal year in the company's history. In addition, our goal continues to be to take share in the pizza category while leveraging our differentiated strategy and premium position to protect margins in the face of commodity and labor headwinds. We're excited about our plan to accelerate development from the 250 net units we added in 2021 to between 260 and 300 net new restaurants globally in 2022. At the midpoint of the range, this represents approximately 5% growth on our total system-wide unit count. Papa John's momentum today gives us more confidence than ever that we are positioned to consistently and sustainably deliver strong sales growth beyond 2022. Our view of our long-term unit opportunity, both domestically and internationally, continues to expand as we sign historic deals to develop within key areas of white space. Last but not least, the purpose and values that have been the foundation for our progress and that guide our team members are as strong as ever. We continue to move closer to our goal of becoming the world's best pizza company, and I look forward to sharing more color on our path to that goal throughout the year. I'll now turn the call over to Anne to discuss our financial results as well as provide some more color on fiscal 2022 in Q1. Anne?