Papa John's International, Inc.

Hello, and thank you for standing by. Welcome to Papa John's fourth quarter and four-year 2025 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 the question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. We ask that you limit yourself to one question and one follow-up. I would now like to hand the call over to Heather Holliday. You may begin.

Good morning, and welcome to our fourth quarter and full year 2025 earnings conference call. Earlier this morning, we issued our 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 Pettigore, President and Chief Executive Officer, and Robbie Sannawalla, Chief Financial Officer and President, North America. 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. 2025 was a year of transformation for Papa John's as we made improvements across the company to our brand health, technology platform, innovation pipeline, customer experience, restaurant fleet, and cost structure. These actions, together with key leadership appointments and organizational changes, represent meaningful progress against our transformational objectives. We have substantially improved our brand health, as well as our value and quality perception with our customers, which will translate into market share gains. We achieve growth and higher utilization amongst our loyalty members or our most valuable customers, increasing loyalty orders redeeming Papa Doe from 24% last year to 48% at the end of 2025. In our international business, we've delivered five consecutive quarters of positive sales comps. We have made progress against our technology road map, with the goal of establishing Papa John's as a best-in-class technology leader in QSR. We established a plan to deliver at least $60 million of system-wide supply chain cost savings to our company and franchise restaurants without compromising the customer experience. We identified at least $25 million of non-customer-facing corporate cost savings to be realized through 2027. And we ended the year meeting or exceeding our updated guidance targets, while investing $21 million in supplemental marketing year over year to support our value proposition and our franchisees. As we work to build on this momentum, I am even more confident in Papa John's' well-positioned for meaningful medium and long-term growth and value creation than I was at this time last year. Still, our progress is just beginning, and near-term performance is mixed as our transformation initiatives begin to take hold. For example... From a consumer lens, in the fourth quarter, we saw strength in our loyalty customers and existing customers in North America. However, new customer acquisition was lower than last year, which pressured comparable sales. From a product perspective, Core Pizza remains resilient. We continue to see consumers buying more pizzas overall, with the total number of pizzas sold actually increasing 1%, as well as improvement in orders that included multiple pizzas. On the other hand, single pie orders declined during the quarter, and total pizza sales declined low single digits as our order mix shifted towards smaller, non-specialty pizzas. From a geographic perspective, we delivered strong 6% comparable sales growth internationally, driven by strength across key markets in the Middle East, Asia Pacific, and Europe. Performance highlights include 7% comp sales growth in the UK, as the market benefited from our transformation work. As for fulfillment channels in North America, we were pleased that our carryout business returned a low single digit order growth supported by the 50% carryout offer in November. There was also notable strength in Uber Eats performance. This upside was offset by year over year order declines in total delivery. As we look to 2026, we are positioning the business to win in a category that has staying power and growth opportunities. Pizza is a go-to for families and friends in everyday moments, special occasions, and gatherings. And that deep-rooted consumer affection ensures pizza remains one of the most durable food categories. By being the best pizza makers in the industry, I am confident Papa John's will capture this global market opportunity. Our two largest opportunities to gain share are building on the advancements we've made in value perception, and leveraging our rebuilt innovation pipeline to win new customers, elevate our pizza order mix to more premium pizzas, drive add-ons, and expand our total addressable market. Let me share more on each, starting with our value proposition. In the fourth quarter, promotions such as our 50% carry-off deal, 999 Create Your Own Pizza, and our popular Papa pairings were effective in improving our value perception scores. which increased mid-single digits compared with last year, even as QSR peers introduced aggressive new promotional offers. We'll continue to pulse compelling promotions to meet the customer where they are. We're also significantly evolving our promotional intensity across a third-party ecosystem to drive strong performance across all aggregators. Second, a steady dose of innovation is critical for new customer acquisition, and our innovation engine is firing on all cylinders. We are rolling out exciting new products that are showcasing our Better Ingredients, Better Pizza brand promise in new ways and delivering new products customers have requested. At the end of January, we launched our Pan Pizza platform. Following extensive culinary research and development, our teams have crafted an elevated, differentiated pan pizza experience using our premium ingredients and featuring our signature sauce. a six-cheese artisan blend, and a fluffy, soft interior with a crispy garlic parmesan crust. Pan Pizza fills an important menu gap for us, and it raises the bar on a nostalgic type of pizza that we know our customers love. While early, Pan Pizza Mix is performing above expectations, and we plan to build momentum off the Pan Pizza launch, driving trial and awareness of this outstanding product. We're also excited to expand pan pizza into several priority international markets in the coming months. Our innovation pipeline expands our aperture beyond traditional QSR pizza and is designed to drive incremental sales and attract a broader customer base throughout the day without complicating our make line. For example, we're testing oven toasted sandwiches in North America and will soon begin testing in certain international markets. to provide a handheld option at an accessible price point. These chef-crafted sandwiches are made on bakery-fresh ciabatta bread and packed with innovative flavors and high-quality meats, brushed with our signature garlic sauce. We are pleased with the early results of this new growth platform, with our new sandwiches increasing sales of non-pizza items in test markets. Part of our product innovation work in 2026 is centered around crafting compelling side items at accessible price points, which we believe will entice customers to look beyond the center of the plate and drive benefits to total ticket, sales, and four-wall margins. As we elevate our offerings outside of core pizza, in the UK, we're serving up new crispy coated chicken tenders alongside new dipping sauces, and we are pleased with the early results, increasing sales of side items. We plan to build upon these learnings for chicken innovation in the U.S. Our innovation is supremely customer-centric and insights-driven. We recently piloted a protein crust pizza featuring an industry-first protein-infused dough that aligns with the customer's desire for protein-rich options. When paired with our premium toppings, this pizza delivers up to 55 grams of protein per serving, with 23 grams in the crust alone. Customer feedback during the test was highly positive. Though we are still in the early development phase, the protein crust pizza is an example of how we're rebuilding our innovation pipeline and aligning with the trends that matter most to our customers. The foundational work we have done to recalibrate our ovens, adjust bake temperatures, and optimize bake times has made our expanded innovation pipeline possible and has improved product quality and consistency. At Papa John's, innovation extends beyond the menu. We're also building partnerships with notable brands and strategic collaborations to introduce Papa John's to new customers. We're putting innovation behind these partnerships with a new single serving pizza soon joining our menu lineup. While it's too early to share the details about these partnerships, we're excited about what's ahead and look forward to providing updates in the coming months. We expect the benefits of a sharpened comprehensive value proposition along with consumer-led data-driven product innovation to win new customers, drive incremental orders from existing customers, and improve order mix on the path to sustainable, profitable top-line growth. With the competitive dynamics in the QSR marketplace, we are equally focused on sharpening our marketing message. We know pizza is a game played nationally, but one locally. I'm thrilled to share that we have re-established co-ops across 50 markets in the United States, which includes the majority of our priority markets. These co-ops enable franchisees across regions to pool resources for more effective localized targeting and brand support. Now, nearly half of our North American system-wide sales are supported by an advertising co-op with collaborative local campaigns. As we bring innovation to market, we are supporting our product launches with an all-new creative platform developed in partnership with our new agency of record. We'll continue to anchor on our six simple ingredients promise, these new campaigns will also connect with customers by leaning into culture-forward omni-channel storytelling. For example, as we prepared for our pan pizza launch, we launched a comprehensive campaign built around online video, social and owned channels, TV, influencer and media activation, and widespread press outreach. Earlier this month, we launched a campaign to be the first national pizzeria to be awarded a Michelin star with Pan front and center because we know great pizza deserves a star. Our messaging around Pan is performing well, especially among younger consumers with strong purchase intent and desirability results. Investing in technology and our tech stack is essential to being at the forefront of digital leadership in QSR and elevating the customer experience. Early in the fourth quarter, we launched our new omnichannel apps across both iOS and Android devices. This enhancement consolidates our apps onto a single modern code base, makes digital innovation faster and more efficient, and increases our agility in adapting to customer needs. The new app experience is delivering strong early results, outperforming our legacy platforms in reliability, with response times nearly 40% faster and in conversion, which has improved 70 basis points. To reduce complexity and improve workflow in our U.S. restaurant operations, we've partnered with leading food service technology provider, PAR Technology. Over the next two years, we will migrate from our legacy system to PAR POS, consolidating inventory management, make line operations, and AI-powered labor, inventory, and restaurant management systems onto one platform and enable real-time insights. The new system will utilize existing hardware, minimizing implementation expense, and accelerating deployment. A modernized POS, combined with 70% owned digital business, provides us with the powerful data and insights to inform our decisions and better serve our customers. Additionally, we continue to expand our partnerships with Google Cloud to transform digital ordering through its AI-powered food ordering agent. In the second quarter, we plan to launch an advanced voice and group ordering feature and frictionless reordering for Papa Rewards members. Together, these enhanced tools will simplify the ordering experience, reduce card abandonment, and shorten the path from app open to checkout. We will continue to leverage our strong partnership with Google Cloud to deliver additional enhancements to make the customer experience even more seamless. Differentiating our customer experience across every demand channel remains a top priority. Our loyalty program, Popper Rewards, is one of our most valuable assets, connecting us with nearly 41 million fans and helping to build advocacy among younger, value-orientated consumers. Our Popper Rewards loyalty program continues to increase order frequency and engagement across all customer cohorts. In 2025, our loyalty members placed two and a half times more orders than non-rewards members, indicating both the strength of our loyalty program and the opportunity associated with capturing new members. We're also engaging customers more frequently, leveraging personalization and exclusive offers to drive urgency, exclusivity, and incremental visits. And given the importance of the carryout channel, we're also providing franchise incentives, to support remodels and elevate the in-store experience. Finally, we continue to partner with and evolve our franchisee base. I'm pleased to report that we continue to gain momentum with our efforts to optimize our North American supply chain and reduce overall costs to serve. As we progress with the work, we have identified additional productivity opportunities and now expect to achieve at least $60 million of North American system-wide cost savings with $20 to $25 million realized by the end of 2026. These cost savings will equate to at least 160 basis points of four-wall EBITDA improvement by 2028 for both company and franchise restaurants and do not impact our commitment to product quality or our brand standards. Next, we are accelerating our refranchising program and expect to reduce company-owned restaurants to mid-single-digit percent of the North American system. Partnering with well-capitalized, strategic, growing franchisees enhances local execution, improves operational efficiency, and unlocks future growth. In November, we refranchised 85 restaurants, and we are currently in negotiations to refranchise 29 additional restaurants in the southeast to another strong growth-orientated operator, and expect to finalize that transaction in the second quarter. In addition to accelerating re-franchising, we've completed a strategic review of our restaurant fleet and identified targeted opportunities to strengthen it through selective closures. Ravi will share more about our plans in a moment. Turning now to our cost structure, we have conducted a comprehensive review of non-customer facing costs as well as our corporate and field resources to create incremental flexibility across the company, further strengthen execution, and support profitable long-term growth for the Papa John's system. Together with the just-reviewed actions to optimize our restaurant portfolio, we expect this program to deliver at least $25 million in cost savings outside of marketing through 2027, with approximately $13 million expected to be realized in 2026. I'll briefly walk through the key drivers of these savings and Robbie will share the expected financial impacts from these initiatives in a few moments. Starting with our organizational structure, we are taking action to better align corporate and field resources with our transformation priorities and optimize spans and layers in our organizations. These changes are designed to increase efficiency and simplify operations. In parallel, We also evaluated non-customer facing costs and are executing against identified opportunities to reduce indirect spend. A portion of these savings will be reinvested in business areas that we believe have the greatest potential to drive sustainable growth, including innovation to ignite even more customer enthusiasm and expand our addressable market, marketing to remain agile and, as needed, to invest on behalf of the system to supplement national advertising, return co-ops to full strength, and support compelling price points across the system, technology such as our new POS and advancements in personalization and loyalty to drive customer engagement, priority markets and franchise development incentives that deliver strong returns for both franchisees and franchisor, and supply chain to improve cost leverage and four-wall EBITDA across the system. We have established clear success criteria and are closely tracking returns on these investments, and we are already seeing green shoots. Our international business provides a compelling proof point, delivering five consecutive quarters of positive comparable sales through focused investment in product, customer experience, and priority markets. In summary, as we accelerate our transformation, we are making visible progress, executing our strategy. We are confident in our directions, and in our ability to deliver sustainable, profitable long-term growth and capitalize on opportunities across the category. And with that, I'd like to turn it over to Ravi.