Papa John’s(PZZA) - 2019 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q3 2019, the company reported a loss per diluted share of $0.10, an improvement from a loss of $0.42 in the same quarter last year, primarily due to prior year special charges and positive North America comparable sales [36] - Adjusted earnings per diluted share were $0.21, compared to $0.19 a year ago, with special charges totaling $14.2 million in Q3 2019 [37] - Consolidated revenues increased by $18.5 million or 4.8%, driven by positive comparable sales in North America and higher pricing in commissary sales [38] Business Line Data and Key Metrics Changes - Domestic company-owned restaurants saw a pre-tax income increase of $7.6 million, attributed to positive 2.2% comparable sales and favorable insurance costs [39] - North America franchising pre-tax income improved by $1.2 million due to positive 0.6% comparable sales and favorable G&A costs [40] - International sales rose by 10%, with positive comp sales growth of 1.6%, although pre-tax income in this segment decreased by $324,000 due to foreign exchange impacts [41] Market Data and Key Metrics Changes - The company opened 15 restaurants in North America and closed 38, resulting in a net reduction of 23 units, while internationally, 60 restaurants were opened and 39 closed, leading to a net increase of 21 units [47] - The total number of global restaurants at the end of the quarter was 5,343 [47] Company Strategy and Development Direction - The company has set five strategic priorities, including building a culture of inclusivity, improving unit-level profitability, establishing superiority of pizza via commercial platforms, leveraging technology, and expanding its footprint [18][27] - A focus on innovation and improving service quality is emphasized, with a new garlic Parmesan crust pizza launched as part of product innovation efforts [22][23] - The company aims to improve unit economics for franchisees and reduce construction costs to enhance new store ROI [28] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the brand's potential and the positive sentiment from franchisees despite past challenges [56] - The company is focused on improving restaurant productivity and profitability, with expectations for better performance in 2020 [58][100] - The management acknowledged the competitive landscape and emphasized the importance of quality food and service as differentiators [114] Other Important Information - The company announced a significant step to realign its organization by streamlining the senior leadership team [30] - The CFO, Joe Smith, will be leaving the company in spring 2020, and a search for a new CFO is underway [32][33] - The company declared cash dividends of $10.5 million during Q3 2019, with an additional $10.6 million declared for Q4 [48] Q&A Session Summary Question: Can you provide more detail on improving unit-level economics for franchisees? - Management noted that franchisees are optimistic and that efforts are underway to improve restaurant productivity and delivery services [56][58] Question: What are the plans for menu innovation beyond pizza? - The company is encouraging creativity within the innovation team and is open to expanding offerings beyond traditional pizza [60][62] Question: How did sales trends progress throughout the quarter? - Management reported positive movement in consumer sentiment metrics since launching the Shaq campaign, which began in late August [64] Question: What is the impact of the new Chief Marketing Officer on existing strategy? - The change is aimed at creating a holistic go-to-market strategy without altering the current strategic direction [70] Question: What is the most obvious low-hanging fruit for improvement? - Management identified partnerships with delivery aggregators as a key opportunity for growth and efficiency [73] Question: How does the company view value versus low price? - The company believes in delivering fair prices for quality products and will explore price-point offerings strategically [84] Question: What is the current state of franchisee profitability? - While specific numbers were not disclosed, management indicated that improved revenues and productivity would positively impact franchisee profitability [117]