McDonald's Corporation

Hello, and welcome to McDonald's Fourth Quarter 2022 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 Seplak, Investor Relations Officer for McDonald's Corporation. Mr. Seplak, you may begin.

Good morning, everyone, and thank you for joining us. With me on the call today are President and Chief Executive Officer Chris Kempczynski and Chief Financial Officer Ian Borden. As a reminder, the forward-looking statements in our earnings release and 8 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, along with their corresponding GAAP measures. Following prepared remarks this morning, we will take your questions. Please limit yourself to one question and then re-enter the queue for additional questions. 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.

Thank you and good morning, everyone. When we gathered at this time last year, we expected 2022 to be a year of recovery from the pandemic, particularly in Europe. Little did we know that it would be another challenging year, and nobody could have predicted the extent to which the war in Europe would disrupt businesses around the world and the macroeconomic impact that would follow. Despite continued volatility in nearly every corner of the globe, McDonald's delivered exceptional growth throughout 2022. We achieved full-year comp sales growth of 10.9%, delivered strong guest count performance with 5% growth globally, and saw our momentum strengthen as the year progressed, with double-digit comp sales growth across all segments in Q4. These results are a testament to the resilience of the McDonald's system and demonstrate that our Accelerating the Arches strategy, which we unveiled in the early days of the pandemic, is working. This strategy is anchored by three growth pillars, also known as our MC&Ds, maximize our marketing, commit to the core menu, and double down on the 3Ds. Our 2022 performance demonstrated the continued potential of each growth pillar. You've heard me say McDonald's is one of the world's greatest brands. In the last year, we've unlocked even more ways to elevate our marketing through creative excellence. Our scalable insights are helping us tap into our fans' love for McDonald's and create culturally relevant campaigns that resonate across markets and drive growth. That momentum continued into Q4. In October, our collaboration with Cactus Plant Flea Market in the U.S. brought together our adult fans' love and nostalgia for the Happy Meal with one of the most on-trend brands and culture. Customer excitement was palpable and it's fair to say the program exceeded expectations. This program drove the highest weekly digital transactions ever seen in the U.S. To celebrate the FIFA World Cup, we launched our largest global marketing campaign ever with more than 75 markets participating worldwide. Want to go to McDonald's? Brought to life yet another fan truth. Whatever the culture or language and whatever the outcome of the game, we can all unite under the golden arches. Our aim was to support fans that were watching the FIFA World Cup at home through relevant and meaningful McDelivery promotions, regardless of the time zone that their team was playing in. During this campaign, we saw double-digit increases in delivery sales across our top 10 markets. And just a couple weeks ago, the UK launched their Raise Your Arches campaign, which has generated significant excitement with our customers. Even though the campaign never shows our food, never shows our restaurant, and never mentions our brand name, it's nonetheless instantly recognizable as only McDonald's. Imagine that, a brand so powerful it requires no introductions. The campaign has been quickly picked up by over 30 other markets, demonstrating our system's ability to quickly scale compelling ideas across the globe. Throughout 2022, some of our most successful campaign platforms brought our customers closer to the core menu items they love. The strength of our brand goes beyond the Golden Arches themselves and includes our iconic products, such as our world-famous French fries, the Big Mac, our Chicken McNuggets, and the McFlurry. Each of these products are billion-dollar brands, and in total, McDonald's possesses 10 of these billion-dollar brand equities. In an environment where our customers are looking for the simple and familiar, our core menu items have never been more relevant or beloved. Throughout the year, we continue to step up our game on the favorites that build our heritage. We're delivering hotter, juicier, more delicious burgers and building on the success of emerging equities like the McCrispy Chicken Sandwich. As a result, we are gaining market share in both chicken and beef. When customers want to enjoy our classic favorites, they are increasingly looking for even more personalized and convenient ways to get their meals. Through our focus on digital, we are transforming from a brand that serve billions and billions all the same way to one that serves each of our billions of customers uniquely as individuals with customized products, offers, and experiences. By doing this, we strengthen our customers' love and loyalty for McDonald's. These investments are paying off. In the fourth quarter, digital represented over 35% of system-wide sales in our top six markets. In 2022, the McDonald's app was downloaded over 40 million times in the U.S., greater than the total downloads of the second, third, and fourth brands combined. Through our Loyalty Program, which we've expanded to over 50 markets and counting, customers are feeling more connected to McDonald's, which in turn increases visits and frequency. As we close the year, we had almost 50 million active loyalty users in our top six markets. The success of Accelerating the Arches has put McDonald's in an advantage position. Since the start of the pandemic, we've grown system-wide sales nearly $20 billion, despite closing over 800 restaurants in Russia. Our brand is clearly in the strongest position it's been in years, attributable in part to our best-in-class marketing engine. And service times and customer satisfaction are both improving, a testament to the dedication of our restaurant teams. Our success is fueling even greater ambitions. While we feel good about our strategy and the growth potential in each of our MCD pillars, we've been asking ourselves two questions. Is there anything we should add to Accelerating the Arches? And Is there anything that could get in the way of the success of Accelerating the Arches? The answers to these two questions led us to evolve our Accelerating the Arches strategy, which we announced a few weeks ago. We'll continue to double down our MCDs while adding a fourth D, restaurant development, to our three Ds growth pillar. Our strong comp and brand performance has given us the right to build new units at a faster rate than we have historically. We also announced Accelerating the Organization, an effort to modernize the way we work so that we're faster, more innovative, and more efficient. Work is now underway to further build out these initiatives and quantify their contribution to our long-term financial algorithm. We'll share more details with all of you at an investor update in Chicago sometime in late 2023. To expand further on how Accelerating the Arches drove success in 2022, I'll now turn it over to Ian. Thanks, Chris.