Papa Johns International Q1 2024 Earnings Report $225.74 +0.26 (+0.11%) As of 09:51 AM Eastern This is a fair market value price provided by Polygon.io. Learn more. Earnings HistoryForecast Asbury Automotive Group EPS ResultsActual EPS$0.67Consensus EPS $0.58Beat/MissBeat by +$0.09One Year Ago EPS$0.68Asbury Automotive Group Revenue ResultsActual Revenue$513.90 millionExpected Revenue$544.46 millionBeat/MissMissed by -$30.56 millionYoY Revenue Growth-2.50%Asbury Automotive Group Announcement DetailsQuarterQ1 2024Date5/9/2024TimeBefore Market OpensConference Call DateThursday, May 9, 2024Conference Call Time8:00AM ETUpcoming EarningsAsbury Automotive Group's Q1 2025 earnings is scheduled for Tuesday, April 29, 2025, with a conference call scheduled at 10:00 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Q1 2025 Earnings ReportConference Call ResourcesConference Call AudioConference Call TranscriptPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryABG ProfilePowered by Asbury Automotive Group Q1 2024 Earnings Call TranscriptProvided by QuartrMay 9, 2024 ShareLink copied to clipboard.There are 13 speakers on the call. Operator00:00:00Call. As a reminder, today's program is being recorded. Operator00:00:07And now I'd like to introduce your host for today's program, Stacy Froehle, Vice President of Investor Relations. Please go ahead. Speaker 100:00:16Thank you. Good morning, and welcome to Papa John's Q1 2024 Earnings Conference Call. This morning, we issued our Q1 2024 earnings release. A copy of the release can be obtained on our Investor Relations website atir.papajohns.com under the News Release tab or by contacting our Investor Relations department at investorrelationspapajohns.com. Joining me on the call this morning is Ravi Thanawala, our Interim Chief Executive Officer and Chief Financial Officer. Speaker 100:00:51Before we begin, I need to remind you that 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 for the required reconciliation of non GAAP financial measures discussed on today's call. Lastly, let me thank you in advance for asking only one question and getting back in the queue for additional follow ups. Speaker 100:01:31And now, let me turn the call over to Ravi. Speaker 200:01:34Thank you, Stacey, and good morning, everyone. Before I jump into my prepared remarks, I'd like to convey my appreciation to the Papa John's team and our Board of Directors for entrusting me to lead the organization as Interim CEO. I'd also like to acknowledge the passion and commitment of our talented team members and highly engaged franchisees who continue to deliver for our customers every day. There is so much to be proud of and excited for as we begin our next phase of growth. We are navigating the current dynamic environment with a balanced approach to delivering improved unit level economics and company operating profits, while also investing in the future. Speaker 200:02:16As such, in January, we launched our Back to Better 2.0 strategy and in a short period of time, we have achieved the meaningful milestones. In the areas of enhancing national marketing investment and effectiveness, we launched our newest platform innovation, Crispy Cupriaroni, across a trio of products in different accessible price points and introduced an all new brand platform, Better Get You Some, that is part of our deepened commitment to and investment in our new marketing strategy. Regarding our focus on accelerating North America development, we improved the cash on cash paybacks on new North America development through attractive incentives. We also remain focused on enhancing unit level profitability and reducing overall build costs for new restaurant development. Finally, on our international transformation initiatives, we established international regional hubs led by proven leaders with direct industry and relevant market experience to help drive market share gains in key markets around the globe and are progressing the optimization of our UK market with the planned closure of 43 company owned locations later in May and the active pursuit of refranchising opportunities for other locations. Speaker 200:03:36Our energy will remain focused on laying the right groundwork so we can continue to evolve our business, enhance our long term performance and create value for our shareholders and ultimately become the QSR pizza brand of choice for consumers and franchisees around the world. Now I'd like to touch on our Q1 performance. In our North America business, results were mixed, but thanks to the highly disciplined approach of our operators, especially in our company owned restaurants remaining diligent throughout the quarter, restaurant level margins exceeded our expectations, leading to higher adjusted operating income despite near term sales pressure. In the Q1 of 2024, North America comparable sales were down roughly 2% from a year ago. This was primarily due to lower transactions as the continued growth in our aggregator channel was more than offset by a decline in organic delivery, while our carryout business remained consistent with the prior year. Speaker 200:04:37This shift in channel mix also led to a slightly lower average ticket as the relatively profit neutral revenue from our organic delivery fee decline. Strategic pricing actions by our revenue management team helped to somewhat mitigate this delivery fee impact. In the current environment, we're also seeing customers become more deliberate in managing their overall order costs. So while our core offering pizza remained higher year over year, sides and beverages were lower. It has been my experience that brands that win consumers' hearts and minds on the most important days of the year have a unique role in their lives that brands are able to build upon. Speaker 200:05:21We are encouraged by our performance on traditionally high volume occasions for the pizza category during the Q1, including Valentine's Day, Super Bowl weekend and March Madness, reinforcing our confidence in the strength of our brand. From an international perspective, we are pleased with the progress we continue to make in this dynamic environment. As anticipated, our Middle East region impacted our 1st quarter international comparable sales due to the ongoing conflict in this part of the world. Excluding this region, our international comparable sales were up approximately 1% from a year ago. For the Q1 2024, global system wide restaurant sales were $1,230,000,000 down 1% in constant currency compared with the prior year's Q1. Speaker 200:06:13The lower sales were largely due to the strong prior year Q1, which had a benefit of approximately $10,000,000 from the high volume week between Christmas and New Year's. The decrease in sales due to the calendar shift was partially offset by 3% net unit growth from the prior year. Total revenues for the Q1 were $514,000,000 down 2% from a year ago, primarily reflecting a $9,000,000 decrease in North America commissary revenues due to lower commodities prices in the quarter and to a lesser extent lower transaction volumes a $9,000,000 decrease in other revenues, which includes a $5,000,000 impact from the sale of preferred marketing, our formerly wholly owned print and promotions business and a $4,000,000 decrease in domestic company owned restaurants, reflecting lower transaction volumes somewhat offset by higher average ticket. Partially offsetting these revenue declines was an approximate $10,000,000 contribution from the 2023 UK franchisee acquisitions. Turning to profits. Speaker 200:07:32Adjusted operating income for 2024 Q1 was $43,000,000 up from $39,000,000 a year ago. The key drivers of our improvement over last year's Q1 include an approximate $2,000,000 benefit from improved North America company owned restaurant margins and domestic commissary margins an approximate $3,000,000 benefit from reduced local marketing reserves at our company owned restaurants, a result of the recent change to our local and national marketing spend requirements and an approximate $4,000,000 benefit from equity forfeitures primarily resulting from the recent CEO departure. These positive impacts were largely offset by a roughly 4 impact related to the operations of our UK franchisee acquisitions when taking into consideration a Q1 2024 operating loss and the Q1 2023 franchisee royalty fees. Higher G and A expenses D and A expenses of approximately $3,000,000 as we continue to invest in our restaurants and technology platforms along with the consolidation of the acquired UK restaurants and lower North America comp sales. Adjusted operating margins for the Q1 was 8.4%, up from 7.4% a year ago, primarily reflecting improved margins at our domestic company owned restaurants and supply chain improvements. Speaker 200:09:07Overall, our domestic company owned margins improved 220 basis points compared with the prior year Q1. Driving the improved margins was an approximate 110 basis points benefit from lower food basket costs as we continue to see relief in cheese and dough prices. Lower operating costs and a slightly higher ticket at our company owned restaurants also contributed to our margin improvement, while labor costs were only slightly higher by approximately 10 basis points. Our teams did a great job in the Q1 optimizing our labor model to meet consumer demand and delivering an excellent customer experience, while also adjusting for shifts in channel mix. Moving on to cash flow and our balance sheet. Speaker 200:10:00In the Q1 of 2024, net cash provided by operating activities was $12,000,000 down from $41,000,000 a year ago. After accounting for $13,000,000 in capital expenditures for the development of new domestic restaurants and investments in technology innovation, we generated a cash outflow of $1,000,000 This compares with free cash flow of $22,000,000 generated in the Q1 of 2023, primarily reflecting unfavorable working capital changes driven by the timing of payments in the Q1 of 2024. Our liquidity continues to be strong with $260,000,000 in cash and borrowings available under our revolving credit facility and a gross leverage ratio of 3.1 times. Overall, our teams around the globe continue to take a disciplined approach to running the business. We've improved restaurant level margins and operating profits through commodities normalization, revenue management and labor optimization in the quarter despite the lower sales. Speaker 200:11:09Our efforts are having a positive impact on our bottom line. However, there is more work to do. As I mentioned earlier, in January, we launched multiyear strategic initiatives that are designed to drive a higher system wide sales, enhance restaurant level profitability and reinvigorate development over the long term in key markets around the world. I'm pleased to say, while still in early improvements we are implementing in our marketing platforms, our supply chain and our international operations. 1st, product innovation remains a cornerstone to our brand promise of better ingredients, better pizza and will continue to be a focus of our strategy. Speaker 200:11:54In April, we launched our newest platform innovation Crispy Caperoni, which is available across a trio of products at different accessible price points. In conjunction with this new platform innovation, we launched a modern refresh of our brand visuals, tone and message with better get you some. This amplification of our brand is the culmination of our efforts over the past 9 months where we focus on improving audio segmentation, building customer loyalty and driving cultural relevance. This combination of brand and product innovation helps the consumer to appreciate the strong value proposition Papa John's provides. While it's only been 5 weeks since we launched our new brand platform, early research of the campaign showed an increase in the consumers' purchase intent. Speaker 200:12:45Moving ahead, we're focused on improving sales via our revenue management strategies, ongoing loyalty improvements and adapting our media strategy mix to maximize effectiveness across channels. 2nd, to support the new brand platform and leverage the scale national investments deliver, our franchisees voted last year to increase the contribution rate to the national marketing fund by 100 basis points of sales beginning in the Q2. As part of the consolidation to national funding, we made local marketing spend optional for the system. For our domestic company owned restaurants, we intend to optimize our local marketing spend in 2024 and still see value in investing in certain local marketing co ops and brand partnerships within specific markets to build upon the strong community relations already in place. Many of our franchisees are taking a similar strategic and targeted approach given the additional optionality the new marketing fee structure provides. Speaker 200:13:50The initial customer response and reviews to our new product innovations and brand platform have been positive, but the highly competitive promotional environment has been a headwind to transactions. We believe Papa John's perceived value is about providing high quality product innovation at the right time at the right price. It is important that we maintain discipline in our limited time offers, pricing strategies and product innovations for the long term success of the business. Although we won't hesitate to make short term adjustments as we deem appropriate on a market by market basis to remain competitive. 3rd, as previously discussed as part of our Back to Better 2.0 strategy, we're evolving our domestic commissary business to support additional investment in supply chain productivity. Speaker 200:14:42Beginning with the Q1, we increased the fixed operating margin that our domestic commissaries charge by 100 basis points from 4% to 5%. We plan to continue this annual increase until 2027 when the fixed operating margin reaches 8%. At the same time, our franchisees can now earn incentive based rebates by delivering higher volumes and new restaurant development. Through the Q1, more than 40% of our franchisees are on track to earn a rebate in 2024. As we drive higher volumes through our supply chain model, we intend to reinvest into this segment to increase productivity throughout the system making our supply chain even more effective. Speaker 200:15:30Modernizing equipment, automating processes and negotiating contract renewals as we continue to scale are just a few examples of our opportunities available to Papa John's. 4th, unit level productivity is a primary driver of unit development and we are confident supply chain efficiencies will deliver improved results over the next several years. In addition, we have been focused on rebuilding and elevating our development team to accelerate North America new unit growth through franchisee cultivation, quality site selection, lower cost to build and quicker speeds to open. As part of this process, we're evaluating and revamping every aspect of the development process from general contractor selection and architectural costs to leasehold improvements and furniture fixtures and equipment. These improvements are delivering real time cost savings and will offer franchisees more resources throughout the development process in addition to greater contractors, supplier and equipment optionality based on market and anticipated restaurant volumes. Speaker 200:16:42The development incentives announced last November, combined with the improving cost to build, significantly improves the cash on cash payback for our developing franchisees who open new units in 2024 2025. The attractive ROI on new builds and the strength of our brand gives us confidence new unit development in North America will continue to accelerate. Now moving to our international transformation initiatives. Our number one focus is to ensure we have the right foundation to support and drive long term success. This means being closer to the consumer, continuing to focus on menu innovation that is locally relevant and making sure we have the right insights to help our franchisees within their markets. Speaker 200:17:32In the Q1, we launched our international regional hub structure with proven leaders that have direct industry and relevant market experience. These hubs are designed to help our international franchisees to drive sales and profitability by aligning global best practices with local preferences and the resources to accomplish our long term objective of increasing share in key markets around the world. We are also advancing our efforts to optimize the UK business model. Most recently, we announced plans to close 43 underperforming company owned restaurants later this month. We'll continue to evaluate our remaining portfolio as well as our franchisee locations focusing on sales trend, overall profitability and their lease and loan obligations. Speaker 200:18:24Due to this process, additional strategic closures and refranchising opportunities will be considered as we look to drive profitability and strengthen our franchisee base. We believe with these actions, the UK market will become profit accretive in the second half of this year. Finally, we're investing in our international consumer facing technology and digital infrastructure to improve purchase conversion, increase customer retention and deliver faster consumer insights to franchisees. There remains significant white space for the Papa John's brand internationally. And while we saw more foundational investments to make, we're confident the actions we are taking are setting our largest international markets up for profitable market share gains over the long term. Speaker 200:19:20Looking at our outlook for the balance of the year. For the 1st 4 weeks of the second quarter, North America comp sales were down approximately 1% and may remain under pressure in the near term as the challenging macroeconomic environment continues and consumer confidence softens. Because of this, we have chosen to update our full year guidance with a more cautious outlook. If orders remain at a similar level as the past 4 weeks, we anticipate 2024 North America comps to be flat to down low single digits for the full year 2024. As a reminder, we are in the early stages of our Back to Better 2.0 investments and are committed to providing updates as the year progresses. Speaker 200:20:09Internationally, we remain in a dynamic environment and continue to maintain a cautious outlook on international comps in 2024. Based on the lower sales outlook and assuming we remain at similar levels for the remainder of 2024, we would anticipate 2024 adjusted operating income to be between $145,000,000 $155,000,000 Our teams remain focused on executing against our strategies and maintaining cost discipline. We continue to expect benefits from the increase to our fixed commissary margin, our international transformation initiatives, notably the closure of UK restaurants we mentioned earlier and an increase in North America development. However, these benefits will likely be offset by lower North America comparable sales combined with higher G and A expenses and higher G and A expense that have been discussed previously. In terms of other non operating expense items, we expect net interest expense to be between $40,000,000 $45,000,000 our capital expenditures to be between 75,000,000 dollars $85,000,000 and our tax rate to be between 23% 26%, all consistent with our prior guidance. Speaker 200:21:36From a development perspective, the North America market is our most accretive development for Papa John's and we remain committed to accelerating the expansion of our domestic footprint moving forward. In the Q1, we added 14 net new North America units, bringing our total North America restaurant count to 3,447. For fiscal year 2024, we expect net new units for North America to increase more than 20% relative to 2023 net unit openings. From an international perspective, we saw 23 new restaurant openings on a gross basis. These new restaurant openings were offset by 29 closures primarily in certain Middle East markets and China. Speaker 200:22:25This brings our total international restaurant count to 2,467. We are maintaining a cautious approach for our international markets and expect gross openings between 101 140 new international restaurants for fiscal 2024. We continue to review the performance of our international franchisees and may initiate additional strategic closures to improve marketplace health or exit unprofitable locations. As such, our net openings could be impacted by the closure of underperforming locations to enhance long term profitability. Finally, as we look to the longer term, we continue to see significant opportunities to drive higher system wide sales, global development and overall profitability as we continue to execute on our strategy. Speaker 200:23:21Given the current dynamic environment and business trends we discussed today, our longer term targets are under evaluation as we want to ensure our goals are achievable and aligned with our strategy. In summary, we are executing against our Back to Better 2.0 strategy. This strategy is designed to drive restaurant profitability, improve supply chain efficiency, increase marketing effectiveness and reinvigorate global development. We are making steady progress as our teams are collaborating across departments and geographical borders, laying a solid foundation for our next chapter of growth. I'm confident in the strength of the Papa John's brand, our team, our company's long term performance potential. Speaker 200:24:08I look forward to sharing our progress with you throughout the coming year. Now I'll turn the call over to our operator to take your questions. Operator00:24:23And our first question comes from the line of Jim Zallara from Stephens Inc. Your question please. Speaker 200:24:29Hi, good morning guys. Thanks for taking our question. Bobby, can you just give us Speaker 300:24:34an update on what you're seeing in the aggregator channel as far as demand, especially as we've heard more consumers kind of engaging in value seeking behavior, how your presence on that in your own proprietary digital channel helps convey Speaker 200:24:53value? Yes. Well, Jim, thanks for the question. And I'll start there, but I may need you to repeat the second half of that question in a moment. So first, we've been on the aggregators since 2019 and have been leading in that space. Speaker 200:25:09More broadly, what we're seeing is that the pizza category continues to perform well and take share within the aggregator universe. 2nd, the benefit of the aggregators is that they are highly convicted consumers that are ready to purchase when they're on those apps. What we're specifically seeing is continued growth year over year in the aggregators. It represented 16% of our business in Q1 relative to 12% in the prior year. Also, we continue to see growth quarter over quarter. Speaker 200:25:49We think that the aggregator experience and when consumers are on it is a very specific occasion. So how we communicate value and how we communicate growth there. We are continuing to stay really focused on menu innovation, cutting through, doing great jobs on making sure navigation is coming to life. And then we're in the markets pretty consistently testing different pricing strategies to make sure we strike the right balance at a geography level on balancing the premiumness of our product as well as value that the consumer needs. Jim, I don't know if I got that second half of your question. Speaker 300:26:30Yes. The second part was just relative to what you're seeing on your own or proprietary channels? Speaker 200:26:37Yes, absolutely. And similar to what we spoke about in prior quarters, we are seeing the aggregators outperform our organic delivery and carryout business, specifically our organic delivery business and maybe 2 important points. I think the good news in this is that like aggregators gives us a really clear opportunity to win new consumers who are a younger demographic, more diverse overall. So we see a lot of strategic benefit and continue to grow aggressively in this channel. Organic delivery has continued to decline year over year and we're really focused in on the second half of this year on how do we communicate the value of our service, of our offers more clearly in our organic delivery business and making sure everyone understands the value that our loyalty program provides in our native channels. Speaker 200:27:39But there has been a spread between the 2. And just as a reminder, the margin profiles on the aggregator business and organic delivery business are slightly different given how the pricing architectures come to life. Speaker 300:27:55Great. That's helpful. I appreciate the color. Speaker 200:27:57I'll hop back in the queue. Thanks. Operator00:28:00Thank you. One moment for our next question. And our next question comes from the line of Eric Gonzalez from KeyBanc. Your question please. Speaker 400:28:12Thanks for taking the question. Good morning. I just want to talk about the current strategy. I mean, I want to maybe ask you about your confidence level that the strategy is working. And I realize the environment shifted with several of your competitors have called out the more cautious consumer. Speaker 400:28:26But how do you know that the shift away from regional marketing isn't having an adverse effect on your results as it seems like the quarter to date same store sales trends are probably quite a bit below what you had hoped for back in January? Speaker 200:28:38Yes. Eric, thanks for the question. And I'm going to take that in 2 parts. First, like more broadly, the Back to Better 2.0 strategy had a couple of really clear filters to it. The first was find ways to improve unit economics that comes to life through continuing to remix the total amount of marketing spend to drive ROASs, improve and incentivize supply chain, commensated margins by giving rebates for really meaningful growth. Speaker 200:29:12And 3, this really clear focus that we're taking in terms of our new national marketing strategy. When we look at April results, there are a few things that we want to call out where we're seeing challenges from a traffic standpoint actually started slightly prior to when we went live with the new marketing strategy. We saw slightly softer sales in the month of March than what we expected. So that's one important thing. 2nd is that when we actually look at consumer behavior, what we're actually seeing is that consumers are check managing a little bit more and we're seeing slightly higher exit rates at certain points in the consumer funnel. Speaker 200:29:58Those to us give us the indication that this is more about a softening of the consumer and a slightly higher value orientation versus directly tied to anything in our creative and media strategy. What I will say is we are 5 weeks in to our creative and media strategy, new visuals, new tone, new media mix. There's obviously some ongoing calibration that we're going to want to do. But as we've actually done the consumer testing work, we are absolutely seeing purchase intent go up as we've tested this new created and media strategy. So we will continue to keep you in the loop and keep the investor community in the loop and following quarters of our progress, but we believe we're on the right track from a creative and a media standpoint. Operator00:31:04And our next question comes from the line of Sara Senatore from Bank of America. Your question please. Speaker 500:31:10Thank you. I guess one question and then a follow-up please. The first is that, at the end of March when you announced the CEO transition, I think you reiterated or reaffirmed the guidance for fiscal 2024. It sounds like you said March was a little softer than you had expected. I'm trying to understand then maybe what's changed since the 3rd week of March and now given that it sounded like you already perhaps seeing some of the softness materialize? Speaker 200:31:44Yes. To be clear and clarify, we were seeing some slight softness in traffic. However, we were continuing to work towards our creative launch, our media launch, new innovation launch in the month of April. Throughout the month of April, we saw that the consumer behavior continued to soften, particularly in elements of traffic and check management. And that's really the differential of what we started to see in the month of April. Speaker 500:32:14Got it. Okay. And then in that context, I know you mentioned you're it sounded like you're not looking to kind of match the promotional intensity that competitors are engaging in. But I guess ultimately to grow transactions, how do you plan to do that if what consumers are looking for is value? And I guess maybe said otherwise, do you have a choice, but to try to be more aggressive or sharper on your price points if that's what consumers want and that's what's driving traffic growth elsewhere? Speaker 200:32:50So we think we have multiple levers to be able to demonstrate value to our consumers. So first, like when we think about Q1, what happened from a comp standpoint was that pizza sales continued to be up year over year to sides and beverages and the profit neutral delivery fee is where we started to see compression. So we're actually pretty clear on where our opportunities are to continue to bend the curve from a sales comp standpoint. 2nd, our loyalty program is a great toolkit and a great opportunity for us to continue to reinforce the value that we can offer in our organic channels. And lastly and importantly, we are testing continuously and we'll continue to test different pricing and promo strategies, particularly for the carryout business to ensure that we can communicate the great service we offer plus the value in our carryout business. Speaker 500:33:59Thank you. Operator00:34:02Thank you. One moment for our next question. And our next question comes from the line of Brian Mullen from Piper Sandler. Your question please. Speaker 600:34:14Thank you. Just a question on Speaker 200:34:16G and A. Robbie, can you speak Speaker 600:34:17to what your expectations are for this year and then what you incorporated into the operating income guidance. If I'm doing it right, it seems like Q1 was about $49,000,000 or $50,000,000 on an adjusted basis. Is that a good run rate for the next couple of quarters? And then just related to that, you've had some more time in the seat first as CFO, now you've stepped into a bigger role. Do you see any opportunities across the organization to get more efficient on G and A bigger picture over the next couple of years? Speaker 600:34:45Is it possible to make cuts without hurting sales? Just fresh set of eyes, I'd love to get your perspective. Speaker 200:34:52Yes. So thanks for the question, Brian. So first on G and A, I just want to remind us that in Q1 there were a number of puts and takes that were happening that were one time in nature. So on an adjusted basis, I think we're going to be slightly above $50,000,000 for the run rate for the next few quarters. And you have to remind everyone that we are still lapping the UK acquisition that happened in 2023. Speaker 200:35:26When we look at like opportunities, we're absolutely taking a really focused cost discipline approach to running and operating the business. We're going to want to continue to invest in our strategic growth drivers of the company in the future, which is really around product innovation, marketing and our tech stack. We're looking for opportunities continuously to be highly streamlined as an organization, and continuing to look to drive foundationally better unit economics for our restaurants. Operator00:36:05Thank you. One moment for our next question. And our next question comes from the line of Brian Bittner from Oppenheimer. Your question please. Speaker 700:36:19Thank you. Good morning. My question is on the new EBIT outlook for 2024. I understand that you're now assuming lower same store sales than you originally were. But when I take a step back and I look at 1Q's EBIT, it was very strong. Speaker 700:36:37Margins expanded 100 bps, EBIT grew 10%, be consensus by a meaningful amount on negative low single digit same store sales, which you're assuming moving forward. The guidance would assume this trend in EBIT changes pretty meaningfully for the rest of the year. Can you maybe just unpack some of the assumptions in EBIT moving forward versus maybe the strength that you saw in the Q1? Speaker 200:37:08Yes, Brian. Thanks for the question. And first, I just want to reinforce that we are taking a really disciplined approach to running the business once we're in quarter and we're thinking about how we're investing going forward. More broadly, if you actually look at the Q1 results from EBIT and unpack the one times, we are slightly above last year on an adjusted basis. If you exclude the impact of one times this year versus last year. Speaker 200:37:39More broadly, if you look at the full year guide and take the midpoint of that, that's effectively a flat OI versus last year on a 52 week basis. So I just want to provide that little bit of context. 2nd, as we look through the balance of the year, we know that the consumer is going to be more value conscious as we see check management happening and we're watching exit rates and abandonment rates throughout the consumer funnel. 2nd, we're going to want to take a more aggressive approach to testing strategies related to pricing promotions in our media mix for the balance of the year. So we're just taking a more cautious approach to how we think about the EBIT or OI outlook for the balance of the year. Speaker 200:38:29But I want to give confidence that if you look at our results in Q4 of 2023 and Q1 to 2024, we're highly focused on driving unit level economics, which we think will spur the right development for the brand over the long term. Operator00:38:58And our next question comes from the line of Lauren Silverman from Deutsche Bank. Your question please. Speaker 100:39:05Thank you very much. I wanted to ask about the international comps and what you're seeing there. 1, are you seeing any signs of improvement in the Middle East? And if you can quantify the impact? And then 2, can you talk about the performance across some of the other markets outside of the Middle East, more specifically? Speaker 100:39:23Thank you. Speaker 200:39:29Thanks, Lauren. So we are seeing that the Middle East performed better in Q1 relative to the run rate that we had been on in the prior quarters. And just as a reminder, it's a small component of our business from a system wide sales standpoint, but has been historically a really meaningful development driver of the company. We have seen more than a 10 point acceleration in terms of the comp run rate as we progressed from 2023 in the fall and winter to what we were seeing in the Q1 of 2024. More broadly, when we think about our international strategy, we set up this hub strategy to give us laser focus on a few regions that matter the most for the business and company. Speaker 200:40:25The way that's coming to life is like really clear, sharp perspective on product innovation and the consumer target. So in the UK, we've seen flat to slightly negative comps through the Q1. And what's important there is as we unpack it is that restaurants that have changed to end to more seasoned operators, we're seeing double digit increases in terms of sales performance. We recently launched a new product innovation across our platform of products, which had the highest penetration we've had for an innovation LTO for a couple of years. In LatAm, our largest market, Chile, we saw the strongest performance in this quarter and got us back on a good trajectory. Speaker 200:41:16It's easy to read into like China and saying we had some strategic closures. I think the way that everyone should look at that and think about that is we're taking on the necessary pruning locations that aren't productive, that aren't as fit to our go forward strategy from a real estate standpoint. But ultimately, we are even seeing improvements in our China business from a comp standpoint in Q1 relative to the run rates that we've been on. So we have a laser focus on like the few regions and the few countries that matter the most in international. Speaker 100:41:56Thank you. Operator00:41:58Thank you. We will open for our next question. And our next question comes from the line of Anastrosyk from BMO Capital Markets. Your question please. Speaker 800:42:11Hey, good morning. Thanks for taking the question. I wanted to ask about the development pipeline in North America and how you're seeing Speaker 600:42:19that build as you have Speaker 800:42:20a few more months of the incentives under your belt. What kind Speaker 600:42:25of visibility do you have to Speaker 800:42:26the guidance that you've given for this year? Do you have any visibility to next year as well? And I guess, I know you're doing a lot of things to support the economics currently, but I guess do you see risk as given the top line outlook that maybe some of those comparisons get pushed out or don't come to fruition? I guess, how are you thinking about that? Thanks. Speaker 200:42:53Yes. Well, thanks for the question, Andrew. And there's quite a few things there that I want to unpack. First, just a little bit of context. I like myself and Joe Stevie, our Head of Restaurants in North America and who also leads development, We're meeting every single month with the cost functional team to talk about the pipeline of restaurant openings for North America. Speaker 200:43:18And a couple of really impactful things. 1, we reaffirmed that development in North America is going to be upgraded at 20% year on year. As I look at the pipeline of restaurants that are in the pipe, whether they're leases that are being negotiated at LOI that are in construction design, we're meaningfully above that 20%. So we feel good that we're tracking against those objectives. 2nd, we are really focused on unit level economics at Papa John's and everything we do is balanced and things that we're doing that drive top line and great consumer demand and making sure that's flowing through to penny profits and our restaurants. Speaker 200:44:08And as we look at Q1, we talked about the fact that our restaurant margins were up 220 basis points. When we actually even looked at the month of April and looked at what's happening from a product margin standpoint, even though we had a negative comp, we did deliver positive product margins for the month of April. What that means is we believe that we are on the right strategy to continue to focus on delivering really meaningful improvements in terms of our unit economics from a restaurant standpoint. And then lastly, from a construction and a build out cost standpoint, we shared a little bit more detail in our prepared remarks around like the stringent and thoughtful RFP process we're going to make sure we're driving costs out in an effective way from general contractor spend to furniture and fixtures. And we're also doing things like taking a step back and looking at our holistic architectural design to making sure that we're optimizing for construction costs. Speaker 200:45:21So we are focused on it and we're focused on making sure development comes to life because we have solid unit level economics and we are delivering strong restaurant profitability. Speaker 800:45:37Great. Thank you very much. Operator00:45:40Thank you. One moment for our next question. And our next question comes from the line of Alexander Slagle from Jefferies. Your question please. Speaker 200:45:52Thanks. Good morning. Speaker 300:45:54Ravi, I wanted to get your perspective, I guess a follow-up on Jim's question earlier in the 3rd party and kind of what point does the 3rd party business get to an optimal size? And I know it's continued to grow nicely and you've called out more opportunity for some of the non core day parts and other growth avenues. Just trying to get a sense how big you think it could be and if you get the sense franchisees are continuing to be happy with this trajectory and where it's gone. Speaker 200:46:29Thanks for the question. And fundamentally, we're taking the mindset that the consumer decides. We are going to make sure that we are at the right places, at the right time, at the right price points. And while the aggregator business has continued to accelerate, we see that as a consumer pattern that pizza is taking more share in the aggregators and we've continued to perform well because we've executed well in that space. So while I don't know what the ideal mix is, I think we should be watching consumer behaviors to see like how many how much are consumers migrating to that. Speaker 200:47:11What I would say is what is unique to the organic channels is we have a strong loyalty business. We have a large base with a high active rate. When I look at my experience at other digital first companies, we have a really solid active rate in terms of members and we get to offer value to our most loyal consumers in a different way. So our objective long term is not to have our organic business decline and only our growth coming out of aggregators. We believe that there is going to be opportunity for us to continue to focus in through delivering great service and offering great value to our loyalty that has unique value that you can only get on our organic delivery and carryout channels. Speaker 200:48:09Great. Thanks. Speaker 300:48:11Thanks. Operator00:48:12Thank you. One moment for our next question. And our next question comes from the line of Dennis Geiger from UBS. Your question please. Speaker 600:48:24Thank you. Ravi, wondering if you could talk Speaker 900:48:26a little bit more on the new build cost topic. Speaker 600:48:29Is there anything you can share on sort of how much lower you're targeting, maybe how much lower those costs could be? Or even if you look at it from a returns or payback period, is there something you're targeting there that you guys are able to share between lower build costs as well as incentives where you're at X and you're trying to get those paybacks to Y and that's kind of the magic number for the U. S. Franchisees. Anything there to share? Speaker 600:48:57Thank you. Speaker 200:49:00Thanks for the question, Dennis. While we don't share what the build out cost is, I did reference earlier that Joe Seavey and myself are consistently in corporate real estate committees and we're looking at both franchisee deals as well as corporate restaurant opportunities. And what I can say is that really solid pipeline of corporate restaurants that are generating solid IRRs that we as Papa John's would continue to invest our capital in. Specifically in terms of like what we're doing to drive down cost, We're looking at a few big areas, but we're looking at the biggest blocks of expense, which is truly like in general contracting. And second is around equipment. Speaker 200:49:49And we're running through a really deliberate process to ensure that we are getting great regional rates on our equipments and GC costs. We're providing more optionality for our franchisees based on volume of the store to make sure that we are building out the store appropriate to the volume that to drive to drive down costs. And as a franchisor, we're continuing to develop and we're developing because the IRRs are healthy on the deals we're signing. Thank you. Operator00:50:35Thank you. One moment for our next question. And our next question comes from the line of Todd Brooks from The Benchmark Company. Your question please. Speaker 1000:50:49Hey, thanks for taking my question. Wondering, Ravi, you talked about lower attach of beverages and sides. Can you comment what average check, what the decline was during the Q1, just so we can get a sense of what that headwind is manifesting itself as. And just following up on a couple of the 3rd party delivery questions. I know the company has long talked to new entrants growing the category. Speaker 1000:51:15But when you look at Uber Eats specifically, is Papa John's growing their share on that channel given new entrants recently? Thanks. Speaker 200:51:28Thanks for the question. So first, when it comes to average ticket, we just want to make sure we remind you and everyone that like ticket was actually up slightly for the slightly up to flat for the quarter, driven by pizza sales being up, sized beverages and delivery fee coming down. We still believe that we can unlock some real value by having the right balance of focus on driving attachment, but also leaning into a more product proposition itself. Specific to Uber Eats, we have been tracking where we had been performing given that the competitive space has gotten, there's more competitors on it. And as we previously stated that we believe that there is enough volume for the large chains to be on there and we've been continuing to feel good that we are on track in our business on that channel relative to what our expectations were. Speaker 200:52:46And Todd, I actually want to clarify that our ticket was down about 0.5% for Q1. And again, that was all specifically related to sides, beverages and the delivery fee. Thanks, Rafi. Thanks. Operator00:53:06Thank you. One moment for our next question. And our next question comes from the line of Piyush Suri from BTIG. Your question please. Speaker 1100:53:17Yes, great. Thanks for taking the question. I did want to come back to the conversation around check management or mix management. Ravi, are you seeing that check management through your or just through your organic channels? Are you seeing it in 3rd party as well? Speaker 1100:53:34And can you comment on the behavior of, I guess, traditional customers versus rewards customers or loyalty customers in that context of the check management? Thanks. Speaker 200:53:46Thanks for the question, Peter. So there's a couple of factors. And 1, like we believe in this notion like that the consumer decides. So what we're seeing is that the consumer is mixing into their channels differently and into their dayparts differently as well. So as we see check management coming to live, we're seeing that the organic carryout business was effectively flat in Q1 versus the organic delivery business that was down. Speaker 200:54:17Naturally when your mix moves more towards carryout versus organic delivery, you see a slight decline in the attachment rate just because the mindset and the occasion for the consumer is slightly different. I think more broadly like consumers are coming to Papa John's right now while they're doing check management. They're buying the things that we are famous for and that is for our core offerings of pizza and our specialty pizzas. So we are seeing that the consumer is spending more year over year in pizza and they're pulling back in sides and beverages. We think that we're going to continue to test offers that continue to improve that mix, but ultimately we're seeing that consumers are using the channels of how often they're using the channels of aggregators delivery carryout slightly different. Speaker 200:55:16And second, that we're seeing that the consumer vote for the things that we're most famous for. Specific to loyalty consumers are the core of our business and it is a highly active and engaged group. Well, I don't want to have any specifics at my fingertips in terms of differential in behavior there. But what I will say is like with our loyalty consumers, we have the ability to touch them much more frequently through emails and through app pushes that allow us to nudge behavior a little bit differently. Speaker 1100:56:01Thank you very much. Speaker 200:56:03Thanks, Peter. Operator00:56:05Thank you. One moment for our next question. And our next question comes from the line of Jim Sanderson from Northcoast Research. Your question please. Speaker 1200:56:17Hey, thanks for the question. I wanted to go back to the international segment. I think you mentioned expecting that the back half of the year could be accretive and that you were also reviewing potential closures. Can you just provide a little bit more detail about what that entails? And that's in the context of McDonald's recently announcing that they did buy out a franchisee in the Middle East. Speaker 1200:56:38Just wondering if that's on the table in other marketplaces or in the UK? Speaker 200:56:44Thanks for the question, Jim. And I just want to make sure I clarify for the group, we were specifically talking to the UK turning accretive in the second half of the year. We believe the fundamental of our business model is to be a franchisor and that is the core of what we do is we provide great unit economics, we provide great brand and product innovation. As we think about like the success in the UK, I think there's some like real natural learnings that we can continue to apply to other markets. We got highly consumer centric in terms of like what was the consumer telling us they needed from a value and a product innovation standpoint. Speaker 200:57:25We made sure we were positioning our franchisees to deliver fantastic service. And as we started to change hands between franchisees and continue to get our stores into season more seasoned operators in, we saw a meaningful sales list. And 3rd, as we went back and remapped our trade zones, our DMAs, we saw opportunities where we should be making strategic closures because it makes the overall market more profitable. It improves unit economics. It allows us to have really cohesive trade zone. Speaker 200:58:00So we're partnering back with our franchisees across the world to take a similar playbook of being highly consumer centric, making sure product innovation is coming through and pushing us as an organization to making sure we're laser focused on the trade zones, the DMAs and cities we want to win in. Speaker 1200:58:23Okay. And just a quick follow-up. In the U. K. Specifically, do you think your service levels are improving? Speaker 200:58:30Yes. When we look at delivery time, when we look at out the door times, we are seeing improvements. Speaker 1200:58:39All right. Thank you. Operator00:58:42Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to Ravi Panwalla for any further remarks. Speaker 200:58:54Thank you. I'd like to sincerely thank all of you for your time this morning and your continued interest in Papa John's. I hope that you've taken away from our conversation today that we're facing a challenging macro consumer environment where customers are really being thoughtful about check management and wallet and their wallet, but we have a plan of action and remain confident in our Back to Better 2.0 strategy is going to set us up for long term growth and success. And we look forward to keeping you up to date on our progress and connecting again for our Q2 results in August. Thank you.Read moreRemove AdsPowered by Conference Call Audio Live Call not available Earnings Conference CallAsbury Automotive Group Q1 202400:00 / 00:00Speed:1x1.25x1.5x2xRemove Ads Earnings DocumentsPress Release(8-K)Quarterly report(10-Q) Asbury Automotive Group Earnings HeadlinesIs Asbury Automotive Group, Inc. 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There are 13 speakers on the call. Operator00:00:00Call. As a reminder, today's program is being recorded. Operator00:00:07And now I'd like to introduce your host for today's program, Stacy Froehle, Vice President of Investor Relations. Please go ahead. Speaker 100:00:16Thank you. Good morning, and welcome to Papa John's Q1 2024 Earnings Conference Call. This morning, we issued our Q1 2024 earnings release. A copy of the release can be obtained on our Investor Relations website atir.papajohns.com under the News Release tab or by contacting our Investor Relations department at investorrelationspapajohns.com. Joining me on the call this morning is Ravi Thanawala, our Interim Chief Executive Officer and Chief Financial Officer. Speaker 100:00:51Before we begin, I need to remind you that 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 for the required reconciliation of non GAAP financial measures discussed on today's call. Lastly, let me thank you in advance for asking only one question and getting back in the queue for additional follow ups. Speaker 100:01:31And now, let me turn the call over to Ravi. Speaker 200:01:34Thank you, Stacey, and good morning, everyone. Before I jump into my prepared remarks, I'd like to convey my appreciation to the Papa John's team and our Board of Directors for entrusting me to lead the organization as Interim CEO. I'd also like to acknowledge the passion and commitment of our talented team members and highly engaged franchisees who continue to deliver for our customers every day. There is so much to be proud of and excited for as we begin our next phase of growth. We are navigating the current dynamic environment with a balanced approach to delivering improved unit level economics and company operating profits, while also investing in the future. Speaker 200:02:16As such, in January, we launched our Back to Better 2.0 strategy and in a short period of time, we have achieved the meaningful milestones. In the areas of enhancing national marketing investment and effectiveness, we launched our newest platform innovation, Crispy Cupriaroni, across a trio of products in different accessible price points and introduced an all new brand platform, Better Get You Some, that is part of our deepened commitment to and investment in our new marketing strategy. Regarding our focus on accelerating North America development, we improved the cash on cash paybacks on new North America development through attractive incentives. We also remain focused on enhancing unit level profitability and reducing overall build costs for new restaurant development. Finally, on our international transformation initiatives, we established international regional hubs led by proven leaders with direct industry and relevant market experience to help drive market share gains in key markets around the globe and are progressing the optimization of our UK market with the planned closure of 43 company owned locations later in May and the active pursuit of refranchising opportunities for other locations. Speaker 200:03:36Our energy will remain focused on laying the right groundwork so we can continue to evolve our business, enhance our long term performance and create value for our shareholders and ultimately become the QSR pizza brand of choice for consumers and franchisees around the world. Now I'd like to touch on our Q1 performance. In our North America business, results were mixed, but thanks to the highly disciplined approach of our operators, especially in our company owned restaurants remaining diligent throughout the quarter, restaurant level margins exceeded our expectations, leading to higher adjusted operating income despite near term sales pressure. In the Q1 of 2024, North America comparable sales were down roughly 2% from a year ago. This was primarily due to lower transactions as the continued growth in our aggregator channel was more than offset by a decline in organic delivery, while our carryout business remained consistent with the prior year. Speaker 200:04:37This shift in channel mix also led to a slightly lower average ticket as the relatively profit neutral revenue from our organic delivery fee decline. Strategic pricing actions by our revenue management team helped to somewhat mitigate this delivery fee impact. In the current environment, we're also seeing customers become more deliberate in managing their overall order costs. So while our core offering pizza remained higher year over year, sides and beverages were lower. It has been my experience that brands that win consumers' hearts and minds on the most important days of the year have a unique role in their lives that brands are able to build upon. Speaker 200:05:21We are encouraged by our performance on traditionally high volume occasions for the pizza category during the Q1, including Valentine's Day, Super Bowl weekend and March Madness, reinforcing our confidence in the strength of our brand. From an international perspective, we are pleased with the progress we continue to make in this dynamic environment. As anticipated, our Middle East region impacted our 1st quarter international comparable sales due to the ongoing conflict in this part of the world. Excluding this region, our international comparable sales were up approximately 1% from a year ago. For the Q1 2024, global system wide restaurant sales were $1,230,000,000 down 1% in constant currency compared with the prior year's Q1. Speaker 200:06:13The lower sales were largely due to the strong prior year Q1, which had a benefit of approximately $10,000,000 from the high volume week between Christmas and New Year's. The decrease in sales due to the calendar shift was partially offset by 3% net unit growth from the prior year. Total revenues for the Q1 were $514,000,000 down 2% from a year ago, primarily reflecting a $9,000,000 decrease in North America commissary revenues due to lower commodities prices in the quarter and to a lesser extent lower transaction volumes a $9,000,000 decrease in other revenues, which includes a $5,000,000 impact from the sale of preferred marketing, our formerly wholly owned print and promotions business and a $4,000,000 decrease in domestic company owned restaurants, reflecting lower transaction volumes somewhat offset by higher average ticket. Partially offsetting these revenue declines was an approximate $10,000,000 contribution from the 2023 UK franchisee acquisitions. Turning to profits. Speaker 200:07:32Adjusted operating income for 2024 Q1 was $43,000,000 up from $39,000,000 a year ago. The key drivers of our improvement over last year's Q1 include an approximate $2,000,000 benefit from improved North America company owned restaurant margins and domestic commissary margins an approximate $3,000,000 benefit from reduced local marketing reserves at our company owned restaurants, a result of the recent change to our local and national marketing spend requirements and an approximate $4,000,000 benefit from equity forfeitures primarily resulting from the recent CEO departure. These positive impacts were largely offset by a roughly 4 impact related to the operations of our UK franchisee acquisitions when taking into consideration a Q1 2024 operating loss and the Q1 2023 franchisee royalty fees. Higher G and A expenses D and A expenses of approximately $3,000,000 as we continue to invest in our restaurants and technology platforms along with the consolidation of the acquired UK restaurants and lower North America comp sales. Adjusted operating margins for the Q1 was 8.4%, up from 7.4% a year ago, primarily reflecting improved margins at our domestic company owned restaurants and supply chain improvements. Speaker 200:09:07Overall, our domestic company owned margins improved 220 basis points compared with the prior year Q1. Driving the improved margins was an approximate 110 basis points benefit from lower food basket costs as we continue to see relief in cheese and dough prices. Lower operating costs and a slightly higher ticket at our company owned restaurants also contributed to our margin improvement, while labor costs were only slightly higher by approximately 10 basis points. Our teams did a great job in the Q1 optimizing our labor model to meet consumer demand and delivering an excellent customer experience, while also adjusting for shifts in channel mix. Moving on to cash flow and our balance sheet. Speaker 200:10:00In the Q1 of 2024, net cash provided by operating activities was $12,000,000 down from $41,000,000 a year ago. After accounting for $13,000,000 in capital expenditures for the development of new domestic restaurants and investments in technology innovation, we generated a cash outflow of $1,000,000 This compares with free cash flow of $22,000,000 generated in the Q1 of 2023, primarily reflecting unfavorable working capital changes driven by the timing of payments in the Q1 of 2024. Our liquidity continues to be strong with $260,000,000 in cash and borrowings available under our revolving credit facility and a gross leverage ratio of 3.1 times. Overall, our teams around the globe continue to take a disciplined approach to running the business. We've improved restaurant level margins and operating profits through commodities normalization, revenue management and labor optimization in the quarter despite the lower sales. Speaker 200:11:09Our efforts are having a positive impact on our bottom line. However, there is more work to do. As I mentioned earlier, in January, we launched multiyear strategic initiatives that are designed to drive a higher system wide sales, enhance restaurant level profitability and reinvigorate development over the long term in key markets around the world. I'm pleased to say, while still in early improvements we are implementing in our marketing platforms, our supply chain and our international operations. 1st, product innovation remains a cornerstone to our brand promise of better ingredients, better pizza and will continue to be a focus of our strategy. Speaker 200:11:54In April, we launched our newest platform innovation Crispy Caperoni, which is available across a trio of products at different accessible price points. In conjunction with this new platform innovation, we launched a modern refresh of our brand visuals, tone and message with better get you some. This amplification of our brand is the culmination of our efforts over the past 9 months where we focus on improving audio segmentation, building customer loyalty and driving cultural relevance. This combination of brand and product innovation helps the consumer to appreciate the strong value proposition Papa John's provides. While it's only been 5 weeks since we launched our new brand platform, early research of the campaign showed an increase in the consumers' purchase intent. Speaker 200:12:45Moving ahead, we're focused on improving sales via our revenue management strategies, ongoing loyalty improvements and adapting our media strategy mix to maximize effectiveness across channels. 2nd, to support the new brand platform and leverage the scale national investments deliver, our franchisees voted last year to increase the contribution rate to the national marketing fund by 100 basis points of sales beginning in the Q2. As part of the consolidation to national funding, we made local marketing spend optional for the system. For our domestic company owned restaurants, we intend to optimize our local marketing spend in 2024 and still see value in investing in certain local marketing co ops and brand partnerships within specific markets to build upon the strong community relations already in place. Many of our franchisees are taking a similar strategic and targeted approach given the additional optionality the new marketing fee structure provides. Speaker 200:13:50The initial customer response and reviews to our new product innovations and brand platform have been positive, but the highly competitive promotional environment has been a headwind to transactions. We believe Papa John's perceived value is about providing high quality product innovation at the right time at the right price. It is important that we maintain discipline in our limited time offers, pricing strategies and product innovations for the long term success of the business. Although we won't hesitate to make short term adjustments as we deem appropriate on a market by market basis to remain competitive. 3rd, as previously discussed as part of our Back to Better 2.0 strategy, we're evolving our domestic commissary business to support additional investment in supply chain productivity. Speaker 200:14:42Beginning with the Q1, we increased the fixed operating margin that our domestic commissaries charge by 100 basis points from 4% to 5%. We plan to continue this annual increase until 2027 when the fixed operating margin reaches 8%. At the same time, our franchisees can now earn incentive based rebates by delivering higher volumes and new restaurant development. Through the Q1, more than 40% of our franchisees are on track to earn a rebate in 2024. As we drive higher volumes through our supply chain model, we intend to reinvest into this segment to increase productivity throughout the system making our supply chain even more effective. Speaker 200:15:30Modernizing equipment, automating processes and negotiating contract renewals as we continue to scale are just a few examples of our opportunities available to Papa John's. 4th, unit level productivity is a primary driver of unit development and we are confident supply chain efficiencies will deliver improved results over the next several years. In addition, we have been focused on rebuilding and elevating our development team to accelerate North America new unit growth through franchisee cultivation, quality site selection, lower cost to build and quicker speeds to open. As part of this process, we're evaluating and revamping every aspect of the development process from general contractor selection and architectural costs to leasehold improvements and furniture fixtures and equipment. These improvements are delivering real time cost savings and will offer franchisees more resources throughout the development process in addition to greater contractors, supplier and equipment optionality based on market and anticipated restaurant volumes. Speaker 200:16:42The development incentives announced last November, combined with the improving cost to build, significantly improves the cash on cash payback for our developing franchisees who open new units in 2024 2025. The attractive ROI on new builds and the strength of our brand gives us confidence new unit development in North America will continue to accelerate. Now moving to our international transformation initiatives. Our number one focus is to ensure we have the right foundation to support and drive long term success. This means being closer to the consumer, continuing to focus on menu innovation that is locally relevant and making sure we have the right insights to help our franchisees within their markets. Speaker 200:17:32In the Q1, we launched our international regional hub structure with proven leaders that have direct industry and relevant market experience. These hubs are designed to help our international franchisees to drive sales and profitability by aligning global best practices with local preferences and the resources to accomplish our long term objective of increasing share in key markets around the world. We are also advancing our efforts to optimize the UK business model. Most recently, we announced plans to close 43 underperforming company owned restaurants later this month. We'll continue to evaluate our remaining portfolio as well as our franchisee locations focusing on sales trend, overall profitability and their lease and loan obligations. Speaker 200:18:24Due to this process, additional strategic closures and refranchising opportunities will be considered as we look to drive profitability and strengthen our franchisee base. We believe with these actions, the UK market will become profit accretive in the second half of this year. Finally, we're investing in our international consumer facing technology and digital infrastructure to improve purchase conversion, increase customer retention and deliver faster consumer insights to franchisees. There remains significant white space for the Papa John's brand internationally. And while we saw more foundational investments to make, we're confident the actions we are taking are setting our largest international markets up for profitable market share gains over the long term. Speaker 200:19:20Looking at our outlook for the balance of the year. For the 1st 4 weeks of the second quarter, North America comp sales were down approximately 1% and may remain under pressure in the near term as the challenging macroeconomic environment continues and consumer confidence softens. Because of this, we have chosen to update our full year guidance with a more cautious outlook. If orders remain at a similar level as the past 4 weeks, we anticipate 2024 North America comps to be flat to down low single digits for the full year 2024. As a reminder, we are in the early stages of our Back to Better 2.0 investments and are committed to providing updates as the year progresses. Speaker 200:20:09Internationally, we remain in a dynamic environment and continue to maintain a cautious outlook on international comps in 2024. Based on the lower sales outlook and assuming we remain at similar levels for the remainder of 2024, we would anticipate 2024 adjusted operating income to be between $145,000,000 $155,000,000 Our teams remain focused on executing against our strategies and maintaining cost discipline. We continue to expect benefits from the increase to our fixed commissary margin, our international transformation initiatives, notably the closure of UK restaurants we mentioned earlier and an increase in North America development. However, these benefits will likely be offset by lower North America comparable sales combined with higher G and A expenses and higher G and A expense that have been discussed previously. In terms of other non operating expense items, we expect net interest expense to be between $40,000,000 $45,000,000 our capital expenditures to be between 75,000,000 dollars $85,000,000 and our tax rate to be between 23% 26%, all consistent with our prior guidance. Speaker 200:21:36From a development perspective, the North America market is our most accretive development for Papa John's and we remain committed to accelerating the expansion of our domestic footprint moving forward. In the Q1, we added 14 net new North America units, bringing our total North America restaurant count to 3,447. For fiscal year 2024, we expect net new units for North America to increase more than 20% relative to 2023 net unit openings. From an international perspective, we saw 23 new restaurant openings on a gross basis. These new restaurant openings were offset by 29 closures primarily in certain Middle East markets and China. Speaker 200:22:25This brings our total international restaurant count to 2,467. We are maintaining a cautious approach for our international markets and expect gross openings between 101 140 new international restaurants for fiscal 2024. We continue to review the performance of our international franchisees and may initiate additional strategic closures to improve marketplace health or exit unprofitable locations. As such, our net openings could be impacted by the closure of underperforming locations to enhance long term profitability. Finally, as we look to the longer term, we continue to see significant opportunities to drive higher system wide sales, global development and overall profitability as we continue to execute on our strategy. Speaker 200:23:21Given the current dynamic environment and business trends we discussed today, our longer term targets are under evaluation as we want to ensure our goals are achievable and aligned with our strategy. In summary, we are executing against our Back to Better 2.0 strategy. This strategy is designed to drive restaurant profitability, improve supply chain efficiency, increase marketing effectiveness and reinvigorate global development. We are making steady progress as our teams are collaborating across departments and geographical borders, laying a solid foundation for our next chapter of growth. I'm confident in the strength of the Papa John's brand, our team, our company's long term performance potential. Speaker 200:24:08I look forward to sharing our progress with you throughout the coming year. Now I'll turn the call over to our operator to take your questions. Operator00:24:23And our first question comes from the line of Jim Zallara from Stephens Inc. Your question please. Speaker 200:24:29Hi, good morning guys. Thanks for taking our question. Bobby, can you just give us Speaker 300:24:34an update on what you're seeing in the aggregator channel as far as demand, especially as we've heard more consumers kind of engaging in value seeking behavior, how your presence on that in your own proprietary digital channel helps convey Speaker 200:24:53value? Yes. Well, Jim, thanks for the question. And I'll start there, but I may need you to repeat the second half of that question in a moment. So first, we've been on the aggregators since 2019 and have been leading in that space. Speaker 200:25:09More broadly, what we're seeing is that the pizza category continues to perform well and take share within the aggregator universe. 2nd, the benefit of the aggregators is that they are highly convicted consumers that are ready to purchase when they're on those apps. What we're specifically seeing is continued growth year over year in the aggregators. It represented 16% of our business in Q1 relative to 12% in the prior year. Also, we continue to see growth quarter over quarter. Speaker 200:25:49We think that the aggregator experience and when consumers are on it is a very specific occasion. So how we communicate value and how we communicate growth there. We are continuing to stay really focused on menu innovation, cutting through, doing great jobs on making sure navigation is coming to life. And then we're in the markets pretty consistently testing different pricing strategies to make sure we strike the right balance at a geography level on balancing the premiumness of our product as well as value that the consumer needs. Jim, I don't know if I got that second half of your question. Speaker 300:26:30Yes. The second part was just relative to what you're seeing on your own or proprietary channels? Speaker 200:26:37Yes, absolutely. And similar to what we spoke about in prior quarters, we are seeing the aggregators outperform our organic delivery and carryout business, specifically our organic delivery business and maybe 2 important points. I think the good news in this is that like aggregators gives us a really clear opportunity to win new consumers who are a younger demographic, more diverse overall. So we see a lot of strategic benefit and continue to grow aggressively in this channel. Organic delivery has continued to decline year over year and we're really focused in on the second half of this year on how do we communicate the value of our service, of our offers more clearly in our organic delivery business and making sure everyone understands the value that our loyalty program provides in our native channels. Speaker 200:27:39But there has been a spread between the 2. And just as a reminder, the margin profiles on the aggregator business and organic delivery business are slightly different given how the pricing architectures come to life. Speaker 300:27:55Great. That's helpful. I appreciate the color. Speaker 200:27:57I'll hop back in the queue. Thanks. Operator00:28:00Thank you. One moment for our next question. And our next question comes from the line of Eric Gonzalez from KeyBanc. Your question please. Speaker 400:28:12Thanks for taking the question. Good morning. I just want to talk about the current strategy. I mean, I want to maybe ask you about your confidence level that the strategy is working. And I realize the environment shifted with several of your competitors have called out the more cautious consumer. Speaker 400:28:26But how do you know that the shift away from regional marketing isn't having an adverse effect on your results as it seems like the quarter to date same store sales trends are probably quite a bit below what you had hoped for back in January? Speaker 200:28:38Yes. Eric, thanks for the question. And I'm going to take that in 2 parts. First, like more broadly, the Back to Better 2.0 strategy had a couple of really clear filters to it. The first was find ways to improve unit economics that comes to life through continuing to remix the total amount of marketing spend to drive ROASs, improve and incentivize supply chain, commensated margins by giving rebates for really meaningful growth. Speaker 200:29:12And 3, this really clear focus that we're taking in terms of our new national marketing strategy. When we look at April results, there are a few things that we want to call out where we're seeing challenges from a traffic standpoint actually started slightly prior to when we went live with the new marketing strategy. We saw slightly softer sales in the month of March than what we expected. So that's one important thing. 2nd is that when we actually look at consumer behavior, what we're actually seeing is that consumers are check managing a little bit more and we're seeing slightly higher exit rates at certain points in the consumer funnel. Speaker 200:29:58Those to us give us the indication that this is more about a softening of the consumer and a slightly higher value orientation versus directly tied to anything in our creative and media strategy. What I will say is we are 5 weeks in to our creative and media strategy, new visuals, new tone, new media mix. There's obviously some ongoing calibration that we're going to want to do. But as we've actually done the consumer testing work, we are absolutely seeing purchase intent go up as we've tested this new created and media strategy. So we will continue to keep you in the loop and keep the investor community in the loop and following quarters of our progress, but we believe we're on the right track from a creative and a media standpoint. Operator00:31:04And our next question comes from the line of Sara Senatore from Bank of America. Your question please. Speaker 500:31:10Thank you. I guess one question and then a follow-up please. The first is that, at the end of March when you announced the CEO transition, I think you reiterated or reaffirmed the guidance for fiscal 2024. It sounds like you said March was a little softer than you had expected. I'm trying to understand then maybe what's changed since the 3rd week of March and now given that it sounded like you already perhaps seeing some of the softness materialize? Speaker 200:31:44Yes. To be clear and clarify, we were seeing some slight softness in traffic. However, we were continuing to work towards our creative launch, our media launch, new innovation launch in the month of April. Throughout the month of April, we saw that the consumer behavior continued to soften, particularly in elements of traffic and check management. And that's really the differential of what we started to see in the month of April. Speaker 500:32:14Got it. Okay. And then in that context, I know you mentioned you're it sounded like you're not looking to kind of match the promotional intensity that competitors are engaging in. But I guess ultimately to grow transactions, how do you plan to do that if what consumers are looking for is value? And I guess maybe said otherwise, do you have a choice, but to try to be more aggressive or sharper on your price points if that's what consumers want and that's what's driving traffic growth elsewhere? Speaker 200:32:50So we think we have multiple levers to be able to demonstrate value to our consumers. So first, like when we think about Q1, what happened from a comp standpoint was that pizza sales continued to be up year over year to sides and beverages and the profit neutral delivery fee is where we started to see compression. So we're actually pretty clear on where our opportunities are to continue to bend the curve from a sales comp standpoint. 2nd, our loyalty program is a great toolkit and a great opportunity for us to continue to reinforce the value that we can offer in our organic channels. And lastly and importantly, we are testing continuously and we'll continue to test different pricing and promo strategies, particularly for the carryout business to ensure that we can communicate the great service we offer plus the value in our carryout business. Speaker 500:33:59Thank you. Operator00:34:02Thank you. One moment for our next question. And our next question comes from the line of Brian Mullen from Piper Sandler. Your question please. Speaker 600:34:14Thank you. Just a question on Speaker 200:34:16G and A. Robbie, can you speak Speaker 600:34:17to what your expectations are for this year and then what you incorporated into the operating income guidance. If I'm doing it right, it seems like Q1 was about $49,000,000 or $50,000,000 on an adjusted basis. Is that a good run rate for the next couple of quarters? And then just related to that, you've had some more time in the seat first as CFO, now you've stepped into a bigger role. Do you see any opportunities across the organization to get more efficient on G and A bigger picture over the next couple of years? Speaker 600:34:45Is it possible to make cuts without hurting sales? Just fresh set of eyes, I'd love to get your perspective. Speaker 200:34:52Yes. So thanks for the question, Brian. So first on G and A, I just want to remind us that in Q1 there were a number of puts and takes that were happening that were one time in nature. So on an adjusted basis, I think we're going to be slightly above $50,000,000 for the run rate for the next few quarters. And you have to remind everyone that we are still lapping the UK acquisition that happened in 2023. Speaker 200:35:26When we look at like opportunities, we're absolutely taking a really focused cost discipline approach to running and operating the business. We're going to want to continue to invest in our strategic growth drivers of the company in the future, which is really around product innovation, marketing and our tech stack. We're looking for opportunities continuously to be highly streamlined as an organization, and continuing to look to drive foundationally better unit economics for our restaurants. Operator00:36:05Thank you. One moment for our next question. And our next question comes from the line of Brian Bittner from Oppenheimer. Your question please. Speaker 700:36:19Thank you. Good morning. My question is on the new EBIT outlook for 2024. I understand that you're now assuming lower same store sales than you originally were. But when I take a step back and I look at 1Q's EBIT, it was very strong. Speaker 700:36:37Margins expanded 100 bps, EBIT grew 10%, be consensus by a meaningful amount on negative low single digit same store sales, which you're assuming moving forward. The guidance would assume this trend in EBIT changes pretty meaningfully for the rest of the year. Can you maybe just unpack some of the assumptions in EBIT moving forward versus maybe the strength that you saw in the Q1? Speaker 200:37:08Yes, Brian. Thanks for the question. And first, I just want to reinforce that we are taking a really disciplined approach to running the business once we're in quarter and we're thinking about how we're investing going forward. More broadly, if you actually look at the Q1 results from EBIT and unpack the one times, we are slightly above last year on an adjusted basis. If you exclude the impact of one times this year versus last year. Speaker 200:37:39More broadly, if you look at the full year guide and take the midpoint of that, that's effectively a flat OI versus last year on a 52 week basis. So I just want to provide that little bit of context. 2nd, as we look through the balance of the year, we know that the consumer is going to be more value conscious as we see check management happening and we're watching exit rates and abandonment rates throughout the consumer funnel. 2nd, we're going to want to take a more aggressive approach to testing strategies related to pricing promotions in our media mix for the balance of the year. So we're just taking a more cautious approach to how we think about the EBIT or OI outlook for the balance of the year. Speaker 200:38:29But I want to give confidence that if you look at our results in Q4 of 2023 and Q1 to 2024, we're highly focused on driving unit level economics, which we think will spur the right development for the brand over the long term. Operator00:38:58And our next question comes from the line of Lauren Silverman from Deutsche Bank. Your question please. Speaker 100:39:05Thank you very much. I wanted to ask about the international comps and what you're seeing there. 1, are you seeing any signs of improvement in the Middle East? And if you can quantify the impact? And then 2, can you talk about the performance across some of the other markets outside of the Middle East, more specifically? Speaker 100:39:23Thank you. Speaker 200:39:29Thanks, Lauren. So we are seeing that the Middle East performed better in Q1 relative to the run rate that we had been on in the prior quarters. And just as a reminder, it's a small component of our business from a system wide sales standpoint, but has been historically a really meaningful development driver of the company. We have seen more than a 10 point acceleration in terms of the comp run rate as we progressed from 2023 in the fall and winter to what we were seeing in the Q1 of 2024. More broadly, when we think about our international strategy, we set up this hub strategy to give us laser focus on a few regions that matter the most for the business and company. Speaker 200:40:25The way that's coming to life is like really clear, sharp perspective on product innovation and the consumer target. So in the UK, we've seen flat to slightly negative comps through the Q1. And what's important there is as we unpack it is that restaurants that have changed to end to more seasoned operators, we're seeing double digit increases in terms of sales performance. We recently launched a new product innovation across our platform of products, which had the highest penetration we've had for an innovation LTO for a couple of years. In LatAm, our largest market, Chile, we saw the strongest performance in this quarter and got us back on a good trajectory. Speaker 200:41:16It's easy to read into like China and saying we had some strategic closures. I think the way that everyone should look at that and think about that is we're taking on the necessary pruning locations that aren't productive, that aren't as fit to our go forward strategy from a real estate standpoint. But ultimately, we are even seeing improvements in our China business from a comp standpoint in Q1 relative to the run rates that we've been on. So we have a laser focus on like the few regions and the few countries that matter the most in international. Speaker 100:41:56Thank you. Operator00:41:58Thank you. We will open for our next question. And our next question comes from the line of Anastrosyk from BMO Capital Markets. Your question please. Speaker 800:42:11Hey, good morning. Thanks for taking the question. I wanted to ask about the development pipeline in North America and how you're seeing Speaker 600:42:19that build as you have Speaker 800:42:20a few more months of the incentives under your belt. What kind Speaker 600:42:25of visibility do you have to Speaker 800:42:26the guidance that you've given for this year? Do you have any visibility to next year as well? And I guess, I know you're doing a lot of things to support the economics currently, but I guess do you see risk as given the top line outlook that maybe some of those comparisons get pushed out or don't come to fruition? I guess, how are you thinking about that? Thanks. Speaker 200:42:53Yes. Well, thanks for the question, Andrew. And there's quite a few things there that I want to unpack. First, just a little bit of context. I like myself and Joe Stevie, our Head of Restaurants in North America and who also leads development, We're meeting every single month with the cost functional team to talk about the pipeline of restaurant openings for North America. Speaker 200:43:18And a couple of really impactful things. 1, we reaffirmed that development in North America is going to be upgraded at 20% year on year. As I look at the pipeline of restaurants that are in the pipe, whether they're leases that are being negotiated at LOI that are in construction design, we're meaningfully above that 20%. So we feel good that we're tracking against those objectives. 2nd, we are really focused on unit level economics at Papa John's and everything we do is balanced and things that we're doing that drive top line and great consumer demand and making sure that's flowing through to penny profits and our restaurants. Speaker 200:44:08And as we look at Q1, we talked about the fact that our restaurant margins were up 220 basis points. When we actually even looked at the month of April and looked at what's happening from a product margin standpoint, even though we had a negative comp, we did deliver positive product margins for the month of April. What that means is we believe that we are on the right strategy to continue to focus on delivering really meaningful improvements in terms of our unit economics from a restaurant standpoint. And then lastly, from a construction and a build out cost standpoint, we shared a little bit more detail in our prepared remarks around like the stringent and thoughtful RFP process we're going to make sure we're driving costs out in an effective way from general contractor spend to furniture and fixtures. And we're also doing things like taking a step back and looking at our holistic architectural design to making sure that we're optimizing for construction costs. Speaker 200:45:21So we are focused on it and we're focused on making sure development comes to life because we have solid unit level economics and we are delivering strong restaurant profitability. Speaker 800:45:37Great. Thank you very much. Operator00:45:40Thank you. One moment for our next question. And our next question comes from the line of Alexander Slagle from Jefferies. Your question please. Speaker 200:45:52Thanks. Good morning. Speaker 300:45:54Ravi, I wanted to get your perspective, I guess a follow-up on Jim's question earlier in the 3rd party and kind of what point does the 3rd party business get to an optimal size? And I know it's continued to grow nicely and you've called out more opportunity for some of the non core day parts and other growth avenues. Just trying to get a sense how big you think it could be and if you get the sense franchisees are continuing to be happy with this trajectory and where it's gone. Speaker 200:46:29Thanks for the question. And fundamentally, we're taking the mindset that the consumer decides. We are going to make sure that we are at the right places, at the right time, at the right price points. And while the aggregator business has continued to accelerate, we see that as a consumer pattern that pizza is taking more share in the aggregators and we've continued to perform well because we've executed well in that space. So while I don't know what the ideal mix is, I think we should be watching consumer behaviors to see like how many how much are consumers migrating to that. Speaker 200:47:11What I would say is what is unique to the organic channels is we have a strong loyalty business. We have a large base with a high active rate. When I look at my experience at other digital first companies, we have a really solid active rate in terms of members and we get to offer value to our most loyal consumers in a different way. So our objective long term is not to have our organic business decline and only our growth coming out of aggregators. We believe that there is going to be opportunity for us to continue to focus in through delivering great service and offering great value to our loyalty that has unique value that you can only get on our organic delivery and carryout channels. Speaker 200:48:09Great. Thanks. Speaker 300:48:11Thanks. Operator00:48:12Thank you. One moment for our next question. And our next question comes from the line of Dennis Geiger from UBS. Your question please. Speaker 600:48:24Thank you. Ravi, wondering if you could talk Speaker 900:48:26a little bit more on the new build cost topic. Speaker 600:48:29Is there anything you can share on sort of how much lower you're targeting, maybe how much lower those costs could be? Or even if you look at it from a returns or payback period, is there something you're targeting there that you guys are able to share between lower build costs as well as incentives where you're at X and you're trying to get those paybacks to Y and that's kind of the magic number for the U. S. Franchisees. Anything there to share? Speaker 600:48:57Thank you. Speaker 200:49:00Thanks for the question, Dennis. While we don't share what the build out cost is, I did reference earlier that Joe Seavey and myself are consistently in corporate real estate committees and we're looking at both franchisee deals as well as corporate restaurant opportunities. And what I can say is that really solid pipeline of corporate restaurants that are generating solid IRRs that we as Papa John's would continue to invest our capital in. Specifically in terms of like what we're doing to drive down cost, We're looking at a few big areas, but we're looking at the biggest blocks of expense, which is truly like in general contracting. And second is around equipment. Speaker 200:49:49And we're running through a really deliberate process to ensure that we are getting great regional rates on our equipments and GC costs. We're providing more optionality for our franchisees based on volume of the store to make sure that we are building out the store appropriate to the volume that to drive to drive down costs. And as a franchisor, we're continuing to develop and we're developing because the IRRs are healthy on the deals we're signing. Thank you. Operator00:50:35Thank you. One moment for our next question. And our next question comes from the line of Todd Brooks from The Benchmark Company. Your question please. Speaker 1000:50:49Hey, thanks for taking my question. Wondering, Ravi, you talked about lower attach of beverages and sides. Can you comment what average check, what the decline was during the Q1, just so we can get a sense of what that headwind is manifesting itself as. And just following up on a couple of the 3rd party delivery questions. I know the company has long talked to new entrants growing the category. Speaker 1000:51:15But when you look at Uber Eats specifically, is Papa John's growing their share on that channel given new entrants recently? Thanks. Speaker 200:51:28Thanks for the question. So first, when it comes to average ticket, we just want to make sure we remind you and everyone that like ticket was actually up slightly for the slightly up to flat for the quarter, driven by pizza sales being up, sized beverages and delivery fee coming down. We still believe that we can unlock some real value by having the right balance of focus on driving attachment, but also leaning into a more product proposition itself. Specific to Uber Eats, we have been tracking where we had been performing given that the competitive space has gotten, there's more competitors on it. And as we previously stated that we believe that there is enough volume for the large chains to be on there and we've been continuing to feel good that we are on track in our business on that channel relative to what our expectations were. Speaker 200:52:46And Todd, I actually want to clarify that our ticket was down about 0.5% for Q1. And again, that was all specifically related to sides, beverages and the delivery fee. Thanks, Rafi. Thanks. Operator00:53:06Thank you. One moment for our next question. And our next question comes from the line of Piyush Suri from BTIG. Your question please. Speaker 1100:53:17Yes, great. Thanks for taking the question. I did want to come back to the conversation around check management or mix management. Ravi, are you seeing that check management through your or just through your organic channels? Are you seeing it in 3rd party as well? Speaker 1100:53:34And can you comment on the behavior of, I guess, traditional customers versus rewards customers or loyalty customers in that context of the check management? Thanks. Speaker 200:53:46Thanks for the question, Peter. So there's a couple of factors. And 1, like we believe in this notion like that the consumer decides. So what we're seeing is that the consumer is mixing into their channels differently and into their dayparts differently as well. So as we see check management coming to live, we're seeing that the organic carryout business was effectively flat in Q1 versus the organic delivery business that was down. Speaker 200:54:17Naturally when your mix moves more towards carryout versus organic delivery, you see a slight decline in the attachment rate just because the mindset and the occasion for the consumer is slightly different. I think more broadly like consumers are coming to Papa John's right now while they're doing check management. They're buying the things that we are famous for and that is for our core offerings of pizza and our specialty pizzas. So we are seeing that the consumer is spending more year over year in pizza and they're pulling back in sides and beverages. We think that we're going to continue to test offers that continue to improve that mix, but ultimately we're seeing that consumers are using the channels of how often they're using the channels of aggregators delivery carryout slightly different. Speaker 200:55:16And second, that we're seeing that the consumer vote for the things that we're most famous for. Specific to loyalty consumers are the core of our business and it is a highly active and engaged group. Well, I don't want to have any specifics at my fingertips in terms of differential in behavior there. But what I will say is like with our loyalty consumers, we have the ability to touch them much more frequently through emails and through app pushes that allow us to nudge behavior a little bit differently. Speaker 1100:56:01Thank you very much. Speaker 200:56:03Thanks, Peter. Operator00:56:05Thank you. One moment for our next question. And our next question comes from the line of Jim Sanderson from Northcoast Research. Your question please. Speaker 1200:56:17Hey, thanks for the question. I wanted to go back to the international segment. I think you mentioned expecting that the back half of the year could be accretive and that you were also reviewing potential closures. Can you just provide a little bit more detail about what that entails? And that's in the context of McDonald's recently announcing that they did buy out a franchisee in the Middle East. Speaker 1200:56:38Just wondering if that's on the table in other marketplaces or in the UK? Speaker 200:56:44Thanks for the question, Jim. And I just want to make sure I clarify for the group, we were specifically talking to the UK turning accretive in the second half of the year. We believe the fundamental of our business model is to be a franchisor and that is the core of what we do is we provide great unit economics, we provide great brand and product innovation. As we think about like the success in the UK, I think there's some like real natural learnings that we can continue to apply to other markets. We got highly consumer centric in terms of like what was the consumer telling us they needed from a value and a product innovation standpoint. Speaker 200:57:25We made sure we were positioning our franchisees to deliver fantastic service. And as we started to change hands between franchisees and continue to get our stores into season more seasoned operators in, we saw a meaningful sales list. And 3rd, as we went back and remapped our trade zones, our DMAs, we saw opportunities where we should be making strategic closures because it makes the overall market more profitable. It improves unit economics. It allows us to have really cohesive trade zone. Speaker 200:58:00So we're partnering back with our franchisees across the world to take a similar playbook of being highly consumer centric, making sure product innovation is coming through and pushing us as an organization to making sure we're laser focused on the trade zones, the DMAs and cities we want to win in. Speaker 1200:58:23Okay. And just a quick follow-up. In the U. K. Specifically, do you think your service levels are improving? Speaker 200:58:30Yes. When we look at delivery time, when we look at out the door times, we are seeing improvements. Speaker 1200:58:39All right. Thank you. Operator00:58:42Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to Ravi Panwalla for any further remarks. Speaker 200:58:54Thank you. I'd like to sincerely thank all of you for your time this morning and your continued interest in Papa John's. I hope that you've taken away from our conversation today that we're facing a challenging macro consumer environment where customers are really being thoughtful about check management and wallet and their wallet, but we have a plan of action and remain confident in our Back to Better 2.0 strategy is going to set us up for long term growth and success. And we look forward to keeping you up to date on our progress and connecting again for our Q2 results in August. Thank you.Read moreRemove AdsPowered by