Domino's Pizza, Inc. (DPZ) Earnings Call Transcript & Summary

Good day, and welcome to the Domino's Pizza, Inc. Annual Meeting of Stockholders. I would now like to turn the conference over to Dave Brandon, Chairman of the Board. Please go ahead.

Good morning, ladies and gentlemen, and welcome to the 2020 Annual Meeting of Shareholders of Domino's Pizza, Inc. I'm Dave Brandon, Chairman of the company's Board of Directors, and I will act as chairman of this meeting. We are excited to be hosting our virtual meeting, which allows us to be more inclusive and reach a greater number of our shareholders, while supporting the health and well-being of our shareholders, team members and directors in light of the ongoing public health impact of the COVID-19 pandemic. To our shareholders attending via the web portal, we appreciate your attendance and support. As is our custom, we will conduct the business portion of our meeting first and answer questions at the end of the meeting. [Operator Instructions] Though we may not be able to answer every question, we will do our best to provide a response to as many as possible, and we'll address any unanswered questions on our corporate website shortly after the meeting. It's now 10:00 Eastern daylight time on April 21, 2020, and this meeting is officially called to order. Kevin Morris, General Counsel and Corporate Secretary of the company, will act as secretary of this meeting. I hereby appoint Tim Dohlman of American Election Services, working on behalf of Broadridge Financial Solutions, as inspector of elections at this meeting. Mr. Dohlman has subscribed his oath of office and filed it with the secretary prior to the meeting. The Board of Directors fixed March 2, 2020, as the record date for determination of shareholders entitled of notice of and to vote at this annual meeting and any postponement or adjournment thereof. Mr. Morris, please report on the notice of this meeting and the affidavits of mailing.

Mr. Brandon, I present to the meeting the following documents: a certified list of the holders of common stock of the company as of the close of business on March 2, 2020, the record date for this meeting. This list has been prepared by Computershare, the company's transfer agent. An affidavit of an officer of Broadridge Financial Solutions as to the mailing on March 12, 2020, of the company's annual report for the fiscal year ended December 29, 2019. A notice of this annual meeting, the company's proxy statement dated March 12, 2020, and a proxy for all holders of record of common stock of the company as of the record date. A notice of change of location of this annual meeting filed with the Securities and Exchange Commission on March 31, 2020, and a press release announcing the change to a virtual-only annual meeting issued on March 31, 2020, and posted on the company's Investor Relations website.

Thank you. Please file these materials with the minutes of our meeting. Our inspector of elections has reported the existence of the quorum, so we will proceed with the business of the meeting. First, I'm pleased to introduce to you the directors of our company, all of whom are present with us today. Our CEO, Rich Allison.

Hello.

Andy Ballard.

Hello.

Andrew Balson.

Hello.

Corie Barry.

Hello.

Diana Cantor.

Hello.

Rick Federico. Rick, are you there?

I am.

Okay. Thank you. Jim Goldman.

Hello.

And Patricia Lopez. Patricia, you may be on mute, are you there?

I'm here, yes. Can you hear me?

Yes, we can. Thank you.

Okay.

We have also invited our independent registered public accounting firm, PricewaterhouseCoopers LLP, to attend this meeting. Eric Schwartz is here today to represent PwC and is available to respond to appropriate questions raised by shareholders attending this meeting.

Hello, Dave.

Eric, thank you for joining us. We appreciate it. The business portion of this annual meeting will consist of 2 parts: first, the formalities necessary to establish the validity of the meeting; and second, the meeting's formal business consisting of 3 proposals, which we will discuss in a moment. The company has not received notice from any of its shareholders as required under its bylaws of any other matter to be discussed at today's meeting, and therefore, no other proposals may be properly introduced by shareholders. I now declare the polls open for voting at this annual meeting. If you wish to vote at this meeting and have not yet done so, you may now do so by clicking on the voting button on the web portal and following the instructions there. Shareholders who have sent in proxies or voted via telephone or internet, do not want to -- and who do not want to change their vote, do not need to take any further action. The polls will remain open until immediately after any discussion on today's proposal. On the agenda for this annual meeting is the consideration of 3 proposals recommended to the company's shareholders by the Board of Directors. Mr. Morris, please identify these proposals.

Mr. Brandon, each of the 3 proposals on today's agenda have been fully described in the company's proxy statement and is being presented at this meeting by the Board of Directors. Proposal #1 is the election of the following nominees to serve on the Board of Directors of the company for a 1-year term, until their respective successors are duly elected or qualified or until his or her earlier death, resignation or removal: David A. Brandon; Richard E. Allison, Jr.; C. Andrew Ballard; Andrew B. Balson; Corie S. Barry; Diana F. Cantor; Richard L. Federico; James A. Goldman; and Patricia E. Lopez.

You have heard the motion. Is there a second?

Second.

Mr. Morris, please identify the next proposal.

Proposal #2 is to ratify the Audit Committee's selection of PricewaterhouseCoopers LLP as the company's independent registered public accounting firm for the 2020 fiscal year ending January 2, 2021.

You have heard the motion. Is there a second?

Second.

Mr. Morris, please identify the next proposal.

Proposal #3 is an advisory vote on the executive compensation of the company. Although the vote we are taking -- we are asking you to cast is nonbinding, the Compensation Committee and the Board value the views of our shareholders and will continue to consider the outcome of the vote when determining future compensation arrangements for our named executive officers.

You have heard the motion. Is there a second?

Second.

Mr. Morris, please identify the next proposal.

Mr. Brandon, that concludes the proposals.

Thank you. Let's proceed with the voting on the election of directors and on the other proposals. Will the secretary please identify the voting required to approve each of the proposals?

Mr. Brandon, for proposal #1, the election of directors, the 9 nominees receiving the greatest number of votes shall be elected directors of the company. Each of proposals 2 and 3 will be approved if it receives the affirmative vote of the majority of shares voted in person or by proxy on each such item.

If there are any questions regarding the voting procedure, or if any shareholder wishes to raise any questions regarding the proposals being voted on today, please submit your questions in the designated field on the web portal.

Mr. Brandon, we have one question.

Okay.

Mr. Chairman, the carpenter union pension funds with combined assets of $70 billion have a collective ownership position of 23,455 shares of the Domino's Pizza common stock. Our funds have been leading advocates for the adoption of a majority vote standard in director elections. We appreciate that the company has a majority vote policy, but it continues to use a plurality vote standard in director elections. The vast majority of the market has moved to a majority vote standard. Would the Board consider the adoption of a majority vote standard in uncontested director elections so as to provide shareholders a vote standard that allows them to elect or unelect director nominees? Thank you, Mr. Chairman.

Well, first of all, thank you for your being a shareholder of the company and your support of the company. As you've indicated, Domino's does use a plurality voting standard and under this standard, a nominee is elected as director by receiving the highest number of votes cast for an open director seat, even if that number is less than a majority. However, as you've indicated and as the Board is comfortable and has been our practice, we have implemented a majority voting policy for uncontested director elections. And in the event that the votes withheld from a nominee's election exceed the votes cast for that nominee's election, such nominee shall be required to submit his or her resignation to the Board for consideration. The Board will then have the opportunity to determine whether or not to accept or reject such a tendered resignation. The Board, in making its decision, may consider a variety of factors that may be relevant or other information when it considers that resignation as either being appropriate and relevant or inappropriate and not relevant. We feel that's the best practice for our company, and we do not have any immediate plans to review that policy. Are there any other questions?

Mr. Brandon, there are no questions regarding the proposals at this time.

There being no further discussion of the proposals, we will now proceed with final voting and closing of the polls. Please vote on the web portal if you have not already done so. [Voting]

I now declare that the polls are officially closed. Based on a preliminary report from the inspector of elections, I hereby declare that, number one, each director -- each of the director nominees has been duly elected to the Board for a 1-year term ending at the Annual Shareholder Meeting in 2021. Secondly, the appointment of PricewaterhouseCoopers LLP as the independent registered public accounting firm for the company for the 2020 fiscal year has been ratified. And third, the executive compensation of the company's named executive officers have been approved in an advisory vote. Now I've been advised that the voting results reflected those outcomes. Is there any further details that Broadridge wishes to provide relative to the voting results? Hearing none, the company will file an 8-K with the SEC within 4 business days to announce the final voting results on these proposals, which will include any votes properly submitted at today's meeting. I am aware of no other business that should be brought before this annual meeting. And accordingly, I hereby adjourn the meeting. I would like to thank all of you for your support and understanding in light of our switch to a virtual shareholder meeting this year. Your health and well-being are of a paramount importance to us, and we are thankful for your attendance at today's virtual meeting. I would also like to express my appreciation to all of the shareholders, who submitted their proxies and were not able to join the meeting. The directors, officers and employees of the company appreciate the loyalty and confidence of our shareholders.

Were there any other shareholder questions that we should be entertaining at this time? We would welcome any of those questions you may have. We would ask that you please observe the rules of procedure posted in the meeting materials box on your screen. We would ask that you please state your name, business affiliation and city of residence and indicate whether you are a shareholder or a proxy for a shareholder when submitting your questions. And please note that we will attempt to answer as many questions as time allows, but only questions that are germane to the meeting will be addressed. Any questions that we do not get to today will be addressed on our company website as I mentioned earlier. Do we have any further questions?

Mr. Brandon, we have one additional question related to the business of the Board. That question is, Mr. Chairman, the recent growth in the size of passive mutual funds' corporate ownership interests in U.S. corporations has been dramatic. The carpenter funds believe the growing concentration of ownership raises important policy and corporate governance issues. Currently, BlackRock holds 11.4%, and Vanguard holds 9.9% of the company's outstanding shares. Our review indicates that Vanguard is an investment manager for a portion of the assets of the company's 401(k) retirement plan. Does the Board see this growing ownership concentration as a positive or negative development, as regards to long-term corporate planning and performance? And also, are there potential conflicts of interest when a 5% holder is managing company retirement plan assets? Thank you, Mr. Chairman.

Yes. The first question relates to the concentration, if you will, of 2 rather large shareholders in our company. The Board does not view this as a risk or a problem from a governance perspective. Obviously, our share performance over the past several years speaks for itself, and we have outstanding relationships with our shareholders. We have an Investor Relations activity, and our senior management is actively engaged and involved in discussions with all of our shareholders. And we balance both their interests and their input equally. And the fact that certain shareholders believe in the company to the extent that they're willing to invest to a deeper level, we see as a positive, and we have certainly not experienced any negatives as a result of that. As it relates to Vanguard specifically and the fact that they do provide some services relative to our 401(k) plan, we view that as 2 very separate elements or aspects of Vanguard's business model. We have never felt or have not observed any conflicts as it relates to that, and so we do not see that as a material issue to the company or something our shareholders should be concerned about. But thank you very much for your question. Tim, are there any other questions?

Yes, sir. We have one final question. Why does Domino's not implement a policy on avoiding medically important antibiotics in its pork and beef supply when it does so for chicken? Please explain.

I think that's probably a question that could be better answered by our CEO, Rich Allison. Rich, why don't you address that question?

Yes. Thank you, Mr. Chairman. We follow the guidance of science in how we think about managing the food supply in our business. And we feel very comfortable that we lead with the health and safety of our customers at all times.

Thank you, Rich. And obviously, this is an area that management is actively engaged in, but I can tell you from a Board and governance perspective, it's one that we feel strongly about, and we follow the trends and the science in this particular area very carefully because we understand its importance. And again, thank you for your question. Tim, are there any other questions?

Mr. Chairman, there are no other questions.

That being said, I'd like to thank you all again for joining us for our virtual annual meeting this year. We appreciate your support. And at this point, we will end our discussion for today and look forward to our interactions in the future.