Papa John's International, Inc. (PZZA) Earnings Call Transcript & Summary

Good morning, and welcome to Papa John's International, Inc. Virtual Annual Meeting of Shareholders. Today's meeting may include forward-looking statements. Please refer to the slide on your screen for important information that could cause actual results to differ from those forward-looking statements. I would now like to introduce the first presenter and Chairperson, Jeffrey Smith.

Welcome, ladies and gentlemen. I'm Jeff Smith, Chair of the Board of Papa John's and Chair of this annual meeting. I want to start off by saying that I hope everyone in attendance is safe and healthy. I want to take a moment to express our profound gratitude once again to those who work tirelessly on the front lines of the pandemic to keep us safe and healthy. They include team members and franchisees who kept our restaurants open and operating safely, enabling Papa John's to continue serving our communities at a crucial time. We continue to appreciate all of you and remain grateful. Although we couldn't have predicted the enormous challenges or the incredible possibilities the entire restaurant industry has experienced over the last year, I couldn't be more pleased with the performance of our business, our leadership team and our team members and franchisees across the world. Since I invested in Papa John's 2 years ago and joined its Board, the company has made remarkable progress. I'm proud to say we are now well positioned to fulfill our company's enormous long-term growth potential. I'm optimistic about what we can accomplish this year and well into the future. With that, I'd now like to call the meeting to order. All votes will be delivered to the inspectors of election. The secretary will record the proceedings. I would like to introduce the Board members, all of whom are present today: Rob Lynch, who is also our President and CEO; Chris Coleman; Olivia Kirtley; Laurette Koellner; Jocelyn Mangan; Sonya Medina; Shaquille O'Neal; and Anthony Sanfilippo. Also present are John Federici and Adam Hack, representing Ernst & Young, independent accountants of the company. They will be available to answer appropriate questions during the general question-and-answer period after the formal business of the meeting. After the formal meeting has been adjourned, we will also provide time for general questions. [Operator Instructions] Questions or comments that are not related to the proposals under discussion, or about personal concerns not shared by stockholders generally, or use blatantly offensive language may be ruled out of order. The Board of Directors set February 26, 2021, as the date of record for the stockholders' meeting. We have available, on the virtual annual meeting site, a record of stockholders as of that date. A duplicate record has been on file at the office of the company for the last 10 days, available for inspection by any stockholder at any time during usual business hours. I've been advised by the inspectors of election that immediately prior to commencement of the meeting, over 94% of the company's shares of common stock issued and outstanding and entitled to vote are present or represented by proxy at today's meeting. Because a majority of the company's shares is represented here today, a quorum is present and the business of the meeting may proceed. The Secretary, Caroline Oyler, has informed me that the notice for the meeting was duly and properly mailed. She will file affidavits of mailing of the notice of meeting, proxy card and proxy statement with the records of the meeting. There are 3 items on the agenda to be voted on today: one, the election of directors; two, the ratification of the selection of Ernst & Young LLP as the company's independent auditors for 2021; and three, the approval on a nonbinding advisory basis of the company's executive compensation. The polls are now open and will close following the presentation of the final proposal. If you previously voted by proxy, you do not need to take any further action unless you wish to change your vote. The ballots will be collected and delivered to the inspectors of election. The company has appointed Jamie Youngblood and Debbie Tate Johnson to be the inspectors of election. They're familiar with the duties and responsibilities of an inspector of election at a shareholders meeting. They will report the results after all proxies and votes have been tabulated. We will now turn to item 1. The first item is the election of directors. The nominees and their qualifications are described in the proxy statement dated March 23, 2021, which has been made available to all shareholders of record as of February 26, 2021. Caroline, will you please present the proposal to elect directors?

I move that the director nominees be elected pursuant to the following resolution: resolved that each of Chris Coleman, Olivia Kirtley, Laurette Koellner, Robert Lynch, Jocelyn Mangan, Sonya Medina, Shaquille O'Neal, Anthony Sanfilippo and Jeff Smith be and hereby is elected as a Director of the company to serve until the next Annual Meeting of Stockholders and until his or her successor is duly elected and qualified, or until his or her earlier death, resignation or removal.

The second item is the ratification of the selection of independent auditors for the 2021 fiscal year. Caroline, will you please present the proposal to ratify the selection of auditors.

I move that the selection of Ernst & Young LLP as the company's independent auditors for the fiscal year ending December 26, 2021, be ratified.

The third item is the nonbinding advisory vote to approve executive compensation. Caroline, will you please present the proposal to approve executive compensation.

I move that the company's executive compensation be approved, pursuant to the nonbinding advisory vote and the following resolution, resolved that the stockholders approve the compensation of the company's named executive officers as disclosed in the company's 2021 proxy statement, pursuant to the rules of the Securities and Exchange Commission, including the compensation, discussion and analysis, the compensation tables and the related fitness and narrative disclosures.

This concludes the specific proposals that were established in the notice as the agenda for this meeting. Since there are no additional nominations in accordance with the company's Certificate of Incorporation, the nominations are closed. Any stockholders who have not yet voted or wish to change their votes may do so by clicking on the voting button on the web portal and following the instructions. Stockholders who have sent in proxies or voted via telephone or Internet and do not want to change their votes, do not need to take any further action. We will pause a moment to allow any final voting. [Voting]

Thank you. The polls will now be closed for voting. We will pause for another moment while the inspectors of election tabulate the results of the votes. I am told that the inspectors of election have completed the count of the votes and are ready to report the preliminary results to the secretary. Will the secretary please present the preliminary report of the inspectors of election?

The inspectors of election have presented their report to me, certifying the following results. Of the outstanding shares of stock present in person or by proxy and entitled to vote at this meeting, at least a majority were voted in favor of each of the director nominees in each on the proposal. As a result, all proposals were approved by the stockholders.

Thank you, Caroline. The Secretary will file the final report of the inspectors of election, including the final and complete tally of the votes with the records of the meeting and the record books of the company. This concludes the formal business of the meeting. After the adjournment of the meeting, Rob Lynch will make brief remarks on our business. After which, we will respond to your questions. There being no further business before the meeting, I hereby declare the meeting to be adjourned. I will now turn the meeting over to our CEO, Rob Lynch, to provide a business update. Rob?

Thanks, Jeff, and good morning to everyone attending this year's virtual annual meeting. Like Jeff, I also want to thank each and every Papa John's team member and franchisee whose tireless work and commitment to serving our communities throughout the COVID-19 pandemic make me incredibly proud to be a part of this organization. Also, for those of you who lost loved ones during the crisis, you have our deepest sympathy. 2020 brought a myriad of challenges, but was also a year of significant transformation for Papa John's. 2020's comparable sales growth outpaced our industry peers, and we achieved record cash flow in North American unit volumes. Driving Papa John's strong performance are our clear purpose and core values, clearly defined strategic priorities and a rebuilt executive leadership team that is world-class and also one of the most diverse in our industry. Reflecting on the year's performance, 4 key factors drove our success and continue to propel our company towards its full potential: innovation, our operating model, development and our culture. First, I'll talk about our innovation. Our high-quality food differentiates us in the competitive pizza delivery space. Last year, we launched 6 new products, including Papadias, the limited-time Shaq-a-Roni Pizza, and our new Epic Stuffed Crust. This helped us attract millions of new and returning customers, adding 10 million customers through our digital channels alone and 5 million new loyalty members in 2020. Second, while driving growth, we continue reducing operating complexity at our restaurants and simplifying our operations, overall. Our strategic partnerships with the national delivery aggregators continue to be a competitive differentiator for Papa John's, and we saw a fourfold increase in sales through the aggregators last year. Third, we made significant progress with our development opportunities. Although the pandemic impacted the opening of new stores last year, Papa John's franchisee investment proposition improved with record average unit sales, and we significantly strengthened our development capabilities and pipeline to take advantage of the vast white space for development in the U.S. and internationally. Fourth and lastly, Papa John's progress in creating a strong culture of leaders who prioritize diversity, inclusivity and winning. Every day, I see how our culture fosters innovation that makes us a better brand and positions us for long-term success. To conclude my remarks, in 2020, our team members and franchisees persevered through the challenges that face us all. Their dedication and commitment to executing against the strategy we had in place allowed us to accelerate the positive momentum we were already building. I've never been more excited about Papa John's prospects for long-term sustainable growth.

Thank you, Rob. At this time, we would be happy to answer any questions you may have. [Operator Instructions] As a reminder, the Q&A session is being webcast live this morning.

At this time, there are no questions submitted.

We thank you again for your attendance at this morning's annual meeting of stockholders and for your continued support of Papa John's International. We all are hopeful for a reopening of our global economy and a return to a more normal environment. Stay healthy and stay safe. Thank you, everyone.

Thank you. The Papa John's International, Inc. Virtual Annual Meeting of Shareholders has come to an end. Thank you for attending. You may now disconnect.