Papa John's International Inc (PZZA) 2013 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to Papa John's third-quarter 2013 conference call and webcast.

(Operator Instructions)

As a reminder, this conference call is being recorded.

I would now like to introduce your host for today's conference, Senior Vice President and Chief Financial Officer Mr. Lance Tucker. The floor is yours.

Thank you, Tamara. Good morning. With me on the call today are our Founder, Chairman and CEO, John Schnatter; President and COO Tony Thompson; SVP of Global Operations Steve Ritchie, who is joining us from Dubai this morning; and other members of our senior management team. After a brief financial update, John and Tony will have comments about our Business, and the management team will then be available for Q&A.

Our discussion today will contain forward-looking statements that involve risks and uncertainties relating to future events. Actual events may differ materially from the projections discussed today. All forward-looking statements should be considered in conjunction with the cautionary statements in our earnings press release, and the risk factors included in our SEC filings. All statements made on this call are as of today, and we undertake no obligation to update the information on this call in the event facts or circumstances subsequently change.

In addition, certain financial measures we use on this call are expressed on a non-GAAP basis. Our GAAP to non-GAAP results reconciliation can be found in our earnings press release available on the Investor Relations section of our website.

Unless otherwise noted, all comparisons are versus the same period a year ago.

This call is being taped, and the replay will be available for a limited time on our website and in downloadable podcast format.

Finally, we ask any media to be in a listen-only mode, since this is primarily an investor call.

Now on to a discussion of our Q3 operating results. For the third quarter, our diluted earnings per share was $0.65, up 18%. Our year-to-date 2013 diluted EPS was $2.27, an increase of 23%.

Our third-quarter revenues increased 6.4%, primarily due to comparable sales of 1.8% for North America and 8.1% for international. In addition, the increased revenues were driven by higher volumes at PJ Food Service and a 6.6% increase in the number of units operating globally on a year-over-year basis. We opened 44 net worldwide units in the third quarter, bringing us to 133 net worldwide unit openings year to date.

On a business segment basis, operating income for domestic and company-owned restaurants was flat in the third quarter. This was primarily due to 5.1% comp sales in our corporate restaurants, offset by lower gross margins.

Operating income for the North America franchising segment increased approximately $450,000, due primarily to the increase in net restaurants and comparable sales of 0.6% in the third quarter. Operating income for our domestic commissary business segment decreased by approximately $375,000, due mainly to higher distribution costs offsetting the incremental profits associated with higher sales. We manage commissary results on a full-year basis, and expect the 2013 full-year profit margin to approximate that from 2012.

Operating results for our international segment improved approximately $320,000 in the third quarter. These results were primarily due to an increase in royalty revenue due to the higher number of units and 8.1% comparable sales, partially offset by operating losses in our company-owned China restaurants.

Unallocated corporate expenses improved approximately $650,000 in Q3 due primarily to lower settlement costs than originally estimated for the previously disclosed Agne text messaging litigation.

Our effective tax rate was 30% in the third quarter and 31.9% year to date. Our effective rate may fluctuate for various reasons, including settlement or resolution of specific Federal and state issues. The third quarter of 2013 income tax rate included various credits earned, and settlement or resolution of several such issues. We expect the full-year tax rate to be in the 32% to 32.5% range.

We repurchased approximately $10.3 million of stock during the third quarter, bringing our year-to-date repurchases to $69.1 million as of quarter end. The Company has approximately $65 million of remaining share repurchase authorization.

Our free cash flow, a non-GAAP measure we define as cash flow from operations less capital expenditures, was $36.3 million year to date. Our net debt position, defined as total debt less cash and cash equivalents, was $106 million at quarter end.

Given our strong results, we have several updates to our 2013 guidance as follows. Diluted EPS is increased to a range of $3.02 to $3.10 per share, up from a range of $2.92 to $3 per share. North America comparable sales are raised from a range of 1.5% to 2.5% to a new range of 2.5% to 3.5%. International comparable sales are raised from a range of 5% to 7% to a new range of 7% to 8%.

Worldwide net unit growth is increased from a range of 230 to 260 to a new range of 245 to 275 units. Note that the updated range for North America is now 85 to 95, while the updated range for international is now 160 to 180 units. All other guidance is reaffirmed at previously announced levels.

Finally, the Company's Board has declared a 2-for-1 stock split effective in the form of a stock dividend to be distributed on December 27.

Now I'd like to turn the call over to our Founder, Chairman and CEO, John Schnatter. John?

Thanks, Lance, and good morning to everyone. We appreciate each of you taking the time to be with us on the call today to discuss our third-quarter results of 2013.

I want to start off, as customary, by congratulating our franchisees and operators throughout the world on another strong quarter. From sales to international momentum to EPS growth, this was yet another solid, fundamentally sound quarter, paving the way for future continued momentum. Much like it was through the first half of the year, the global operating and competitive landscape remained challenging in the third quarter. However, by being solid at the fundamentals and focused on consistently delivering on our Better Ingredients, Better Pizza brand promise each and every day, we were able to continue our momentum through the quarter, and position ourselves for a strong close to the year.

One of the areas that continues to be a bright spot for Papa John's is our international business, which performed very well during the quarter. As Lance noted, our international franchisees turned in an 8.1% comp, which helped lead to improved operating income for the quarter. Driving those positive comps, in part, is the fact that our international product and service scores continue to reach all-time highs. It is clear that our international franchisees and operators continue to fully embrace doing things the Papa John's way in every aspect of their business.

In many respects, our franchise strong consistent operations helped increase the demand for our product around the world, which ultimately leads to restaurant growth. This formula helped us exceed 1,000 international restaurants during the second quarter, a milestone we celebrated last month in London. Very few brands in any industry have opened 1,000 stores internationally. So, we view this as a significant event, and a springboard to even greater international growth.

Next, I'd like to comment on the decision by our Board of Directors last week to initiate a 2-for-1 stock split, which Lance just mentioned. Since I found this Company nearly 30 years ago, I've always preached a sound, steady, financial approach to building the Company. This stock split reflects the strength of our brand, and our commitment to increasing shareholder value.

Finally, I would like to personally welcome Bob Kraut to our marketing team. He's our new Chief Marketing Officer. Bob is an innovative marketing leader who joins Papa John's with a significant QSR experience. We are excited to have him on board, and I personally look forward to working with him on taking our brand to the next level.

With that, I will turn it over to Tony Thompson for his comments.

Thanks, John. I also would like to start by congratulating our system on another solid quarter. With a continuing sluggish global economy and a challenging competitive environment, our system showed, once again, the positive impact that focusing on the fundamentals can have on our Business.

As Lance mentioned, we are very pleased with another quarter of strong financial results, with EPS up 18% and revenues up 6.4%. That is a testament to the focus and commitment our operators around the world have to deliver on our Better Ingredients, Better Pizza brand promise each and every day.

Another driver of our strong quarter and year-to-date results is our industry-leading digital ordering and marketing efforts. As I think many of you know, John has always had a keen insight in the consumer trends with an unrelenting focus on giving consumers what they want. Those consumers have told us -- Papa John's is number one in customer happiness by ranking us number one for 12 out of the last 14 years in the American Customer Satisfaction Index.

As a visionary, John recognized very early on that customer ordering habits were likely going to change with the rapid growth of the internet. As a result, in 2001, Papa John's was the first pizza company to offer system-wide online ordering in all of our US restaurants. In 2007, Papa John's was the first to tap into consumer mobile trends nationally with system-wide SMS text ordering. And then in 2010, Papa John's was the first, and is the only pizza company to date, to launch a digital rewards program, Papa Rewards. Just last week, on Halloween, we topped $5 billion in total all-time system-wide digital sales.

As a result of being on the leading edge of technology, Papa John's eCommerce business in the US continues to be the leader in the pizza category. Currently, more than 45% of our sales come through our digital channels, which is the highest percentage in our category. With a significant and ever-growing number of loyal rewards members, we now have the ability to connect in an even more individualized manner and better relate with our customers.

Next, I'd like to touch briefly on our global development efforts during the quarter. As Lance mentioned, we opened 44 net worldwide units during the quarter, bringing us to 133 for the year. And we've raised our guidance from a range of 230 to 260, to 245 to 275. So, with more than 4,300 restaurants opening today in 35 countries -- operating today in 35 countries and territories, a strong pipeline of more than 1,200 restaurants scheduled to open over the next six years, and significant amount of runway both in North America and throughout the world, I'm very bullish on Papa John's international growth prospects in the years to come.

Finally, I'd like to add my welcome to Bob Kraut. After only five weeks on the job, Bob already has begun to make a positive impact, and is a great addition to our marketing team. He's established a great working relationship with the entire executive team, and we look forward to working closely with him as we continue to lead our Company forward.

I'll close by saying that I'm very proud of what the system accomplished during the quarter, which has set us up for a very strong close to the year. Our dedicated franchisees, operators, and team members remain committed to delivering on our Better Ingredients, Better Pizza brand promise, and to not only meeting, but exceeding the high expectations of our customers.

With that, I'm going to turn it over to Lance for questions.

Tamara, I believe we are ready for questions.

(Operator Instructions).

Michael Halen with Sidoti.

Can you give us some color on the high rate of North American franchisee unit closures in the quarter?

Michael, this is Tony. I will start. First, really, nearly half of those closures were due to a couple of five to ten store operators that they were closing struggling units in underpenetrated markets. Then, we had several low impact, non-trad units that were closing. That they closed. So, we remain on track with our longer-term development plans, and the overall health of the system is solid. But, we needed to adjust our original guidance as overcoming these closings, we knew to hit our numbers, was not realistic.

Okay. Thanks. Also, the cost of sales at domestic, company-owned restaurants increased at a pretty good clip in the quarter. Can you give us a little bit of color on that, as well?

Sure, Michael. I will start with that one and then I will let Tony and/or Steve jump in or John, if they'd like. A couple things going on there. First of all, commodity -- there was a little bit of commodity pressure. Mainly from dough boxes and meats. You probably noticed cheese prices on the block were relatively consistent for the quarter. We did, as you know, we do some direct contracting with our cheese. That helped us a little bit in the second quarter -- or in the third quarter of 2012. We did not get that same help this year.

Then, we had a little bit of margin pressure related to some limited time strategic marketing national promotions. With that, I will let some others jump in here.

This is Tony. I think I've mentioned on prior calls, we are going to deliberately and strategically go in and use aggressive promotion and price-point with the right time and cause.

Michael, it's Steve. I will chime in just for a moment. I think, really, first off, very pleased with the corporate restaurants 5.1% sales growth. That kind of continues to remain our overall strategy for the corporate restaurants, as you see. We have had some spread between our corporate and our franchise restaurant sales performance. But, both of them produced in 12 consecutive quarters of sales growth. That will remain the over-arching strategy, where we will continue to see some variability from quarter to quarter on margin pressure. As Lance and Tony both alluded to, some of that driven, some of it, --the commodity piece and the variability in the local and national pricing. Overall, pretty strong performance.

Great. Thanks. My last one. I was kind of surprised you didn't draw-down on the revolver to report purchase more shares in the quarter than you did. Was this a response to the stock price? Do you still project the long-term debt to trailing 12 month EBITDA ratio of 1 to 1.4 times at the end of year-end 2013?

Mike, this is Lance. I will take that one. We do, in fact, still expect to be between 1 and 1.4 EBITDA [bit]. More, kind of timing issue than anything else, relative to the repurchases this quarter. So no change to the long-term plans there.

Great. Thank you very much. Thanks everyone.

Peter Saleh with Telsey Advisory.

Congratulations on the quarter and the year. My question is on the international side. The unit growth guidance was up pretty dramatically at 150 to 180, pretty significant increase. So, I guess, given that it's so late in the year, my question is, where are these incremental units going to be built? Is this a pull-forward from 2014, where we would expect 2014 development to be lower because they're pulling it forward? Or, how should be thinking about that?

Peter, this is Tony. First, we typically don't give any detail around where those openings are going to be. But, I think if you look at the typical pattern over the last couple of years, we tend to be a little bit back-end loaded in our openings. So, that's fairly consistent. We are not going to get into 2014 guidance yet. But what I would tell you, it's consistent with our overall plan for development and openings, and without giving too much detail on 2014, we are not necessarily though pulling forward from our long-term plan.

Okay.

Hey, Peter, it's Steve. Again. just to comment on that, I just want to touch on this. I'm really proud of the corporate team and the international side of the business, this time versus last year. We are about 68% ahead of our net unit development year-to-date. So, just showing that continuous momentum that we have. As Tony alluded to, we continue to have really powerful openings in the fourth quarter.

On the comp, internationally, again, fairly strong. Any comment around the UK market and how that is doing? Or, what the real drivers of that 8% comp were in the quarter?

I will start, Peter. This is Tony. We are certainly really proud of our UK team and the growth and the positive momentum we have in that market. As a matter of fact, I think you probably saw that John and I were over in London celebrating our 1000th store celebration a couple --about last month. That team is just really, really doing a great job over there. Wouldn't want to give a lot of details as far as, --from a competitive standpoint, but we've got great momentum and the future looks really strong in the United Kingdom.

Peter, this is Lance, if I can jump in just for a second. While we're not going to give country by country, I can say that the strong comps are spread relatively evenly throughout the world. That doesn't mean you don't have some markets that are doing better than others, but it is consistent across the entire world.

Peter, this is John Schnatter. The difference between the UK four years ago and today, is night and day. It's a real business. It's run extremely well. We've got fantastic leadership and just a lot of momentum.

Excellent. Lance, on the operating cash flow, for the year, I know for the 9 months, there is some working capital issues, I guess, reduce the cash flows versus last year. For the year, in terms of operating cash flow, how should we be thinking about that? Or are these just timing issues in the third quarter? Should it be more normalized into the fourth quarter?

Peter, this is Lance. A couple things, there. The CapEx -- we've been guiding all year that it's going to be a little bit higher than you've seen. So that's certainly a component that is bringing down that free cash flow a little bit. On the operating side, it is mainly timing. But, I'm not going to -- not going to get into specifics relative to if it's going to look exactly like it did last year, or whatever. There are some timing issues in there, particularly around just timing of some income tax payments and whatnot.

Peter, this is John Schnatter. To expand on that a little bit. We look at depreciation and amortization as a real expense. We believe in big, deep, and wide moats around the business to protect the business model. We build in extra capacities, strong redundancy, and we over-insure, we think that promotes a conservative approach to driving consistent financial results.

Great. Thank you very much.

Mark Smith, Feltl and Company.

Lance, it looks like you're guiding tax rate kind of 30% to 34%. I know you haven't given next year's guidance. Can you give us any reason the tax rate should change going forward out of that kind of historical range?

Mark, it's Lance again. It's actually 32% to 32.5% is what we are saying for the full year this year. To your point, while we haven't given 2014 guidance yet, there's no significant thing that's coming down the pipe that ought to change that rate by a significant amount, it is a little bit lower this year. I would encourage you to wait for the 2014 guidance. There's not a huge swing that I see coming up.

If you guys can talk to the strength of your franchisees, we saw a little higher closures domestically this quarter than expected. Comp was maybe down compared to the trend. How do you feel about the strength and the health of your franchisees today?

This is Tony. I will start and then I will let Steve chime in, as well. We monitor our franchisees very closely. We are very engaged with our franchisees. We actually just came back from a four-city road trip where we met with the majority of our domestic franchisees a few weeks ago. We are constantly working with them on sharing best practices and certainly leading by example with our corporate team. Really, though, the net impact on -- if you look at the success and profitability, opening stores and growth is the best litmus test for that. We are seeing continued growth within our domestic business, and certainly the business is a challenge right now.

There's -- it's still a very sluggish economy and the system operates as a whole and as one unit. That's very, very important with us and the relationship of the franchisees is really critical. Third quarter was a challenging quarter. It was something that -- nothing that we didn't expect. As you saw, we put --we put in place a couple of incentives that historically we've said were going to be about strategic and deliberate on use of incentives. So, in the third quarter, we did that. We think that has worked well to our plan. Steve, you want to make a few comments?

Sure. Mark, it's Steve, just a couple things to add on. For one, as Tony alluded to, 9 consecutive quarters on the franchise side of the business of positive sales growth. That being our overall strategy to grow market share, and there's a direct correlation between sales growth and franchisee health and profitability. Without a doubt, three consecutive years of record commodity prices and extremely challenging pricing from competitive environment, is going to provide some pressure in some of those underpenetrated markets, i.e. some of the closures. However, a lot of the sales growth that we are experiencing and the unit growth are in those underpenetrated markets. So, we have parallel strategies to really ensure we get the right long-term plan.

Mark, this is John Schnatter. I will let Bob Kraut -- after five weeks, you -- he can give you his commentary on the brand. You can't have great numbers long-term, without a good brand. You have to have a good brand to have sustainable long-term numbers and I will let Bob talk to the brand.

Okay. Hello everybody. Just a couple things regarding the brand, I think it's extremely healthy there. There are three, I think, fundamentals that we have in place that are great strengths.

Number one, the quality positioning, and the consistency of execution of Better Ingredients Better Pizza. The number one, the number one ranking in customer satisfaction or as we call, customer happiness, which is just not one year, an event, it's happened 12 times out of the last 14 years. Then, the strength in, I believe, we are the acknowledged leader in digital ordering with, as Lance had mentioned, 45% of our sales occurring through digital ordering. That's a great place to be, it's a great place for me to be, kind of, coming in and trying to take the marketing effort to the next level. I think, what you can expect from me, is really sharpening the focus, in terms of resources, --commitment of resources. Taking advantage of, with regard to customers, their growing use of digital and social media, which, for us, is I think, a pretty quick pivot-point since we are already well-established in those areas.

Then, of course, being the official pizza of the NFL, I think, has been a quite visible statement of our leadership and marketing and our coming-of-age as a very well positioned, big brand, that customers trust. So, I am looking forward, kind of getting through this period of study and just taking the marketing effort, taking the great base that I am inheriting and taking that to the next level.

Mark, one more comment along these lines. In addition to the great partnerships and marketing assets, we have our brand position, really helps us in this type of an environment, pizza is a great value. We've noted that before, and the fact that it is a great value, people are going to choose better. They are going to choose -- if they have a quality choice, that's what they are going to go after. That's something that we consistently -- that's our key part of our marketing strategy. And most importantly, from an operations standpoint, our team members focusing on execution of quality and service, that's what it's all at about at the end of the day.

Then, I think my last question. Your comp guidance for domestic stores is pretty strong, I guess a little higher than I had expected here for the year, taking it higher. It implies that you've got a pretty good fourth quarter built-in. I'm curious, what gives you the confidence in domestic comps given what we just saw in third quarter from the franchisees, that you can achieve kind of this 2.5% to 3.5% comp in Q4. Have you seen something --I know you don't like to speak to cadence. But have you seen that trend really improve through October? Or, is there something up your sleeve still later in the quarter?

Mark, this is John Schnatter. As you know, we don't give quarterly guidance. We felt like maybe the stream was a little low in Q3, --or little high in Q3, a little low in Q4. That's obvious in our raise in the yearly estimates. But, to your point, the business is quite predictable on the short term, but as you mentioned, like all of the businesses, is not quite as predictable on the long-term. Therefore, the short of the timeframe, the higher our profitability of predicting results, assuming something severe doesn't happen. So, we feel very good and very solid about our guidance with only a month and a half to go with the year.

Mark, this is Tony. To follow that, the keyword that we keep coming back to is momentum. Strategically, in the third quarter, as I mentioned earlier, we put in some incentives that were planned to help with the momentum in a quarter, we knew, and expected to be a challenge. As we come into the fourth quarter, for the remainder of the year, again, we are always looking longer-term. We want to maintain that momentum and we feel good about our position and our strategy.

Great. Thank you.

Chris O'Cull with KeyBanc.

John, the company owned stores comp is at 5%, but the store profit dollars were down. Do you think the focus on growing transactions is a profitable venture for the franchisees who aren't comping up as much?

Again, this is John, Chris. The corporate system is having probably the best year they have ever had and the franchisees that really know what they are doing and that execute and get up every day and run their business, the Papa John's way, are having record years. I will let Steve or Tony jump in and give some color to the transaction versus the profitability question.

I will jump in first and let Steve follow. Certainly, driving top-line sales is critical and important. The other things that we've talked about early was driving digital sales as well and where we are with our digital mix. There's certainly a lot of benefits from that, that we've talked about on frequency, the difference in ticket average that you can maintain -- you can get on digital. So, that is a really important part of our overall strategy in addition to driving top-line sales in this environment that works well for us. Steve, I will let you add some comments.

Chris, thanks for the question. First, I'll touch on corporate and I can tell you and we're going to continue to say this, long-term, our strategy will remain driving market share and driving market share through traffic growth. Our corporate restaurants have proved out that model. As John alluded to, another record profit year in the making. I touched on the 5.1% comps and the one year on the corporate side. When on a three-year basis, where it's 16.4%, three-year comp for the third quarter. The corporate restaurants are providing the road map to success for the franchisees. Our franchisees, as a whole, are also experiencing the same kind of traffic and sales growth, not the same significance, but the same kind of consistency. It's the old 80/20 rule. We do have 20% of our franchisees that we continue to work on by providing those best practices on the corporate side of the business. So, I think as a whole, profitability is always going to remain a focus in the restaurant industry and it certainly is in this environment. Overall, very pleased with the progress and with resiliency of our franchisees.

I may have misspoke, I understand that same store -- or the sales volumes of the corporate stores are up quite a bit. It doesn't look -- and I may be wrong about this, Lance, but it doesn't look like the profit dollars for the corporate stores are up. That surprises me, given the size of the comp growth. I would think the profit dollars per store, the corporate stores, would be up more.

Chris, this is John Schnatter. We don't operate in a vacuum. The competitors are down in the $5 to $8 pizza range. It's something we can't ignore. Furthermore, this is probably the most rugged commodity market in the history of the company. So, there is not a restaurant business out there that's not feeling this cost environment.

Chris, I will jump on that again. We touched it earlier, I don't know if you heard it, we talked about Lance providing some direction on the pricing. We do have some variability in our national to local price in the third quarter that did provide some menu-mix pressure to the corporate restaurant side of the business in the quarter.

Again, we look at the business long-term on an annual basis, as you look quarter to quarter, you will see some variation of that menu-mix. It did drive a little bit lower profitability in quarter-over-quarter comparisons. But the full-year picture on our guidance, it looks very strong.

Lance, in the fourth quarter, I know, last year there were several big moves at the store level cost, especially around labor. How do you -- do expect the company store margin to be down at a similar rate in the fourth quarter, as we saw in the third?

Chris, it's Lance. We are not going to give quite that exact a guidance for the fourth quarter. I think, what I can say, and John or Tony and Steve can add to this if they would like to, the competition is going to stay tough, the market's going to stay tough. We are going to get some help, frankly, from cheese versus last year, to the tune of about $0.13 last time I looked on the commodity side. So, you may get a little bit of help there. I would expect, overall, it's going to remain competitive.

Chris, this is John Schnatter, I'll hit this one more time. I think we've risen estimates the last four out of six quarters. As a founder, I'm very happy with the last two years profitability in the restaurants and I'm extremely proud of the year we are having with Steve and the entire operation team from a corporate basis. Going into 2014, I've seen some preliminaries and I feel very good about our profitability going into 2014.

Okay. Last, John, do expect to change the national ad contribution rate in 2014?

Like national marketing?

Yes.

No. No. There's no plan change for that in 2014, this is Tony.

Okay, great, thanks Tony.

Jeff [Blair] with Analytics Capital.

Jeff? Are you there?

If your phone is on mute, you want to try un-muting that? It looks like he disconnected.

(Operator Instructions).

Charles Temel with UBS.

Congratulations on great results. In contrast to your US marketing strategy, which is very John focused and sports focused, I was wondering if you could comment on your international marketing strategy, where you are going across countries and cultures?

This is Tony. I will start and let Steve chime-in since he's actually over in Dubai as we speak. First, our brand positioning globally really is very consistent. We utilize John in our creative, in our imaging, in our marketing that we do local-store. We're primarily -- we go into markets and local-store marketing is our push initially. But, we do it the same way, we've spent the last four years really working on our international business and treating it as a global business. So, we went and we focused on our product, or store operations, and our marketing. So, today, if you were to go to -- if you were to go to Beijing, you were in Dubai. You are going to see and feel -- have a Papa John's experience that's just like it is in the US.

So, from a branding standpoint, we are consistent in our approach. Certainly, from a media stand -- position, you go into a market, you are not going to have the media benefit that we do domestically. But, the same approach that we took as when John started the business, as a local store, guerrilla tactics going into a market, the strength of the brand, the quality of the product, and the execution of the operation is really key and central to our success. We talked about the United Kingdom earlier as a great example of a market that we've grown in a very, very competitive arena and have been extremely successful. That's what's happening around the world and I will let Steve elaborate.

Tony, thanks for that and Charles thanks for the question. To your point, I think Tony covered a good amount of that. I will touch on the sports piece and I will use the UK because I think it's a great example. We signed up the NFL sponsorship, as you are well aware of in the US, we did do an announcement earlier this year. We are now the official pizza partner of the football league in the UK, where there's 72 clubs, an annual attendance of 16 million. That's a great example of us following the US best practices and leveraging those across all international marketplaces.

I can tell you, we are in the strategics, planning sessions from a marketing perspective here this week in Dubai. Where all of Middle Eastern and Europe markets, and really most of the things that I saw over the last couple of days are US best practices.

To Tony's point, we don't have big national, media TV budgets, but what we do have, is strong local-store marketing tactics and execution and it really remains the same focus on quality execution of product. Product-solid operation, solid customer service with great boots on the ground. So, I hope that answers the question.

Thank you.

Charlie, this is John, not to be redundant, but what you just hit on is very, very important. The brand is very, very consistent, worldwide. Whether it's our gold standard with our product, our gold standard with our marketing, we are very, very consistent. The competitive advantage we have, and the demonstrable difference we have in our product and in our marketing in the US, is actually exacerbated worldwide. In other words, the difference between us and our competitors, on product and image worldwide, is even stronger than it is in the US, because we've spent the money, and we've taken the time to implement consistencies through the gold standards on both marketing and product.

Thank you. John, also, we look forward to you throwing out the first pitch at a Yankees game, now that you are the official pizza of the New York Yankees.

Glad to see you got that -- you saw that news.

Thank you, Charlie.

At this time, I'm not showing any further questions.

Great. Tamera, thank you and thanks to everybody for taking time to be on the call. We will talk to you in a few months.

Thank you. Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. You may all disconnect. Everyone, have a great day.

Thank you.