Papa John's International, Inc.

Good day and thank you for standing by. Welcome to the Papa John's second quarter 2025 conference call and webcast. 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 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Heather Hollander, SVP of Investor Relations. Please go ahead.

Good morning, and welcome to our second quarter 2025 earnings conference call. Earlier this morning, we issued our second quarter earnings release, which can be found on our investor relations website at ir.papajohns.com under the news and events tab or by contacting our investor relations department. Joining me on the call this morning are Todd Penagore, President and Chief Executive Officer, and Ravi Sanawala, Chief Financial Officer and Executive Vice President International. 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 SEC filings. In addition, please refer to our earnings release and our investor relations website for the required reconciliation of non-GAAP financial measures discussed on today's call. Lastly, we ask that you please limit your questions to one question and one follow-up. And now I'll turn the call over to Todd.

Thank you, Heather, and good morning, everyone. I'm pleased to be with you today to discuss our better-than-expected second quarter results and provide an update on the meaningful progress we are making in transforming the business. It's been just over a year since I joined the Papa John's team, and we've accomplished a lot in a short period of time thanks to the hard work and dedication of our team members and franchisees. The progress we've made is substantial. For example, we've successfully returned the company to positive comparable sales and transaction growth in North America. With our barbell strategy and enhanced loyalty program in place, our brand strength has improved significantly, and strategic investments are enabling us to deliver great experiences for our customers. Taken together, I am confident we are on the right path towards profitable growth. Our goal is to be the best pizza makers in the business, and we are laser focused on continuing to execute our strategy to grow restaurant sales, generate sustainable profits through the system, and build long-term value for all of our stakeholders. I stepped into this role knowing that Papa John's was a resilient, one-of-a-kind brand with a commitment to quality ingredients, superior operations, and outstanding customer service. While the company had a great foundation in place, we needed to make additional changes to improve our operations and deliver better financial results, and we are. Over the last year, we've spent time in our restaurants, restaurant support centers, and QCCs across the company, and have been meeting with our franchisees, team members, vendors, and community partners Through these experiences, we learned a tremendous amount about the strengths and opportunities, and from there, quickly set our transformation in motion. One of my first priorities was building out the Papa John's leadership team. We supplemented our strong bench of existing talent with the addition of several key industry leaders to build a consumer-focused, insights-driven, experienced team with years of quick service restaurant, digital, and retail experience. With our team in place, we came together to establish a strong strategic plan built around five key priorities. Focusing on our core product and premium innovation, amplifying our marketing message across consumer channels, investing in our technology infrastructure, differentiating our customer experience, and partnering with and evolving our franchisee base. Our second quarter results, which exceeded our expectations, are evidence that our strategy is working. the North America business returned to positive comparable sales, ending the quarter up 1%. We also delivered sequential improvement across several key international markets, driving 4% comparable sales growth in Q2. Ravi will share additional details about our second quarter performance in a few minutes. But before he does, I'd like to review each of our five priorities and share more about the progress we've made against our plans to transform the Papa John's business. First, we are focused on improving our core product proposition and premium menu innovation throughout our restaurants. We're building a menu to not only capture the hearts and stomachs of customers, but also generate margins that improve profitability for our franchisees. Our consumer research consistently shows that exciting menu innovations bring in new customers. In the second quarter, we introduced cheddar crust made on our fresh, never-frozen original dough in our North American restaurants. Our cheddar crust innovation, combined with the addition of a fan-favorite chacaroni pizza as a long-term menu item, plus continued strong value message with our popular $6.99 pop-up pairings, delivered an increase in both the average number of pies per order and overall pizza sales versus last year. In Q2, the number of pizzas ordered increased 6%, demonstrating both the power of our deep focus on our core product as well as value. Internationally, we made global QSR news with the launch of our expertly handcrafted croissant pizza in our Dubai restaurants. Our croissant pizza pairs the flaky texture of a buttery croissant with the bold flavors of Papa John's pizza for an elevated pizza experience. After one year in development and extensive consumer validation, croissant pizza is a prime example of how our talented culinary teams are blending global food culture with the high-quality pizza craftsmanship that only Papa John's can deliver. We look forward to expanding the launch of this exciting product to other international markets. We're also making progress in our oven calibration work, which allows us to advance our innovation while also delivering greater product consistency across our restaurants. Our ovens are the single most important piece of equipment in our restaurants, and by regulating bake time and temperatures, we're able to improve our ability to deliver a consistent pizza with each and every order. Our oven calibration were kicked off in the first quarter, and we're already seeing benefits with improvements in our product quality and taste scores. This work also opens a variety of new product innovations and layers across our menu, including new crusts and formats. Beyond oven calibration, we are making great progress rebuilding our innovation pipeline, leveraging deep consumer insights, world-class suppliers, and our strong culinary team. In fact, our consumer insight work led us to develop an on-trend shareable pizza format and a new lineup of dipping sauces. These are two of the innovations that we'll be launching over the second half of the year as we lean into abundant value and expand into new flavor profiles. Turning now to the progress we've made on our second priority, which is to amplify our marketing message. We've been hard at work creating a marketing message that speaks to Papa John's differentiation among QSR pizza companies. At the end of June, we launched the second chapter of our popular Meet the Makers marketing campaign, leaning into the six simple ingredients of our fresh, never frozen original dough. Six simple ingredients is a strong point of differentiation with high importance among consumers. Our customers have told us that using simple, fresh ingredients is our biggest and most important differentiator. And we've doubled down on that message in our national marketing campaign. Consumers want high quality pizza with real ingredients, and our messaging strategy meets them where they are, emphasizing our points of differentiation and showcasing select core products at relevant price points. This will be part of our long-term strategy to win customers and deliver compelling four-wall economics. Ultimately, we think the world deserves better pizza. and we are here to deliver it. We continue to proactively invest in local marketing efforts at our company-owned restaurants. We've said it before, and we'll say it again. Pizza is a game played nationally, but won locally. In the second quarter, we invested approximately $9 million in incremental marketing versus last year. While a portion of this spend was allocated to working media to support, on a large scale, our improved value proposition, We also invested in our test and learn platform expansion to evaluate new promotions and CRM tactics. We are also leveraging analytics and a strong testing protocol to optimize the allocation of our marketing spend across channels, further improve our marketing ROI, and better meet customers where they are. As we continue to invest in marketing, we are continuously measuring and adjusting our mix towards the most efficient and effective use cases to drive long-term growth supported by data-driven insights. Overall, our targeted approach to amplify our marketing is paying off as we've seen continued improvement in our brand health, including a significant increase in consumer consideration following the launch of our Meet the Makers campaign. We've also grown our share of voice on social channels and launched compelling activations including Cheney Dirty Soda and Stress Doughballs, which are resonating particularly well with Gen Z. We're pleased to see that our work to strengthen and amplify our creative, advance our social presence, and optimize mix is increasing the impact of our marketing efforts. Our third strategic priority is investing in our technology infrastructure. Under Kevin Viscone's leadership, we are implementing our technology roadmap, with the goal of reestablishing Papa John's as a best-in-class technology leader in QSR. By better utilizing data and leveraging AI, we believe we can create a more seamless experience across our digital assets and own channels and better connect with customers. This work is especially powerful because it builds on the advancements we're making in marketing by inviting customers into the brand and then layering in hyper-personalization to drive additional engagement and retention. We're already seeing the benefits from this work with substantial engagement gains in our CRM platform, higher app conversion, and improving repeat purchase rates amongst our digital users. In April, we announced our partnership with Google Cloud aimed at transforming our customer experience from click to crust while driving operational efficiency in our restaurants. We are currently in the beta testing phase for new omnichannel experiences, including the planned introduction of an all-new customer-facing app that is designed to improve navigation, reduce clicks to purchase, and improve order tracking and targeted communication. Leveraging the power of AI, we plan to enhance the ordering experience, better anticipate our customers' needs, generate proactive recommendations, and share relevant offers and messaging based on learned customer preferences. We are also working to utilize voice AI solutions to drive customer orders and deliver operational efficiency. We look forward to updating you on this and many other exciting advancements. Our partnership with Google Cloud is only one of the mechanisms that we're employing to make the customer ordering journey more personalized, more consistent, and more impactful. With approximately 70% of our system sales generated by our own digital channels, we believe that building a more robust technology infrastructure will lead to higher revenue, improved operational effectiveness, and better returns on our marketing investments. Our fourth priority, differentiating our customer experience across all of our channels, underpins each of our strategic pillars, starting with our loyalty program. we continue to benefit from the lowering of our redemption threshold late last year and allowing members to unlock Papa Doe faster. Though this enhancement decreased our overall order ticket by approximately 100 basis points in the quarter, the benefits far outweigh the ticket impact. As a result of this change, we are acquiring new Papa Rewards members, more members are redeeming Papa Doe, and our loyalty customers are returning for their next order more quickly. All in, we have added approximately 2.7 million new loyalty accounts to our POPR rewards program since the November relaunch. The enhanced loyalty platform has proven to be a great customer acquisition tool for our brand while also driving higher order frequency among all customer cohorts. As we look ahead, we will continue to pursue opportunities to build on this progress and enhance our POPR rewards programs to drive additional activation, and recruit more new customers to our loyalty program. As a consumer-driven and insights-led brand, it is critical that we serve our customers on their channel of choice. That means continuing to partner with third-party aggregators. Pizza as a category is underrepresented on aggregator platforms, and we see many opportunities for category growth, as well as growth for Papa John's specifically. We were a first mover among QSR pizza companies in the aggregator ecosystem having first partnered with third-party delivery providers in 2019. We command a leading position in the category in terms of sales per store, and this has not changed with the entrance of competitors onto the platforms. Within the aggregator marketplace, we believe that the most successful players will be those who best serve the customers and provide the highest quality product. Papa John's, with our premium positioning, high-quality simple ingredients, and great value, has a strong competitive advantage. We are encouraged by the strength we're seeing within the aggregator channel as overall sales and orders continue to grow high teens in the second quarter versus the prior year. As we mentioned on our last earnings call, our mystery shop study revealed that our carryout and digital platforms were top in class among QSR pizza restaurants. It also showed us that we need to improve our delivery experience and we are taking action to do just that. For example, We are currently rolling out a system-wide delivery tracking service that will provide better driver tracking for our customers so they will know exactly when their hot, made-to-order pizza will arrive at their doorstep. Currently, approximately 60% of our restaurants offer our updated delivery tracking service, and we expect to substantially complete this rollout to all North American restaurants by the first quarter of 2026. Delivery is a very important component of our business. and we are committed to consistently providing a great delivery experience. Finally, our operations team have been hard at work improving execution and delivering a more consistent experience in our restaurants. Through restaurant visits and evaluations, coaching, and tools to improve product quality, we are improving our customer satisfaction scores in line with our goal to be the best pizza makers in the business. Our fifth strategic priority is partnering with and evolving our franchisee base to drive profitable growth through market share gains, accelerating restaurant development in our most impactful markets, and sustainably improving our restaurant economic model. After the quarter closed, we signed an agreement for the sale of our ownership stake in a joint venture that operates 85 restaurants. We expect the transaction to close by the fourth quarter of this year. and we plan to use proceeds to fund investments in our strategic initiatives as well as pay down debt. We also continue to evaluate re-franchising opportunities across our portfolio of company-owned restaurants in North America. We believe that re-franchising with strategy-forward, well-capitalized, and growing franchisees strengthens the long-term health of the Papa John's system and unlocks future growth opportunities. Finally, we are working to improve the four-wall economics at all Papa John's restaurants, and we have completed an extensive review of our North American supply chain to reduce overall costs to serve. We have identified an opportunity to achieve more than $50 million in total cost savings, with approximately 40% expected to be realized in 2026. Through a series of initiatives, we will optimize our supply chain and enhance productivity while maintaining the same high-quality, better ingredients in our restaurants. Overall, we plan to deliver margin improvement of at least one percentage point to our average North American restaurant once the program is fully ramped by 2028. As I reflect on my first year as Papa John's CEO, I am highly encouraged by the early progress we've made against our strategic priorities. We're attracting new customers to the brand while driving incremental purchases from existing customers. We've substantially improved the value proposition for Papa John's while also improving our quality perception. We're rebuilding the innovation pipeline. We're driving growth and higher utilization amongst our Papa Rewards members. We've developed marketing messages that are resonating with our most important customers. We've established a plan to deliver significant cost savings to our franchisees without compromising the customer experience. And we've implemented our technology roadmap with the goal of reestablishing Papa John's, as a best-in-class technology leader in QSR. Importantly, we've returned the brand to top-line growth while making strategic investments in innovation, marketing, and technology to drive profitable growth in the future. We've made a great deal of progress in the last year, but our work is just getting started. We recognize the significant opportunity ahead and are moving forward with enthusiasm and determination as we implement our plans and build on the foundation we've established. We are in a solid position to deliver sustainable value creation to all stakeholders as we move into the second half of 2025 and beyond. And with that, I'd like to turn it over to Ravi to discuss our second quarter financial results in greater detail.