McDonald's Corporation

Hello and welcome to McDonald's Second Quarter 2025 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. Dexter Combele, Vice President of Investor Relations for McDonald Corporation. Mr. Kambale, you may begin.

Good morning, everyone, and thank you for joining us. With me today on the call are Chairman and Chief Executive Officer Chris Kempczynski and Chief Financial Officer Ian Borden. As a reminder, the forward-looking statements in our earnings release and 8K filing also apply to our comments on the call today. Both of those documents are available on our website at 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 any 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.

Thanks, Dexter, and good morning, everyone. In the second quarter, McDonald's delivered global system-wide sales growth of over 6% in constant currency and global comparable sales growth of nearly 4%. This includes driving positive comparable guest counts globally, despite a challenging backdrop for the industry. In this landscape, the power of McDonald's value and affordability platforms, exciting marketing and menu offerings, and world-class execution are working together to drive comparable sales results and guest count growth as we also accelerate new restaurant development. Our internationally operated market segment comp sales increased by 4% with all markets driving positive comp sales growth. Our international developmental license markets delivered comp sales growth of more than 5.5% led by Japan and with positive comps across all geographies. The results speak for themselves. When we get our value proposition right and execute with excellence, Good performance follows. As we shared last quarter, all of our Big Five IOM markets now have both meal bundles and everyday affordable price or eat-out menus in place. Our eat-out menus feature a variety of sandwiches, snacks, and beverages, typically priced below $4, pounds, or euros. Value and affordability scores improved across the majority of our major IOM markets, as these offerings, as well as offers available through the McDonald's app, continue to gain traction and awareness with consumers. Despite continued high inflation across most of Europe, our IOM markets are being prudent about pricing actions, knowing the continued challenging environment for many of our consumers. I recently visited Germany and saw firsthand how the market is executing our playbook and outperforming the competition. McDonald's Germany is defining good value in the market with a clear eat-up menu, McSmart Snacks, that just launched a few months ago. They've paired this EDAP menu with compelling meal bundles, giving them a strong one-two value punch. At the same time, Germany launched exciting marketing and full-margin menu innovations, such as the Chicken Big Mac, which hit record-high sales in the market during its first full week of launch. As a result, this quarter in Germany, we drove positive sales and guest count gaps versus nearing competitors and gained market share, despite what continues to be a challenging industry environment. Turning to the U.S. business, comp sales were up 2.5% in the quarter. We outperformed nearing competitors on both comp sales and comp guest counts. Certainly, overall QSR traffic in the U.S. remained challenging as visits across the industry by low-income consumers once again declined by double digits versus the prior year period. Re-engaging the low-income consumer is critical as they typically visit our restaurants more frequently than middle and high-income consumers. This bifurcated consumer base is why we remain cautious about the overall near-term health of the U.S. consumer. In this environment, we will continue to remain agile with respect to our value offerings to ensure the U.S. strengthens its leadership in value and affordability. Overall, we've made good progress with our value offerings. $5 meal deal continues to resonate with consumers as we recently celebrated the one-year anniversary of the program. We've also continued to see incrementality from our McValue platform, which also includes our buy one, add one for a dollar deal, which launched at the beginning of this year. And of course, we're excited to welcome Snack Wraps back onto the menu after a nine-year hiatus. We launched Snack Wraps with an attractive $2.99 nationally advertised price point, and early results are encouraging. Our franchisees also recognize the importance of the $2.99 price point and we're excited to announce that they recently voted to extend this advertising through the end of the year. But we recognize that consumers' value perceptions are most influenced by our core menu pricing. We're working closely and collaboratively with our U.S. franchisees on this opportunity, and we're developing ideas for how we might address this as an entire system. In combination with strong value, we're also unlocking growth across our most important menu categories of beef, chicken, and beverages. Ian will discuss beef and chicken shortly, but I'd like to touch on beverages. The work of our beverage category team is rapidly moving forward. As we recently announced, exciting things are brewing with an upcoming test in about 500 restaurants in the U.S. with a beverage lineup that includes a variety of options from cold coffee and fruity refreshers to crafted soda and energy. We've been able to quickly embed Cosmic's key learnings into our McDonald's core business, demonstrating the speed, scale, system prowess, and efficiency of our cross-functional category teams. We're finding new ways to tap into what customers want and believe no one is better positioned than McDonald's to deliver more of these moments to our fans. Finally, central to our accelerating the Arches strategy is aligning our greatest assets, our iconic brand and unmatched size and scale, with the power of data and technology. It's happening in three distinct ways. We're reimagining how we improve the restaurant experience, transforming how we engage our most loyal brand fans, and modernizing the employee experience. Our progress to digitize the Arches is unleashing the full potential of our size and scale, all while strengthening our foundation, such as increasing the reliability of our systems. As I said during our investor update in late 2023, when we first introduced the restaurant, consumer, and company platforms, we believe they can create a step change in our sales and margin trajectory over time, slowly at first with increasing speed and impact as we scale like no other brand can. We're excited to see this start coming to life. In our restaurant platform, in partnership with Google, We're developing Edge Computing, which extends the cloud to our restaurants. Edge is the digital foundation for the next generation of restaurant innovation that powers AI and Internet of Things-enabled restaurants. The expected benefits are many, increased restaurant uptime, an enhanced customer and crew experience, improved food quality, and cost-savings opportunities. We're currently live with Edge in hundreds of U.S. restaurants and are beginning to deploy it internationally. Running great restaurants is just one component of serving up great customer experience. Our fans want greater personalization, convenience, and value. And bringing millions more consumers into the McDonald's digital universe is how we're ensuring customers feel seen and satisfied with each and every visit. In 2023, we set a goal to reach 250 million 90-day active loyalty users by the end of 2027. As of this quarter, we've reached more than 185 million 90-day active users across 60 loyalty markets. In the U.S. alone, on average, the same customer visits 10.5 times in the year before joining the loyalty program and then 26 times in the year after joining. They're earning points in the app and using them to unlock exclusive deals. And thanks to our recent partnership in the U.S., customers were able to extend rewards to new experiences, like the Snapchat Plus subscription with premium features. Fans ordering on the app are already saving time with Ready on Arrival. Our geofencing technology can let our restaurants know when to start your order. In the US, restaurants with Ready on Arrival can reduce wait times for food pickup by more than 50%, and in many cases, eliminate them altogether. Ready on Arrival is deploying in restaurants across five of the top six markets, and we're on track to launch in the last of the top six later this year. Finally, we're applying new technology across the company that will change our ways of working. We're moving from hundreds of legacy systems to standardized modern global platforms to help our employees be more efficient and make data-driven decisions while increasing the speed of innovation. We took a couple of big steps towards improving processes by going live with a new finance system in the first wave of markets just a few weeks ago, and rolling out a new HR or human capital management system in the second wave of markets this past quarter. We're modernizing McDonald's at a pace which will enhance not just the customer experience, but provide new capabilities for our system. With that, I'll turn it over to Ian.