McDonald's Corporation

Hello, and welcome to McDonald's 4th Quarter 2019 Investor Conference Call. At the request of McDonald's Corporation, this conference is being recorded. Following today's presentation, there will be a question and answer session for investors. At that time, investors only may ask a question by pressing star 1 on their touchtone phone. I would now like to turn the conference over to Mr. Mike Zeplak, Investor Relations Officer for McDonald's Corporation. Mr. Saplunk, you may begin.

Good morning, everyone, and thank you for joining us a little earlier this quarter. With me on the call this morning are President and Chief Executive Officer Chris Kamchinsky and Chief Financial Officer Kevin Ozan. I want to remind everyone that the forward-looking statements in our earnings release and AK filing also apply to our comments on the call today. Both of those documents are available on our website as are reconciliations of any non-GAAP financial measures mentioned on today's call with their corresponding GAAP measures. Following prepared remarks this morning, we will open a queue for your questions. I ask that you please limit yourself to one question, and if you have more than one, please ask your most pressing first and then reenter the queue. Today's conference call is being webcast and is also being recorded for replay via our website. And now I'll turn it over to Chris.

Thanks, Mike, and good morning. Thanks, everybody, for joining us. It's great to be with you on my first earnings call as CEO of McDonald's. Before I go into our highlights for the quarter and full year, I want to talk briefly about some of my observations from my first few months in this role. For the past three months, I've been meeting with employees, conducting town halls, reviewing plans with senior functional and market leaders, sharing ideas with franchisees and suppliers, and visiting restaurants and customers. This invaluable time spent with our people, partners, and customers reinforced to me the vitality and global alignment we're seeing behind our Velocity Growth Plan. Our people are energized. They're proud of our culture, committed to the promise of our brand, and share my confidence in the business and our direction. This time has also reinforced things that make me deeply proud of our system. We create opportunity for our colleagues across the system. At every McDonald's gathering, there's a story to tell. Of the crew person who's also a grandparent and excited to begin a new chapter in life working for McDonald's. Or the company employee who started in the system with a first job in their teens, went to college with the system's support, and is now in a leadership role. For those who work hard and live our values, McDonald's can change lives. We provide a community space for our customers. When you enter a McDonald's, whether in Brisbane, Berlin, or Boston, you're entering more than just a restaurant. You're walking into a vibrant community, a place where people congregate, share stories, and enjoy simple but powerful and delicious moments of happiness with family, friends, and loved ones. That commitment to communities is the spirit that inspired the creation of Ronald McDonald House Charities. and has helped friends and neighbors through hurricanes, tornadoes, and countless other times of stress. Being integrated into communities worldwide, we know the very real challenges our customers face, and we show up with solutions. As we have grown, we've recognized our responsibility as one of the world's leading companies to use our scale to gain traction on some of the globe's most pressing challenges. It's the strength of our business over the past 65 years that enables McDonald's to play this role, and the humbling responsibility to lead an organization with the ability to make an impact on the world. Kevin will drill down on our quarterly results. Before then, I'd like to share with you some headlines for the year. In 2019, our system marked a historic milestone, $100 billion in system-wide sales. For the year, we grew global comp sales 5.9%, the highest increase we've seen in over a decade. 2019 was our third consecutive year of global comp guest count growth. To put that in perspective, McDonald's and our franchise partners now serve nearly 70 million people in over 100 countries every 24 hours. And owner-operator cash flow is at or near all-time highs in most of our largest markets And in the U.S., it's at an all-time high. Turning to segment highlights, our international operated market segment, or IOM, generated comp sales growth of 6.1% for the year. This was underscored by every market in the segment delivering both comp sales and comp guest count growth. At the same time, our international developed licensee segment, or IDL, generated comp sales of 7.2%. Importantly, our three largest IDL markets, China, Japan, and Brazil, all posted positive comp sales, leading a list that includes nearly all of our IDL markets. We also have strong momentum in the U.S. In fact, we're now seeing the results of our most ambitious turnaround of the U.S. history. For the full year, comp sales growth grew 5.0%, our best comp since 2006 or 13 years ago. Across the country, we're seeing clear evidence of the power of Bigger Bolder Vision 2020, which our U.S. adaptation of the Velocity Growth Plan developed in combination with our franchisees. The initiatives we and our franchise partners deployed in 2017 and 2018, including a new value platform, fresh beef, delivery, EOTF modernization, and more, were met with strong approval by our customers. This led to continued strong top-line growth over the past three years. As one of the architects of our Velocity Growth Plan, it gives me a great sense of pride to watch 2 million restaurant crew around the world execute our strategies with such care and conviction. I continue to have great confidence in our ability to grow and shape our industry, and I'm equally confident that we have the right leadership in place to meet our customers' evolving needs with increasing ambition and speed. Joe Erlinger, an 18-year veteran of our company, is now head of our U.S. business, where he's responsible for the operations of nearly 14,000 restaurants across the country. Joe returns to the U.S. after several years of increasing responsibility around the world. Most recently, he served as president of our international operator markets, where he had oversight for McDonald's wholly-owned markets outside the U.S. With Joe's transition, Ian Borden has expanded his role to oversee both our IOM and IDL segments. Ian began his McDonald's career 25 years ago in our finance department in Canada and has spent 23 of these 25 years in markets outside of North America. In his most recent role as president of our IDL segment, Ian worked with our developmental licensee partners across more than 80 markets. Under his leadership, we will drive greater collaboration across all markets and accelerate our pace of best practice and innovation sharing, building on our rich heritage of learning from each other. It's an important role for McDonald's as we maximize the full potential of our three-legged stool of company, franchisee, and supplier resources. Both Ian and Joe have deep track records of delivering profitable growth while building high-performing teams and strengthening collaboration with our franchisee community. Importantly, Ian, Joe, and I have also worked closely together as segment presidents over the past few years, embodying the trust, respect, and unity of mission that are the hallmarks of our partnership culture. I'm thrilled to be working with both of them in their new roles. Now I'll turn it to Kevin to talk about our fourth quarter results. Kevin?