Papa John's International, Inc.

Good day, and thank you for standing by. Welcome to the Papa John's second quarter 2022 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 the session, you will need to press star 11 on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Stacey Frohl. You may begin.

Thank you. Good morning and welcome to our second quarter earnings conference call. This morning we issued our 2022 second quarter earnings release. A copy of the release can be obtained on our investor relations website at ir.papajohns.com under the news releases tab or by contacting our investor relations department at investor underscore relations at papajohns.com. On the call this morning are Rob Lynch, our president and CEO, and Ann Gugino, our CFO. Before we begin, I need to remind you that comments made during this call will include forward-looking statements within the meaning of the federal securities laws. These statements may involve risks and uncertainties 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 FCC filings. In addition, Please refer to our earnings release for the required reconciliation of non-GAAP financial measures discussed on today's call. Lastly, let me thank you in advance for asking only one question and getting back in the queue for more follow-ups. Rob?

Thank you, Stacey. Good morning, everyone, and thanks for joining us today. Before we begin, I'd like to welcome Stacey to her first Papa John's earnings call since joining the company in May. Many of you have already met with her or will have the opportunity soon. as we ramp up our outreach and shareholder engagement over the coming year. She has a very strong finance and IR background, and we're excited to have her as a part of our team. This morning, my remarks are going to focus on Papa John's top-line sales growth, how we're navigating this dynamic environment, and our continued development momentum. I want to start off by saying I'm so proud of our team members and franchisees. Thanks to their hard work and dedication, we delivered our 12th consecutive quarter of positive comparable sales in North America, building on our significant gains over the past two years. And we delivered these results despite an increasingly difficult macro environment. This proves the resiliency of our differentiated brand, product innovation, digital capabilities, and winning culture. In fact, weekly per store average sales across every one of our markets are higher today than they were before the pandemic, and our franchisees continue to grow and prosper. That being said, accelerating commodities and labor costs impacted unit economics, margins, and operating income in the second quarter. But with continued strategic price increases and the strong performance from our premium price menu innovations, we were able to partially, but not completely, offset these higher costs. As consumer sentiment continues to soften, I'd like to reiterate a point I've made before. Pizza offers tremendous value relative to other QSR, fast casual, or casual dining concepts. For this reason, the segment has been historically resilient through past economic cycles. Because we invest in better ingredients, consumers recognize the superior value already offered by Papa John's Pizza and can feed their family a delicious, high-quality meal very affordably. As we have discussed in the past, our loyalty program and one-on-one marketing capabilities offer more price-sensitive customers compelling incentives to order our high-quality pizza at great value. At the same time, those customers who are less price-sensitive are targeted with opportunities to self-select into our premium innovations, bifurcating our customer base and maximizing profitability for our restaurants. We're navigating this dynamic environment with a balanced approach to optimize short-term results while investing for our future. This positions us even better for long-term growth and margin accretion when the commodity cycle reverts and costs eventually normalize, which we expect heading into 2023. Our long-term perspective and optimism are also reflected in our franchisees' development activities. We continue to open new stores and sign significant new development deals, further validating and supporting the brand's long-term potential. In the second quarter, we delivered positive sales growth on top of best-in-class growth over the last two years. Comparable sales in North America rose 1%, contributing positively to a three-year stack of 34%. Driving these positive comps were premium menu innovations, technology integrations with third-party aggregators, and our revenue management capabilities, which allowed us to strategically execute pricing actions while maintaining demand. Our brand's unique promise of better ingredients, better pizza, combined with our menu innovations and popular rewards loyalty program, enables us to provide strong value to each customer segment at the right price. In the current environment, there is always temptation to chase transactions through aggressive discounting. As we evolve our revenue management capabilities, we have instilled a disciplined approach to provide the right promotions, to the super value-oriented customer without risking the erosion of our brand or pricing integrity. Since the beginning of the year, menu prices on average at Papa John's have risen approximately 7% to 8% system-wide. From a menu innovation standpoint, our epic pepperoni stuffed crust pizza, introduced in April, has been a huge hit with customers. It is strengthening our stuffed crust menu platform, which is driving orders and some of the highest percentages of customers expressing an intent to repurchase that we've ever seen. We're also excited about our innovation pipeline for the second half of the year, as we balance the introduction of new innovations with bringing back fan favorites. Additionally, our efforts over the past few years to build strong partnerships with each of the nationwide third-party delivery aggregators continues to be a strategic differentiator for us. We are dedicated to meeting our customers where they are And these partnerships provide us with a new opportunity for consumers to discover our brand through an incremental sales channel and an ability to leverage their incremental delivery capabilities, particularly at peak times. In our international business, comps declined 8%, though still delivered a three-year stack of 19%. These results primarily reflect declines in the U.K., our largest international market, which is experiencing some of the same challenges that we are facing here in the U.S., and some unique to the UK. They have seen record high inflation, the lapping of government stimulus, the VAT tax holiday, and the lifting of COVID restrictions, which may have disrupted normal industry seasonality last year. As we mentioned on our first quarter call, we have strong leadership overseeing our international business and the UK. This team is focused on differentiating the brand from our competitors, growing our share in existing markets, and efficiently scaling in new markets. Excluding the UK, our other international markets remained healthy in the quarter, lapping two strong years of positive comp growth. In the U.K. specifically, and our international markets more generally, we see enormous opportunities to apply the model we have developed in the U.S., including our revenue management capabilities, product and technological innovation, and third-party delivery relationships to achieve significant gains in restaurant-level profitability in the future. which will help fuel further development acceleration outside the U.S. After two years of double-digit comp growth, when our top priorities were keeping our employees and customers safe and meeting customer demand, today we're operating in a very different environment. This is providing the impetus to focus our innovation mindset on our operations to improve customer service and delivery capabilities and efficiencies, which will grow long-term restaurant profitability across the system. To optimize labor, we are evolving our management tools and systems to improve execution. Over the last few years, we've made significant operational changes. We introduced centralized call centers, partnered with third-party aggregators, and improved efficiencies through equipment innovation. With these and more improvements underway, we are currently working to build new labor optimization tools to increase restaurant profitability moving forward. We're extremely excited about our new unit development growth story. as there are significant market expansion opportunities in North America and internationally. We already have development agreements in place with nearly all of our top 25 North American franchisees, versus only three in 2019. And we are actively pursuing new deals with highly experienced, well-capitalized franchisees around the globe. In the second quarter, we opened 47 net new units, consistent with our expectations. and plan to open between 280 and 320 net new units for the full year of 2022. We continue to sign new deals, which further reinforces our confidence in our multi-year development goal to grow global net units by 6% to 8% annually for fiscal 2023 through 2025, continuing the acceleration we have seen over the past year. When franchisees open up new Papa John's restaurants, or sign a new development deal, they're making a long-term investment decision. Q2's solid development activity and new deals are a strong indicator of our brand's long-term momentum and profitable growth potential. Now I'd like to turn the call over to Ann to discuss our financial results in greater detail. Ann?