達美樂 (DPZ) 2014 Q2 法說會逐字稿

Good morning. My name is Tanisha, and I will be your conference operator today. At this time, I would like to welcome everyone to the Q2 financial results earnings call.

All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions). Thank you.

Miss Lynn Liddle, you may begin your call.

Thank you Tanisha, and good morning everybody. Thanks for joining us on this lovely Michigan summer day.

We are going to follow our usual protocol. We should be just about an hour or a little bit under an hour this morning. We have some prepared remarks and we will follow up with an opportunity for Q&A. This is designed to be an investor call, so I will ask members of the media on the call to be in a listen-only mode. And I'll also call all of your attention to our Safe Harbor statement that you will find in our 8-K in the event any forward-looking statements are made.

So beginning today, we will have Mr. Mike Lawton, our Chief Financial Officer, open up with comments.

Thank you, Lynn, and good morning everyone. This quarter, momentum continued as we posted strong same-store sales in both our domestic and international businesses. We opened a significant number of new stores and our EPS grew 17.5% over the prior-year quarter.

Global retail sales, which are the total retail sales at franchise and Company-owned stores worldwide, grew 11.5%. Foreign currency only had a minimal impact this quarter, and when we exclude the adverse impact of foreign currency, global retail sales grew by 11.7%. The drivers of this growth included domestic same-store sales, which rose 5.4% in the quarter, lapping a positive 6.7% from last year. This was comprised of franchisee same-store sales which were up 5.5% and Company-owned stores which were up 3.5%.

We are pleased to report that we opened 11 net domestic stores in the second quarter consisting of 18 store openings and seven closures. And during the trailing four quarters, we opened 70 net domestic stores.

Our international division had another very strong quarter as same-store sales grew 7.7%, lapping a prior-year quarter increase of 5.8%. In the second quarter, our international division grew by 122 stores made up of 130 store openings and eight closures. For the trailing four quarters, we opened 611 net international stores.

Turning to revenues, total revenues were up $36.5 million, or 8.8%, from the prior year. This increase was primarily a result of three factors -- first, higher supply chain revenues from increased commodity prices and increased volumes; second, higher international royalty and supply chain revenues from increased same-store sales and store comp growth; and third, higher domestic franchise royalty revenues again from same-store sales and store count growth.

Moving on to operating margin, as a percentage of revenues, consolidated operating margin for the quarter decreased to 29.9% from 30.4% in the prior-year quarter. Some of the drivers of this decrease included the following. Company-owned store operating margins decreased as a percentage of revenues due primarily to higher food cost. Also, our supply chain margin percentage decreased from 11.1% to 10.4%, due primarily to an increase in commodity cost. The average cheese block price in the second quarter was $2.20 per pound versus $1.77 in the same period last year. Pork also increased in the quarter, which led to our overall market basket increasing 5.8% as compared to the prior-year quarter.

As a reminder, commodities are generally priced on a constant dollar markup to our franchisees. Therefore, higher commodity prices do not impact our supply chain dollar profit. They do, however, negatively impact our supply chain margin as a percentage of revenues.

Year-to-date commodity prices have run about 6.5% higher than last year. We expect this comparison to slightly improve over the remainder of the year and for the year will average 4% to 6% higher over last year. We believe that this increase is manageable in the overall context of our business.

Turning to G&A expenses, G&A increased by $1.1 million or 2.1% quarter-over-quarter. The increase was primarily due to eCommerce and technology support as well as investments to expand our international team. Through Q2, our G&A spend, which includes a $1.7 million gain on the sale of stores that we had in the first quarter, is roughly flat with last year. We have previously indicated that we projected our full-year G&A would increase $4 million to $8 million over our 2013 level. Based on the timing of some of our expenses, we do expect the G&A run rate will increase in the second half of the year, and we now project our G&A spend for the full year to be $3 million to $6 million over 2013.

Regarding income taxes, our reported effective tax rate was 37.5% for the quarter. We continue to expect that 37% to 38% will be our effective tax rate for the foreseeable future.

Our second-quarter net income was up $5.2 million, or 15.6%. This increase was primarily driven by higher domestic and international same-store sales and international store growth.

Our second-quarter diluted EPS was $0.67. There were no significant items affecting comparability during the quarter. The $0.67 is a $0.10, or 17.5%, increase from the $0.57 in the second quarter of last year. Here's how that $0.10 difference breaks down. Our improved operating results benefited us by $0.08, our lower diluted share count primarily due to our share repurchases benefited us by $0.01, and lower interest expense benefited us by $0.01.

Now, turning to our use of cash, during the quarter, we repurchased and retired approximately 688,000 shares for $49.9 million, or an average share price of $72.52 per share. We also returned over $14 million to our shareholders in the form of a quarterly dividend. We made our required $5.9 million principal amortization payments in the second quarter as we indicated to you in our first-quarter earnings call. We have now but the ratio specified in our debt agreement and will cease making these required amortization payments beginning in the third quarter. Ceasing these payments will leave us with about an additional $28 million of available cash over the next year which can be used to repurchase shares, pay dividends, or invest in our business.

In closing, we are pleased with the quarter, and the results and our consistent, positive performance this year. Thank you for your time today. And now I'll turn it over to Patrick.

Thanks Mike. As you heard, we delivered yet another strong quarter with excellent sales and store growth as well as a very strong 17.5% increase in our EPS over last year. Our dependable franchise model, robust global business, and leading digital strategy worked together to drive great consistent results.

Here in the US, we drove both traffic and ticket in the quarter. We were primarily marketing our new specialty chicken, which is boneless chicken covered with pizza toppings. This product was embraced by our customers and drove good margins for our franchisees. So, overall, we are very pleased with our latest addition to the menu.

We also had good adoption of our store reimaging campaign this quarter. Between re-images, new builds and relocations of existing stores, we now have almost 10% of our US stores and just over 20% of our international stores already in our new image. Our goal is to substantially complete remodeling all corporate stores by the end of 2015. Our franchisees will generally have until the end of 2017 to remodel.

We are pleased to see that our franchisees are adopting and embracing the store remodels despite a cost environment that remains uncertain for small businesses across the US. They are holding the line and remaining disciplined on prices despite rising wages and the potential for further increases in many places as well as higher food costs among other cost pressures. As a system, we have been very successful which is a credit to our franchisees and their buy-in of our vision and brand strategies. They are working hard to run stores that are part of their local economy, serving millions of hot pizzas a day, employing tens of thousands of great people, all of which is a testament to the strength of our system.

Our international business thrived in the second quarter with accelerating same-store sales over last year's results and plenty of momentum in markets across the globe. We had one of our largest net store openings for any second-quarter period, which means that in the first half of this year hundreds of new image stores have been going up all around the world. In May, we opened our 11,000th store in Brantford, Ontario in Canada, the country where international business began 30 years ago. It continues to be an important market for Domino's and the recent focus on value promotion drove double-digit year-over-year order count increases for the fourth consecutive quarter.

Our international success this quarter was based on promotions that resonated, expanding the brand through new stores and executing well on service and quality. Some notable performances include South Korea, where promotions focused on digital ordering and new product news helped drive strong results. Robust order count growth in Spain was largely the result of product innovation and value driven carryout promotions. They've also had a strong start to the year on store growth. And finally, in Brazil, double-digit sales in the second quarter were driven by strong value promotions as our brand continues to expand through excellent store growth. The market is nearly at the 100th store mark.

Many of you probably still have World Cup on your mind and I'd like to point out that only four days of World Cup overlapped with Q2 results. But as with most events like this, we would not expect that this event would have a material impact on full quarter results.

Both our domestic and international markets continue to keep their attention focused on digital access. Our goal is always to be able to take an order whenever and however a customer wants. Whether they need a pizza in the UK through their cell phone, whether they want to order from their laptop in Australia or from their Ford SYNC system here in the US, we want to be everywhere our customers want us to be with hot, delicious food.

In the US, we announced a number of new digital initiatives, including the iPad app that I talked about in May. We logged over $1 million in sales through this app in its first four weeks alone. Since then, we also became the first company to launch voice ordering through our iPhone and Android apps. The voice ordering is similar to Siri on your iPhone, only our computer generated voice is called Dom. We feel this was a trailblazing move in the direction that technology is headed.

Around 45% of our overall sales now come through digital channels and we are fast approaching half of that coming through mobile in particular. It reinforces for us that convenience is key for our customers.

Even the simple customer convenience issues can be solved with a technological fix. For example, during the quarter, we launched our group ordering tool online, helping customers determine how many pizzas they need for large group order, along with recommendations for the most popular pizzas. We are always looking for ways to make ordering easier for customers and the digital experience a richer one. We have recently moved our website to responsive design which automatically rearranges page layouts to fit any screen size and results in a great experience for our customers, whether they are ordering from a desktop, laptop, tablet, or mobile phone.

At a roughly $3 billion run rate on worldwide digital sales, we believe we are the global digital leader in our industry with an innovation oriented mindset in everything we do. For us, technology is not an add-on or a nice-to-have. It's a core part of our global strategy and central to the great experience our customers have with Domino's.

Let me just use my final few minutes to highlight our use of cash this quarter, which largely went towards dividend payments and very active share repurchases. With around $2 million a week in free cash generated, we remain focused on deploying our cash to benefit shareholders.

In conclusion, it was just another boring, great quarter here at Domino's. Our team remains focused on driving consistent, strong results which come from leading innovation, delivering a great experience to each and every one of our customers, building new stores and executing our reimage campaign.

Thank you for your time today. Operator, I am ready for questions.

(Operator Instructions). Alex Slagle, Jefferies.

Hey, thanks. I had a question on the specialty chicken, if you could just give a little more perspective on that launch, and any evidence you have, the dynamics of the sales that it's driving new customers, increased occasions for existing customers, and any color on mix of delivery versus carryout if you had that kind of detail.

Yes, it did very well for us. As you heard, we had nice traffic and ticket growth in the second quarter. As with any product, as we have kind of described in the past, this is not as much kind of center of the plate as pizza. So, a little bit more of it is an add-on, which was a great way for us to get some growth in ticket through mix in the second quarter, and that was part of that ticket growth. But overall the response was very strong. I think it played into maybe a little bit of the order growth, but I think most of the order growth in the second quarter really came from continued momentum in brand, continued digital growth, all of those things that have been driving results for us for quite a few years.

Great. Thank you.

Alton Stump, Longbow Research.

Thank you. As always, good job once again on the quarter. I just had a quick question. Obviously, you guys saw I think across all three segments comp growth accelerate in 2Q versus the first quarter even though obviously it didn't have the weather benefit, at least I would think that had a weather benefit this quarter versus the first quarter. As I kind of look at the key drivers of that, obviously specialty chicken launched in the US. Is there anything else in your view that drove that acceleration?

No. I think, honestly, the answer is we've got the offering right with our customers. We've got the brand right, the food right, the digital side of this right, and that's really the momentum growth. So, we are very happy with specialty chicken and how it performed. It was good for store level margins at a time when there was a lot of cost pressure from food cost, as Mike had referenced earlier. But honestly, I think it is really about the continued momentum we've got in the brand, giving customers an experience that's relevant to them today. And that's really been the continuation of the strength that you saw, both domestically and internationally.

It makes sense. And then just a quick follow-up. I think you mentioned, Patrick, that as a percentage of overall sales, that you are seeing mobile approach half or so of 45% total digital sales. A, is that correct, so does that imply the 20-plus percentage of sales? Any color as to how fast that piece is growing on the sales line?

Yes, so you did get that right. So the way to think about it is we are about 45% digital overall, so we are kind of approaching 50% digital, and we are approaching 50% of that digital being from mobile. So kind of 20% to 25% from mobile, 20% to 25% from desktops or laptops is kind of the overall mix on that today.

Every part of the digital mix has been growing, but mobile has been growing clearly much faster than laptops and desktops. But we are still continuing to see growth out of computers as well, which is interesting. It's hasn't been about cannibalization. It's really been about just faster growth coming from mobile than from computers.

Got you. Makes sense. Thanks, Patrick.

Jeffrey Bernstein, Barclays.

Great, good morning. Thank you. Two questions. Just first on the international growth, and obviously the comps are impressive and have accelerated, and I know your long-term guidance -- long-term guidance of the 3% to 6% comps, now you're doing in the 7s% or 8s%. I'm wondering whether there is a correlation between that and the pace of unit growth. If international comps continue to far outpace the high end of that guidance, should we assume a further acceleration in the pace of openings, or perhaps are there gating factors, whether it's franchisees happy with the pace today are already meeting your commitments, or is there are lack of people, real estate? Or if the comps continue to run this way, should we just assume these businesspeople overseas are going to accelerate further and there's upside in the near term to that international unit growth?

Yes. I think what I'd say is what you saw in the second quarter was just continued broad strength from the international business. And I think your theory is largely correct, which is, as we've always said, strong unit economics are what drives people to build stores. And this has never been -- you talked about commitments from different markets. I think we've said this many times, but I just don't believe that stores get built because of what's in a contract. Stores get built because they're going to generate a good return for the people investing in them. And if they don't see that return, then there's going to be a problem in that market. And so the continued strength of the markets, of same-store sales which is flowing through into unit economics, it certainly correlates to the continued strength in store growth. And so you're seeing on kind of a trailing 12-month basis, on a net basis right now, we are just higher than the high end of our store growth range, which we have given 4% to 6%, and I think we are in the range of kind of 6.5% on a trailing 12-month basis right now. And part of that is clearly continued strong comps, both domestically and internationally.

Got it. And then just related to that on the G&A front, I know, Mike, you mentioned that the range for this year, now we are talking about I guess $3 million to $6 million higher than last year, that's tweaked downward, which less about the $1 million tweaking downward, more about just a question on the G&A spend in general with the comps as strong as they are and the unit growth accelerating, I don't know whether there are opportunities elsewhere to invest that would support that faster growth, or are you really doing everything you possibly can think of from a technology and an infrastructure standpoint and there's just no additional G&A to be spent?

Interesting way to put that question. The fact is, the last half of the year we will be spending more money on the technology side. One of our challenges, both in international and in the IT area, has been, for the last two or three years is actually getting the right people on board as fast as we would like. We are willing to spend the money to support the growth areas, but you don't want to do that just by throwing it around loosely. And right now, we are staffed up better in IT than we were at the beginning of the year, so we are spending at a faster rate. You saw that in the second quarter as the numbers creep up a little. We want to be investing where it's appropriate. Sometimes it takes a little more time than you would like.

Totally understood. Thank you.

John Glass, Morgan Stanley.

Thanks. First, Mike, can you just talk about the financing environment? If you were to choose to go out to the market and borrow more money, would you be able to borrow at your current leverage or adding a turn at the rate you're currently paying, or would that do you think drive the weighted average up?

I think we could probably add a turn at or below the current -- the rate that we currently have borrowed at, the 5.25%.

Okay, thank you. And then, Patrick, you just talked about holding the line on pricing, which is important in the competitive market with rising prices. How much rising commodity prices -- how much of a debate is that with the franchisees right now? Is that really a conversation you're having, or are they just doing this on their own volition because they understand they're going to drive better volumes?

It's a conversation that we're having with them, but I think they are also really pleased with the results they have been seeing in their stores for a number of years now. And so with food costs where they were in the first half, you are seeing that the volume growth has offset kind of those increases in food costs. They have taken a little bit of price, which we think was appropriate, but not a lot. And so that's keeping the order count growth going.

We've got a pretty good meeting of the minds with our system right now around kind of the approach we are going to take. They are seeing it work. We would clearly be happier if cheese costs and pork costs were a little lower than they are right now, we would be flowing a little bit through more at the store level. But I think we give them guidance. We tell them here is where we think you should take increase if you're going to take increases. But overall, I'm really proud of the system. I think they've done a great job of being very judicious about how we are going to take price in this environment.

Great. Thank you very much.

Brian Bittner, Oppenheimer and Company.

Thank you. Congratulations on another good quarter here. I think you said that 10% of stores are reimaged in the US. Is that correct? And if so, that's a pretty good sample size here. I'd love to get some color on what you are seeing from those reimaged units. Are they outperforming the base on a same-store sales basis? If so, where at carryout or what have you? I'd love to hear some color on that.

Yes, I think the answer, Brian, is it's performing very much in line with kind of what we have expected. Which you are correct. I said we are kind of approaching 10% domestically, and we are probably just a little bit over 20% on the international side.

And on a straight reimage on a single-store basis, we see a modest increase in same-store sales versus kind of control groups.

What we continue to believe is that the real play here is the overall strength of the brand, relevance of the brand over the long-term. And so it helps a little bit at the margin as we are doing these, but we think the bigger play is what it means for the brand overall over the long-term. And that's kind have been very consistent with what we were expecting.

Remember, as a business that still does more deliver than carryout, it takes some time for customers to even see the fact that you have reimaged the store if they are primarily a delivery customer. So, we are seeing it. We are seeing some increase as we do them, but it's pretty modest. And we really believe in what it means long-term for the brand.

That makes sense. And on the international side, I'd love to hear an update on how -- I know it's very small right now, but I'd love to hear an update on how the stores in China are doing under Dash Brands' management. And following up on that, as you continue to grow the international business, is there anywhere around the world where a joint venture and having more equity in the game would make sense, whether it be China or somewhere else?

So we are continuing to progress nicely in China. It's still very small. I think we ended the quarter at about 44 stores, something like that, and so it's growing. It's doing better. We like the base, but we've clearly got a long way to go in China before it's going to be a big part of our business overall. So, we like the start. We like Dash a lot. We think they've got a terrific management team there, but it's still pretty early.

Okay. And as far as maybe looking at possible JVs around the world, is there anywhere that just maybe interests you a little bit?

I think the answer, Brian, is, as you've seen to date, we are 100% master franchised outside of the US. When we think that there is a situation where our capital going into a market will cause that market to grow faster and be more successful, we are kind of -- we reserve the right to do that. But as you've seen to date, we haven't made that decision.

Okay. Thanks guys.

John Ivankoe, JPMorgan.

Hi, thank you. Just a couple of follow-ups if I may. I'll just do them one by one. Does the current cost environment allow you to keep that $5.99 medium two-topping? Is that something that you foresee as maybe in the next couple of years as something that's permanent on the menu?

Two medium two toppings for $5.99 has been our primary promotion for four plus, almost five years now. And clearly it's done very, very well for us. We like the fact that we've been able to be consistent with that because, frankly, it means the price isn't the news. What we're doing with the brand really becomes the news. It's resonated with customers. You've seen what it's done for not only comps but for profitability of the stores, so we feel good about it. I'm not going to project forward on that, and I'm sure competition would love to know what our plans are in pricing, but clearly, over the course of the last four or five years, it's been a winner from us.

Yes, I understand and I think I understand the color as well.

Secondly, with the US being 45% digital, can you compare that to other international markets maybe that have a higher mix, and whether -- assuming that mix is higher when it grew from 45% to whatever it is today, whether that growth in digital sales mix was proven to be incremental to traffic, in your opinion?

Yes, it is. It is. And we've seen that consistently around the world that some minority of that growth in digital has been incremental to the business. And we've got different ways of kind of cutting those numbers, but clearly some of it has been incremental.

In terms of progress around the world, we continue to -- I think the overall average mix is probably, in international is probably a little bit lower than it is domestically, but not a lot, probably more in the kind of 40% range on a blended average somewhere in there, but you still have markets that are significantly higher. So Australia, Japan, Korea, UK, you've got markets that are kind of 50% plus, and those are all markets that have performed very, very well over the course of the past five years, and continue to grow on their digital business. So, we think it continues to be a great driver of convenience for our customers, which has driven some incrementality in our sales, both domestically and internationally.

Thank you. And just one final quick one. Patrick and Mike, with the debt where it needs to be to no longer amortize, what is the thought of not adding that additional turn of leverage at or below 5.25%? In other words, if not now then when, and why hasn't been done to date, if I can ask in that direct a fashion?

Certainly, the ability to borrow is there, as in answer to a prior question from Brian about do we ever participate in other JVs or anything? If we are borrowed up to the maximum, that does give us a little bit more limitation of what we could do. We also have to have a use of cash that we feel is appropriate because of who our investor base is. We do take that into account, and it was a little bit different in the past where there was always a very strong view that special dividends were great. Not everybody shares that view. So we are weighing all, both the sources at a very -- our ability to borrow at a very attractive interest rate versus what those potential uses of cash are if we were to do so. We do have the ability a year from now to call up to a third of our existing debt and refinance. That's not something that's available to us today.

Okay. Thank you.

David Carlson, KeyBanc.

Hey guys. Hope everyone is well. I had a question related to the costs at your Company-owned stores, specifically actually the occupancy line. This is -- with the strong comps you guys have had historically, this has traditionally been a source of leverage when you've had the strong positive comps. There's been a headwind in the last couple of quarters. I noticed in the Q this morning you called out I think it was higher depreciation. Telephone costs is the reason for the I think it was about a 40 basis point increase year-over-year. So, that said, is there new equipment that's causing this increased depreciation, or is it more from remodel activity?

And then on the telephone costs, I would think that increasing digital ordering would essentially lower your telephone costs, or the higher costs related to a new phone system or a new telecom contract. Any color you could provide would be appreciated.

Okay. The depreciation is a combination of the reimaging as well as some equipment, so we will see. You're going to see the reimaged -- as we reimage the corporate stores -- and we are not at the 10% level on corporate stores. We are actually closer to a fourth of our corporate stores having been reimaged already. So, you're seeing a little bit coming through there. Also there is some computer equipment that's coming through, which has a fairly short life on it the way we do things.

On the telephone side, we've actually changed some contracts out. And as we have done that, there's a little bit of extra cost to get out of one contract and get into the new one. Over time, we will be at the old rate or similar. So, it's not a big number even for this quarter, but it was just enough that it -- against the total corporate -- the scale of the corporate stores, it bumped things up just a little bit.

Fair enough. So, I guess that kind of leads me to as you accelerate the remodel program at the Company-owned stores over the next year and a half, I think you're trying to finish it by 2015, should we continue to see new leverage on this line or --?

You're going to see a little bit of depreciation cost in there. It's got to flow through. The average reimage cost on a store for us is running $50,000, $60,000. So you can see it's not a huge number for us, but it will have a bit of an impact.

My last question is on the -- I think, on the last call, you guys said that your unique profiles were -- I think had grown 2 million in the quarter to about 9 million individuals. Where does that number stand today?

We'll get back to you on that one. I honestly don't remember the exact number on it. What I'd tell you is it has continued to grow very nicely.

Okay. Fair enough. Thank you.

Paul Westra, Stifel.

Great. Thanks and good morning. Just a question on the US business. Can you talk a little bit about where you believe your market share gains are coming from when you compare yourselves maybe versus your largest competitors, your regional competitors, and your independents? Are you gaining in markets more or less when there's more or less regional exposure?

Yes, I think the answer is that the overall story has continued to be the same, which is the larger players have generally been taking share from the smaller players and the regional players. Clearly, we've had one of our national competitors that has struggled a bit recently, and so they've been a bit more of a share donor for a few quarters here. But overall, I think the strength of the nationals has been playing out against the smaller regional players.

Okay. So even with the large share donor competitor, you are still seeing as good or better share gains in markets where there's maybe less of big two competitors versus the regional players?

Yes. As you look nationally, there are some places where smaller and regional chains are relatively stronger, but overall the share donor is national, so that's kind of an effect everywhere. But you're still looking at the four largest players in the US only do about 40% of pizza in the US, so the majority player in almost every market in the country is those smaller and regional chains. So that is where most of it has been coming from.

Okay. And then a related question, I'm just trying to dig back. I know this question has been asked before. But as you look at the deal rates or percentages or however you want to calculate with mobile in particular and digital in general being a larger and larger percentage, I know you mentioned in the past that the coupon needs to be there for consumers who order online digitally don't always take them. I guess are you seeing a change in that deal rate? And just any color you can give us on the directionality of I guess the coupon rate in orders overall as digital becomes a larger percentage?

I guess what I would say is what continues to be true is the economics of digital orders are better for us than phone orders and walk-in orders, and it continues to be a better experience for our customers. Their loyalty is better. Their customer satisfaction is higher. And so that all continues to be the same.

In terms of the specifics around coupons and coupon usage, I don't think I'm going to get into all of that.

Okay, thank you.

Joseph Buckley, Bank of America.

Thank you. Just a couple of clarification questions. I think you gave two different percentages on the US stores. Maybe one percentage was for the US system, the other percentage was for the US company operated and are in the reimage mode. So can I just ask you to clarify those stats? One was 10% and one was 25% of it?

So, yes. So, our total domestic system is just a little bit under 10% reimaged. Our corporate stores are around 25% reimaged within that overall kind of 10-ish%.

Okay, I got it. And then you commented on the same-store sales lift for a reimaged store. How a5re the new stores that you're putting up? How do they perform from a sales perspective?

New stores are opening very, very nicely and stronger over the course of the last year or 18 months than I think they have done historically. So, we are very pleased with how new units are opening.

Okay. And one last one. Patrick, you've talked before about kind of like maybe a seasonal change in digital orders where you kind of move to a new plateau. The mix this quarter sounds pretty similar to the mix last quarter. When does that typically occur during the year? Is there a regular kind of seasonal pattern to when you pick up more brand on the digital front?

Yes, there is. And it's interesting. It's kind of fall into winter, we see our digital mix grow. And late spring into summer, it seems to kind of flatten out every year. And that pattern has held for five, six, seven years now. It's been very, very, very consistent.

Okay. That's helpful. Thank you.

Peter Saleh, Telsey Advisory Group.

Great, thanks. I just wanted to ask about the strategy to relocate some of the stores. Could you give us an update on how many stores you plan within the system to relocate, and what kind of benefit you expect to see from those relocated restaurants?

Yes, I think the expectation is we will see a bit more of a lift from relocated stores than we do from reimaged stores. I think, as we go through this process, it's going to be a relatively small minority of stores that wind up getting relocated, but you know, not completely inconsequential. It could be 10% of the system, something like that, that we see, maybe a little bit more. But the answer is yes, you will tend to see a better lift from relocated stores, but it's going to be a relatively small percentage of the stores that will get relocated.

Great. And then just any thoughts on unit growth domestically? It seems like you're adding a little bit more here and there, but what's the I guess gating factor to maybe accelerating it a little bit faster on the US development side?

Yes, it's continued to get better. I think our trailing 12-month net number now is 70, so that's moved up nicely from where we were a year or two ago. Our goal is to continue to grow that and to continue to accelerate that. And I don't think you're going to see a short-term market increase in that, but our goal is certainly to continue to grow faster as we move forward. And unit economics are a driver on that.

Great. Thank you very much.

Mark Smith, Feltl.

Hi, yes. This is Shannon Richter on for Mark Smith. Just one quick question here. Can you talk about the competitive environment especially concerning pricing in both your domestic and international markets?

Yes. You know what? I Think the answer is it's really been pretty consistent for a number of years now. And that is certainly more a domestic answer than necessarily an international answer. Internationally, on average, the answer is probably the same. There are certainly some markets where you're seeing a little bit more pricing activity. There has been fairly aggressive pricing activity in Australia recently. But you know, overall, it's been pretty consistent. I think you are seeing ticket up a little bit. Our best sense is that you're seeing ticket up a little bit from our major competitors in the US as well, but not materially out of line with what we have done.

Thank you so much.

Stephen Anderson, Miller Tabak.

Good morning. Just taking a look at the international breakdown, looking at comps of -- international comp of 7.7%. Do you have some of the major country breakdowns yes. Like I'm talking about northern Europe and India specifically?

Yes, I guess what I would say is continued broad strength. And we are in a little bit of an unusual situation this quarter in that our publicly traded master franchisees, only one of them has released so far, and it happens to be the one that released, which is I'll say released yesterday. And they release a kind of aggregated number with their other brands. I think their overall number was like 5.5%, something like that, for all their brands. But I guess what I would say is it's been a continuation of kind of the strong trends that we have seen.

Thank you.

So, I believe that is the last question, so I'd like to thank all of you for your time today and I look forward to reporting our third-quarter results in October. Thank you.

This concludes today's call. You may now disconnect.